Boeing VP has optimistic outlook for industry

  • 25-Nov-2009 09:24 EST
Mike Bair.jpg

"This clearly continues to be a great long-term marketplace for all of us," said Boeing's Mike Bair.

No one at SAE International’s recent AeroTech Congress & Exhibition in Seattle was in denial about how severely the poor economic situation has impacted the aviation industry. So it was only because he was first on the agenda that Boeing’s Mike Bair was the first speaker to address that reality. The Vice President of Business Strategy and Marketing for Boeing Commercial Airplanes was also the first to posit that, recession notwithstanding, the world is not coming to an end. And he did it with a welcomed and uplifting splash of humor.

“It’s a pleasure to be here,” Bair said the outset of his speech, “and I’m especially pleased to be able to talk about the future of commercial aviation. I think the good news is, despite what’s happening in the world today, there is a future of commercial aviation.” His acknowledge-the-challenge-but-focus-on-the-solution opening got the intended laugh from the audience, and in the process set a positive tone for the rest of his presentation—and, one might argue, for the rest of the conference.

Only twice before the current global recession—during the first Gulf War and post 9/11—has the industry experienced anything but growth, Bair noted. And although “we’re not ready to call it an up-cycle yet,” there are indications of stabilization vis-à-vis “severe depression in passenger travel and unprecedented collapse in the cargo markets,” he said.

Boeing expects the recovery to “really start taking hold” in the third and fourth quarter of 2010, “moving to relatively substantial growth in 2011, and then recovery in the airline industry in 2012, which is a long time,” Bair said. “It’s gonna be a good two or three years of really hunkering down and really trying to survive. Long-term, though, there’s still a magnificent opportunity. This is a marketplace and an industry that clearly has long-term potential.”

The world economy will grow at about 3% annually for the next 20 years, Bair said, with passenger air traffic growing at a faster clip (about 5%). Cargo will grow slightly faster than air traffic, but at a rate slower than the past 20 years’ 7% annual average. The growth estimates translate into the need for about 30,000 new airplanes—“about $3 trillion worth of business,” said Bair. The vast proportion of demand will be split roughly equally between single-aisles (such as Boeing’s 737 and Airbus’s A320) and medium to larger-size wide-bodies (such as Boeing’s 777 and Airbus’s A340). Niche products (ranging from the very large Boeing and Airbus aircraft to regional aircraft) will account for about $300 billion in revenue.

“I think the days of large, 50-seat airplane fleets are probably behind us, and we see those airlines expanding into the 100- to 120-seat marketplace,” Bair said. The impact on Boeing is that makers of regional jets are interested in producing larger aircraft. He cited Bombardier and Embraer as near-term potential competitors, with long-term potential competitors from China and Russia.

He noted that large U.S. domestic carriers, previously driven by market share, recently have been putting more emphasis on matching capacity to demand. They have been “remarkably successful” in doing so, and as a result they will just about break even for 2009 while the global industry suffers a $9 billion loss. The focus on capacity management will mean more airline mergers, Bair predicted.

Regarding the environment, Bair said there has been a significant change in thinking within the industry: “If I were up here three or four years ago, my comment would have been, “We’re 2% of the problem; leave us alone and go pick on somebody else.’ That doesn’t work anymore.”

Much of that thinking is directed toward renewable fuels. “We are a small enough piece of the petroleum industry that you can construct a scenario that says you can actually produce enough biofuels to run this industry,” said Bair. “There are sustainable feedstocks out there that will not compete with ‘foodstocks,’ and we are quickly moving down the road to make this an alternative to dead dinosaur-based kerosene.”

The two other components of improved environmental performance are more efficient aircraft and aircraft engines, as well as a more efficient air-traffic-management system, Bair said.

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