Embraer market outlook shows realignment of supply chains will affect Asia’s aviation outlook

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Use this oneEmbraer’s newly published 2020 Commercial Market Outlook examines passenger demand for air travel and new aircraft deliveries over the next 10 years with special emphasis on Embraer’s product segment, aircraft up to 150 seats. The report identifies emerging trends that will influence growth, factors shaping future airline fleets, and the regions of the world that will lead demand in the commercial sector.

Download the full outlook here.

The global pandemic is causing fundamental changes that are reshaping air travel patterns and demand for new aircraft. There are four main drivers:

  1. Fleet Rightsizing – a shift to smaller-capacity, more versatile aircraft to match weaker demand;
  2. Regionalisation – companies seeking to protect their supply chains from external shocks will bring businesses closer, generating new traffic flows;
  3. Passenger Behaviour – preference for shorter-haul flights and decentralisation of offices from large urban centres will require more diverse air networks;
  4. Environment – renewed focus on more efficient, greener aircraft types.

“The short-term impact of the global pandemic has long-term implications for new aircraft demand,” said Arjan Meijer, president and CEO of Embraer Commercial Aviation. “Our forecast reflects some of the trends we’re already seeing – the early retirement of older and less efficient aircraft, a preference for more profitable smaller airplanes to match weaker demand, and the growing importance of domestic and regional airline networks in the restoration of air service. Aircraft with up to 150 seats will be instrumental in how quickly our industry recovers.”

Traffic Growth

  • Global passenger traffic (measured in Revenue Passenger Kilometres – RPKs) will return to 2019 levels by 2024, yet remain 19 percent below Embraer’s previous forecast through the decade, to 2029.
  • RPKs in Asia-Pacific will grow the fastest (3.4 percent annually).

Jet Deliveries

  • 4,420 new jets up to 150 seats will be delivered through 2029.
  • 75 percent of deliveries will replace ageing aircraft, 25 percent representing market growth.
  • The majority will be to airlines in North America (1,520 units) and Asia-Pacific (1,220).

Turboprop Deliveries

  • 1,080 new turboprops will be delivered through 2029.
  • The majority will be to airlines in China/Asia-Pacific (490 units) and Europe (190).

Embraer said the repositioning of the world supply chains will promote economic development in the Asia-Pacific region and require a new degree of air transport connectivity. As the main driver of growth, airlines will need to establish new schedule and network strategies for better access to underserved low and medium-density markets. The manufacturer also said secondary airports will be the key component of this new strategy, avoiding the constraints currently prevalent at large, saturated airports.

China and Asia have led global growth in air passenger traffic for years. Now, as growth slows following travel restrictions precipitated by the coronavirus, there are fundamental changes that will shape future air travel demand in the region, Embraer said.

The fallout from protracted USA-China trade tensions has forced businesses to modify or duplicate their supply chains to mitigate risk. Disruptions to labour and air freight capacity during the pandemic further emphasised how supply chains are vulnerable to uncontrollable global forces. As companies look to insulate themselves from future shocks, ASEAN and SAARC countries, with their lower labour and production costs, will be well-positioned to redirect future growth. Air transport is key to realising growth and attracting new investments. It will require greater connectivity among existing airports and upgrades to access and infrastructure. New supply chains in these countries will create new flows of business passengers in domestic networks, Embraer said.

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