Expects roughly half the world’s air traffic growth over the next 20 years to be driven by travel to or from the Asia-Pacific region, with total air traffic for the region forecast to grow at a CAGR of 6.7%. In a special report on China’s aviation sector, UBS Investment Research predicts that the country’s airlines will boost their capacity by 10%, below the 12% year-on-year demand growth seen in first-quarter 2011. The July issue of the IEA’s Oil Market predicts that Chinese jet fuel and kerosene demand will rise by 6.4% and 5.5% in 2011 and 2012, to 392,000bpd and 414,000bpd, respectively.
UBS’s proprietary analysis on the impact of high-speed rail on Chinese air travel demand suggests it will reduce air travel traffic by 1.7% in 2011, rising to 4.6% in 2013. However, it anticipates that some of this impact will be mitigated by foreign currency effects, including a 5% appreciation of the yuan against the US dollar this year, and for this trend to continue into 2012.
India, although currently generating fewer domestic passengers than Australia, is expected to be a huge growth market, with the Airport Council International projecting that it will become the third largest aviation market in the world within 12-15 years. In addition, the Airbus report has projected that the domestic Indian market will be the fastest-growing market in the world over the next 20 years. However, the scale of this expansion is expected to test the industry to its limits, particularly given the high debt levels of the three major Indian airline groups (which together amount to around $11 billion), the need for access to capital, and estimates suggesting that $30 billion of investment will be needed in airports over the next 15 years, according to the Centre for Asia Pacific Aviation.
In the CIS, there is also plenty of potential for future growth, given that just 5% of Russia’s population use aircraft services. Russia’s Federal Air Transport Agency recently reported that passenger traffic was up 10.1% in first-quarter 2011 and Boeing expects the region to see a CAGR of 4.2% over the next 20 years. It should be noted, however, that the region’s economy is particularly sensitive to changes in the price of crude.
There is also the impact of aircraft technology in a broader sense. Opec notes that aviation fuel intensity fell at an average annual rate of nearly 3% over the past three decades. Since 1950, there has been a cumulative 50% improvement in aircraft efficiency, and the next generation of aircraft is expected to demonstrate further improvements in this area. According to A Beginner’s Guide to Aviation Efficiency produced by the Air Transport Action Group, there is a range of new engine designs, such as geared turbofans and open-rotor engines, that may offer 16-30% improvements in fuel efficiency and could enter service by the second half of the next decade. In addition, new fuel saving procedures such as ‘continuous descent operation’ have been shown in trials to generate fuel savings of up to 40% in the approach phase (the descent towards an airport for landing), saving between 50 and 150 kilogrammes of fuel.
In a recent interview with the Centre for Asia Pacific Aviation, Avocet principal Barry Moss said both Airbus and Boeing appear “at least 12 years away from producing all-new models to replace their comparatively emissions inefficient cash cow narrow-body models”.
Adding to the uncertainty about when the new breed of aircraft will start to have an impact on jet fuel demand is the financial outlook for many carriers. Declines in profits would be expected to encourage carriers to keep older aircraft in the air for longer. On the other hand, the expected rise in passenger numbers in Asia will mean a boost in demand for new aircraft and Airbus’s Global Market Forecast 2011–2030 forecasts that between 2011 and 2030 more than 26,900 new passenger jetliners will need to be built to accommodate growing global demand for air travel and 10,500 aircraft from the existing global fleet will be replaced by more efficient