The ART Of Business

$4.5 Trillion Commercial Aircraft Forecast: Reality or Fantasy?

Last week, Boeing released its 20-year commercial airliner forecast through 2031.

It was stunningly optimistic; some might even say over the top.

Boeing believes that 34,000 new aircraft worth $4.5 trillion will be needed to replace older, less-fuel efficient planes, and meet growing demand in emerging markets.

In my recent book SOFT LANDING: AIRLINE INDUSTRY STRATEGY, SERVICE, AND SAFETY, I spent a lot of time looking at the planes of tomorrow and the future needs of the industry.

While I agree with Boeing in principle that we can be somewhat sanguine about the future of aircraft manufacturing, a bit of caution is also needed.

What many estimates- including Boeing’s- tend to underemphasize is the role of government.

The airline industry is a loss leader in the truest sense of the word.

Throughout their history, airlines around the world have lost far more than they have ever earned.

The stark reality is that it is only government support from every level that keeps the airlines flying at all.

The same is true for aircraft manufacturers.

Boeing, Airbus, Embraer, ET. AL. are each highly dependent on government contracts and subsidies to sustain themselves.

Going forward, the demand for greater fuel efficiency and the opening of new markets will certainly require new aircraft.

Nevertheless, the bigger question is whether governments around the world will have the resources AND the will to underwrite it all.

TAGS: The Economy
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