Both Airbus and Boeing have released 20-year forceasts this week that focus on the substantial rise in demand for commercial aircraft services.
Airbus’ new Global Services Forecast predicts a US$4.6 trillion worldwide market for commercial aircraft services from 2018 to 2037. The new analysis is based on a three-way market segmentation, respectively focusing on the aircraft, the airline operation, and the passenger experience.
Aircraft-focused lifecycle services represent the largest segment of growth and include maintenance, spares pool access, tooling, technical training and system upgrades . This market represents a cumulative value of $2.2 trillion over the 20-year period – from $76 billion in 2018 to more than $160 billion per annum by 2037. These services are provided throughout the lifecycle from design to dismantling. In this category, aircraft manufacturers provide customers with core services which come with the aircraft, including assigned field reps and call centres for AOGs for example. The largest market by value is maintenance, increasingly characterised by outsourcing and “paid-by-the-hour” (PBH) contracts. Moreover, as technology and new materials develop, such as composite repairs, Airbus sees a strong trend for further outsourcing. PBH contracts allow airlines to secure and predict their maintenance costs, allowing airlines to focus on their core business of flying. Airbus also sees airlines increase their outsourcing of inventory management – towards pooling, instead of investing in their own stocks.
The next largest category encompasses flight operations services – such as pilot training and flight-planning solutions – and will account for a $1.5 trillion cumulative spend over 20 years. Fleets are expected to more than double to 48,000 aircraft over this period, such that Airbus estimates a need for 540,000 new pilots in the next 20 years. This trend will require ‘smarter’ ways of training using new digital technologies.
The third component of the global services market centres on the passenger experience which will account for an estimated $0.9 trillion cumulative value over the 20 year period. This encompasses the services needed to optimise the flight experience, including cabin upgrades, cabin crew training, in-flight-entertainment, connectivity and booking. This segment is expected to more than double in the next 20 years and grow from $27bn to almost $70bn. A notable trend is that seamless connectivity will undergo exponential growth, as more and more passengers manage their travel using a smart device, providing them all the information in real-time about the airport, connecting flights, bag collection details etc.
After an 18 percent annual growth in its services revenues for the past two years, Airbus’ ambition is to triple its services revenues from more than $3.2bn in 2017 to reach $10bn of services revenues in commercial in the next decade. To attain this goal, Airbus will continue to develop full lifecycle integrated services for all Airbus’ aircraft operators. Furthermore, these integrated services – such as Flight Hour Services (FHS) – will be even delivered through the Skywise open data platform.
Airbus will also expand its current service portfolio to non-Airbus platforms, given that 62 percent of Airbus’ total fleet is operated by ‘multi-fleet’ operators. An example of this happening today is illustrated by Airbus’ materials management subsidiary Satair, which already has 25 percent of its revenues coming from non-Airbus parts; while the Navblue flight operations subsidiary also delivers multi-fleet services. Furthermore, Airbus will extend services to a wider customer base – such as airports and air traffic control operations. Lastly, Airbus will reinforce its strategic position in the value chain. Another visible facet of Airbus’ growth in its services is the increasingly local presence, ie. being closer to its customers. Airbus’ developing global services footprint now spans 65 locations globally including 17 training centres.
One common denominator, across all the services which Airbus will increasingly cultivate is ‘digitalisation’, with many solutions being interconnected and integrated. These solutions will create additional value for airlines, lessors and MRO companies, for instance by allowing real-time decision-making, or by optimising flight and maintenance operations through analytics.
Arch rival Boeing has posted a similar 20-year forecast, which lifts its most recent forecast. Boeing’s Commercial Market Outlook (CMO) projects the total number of airplanes increasing 4.1 percent over the previous forecast.
According to fleet data, there are more than 900 airplanes today that are over 25 years old. By the mid 2020’s, more than 500 airplanes a year will reach 25 years of age – double the current rate – fueling the retirement wave. Randy Tinseth said the data explain why 44 percent of the new airplanes will be needed to cover replacement alone, while the rest will support future growth.
The massive fleet generates a strong and growing demand for aviation services ranging from supply chain support (parts and parts logistics), to maintenance and engineering services, to aircraft modifications, to airline operations. Over the next 20 years, Boeing forecast an $8.8trillion market for commercial aviation services with annual growth of 4.2 percent.
“The commercial airplane business fuels an enormous ecosystem of service providers. Our combined forecast shows the full picture of the $15T commercial market ahead of us,” Tinseth said. “We see a market in which airlines outsource more and more, a market in which data and data analytics help aircraft and airline networks become more efficient and reliable, and a market in which new technologies provide new services solutions. All of these trends drive greater demand for integrated solutions over the life of an airplane.”
Major categories in the services forecast include the $2.3 trillion market for Maintenance & Engineering, which covers tasks required to maintain or restore the airworthiness of an aircraft and its systems, components, and structures. Another major category is the $1.1 trillion market for Flight Operations, which covers services associated with the flight deck, cabin services, crew training and management, and airplane operations.