Aircraft order levels are still down from their peak in 2013-2014. Increasing MRO demand, low fuel prices and higher aircraft deliveries are driving the commercial market.
We anticipate the overall 2018 commercial market to grow at a healthy 3.5% annual growth rate as compared to 2.1% last year. While Boeing and Airbus continue to increase narrow body production rates we do expect order softness to stay. This continued capacity expansion will put pressure on costs and drive additional efficiency, production automation, cost visibility and supplier development investments. Both Airbus and Boeing have over 5 years of production backlog for their commercial aircraft models. These significant backlogs are allowing the commercial aerospace industry to ride through the continued drop in aircraft orders.
In 2018, the Asia Pacific market is expected to sustain its global lead with 7.4% commercial aerospace industry growth compared to 2017. North America is expected to be up 4.3% YoY. Optimistic signs are also coming from Europe, Latin America and Middle East and we expect this market will increase by 2% YoY.
The 2018 Global Outlook
The 2018 Global Outlook is promising and builds up from 2017 for higher growth rate across regions.
- New aircraft deliveries in 2017 met overall expectations with increases anticipated for 2018. The aftermarket continues to be healthy driven mainly traffic growth and older fleets continuing fly.
- The production outlook is intelligently keeping up with rate increases. The narrow-body aircraft production will continue to drive unit volume growth.
- Slight reductions in cost are anticipated for the Production inputs from being flat. As the 2018 material and labor costs are expected to stay at similar levels to 2017 there will be marginal reductions in the cost.
- A strong business cycle stance with a promising 2018. There will not be a dramatic increase in new aircraft orders, a strong MRO market and delivering on the current backlog will be the main market growth drivers.
- Aircraft operations to surge as the fleets to keep flying driving the MRO demand. Rise in air traffic and load factors coupled with older fleets continuing to fly will have an overall positive impact on MRO.
Although geopolitical risks weigh on industry executives’ minds, the aerospace industry is on a steady course for 2018. While the orders may have continued to be below the 2013- 2014 peak, we see overall production rates and in-service demand continue to stress the supply chain promoting overall positive environment. Find out more in the full report.