Crystal Ball Time

by Joy Finnegan, Editor-in-Chief

With healthy growth projected in air travel, the FAA has a tremendous opportunity to make a major difference in the industry,” FAA Administrator Michael P. Huerta said recently in conjunction with the release of their annual forecast. “As the system becomes more complex, we’ll look to new technologies to meet the growing demand for safe and efficient air travel here at home and around the world.”

The FAA Forecast warns, per usual, that shocks can impact the accuracy of the forecast. These shocks include things such as the terror attacks of September 11, skyrocketing fuel prices, and global recession. It says these recent shocks have caused air carriers to manage this period of extreme volatility by fine-tuning their business models by lowering operating costs, eliminating unprofitable routes and grounding older, less fuel efficient aircraft.

The report says passenger demand shows minimal growth in 2014, but projects an upturn in growth for the 2015-19 period. Over the same time period, the report says, system capacity growth averages of 3.3 percent per year. “For the overall forecast period (2014-34), system capacity is projected to increase an average of 2.7 percent a year. Supported by a growing U.S. and world economy, system RPMs are projected to increase 2.8 percent a year, with regional carriers (up 2.3 percent a year) growing slower than mainline carriers (up 2.8 percent a year).” By 2034 the report says U.S. commercial air carriers are projected to fly 1.75 trillion ASMs and transport 1.15 billion enplaned passengers a total of 1.47 trillion passenger miles.

One bright spot noted is growth in air cargo with air cargo traffic, as measured by Revenue Ton Miles (RTMs – one ton of cargo flown one mile) expected to more than double by 2034 at an average growth rate 4.1 percent.

The 2014 FAA forecast says as “the economy recovers from the most serious economic downturn and slow recovery in recent history, aviation will continue to grow over the long run.” The FAA Aerospace Forecasts FY 2014-2034 can be found here: http://www.faa.gov/about/office_org/headquarters_offices/apl/aviation_forecasts/aerospace_forecasts/2014-2034/
VZM Management Services has released their VZM Market Outlook 2014 for commercial aviation and maintenance. The group’s report “looks back at how the aerospace market evolved through the Great Recession and provide our thoughts regarding future developments.”

Marcel Versteeg, owner of the consultancy says, “Increasing OEM dominance in both airframe and engine aftermarkets is forcing the independents to review their business strategies, putting pressure on MRO management to identify and implement cost effective initiatives throughout the aftermarket supply chain. The VZM Management Services report can be found here: http://www.vzm.net/Infopercent20Center/VZMpercent20Publications

Focusing more intently on MRO, comes the ARSA/Team SAI 2014 Global MRO Market Economic Assessment, released last month as well. The Aeronautical Repair Station Association (ARSA) is a Virginia-based trade association that represents aviation maintenance and manufacturing companies and Team SAI is an aviation consulting services firm.

Their report says the aviation maintenance business is a vibrant $57.7 billion global industry that is expected to grow to $86.8 billion in the next decade. The study also stresses that the commercial and business aviation MRO and parts manufacturing/distribution industries combined generate $44.4 billion in economic activity in the United States and employ 244,000 workers across the country.

Other issues addressed in the report include the flow of trade between various regions and market conditions in specific maintenance sub-sectors such as airframe, engine, component and line maintenance. Some highlights from the report:
• Airframe MRO is forecast at $11.5B for 2014. Nearly 30 percent of this spend is for aircraft based in North America.
• Engine MRO is expected to be $22.1B in 2014.
More than 30 percent of this value is tied to
North American operators.
• Component MRO is forecast to be $12.2B in 2014. Upwards of 35 percent of this spend is for North American aircraft.
• Line MRO is pegged at $11.9B in 2014. North America represents 27 percent of the market.

You can download the entire report at http://arsa.org/wp-content/uploads/2014/03/ARSA-TeamSAI-EconomicReport-20140307.pdf
Additionally, in this issue, we have leaders from around the globe giving their input in our annual “State of the Industry” feature starting on page 22. We hope these insights help give you the information you need to understand our unique, dynamic and challenging industry.

 

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