Boeing Predicts Its Growth Driver: Asia Pacific’s Rising Middle Class

boeing

Over the next 20 years, Boeing predicts that air traffic growth will be driven by Asia Pacific’s rising middle class and their need to travel to, from or within the region. In a media briefing on Monday ahead of the Singapore Airshow, the world’s biggest aircraft manufacturer said that airplane demand for the Asia Pacific region would total to $1.9 trillion over the 20-year period. Plus, from a fleet of just 5,090 jets in 2012, it would reach 14,750 jets in 2032. On the other hand, the total airplane demand in the world for the same 20-year forecast is pegged at $4.8 trillion.

According to the vice president of marketing of Boeing Commercial Airplanes Randy Tinseth, “Asia Pacific economies and passenger traffic continue to exhibit strong growth.” From this almost triple in quantity increase, Boeing forecasts that 70 percent of these aircrafts are from the single-aisle models which are mostly utilized by low-cost carriers. Although Asia Pacific has a rising middle class, most of them are still budget conscious travelers which would make low-costs carriers their air travel service of choice.

Based on industry data, there are currently 47 budget carriers operating in the Asia Pacific region which will make it the world’s largest air transport market by year 2016. Included in this list of budget carriers is the region’s largest low-cost airline which is Malaysia’s Air Asia and Indonesia’s Lion Air. Both of these airlines have already placed orders for new aircrafts valued at billions of dollars and incidentally they are also the biggest customers of Boeing and Airbus, another aircraft manufacturer. The aircraft industry estimates that single-aisle airplanes will account for 69 percent of new airplanes in the Asia Pacific region.

With their customers’ need for single-aisle airplanes, Boeing can thus offer their Next-Generation 737 and their 737 Max which is a new engine-variation of their existing 737. Although both Boeing and Airbus have already committed to produce the needed number of airplanes, their executives are still closely monitoring the financial upheavals in some of their primary markets like Thailand and Indonesia.

However, many observers note the rather rapid growth of Asia Pacific’s low cost airplane industry. According to the head of DVB’s aviation and transport finance division Bertrand Brabowski, major carriers are ordering aircrafts which are more than what they really need. Industry experts say that there are more aircrafts in order than those that are in actual operation and this can create an aircraft order bubble. They say that this happened because of the low interest rates as well as the stimulus package being offered by their respective countries rather than being driven by regional demand.

However, Tinseth views it otherwise, “Their growth is being bolstered by both the growth in income we see, growth in the economy, but also the fact that they are able to push their product into a greater base.”

For this year alone, Southeast Asia-based carriers are expected to receive their orders of 230 aircrafts which are worth $20 billion. Singapore Airlines is intending to order 40 777X aircrafts worth $15 billion.

With these positive developments happening in the aircraft industry not only in the world but more specifically in the Asia Pacific region in the next 20 years, Boeing is poised to grab these opportunities. And Asia Pacific’s rising middle class is the key in Boeing’s growth.

By Roberto I. Belda

Sources:
Reuters
Quartz
The West Australian

One Response to "Boeing Predicts Its Growth Driver: Asia Pacific’s Rising Middle Class"

  1. Monette   February 11, 2014 at 8:26 pm

    Some quarters may have apprehensions that this is only an aircraft order bubble but plane makers and other stakeholders of the airline and perhaps tourism industry note that there is increasing demand for air travel due to rising incomes. There are also plans to increase capacity of airports as well as open new ones within the decade. This is what’s probably fueling airlines’ desire to purchase new single-aisle aircraft models.

    Reply

Leave a Reply

Your email address will not be published.