Widebody world: growth / replacement trends September 2018

In the past ten years since the global financial crisis the airline industry has been performing strongly. Total traffic demand since 2008 has grown at an average annual rate of 6% in RPK terms (and slightly less in the numbers of passengers), capacity by just over 5% and passenger load factors have risen from 76% to 82%. In the past five years, there has been an acceleration in growth rates: since 2013 demand has averaged an annual growth rate of 7%.

All this appears a little above the long term trend (depending on how you work it out) of 4.5%-5% pa growth.

Intriguingly over this period, from analysis of the schedules, long haul operations (which account for a third of total ASKs but just 8% of seats) and widebody operations have grown at a slightly lower rate.

Since 2011 we have seen a strong pick up in the numbers of wide body aircraft delivered into service.

Deliveries and Orders

Through much of the noughties wide body deliveries averaged 150-180 a year (see chart) equating to around 3% of the fleet in service. After taking account of the retirement of older equipment, this ratio falls to under 2%.

Since 2011 deliveries have doubled to around 400 units a year — although the numbers of aircraft leaving the global fleet have also risen strongly so net replacements still only accounts for 3%. This suggests that less than a third of new deliveries have been for growth. (This compares with a net replacement proportion of 5% for the narrowbody fleet over the same period.)

The aircraft order cycle is volatile but seems to respond to the financial health of the industry: airlines order equipment when they are optimistic and confident. Annual net orders for widebodies peaked in 2007 at 682 units — mainly for 777s, 330s, 787s (which entered service in 2011) and A350s (2015). This represented 27% of the total jet orders of 2,479 in that year.

The latest order peak was in 2014, with 627 widebody orders reflecting only 17% of the total 3,649.

The total widebody jet fleet has grown from 3,304 units in 2011 to 4,244 at the end of December 2017, and the total number of seats these have available for operation by a compound average annual 5%. Unlike the narrowbody market the real number of operators round the world is quite small: 40 airlines account for 80% of the total fleet, while there is a long tail in the distribution of operators which operate only one or two widebody aircraft.

In that period more than half of the increase has been accounted for by acquisitions by the Superconnectors (Emirates, Qatar, Etihad and THY) and Chinese carriers for pure growth (see chart): elsewhere the priority seems to have been replacing aging equipment.

In 2011 the Superconnectors accounted for 9% of the total fleet but had grown this to 13% by the end of 2017. In the period the total number of seats these aircraft represent had increased by a compound annual average of 13%. They (particularly Emirates) dominated deliveries of the A380 (accounting for 65% of the global deliveries of the type in the period) and favoured the  777 (28% of the total).

The carriers of greater China accounted for 10% of the fleet in 2011 and have increased the proportion to 15% by end 2017. The total number of seats has grown by 9.5% a year and ASKs by an annual average 9.2%. The carriers in the region have tended to go for 777s (17% of units delivered of the type) and A330s (31%). Intriguingly, as we pointed out in the May edition of Aviation Strategy, Chinese carriers have a need for high density equipment on relatively short haul routes, and 75% of the flights operated using A330s in their networks are on routes of less than 3,000km.

Carriers in most of the other regions acquired widebodies for replacement. One exception was in Europe where Norwegian, as pioneer of the long haul low cost operating model, accounted for 12% of the net increase in the widebody fleet as it took delivery of the first 12 of its 787s.

Future deliveries

While the ordering spree of the last five years may not have show as much exuberance from the world’s airlines for widebody as narrow, there were still some 2,200 orders — slightly favouring the lower seat capacity new generation 787s and A350s, but nevertheless also featuring the remodelled 777X (due to enter service in 2020) and to a lesser extent the A330neo (2018). The widebody order backlog stood at 2,320 aircraft at the end of 2017. If anything it looks as if the industry is currently favouring slightly smaller aircraft in seat capacity but with range.

Some of these orders are fairly long-dated, but the widebody orderbook is by no means as constrained as the narrowbody. Over the next six years the two manufacturers look set to continue to deliver around 400 units a year. 

In the charts we show an extrapolation of the regional developments of the main current aircraft types for 2018 to 2024. These are all based on the dated orders and options where identifiable to operators. It is noticeable that the Chinese carriers in general — one of the main engines of growth since 2011 — have few identifiable orders or options. A major reason for this may be politics: real orders for these carriers are likely to be included in the segment “unallocated/lessors”.

In the tables we show these same orders and options by carrier. Not all of these order positions should be regarded necessarily as truly firm.

Note that Etihad is supposedly responsible for 64 (8%) of the 787 orders and options up to 2024, 17 (6%) of the 777s and 47 (7%) of the A350s. Emirates and Qatar, meanwhile, have 85 and 65 777s on order for delivery over the seven year period, respectively accounting for 29% and 18% of the type’s passenger deliveries by 2024.

Note also that long haul low cost operator AirAsia X heads the list for the A330neo with orders for 45 by 2024.

At the end of 2017 it had orders in place for a total of 66 A330-900s, and then at this year’s Farnborough air show supplemented its position with an order for a further 34 giving it nearly 40% of Airbus’s backlog of the type.