Back Shop Commercial Edition: Aviation Today

Seattle is famous for three things: self-consciously hip musicians attired like lumberjacks; a citizenry infatuated with overpriced gourmet coffee; and, most importantly for our purposes, aircraft manufacturing. During a recent visit to this spectacularly scenic port city, I discussed today’s robust aviation market with Jim Proulx, a spokesman for the commercial airplanes division of Boeing Corp., the only company more pervasive here than Starbucks.

Boeing moved its world headquarters to Chicago from Seattle in 2001, but its extensive manufacturing facilities still dominate the Washington state economy. Boeing’s stock price lately has been gaining dizzying airspeed, propelled by orders for its new all-composite 787 Dreamliner.

Boeing has racked up 567 firm orders for its Dreamliner. The company’s faltering archrival Airbus is developing the A350 to compete against the 787, but that plane won’t be ready for sale until 2013, five years after the 787. The market’s enthusiastic embrace of the 787 helped Boeing trump Airbus in orders last year, for the first time since 2000.

The Dreamliner is the fastest-selling jet in aviation history. Rollout of the aircraft is scheduled for July 8, with first flight expected by late August or early September.

"Historically, aviation has been a market of up and down cycles," Proulx told me during a dinner interview. "Boeing had 1,002 net orders in 2005 and 1,044 in 2006, so you’d expect that now we’d be heading into a bust cycle, but we’re still experiencing growth. At the same time, airlines are coming up on serious replacement needs. Over the next 10 years, about 5,000 airplanes will reach the end of their lifecycles and need to be replaced. Traditional U.S. and European large-network carriers haven’t yet entered the order market in a big way, and they are going to need to do so."

Citing annual traffic growth of 4.9 percent in passengers and 6.1 percent in cargo, he said the total world fleet would more than double by 2025, expanding from 17,300 airplanes to almost 36,000. In addition, it will take about 9,600 new airplanes to replace retired and converted airplanes. That’s a total need of about 27,200 new airplanes during the next 20 years.

Proulx said Boeing is sold out for the next three years, but the manufacturing behemoth is remaining extremely careful as it faces pressure to ramp up its production rates. "We have to make sure that the entire system, including the factories and the supply chain, are absolutely ready to handle rate increases before we can move forward," he said.

However, there’s a dark lining to aviation’s silver cloud.

Richard Aboulafia, vice president of analysis, the Teal Group, pointed out that explosive growth in aviation would continue to put pressure on MRO capabilities in the coming years, creating a need for new "enabling" technologies that enhance maintenance efficiency and productivity. Boeing’s acquisition of Aviall is just one example of the growing role of giant OEMs to consolidate the provision of service, logistics and spare parts. He hastened to add, though, that the aviation industry is indeed posting historic growth – much of it fueled by Boeing’s good fortunes.

"The world aircraft industry is firing on both cylinders," Aboulafia said. "The first simultaneous civil and military market upturn in decades is giving most primes a boost. While a handful of sub-segments and programs are weak, the supplier base has the diverse program exposure necessary to enjoy this broader growth. Boeing’s jetliner product rejuvenation means expansion of the United States’ share of the industry, and with it dominance in leading edge technologies."

Aboulafia made his remarks during an Aviation Today-sponsored Webinar, entitled, "The Paris Air Show: Predictions, Advice & Insider Information". The Webinar, held May 24, focused on news and industry statistics that are likely to emerge at this major international show, June 18-24. The speakers included Aboulafia and Michel Merluzeau, a principal at G2Solutions.

You still can access this Webinar, now archived on our Web site (register at http://www.aviationtoday.com). You won’t need a Cappuccino with a double shot of espresso to find it stimulating.