strategic transportation & tourism solutions
Putting the Canadian Footing into a Global Context Dr. Michael W Tretheway Chief Economist, InterVISTAS Consulting Group Canadian Airports Council 20 April 2011
Global Economic Shift - 2040 US$ Trillion 2000
2040
North America
11
30
Japan
4
6
China
1
26
India
0.5
12
Brazil
0.8
4
• China is already • A larger economy than Japan • A larger generator of tourists than Japan 1
Value of Goods Shipped by Air Japan:
31%
US:
26%
Canada
10%
• Even for imports •
Canada’s use of air cargo is low by global standards for developed economies
• Two views •
Air Capacity should follow economic growth
•
Air Capacity enables economic growth •
Canada now has one of the most restrictive international air policies in the world
2
Slower Growth? 2010 Hamburg Aviation Conference • Growth in coming decade likely to be •
less than historic
•
Less than previously forecast
•
•
Climate change
•
Recovery of personal liquidity
•
Markets maturing
•
Perhaps 3.5% vs. 5%
Likely to be theme for 2013 conference
3
IATA Premium Passengers
4
2011: A Critical Year for the Future • The future narrow body aircraft •
•
#1: New engines on an existing airframe •
15+% reduction in fuel and carbon
•
Technologies •
Geared turbofan
•
Leap X
#2: New engines on a new airframe •
20-40% reduction in fuel and carbon
•
Larger decrease in total operating cost
•
But a more expensive aircraft 5
Narrow Body Replacement Airbus • Initial announcement is A320neo •
New engine option
•
15% fuel/carbon reduction
•
Airbus view: beyond GTF and Leap-X, •
No further engine technology for next 10 years
•
Thus deploy new engine technology immediately
• The engineering is not far advanced •
Airbus could still switch to new airframe if market demands •
•
E.g., A-350 switch
But, Airbus resources deployed to A350
6
Narrow Body Replacement Boeing • Indicates it is likely to decide on NBR in 2011 •
Would take longer to bring to market
•
But may offer a better long term product •
Recall that 737 deployed several years after DC-9, Caravelle
•
But a higher cost per aircraft
•
Key issue: •
What will fuel prices be in 2020-2045?
•
$100 per barrel favours new engine on existing plane (737G4)
•
$175 per barrel favours new aircraft 7
Scale of Aircraft Market Type
Fleet Size
Carry Forward
Deliveries
2009
2029e
Replace -ment
Single aisle
13,490
25,000
9,490
4,000
21,000
Twin aisle
3,500
8,260
2,340
1,160
7,100
800
960
560
240
720
Large aircraft
Comments The big market and big action new competitors Likely only Boeing/airbus new products launched Only 2% of deliveries, 6% of value, many freighters
Source: Boeing, Current Market Outlook, 2010
• The Narrow Body Replacement is THE MARKET • Biggest impacts on: • Fuel consumption • Carbon generation • Economics for consumer 8
Strategic Long Term Decision 707: 1958-1983 727: 1963-2013 737: 1967-2027+ 747: 1970-2030(F)? 757: 1983-2025? 767: 1982-2027? 777: 1995-2025? 787: 2011-2035? 797: 2018?-2050?
(35 years) [last production: 1979 or 1994, 747 replaced] (50 years) [last production: 1984, 757 replaced] (60 years) [737-700/800/900 in production] (60 years) [747-8 in production] (40+years) [2004, 737NG replaced] (45 Years) [2011? 787 will replace] No replacement anticipated until 2020s No replacement likely until 2030s The big strategic decision, 737G4 or 797?
• The 2011 decision will determine (i.e., lock in) the course, economics & impact of aviation for two decades 9
Contenders Not confined to the Big 2 •
21,000 aircraft to be delivered over 20 years
•
1000 per year
The Big 2: • Airbus • Boeing Others •
Bombardier (C-130 family)
•
Embraer
•
China, Japan, Indonesia, Russia, India
10
strategic transportation & tourism solutions
Fuel Prices
Mar-11
Jan-11
Nov-10
Sep-10
Jul-10
May-10
Mar-10
Jan-10
Nov-09
Sep-09
Jul-09
May-09
Mar-09
Jan-09
Nov-08
Sep-08
Jul-08
May-08
Mar-08
Jan-08
Nov-07
Sep-07
Jul-07
May-07
Mar-07
Jan-07
12
May-11
U.S. $ per barrel
Fuel Prices Crude Oil Spot Prices January 2007 to May 2011
$160
$140
$120
$100
$80
$60
$40
$20
$-
Medium Term Oil Price Forecast Consensus Economics Oil Price Forecast $120 $100
US$
$80 $60 $40 $20 $2010
2011
2012
2013
2014
2015
2016 13
Oil Price Forecast Consensus Economics Oil Price Forecast $120 $100
US$
$80 $60
•Its not down •Its not back to $145
$40 $20 $2010
2011
2012
2013
2014
2015
2016 14
2 Sigma Range of Forecasts Forecast 95% ranges $120 $100 $80 upper 2 sigma average
$60
low er 2 sigma $40 $20 $2010
2011
2012
2013
2014
2015
2016
15
2 Sigma Range of Forecasts Forecast 95% ranges $120 $100 $80 upper 2 sigma average
$60
low er 2 sigma $40
•Everyone seems to agree $20 $2010
2011
2012
2013
2014
2015
2016
16
2 Sigma Range of Forecasts Forecast 95% ranges Note the scale $120 $100 $80 upper 2 sigma average
$60
low er 2 sigma $40
•Everyone seems to agree $20 $2010
2011
2012
2013
2014
2015
2016
17
If History Repeats ‌. Oil Price with Full Historical Range Note the scale $300 $250 $200 Upper range $150
Base price forecast Lower range
$100 $50 $2010
2011
2012
2013
2014
2015
2016
18
Consequences of Fuel Increase • Will accelerate shift adoption of efficient aircraft • Will favour move to turboprop •
Especially Q400 •
Same speed as RJs
•
Much lower fuel consumption
•
Comfort comparable to RJs
• Will affect decision on 737/A320 replacement •
At $100 oil, engine update
•
At $175, new aircraft 19
strategic transportation & tourism solutions
The Carbon Footprint: issues for aviation forecasting
strategic transportation & tourism solutions
Will Anyone Care ?
Spiritual Messaging "Making selfish choices such as flying on holiday or buying a large car are a symptom of sin.” •
"Sin is not just a restricted list of moral mistakes. It is living a life turned in on itself where people ignore the consequences of their actions." •
Richard Chartres Bishop of London
Sophisticated Messaging on Roads & Rail Routes to LHR
Coming Soon to North America Climate Change issue is not confined to Europe •
North American attitudes are shifting rapidly
•
Aviation will be targeted
Carbon Forecast Global Aircraft Emission Projections Hypothetical Scenario
Traffic Growth @4% pa
3.00
2.50
Offsets
Offset reduction effect Effect ETS Normal emission reduction
1.50
797/A360 Y3 aircraft
"Normal Emission Reduction per RPK
1.00
remaining emissions 737/A320 replacement Widebody replacement
0.50
Remaining Carbon 20 33
20 32
20 31
20 30
20 29
20 28
20 27
20 26
20 25
20 24
20 23
20 22
20 21
20 20
20 19
20 18
20 17
20 16
20 15
20 14
20 13
20 12
20 11
20 10
20 09
20 08
Index (2008-1.0)
2.00
strategic transportation & tourism solutions
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