Stability ahead for manufacturers' market shares? June 1999

The US–based Teal Group has just released its latest forecast for the 100+ seat jet market (excluding the former Soviet jetliners, which are the only jet competitors to Airbus and Boeing but which hold less than 1% of the market). Despite the ongoing battle between Airbus and Boeing (see pages 14–17 this issue and Aviation Strategy, May 1999), Teal believes that their respective market shares will remain stable in the medium–term.

Teal’s forecast to the year 2008 (see tables, below and right) can be summarised as follows:

• It forecasts production of 5,859 jet aircraft worth $398bn over the next 10 years. This total includes 3,843 narrowbodies worth $153bn and 2,016 widebodies worth $245bn. (All figures used by Teal are in 1999 dollars.)
• The market’s inherent cyclicality has been exacerbated by a vicious market share war between Boeing and Airbus. This will lead to a massive drop in narrowbody deliveries. Meanwhile, the Asia crisis will hurt widebody demand. Total deliveries will decline sharply, from 873 aircraft worth $53.3bn in 1999 to a forecast 388 aircraft worth $28bn in 2002.
• This market share war is slashing profitability at Airbus and Boeing. It has been particularly traumatic to Boeing, which has been haemorrhaging cash through the present “up” cycle. The battle could also force fundamental changes at Airbus.
• Despite these traumas, remarkably little will change in terms of respective market share. Airbus’s share will advance only slightly, averaging 36.7% through the forecast period.
• Still, this is an impressive achievement for the Airbus consortium, which held less than one–fifth of the market before 1993. Airbus seems to be winning the battle for McDonnell Douglas’s market share.
• There will be no all–new jet programmes introduced in the next ten years. Boeing is likely to cancel the 717, and the A3XX will not arrive during Teal’s forecast period. The A318 and A340–500 and -600 variants, however, will prove reasonably successful.

Prospects for the really large aircraft

Teal also considers the large aircraft market, and believes it is just a matter of time before the 747–X/Y concept is revived. The forecast calls for some kind of low–cost update to arrive around 2005. All–new aircraft are too expensive, and the 747 needs to grow.

Concerning the A3XX, Teal believes that finding the $10–15bn necessary to develop an all–new aircraft is highly problematic, especially since Airbus has no history of generating money for new aircraft via cash flow. Teal believes that as Aérospatiale follows Daimler Benz Aerospace/DASA and British Aerospace, becoming privatised and responsive to equities markets, Airbus will find it increasingly difficult to convince its member companies to deprive their shareholders of dividends by spending heavily on independent R&D. Teal’s view is in marked contrast to Airbus’s stated strategy (see pages 14–17).