Breaking Out

Boeing recently published its market overview for 2006, which predicts 5% growth for the international aviation industry over the next 20 years, spurred by strong growth in the Middle East.

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By  Barbara Cockburn Published  October 24, 2006

|~||~||~|Boeing recently published its market overview for 2006, which predicts 5% growth for the international aviation industry over the next 20 years, spurred by strong growth in the Middle East. The report is largely positive, which is great news for the aviation industry, especially following a period of unexpected downturn, with the 9/11 terrorist attacks, followed by the threat of SARS and a string of disastrous aircraft accidents. However, according to Drew Magill, Boeing’s product marketing director, these incidents have not caused serious long-term damage in the industry. “Our forecast might be a bit conservative, but air traffic has been running at a higher rate of growth in the last couple years than we predicted,” he says. “Security and hassle has minimised and various government agencies are finding ways to be more efficient.” Magill maintains that air travel is a key economic driver and continues to grow at around twice the rate of economic growth. “This will continue to grow as companies spread out across the globe and more markets open up, as more commerce stimulates travel,” he adds. Indeed changes in the air industry, especially in the region, are starting to take shape. What was perceived as a heavily regulated industry is now beginning to break down its barriers, welcoming new carriers into the market and helping existing ones to expand their presence. According to Magill, this competition can only mean more efficiency, lower prices and improved convenience – which in turn will stimulate air traffic even further. Magill expects to see more economic growth in the Middle East compared to other parts of the world, partly because of the region’s tremendous development in commerce and tourism, together with the local governments’ commitment to a modern air transport infrastructure. Another observation that Boeing has made in the Middle East, compared to the rest of the world, is that much of the skilled labour tends to come from other countries based in Asia and Europe. This generates more long haul traffic, with around a third coming from Europe, a third from Asia and only around 15% involving regional traffic which, according to Magill, is “fairly unusual”. “We’ll see more low cost carrier growth because they focus on short haul traffic, but still the main growth will be the long haul markets to and from the Middle East,” he elaborates. “For short haul markets, more direct flights are efficient and we’ll see more low cost carriers emerging.” However, although there are currently several established network carriers successfully flying short haul, Magill warns that success in the low cost market is dependant on which carrier has the best combination of convenience, frequencies, non-stop flights, multiple flights per day and of course, fares. Magill clearly expects traffic growth between Asia and the Middle East to rise faster than other parts of the world, with growth expected to be 5.5% per year over the next 20 years. “People are recognising the importance of air travel and this is evident in the investment we’re seeing,” he says. Freight traffic is another predicted growth area for the manufacturer, with market growth expected to reach 6.9% a year. “In the Middle East, cargo traffic is growing more rapidly because there is more retail and commerce in this region, with high value goods primarily being transported by air. There are also quite a lot of perishable imports into the region like food and flowers,” says Magill. Magill applauds air travel in the region as being “very robust” as he notes some of the region’s carriers resuming flights to Lebanon. “You must have air travel. The importance of it cannot be underestimated. It’s a necessity, not a luxury anymore. People have to get the goods and services that they need and we saw the importance of air travel with the delivery of emergency goods during the hurricane season last year in the US and again in Beirut, with aircraft bringing in supplies and getting people out.” Fundamentally, people want safe, reliable, efficient transportation and they want low fares and comfortable surroundings. Those things are the same globally, explains Magill, who observes the frequency of long haul flights to and from the region compared to other areas of the world. He calculates that the fleet of airlines in the region will double from 630 airplanes in the next 20 years to 1100 airplanes. Good news for Boeing, as this means more demand for twin aisle aircraft. “The interesting thing is that almost half of those will be 777 and 787-sized airplane,” says Magill. “These serve the 200 to 400 seat market, because they allow carriers in this region to provide a direct and more frequent service and it makes sense to do it with twin engine economics. These planes have twin engines that can fly long haul efficiently. In the Middle East, 50% of airplanes will be twin aisle, compared to 23% worldwide.” Boeing has also seen demand grow in the region for 747 sized aircraft and he expects that to continue. In the 1970s, 747s flew long haul missions and were big airplanes with four engines, needing to carry a lot of fuel for long distances. With engine technology becoming more reliable, the same missions can fly smaller airplanes with just a twin engine. Maintaining only two engines means improved fuel efficiency and hence reduced costs. As Magill believes, part of the 5% predicted growth in the Middle East is about having the right size airplane, providing more direct frequent flights and being operationally efficient. “We’re designing the new planes to be 20% more efficient – that’s incredible. It means lower cost per mile and we’re really more environmentally conscious,” he says. “We need to be more efficient in fuel consumption and emissions. The 787 is, for the first time, as efficient as high speed trains and we are burning, over a distance of more than 500 miles, less fuel and generating lower emissions as a result.” Enhancing efficiency in the region also relies on the active contribution from local agencies. One of the potential partners Boeing is keen to develop links with is Dubai’s own aviation hub, Dubai Aerospace Enterprises (DAE), which has been created as the Emirate’s new initiative to bring in aviation technology and expertise to the Middle East. It is clear that in order to increase growth for the air industry in the region, communication and partnership between the different agencies involved is key. “Governments in the region and industry are working together to develop areas with carefully concentrated and sustainable growth, which will help the economy to grow faster than the rest of the world,” he says. “The way we see our role in servicing and maintaining aircraft is to get best suppliers together and help them work with the airlines."||**||

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