New Forecast Predicts the Effect of Alliances on Aircraft Demand

World Airline News, Jan 15, 1999

The establishment of airline alliances could affect on future new-aircraft deliveries, says The Rolls-Royce Major Aircraft Market Outlook, a new market forecast. The report states that some 16,900 new airliners, worth $13 billion and with capacity for 100+ passengers, will be delivered in the 20-year period between 1998 and 2017.

Widebody aircraft will account for 61 percent of the $280 billion value of engines required to power these future deliveries, and for 44 percent of the 43,500 engine units involved, says the report. During the almost 20-year span, passenger traffic is expected to grow at an annual average of 5.1 percent, while cargo traffic will expand at a higher 6.5 percent a year, predicts the outlook. The report identifies a number of issues driving demand for airliners in the forecast period, including: * Almost all of the world's 30 largest carriers (including all the largest U.S. operators) have joined one of the four major alliance groupings: Star, oneworld, Global, or Wings. This will lead to a more efficient provision of capacity and increased traffic as passengers respond to more convenient travel options. Nevertheless, the Rolls- Royce report says: "The future impact of alliances on aircraft purchases is unclear." Acknowledging that some historic alliances have proven to be unstable, it argues that present groups are increasing joint activity "and their future appears solid." * As the world moves towards privatizing previously state-owned carriers, airlines will enjoy greater flexibility in defining strategy and making flexible operating decisions in order to maximize profit. Typically, privatization results in moves toward modernization and rationalization, according to Rolls-Royce. * According to the report, airport congestion and high growth on long-haul routes will lead to sales of larger and longer-ranged aircraft. The opening of new long-haul routes is likely to be performed with aircraft smaller than the Boeing 747, previously the aircraft of choice. In the short term, the transfer of slots from short-haul routes is expected to mitigate pressure for carriers to increase aircraft size. * Demand for high frequency service, a successful ploy in airline competition, will drive requirements for more aircraft in the 300-to 350-seat category. * European, Asian and trans-Pacific routes are limited to departure and arrival "windows." Smaller aircraft are better suited for multi-daily frequencies of high-capacity aircraft. "The overall effect of these influences will be to drive a move away from today's domination by 400-seat aircraft (in these markets)." * Few new major long-haul routes are being launched with Boeing 747s, the primary type for many carriers, says Rolls-Royce. Accordingly, new routes to and from Asia are expected to be initiated with mixed fleets of 300/400-seat aircraft. >>Rolls-Royce Marketing Forecast, 44 1332 248288, Business Development, 317/230-6763, BMW Rolls-Royce Marketing, 49 033 708 63 000<<