Opinion: The End Of The Airbus-Boeing Supercycle

Opinion: The End Of The Airbus-Boeing Supercycle
  1. Opinion: The End Of The Airbus-Boeing Supercycle
    Richard Aboulafia After a remarkable 12-year boom, world aircraft industry output growth sputtered to a halt in 2016. read…

After a remarkable 12-year boom, world aircraft industry output growth sputtered to a halt in 2016. The market fell 1.2% (in constant dollars) relative to 2015, the first aggregate decline since 2003. While military demand remains robust, most civil segments are feeling the impact of negative macroeconomic and geopolitical developments.

The previous year, 2015, was also a lackluster year, with just 1.3% growth relative to 2014. The industry had been expanding at a compound annual growth rate (CAGR) of 6.5% in 2003-14. Those good times have come to a halt.

There are few signs of impending improvement this year. The summer of 2016 was an inflection point for the jetliner industry, which by a wide margin is the largest aircraft segment by value—about 60% of total world aircraft output—and the industry’s most important growth engine. Deferrals have increased, and plans for higher production rates are being reconsidered.

The jetliner market is just finishing a 12-year supercycle. Airbus and Boeing guidance, until recently, indicated that they expect a 17-year supercycle. That now looks unlikely to happen. For some time now, there has been a disconnect between airliner market prosperity and the rest of the world economy, which is seeing higher instability and slower growth. The jetliner industry, unfortunately, is falling in line with that macro environment.

For now, airline traffic and profits continue to outperform broader economic indicators, but there are no guarantees that this will continue, and in some regions, such as the Middle East, demand is slowing and airline profitability has diminished.

While there will be some additional modest growth in airliner deliveries starting this year, it will be in the 3-4% range rather than the 9% or more that we have enjoyed over the past 12 years. All…

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