Suppy Ad Demand of Air Transportation

Supply and Demand for Air Transportation

Raja. Rajendra Prabhu

Embry-Riddle Aeronautical university

Introduction on Airbus and Boeing develop their 20-year forecasts.

Aviation demand forecast is an important aspect in the airline industry to predict the growth of the future air travel, which guides the aircraft manufactures to align their manufacturing plan accordingly with the future demand of the aviation industry. Aircraft manufactures like Airbus and Boeing forecast aviation market demand every year for the period of 20 years. They have their own methodology to analysis the factors that affects the supply and demand. For Airbus the forecast is nomenclature as “Global Market Forecast”, and for Boeing it’s termed as “Commercial Market Outlook”. Both the Airbus and Boeing manufacturer uses “The Bottom-up” method forecast methods.

The airbus industry divides the world into 14 geographic areas, with the consequent potential of 105 markets, airbus took a leap ahead by reframing their forecast methodology in their 2018 Global Market forecast by segmenting the aircraft category from “Small Aircraft below 230 seats, Medium Aircraft between 230 and 300 seats , Large aircraft between 300 and 350 seats and Extra-large aircraft with seats more than 350 ”, Boeing divides the world into 12 geographic areas, with the potential of 78 markets , 2018 CMO classify the aircraft category as reginal jet, single aisle jet and wide-body jet. Airbus and Boeing both agrees on the percentage of the traffic growth per annum would be + 4.0 %, with a world’s passenger fleet would be above 48,000 aircraft by 2037 and Asia Pacific being a dominating region on the aircraft deliveries by 2037.

Factors affecting the supply and demand for air transportation

According to Cook & Billig (2016) Globalization and Demographic affects the demand of the air travel while the liberalization and factors of production influence the supply of the air travel. Factors such as Gross Domestic Product, emerging economics, wealth effect, evolution of the middle class, and the evolution of airline business model can be categorized under Airbus globalization factors. While the local economics, social media, Geographical location, population growth, and number of long hauls passengers categorized under Airbus demographics effect. Government policies around the open sky like Ude Desh Ka Aam Nagrik Regional Connectivity scheme in India and government polices like China’s Belt and Road Initiative aims to connect Asia, Europe, the Middle East and Europe are the factors of airbus liberalization. Lastly the factors of production has its components such as oil price and labor are the airbus factors of production.

Table.1

Supply and Demand for Air Transport (AIRBUS)

Globalization Demographic Liberalization Factors of production

1. Gross Domestic Product Geographical Location Government Policy around the open sky Oil Price

2. Emerging Economic Local Economic China’s Belt Labor

3. Wealth effect Social media

4. Evolution of Airline Business Model Population Growth

& Tourism Growth

5. Evolution of Middle class No. of long hauls passenger

Similarly, the factors of Boeing can be categorized such as economic and income growth, service-based economics, as the components of Boeing globalization, travel and tourism as the Boeing demographical components, new airline business model and augmented demand as the Boeing component for liberalization are airport infrastructure investment and congestion, sustainable growth as the Boeing factors of productions.

Table.2

Supply and Demand for Air Transport (Boeing)

Globalization Demographic Liberalization Factors of production

1. Economic and income Growth Travel and Tourism New airline business model Airport infra-structure

2. Service based Economic Augmented Demand Congestion

Forecast for growth of Asia-Pacific in air travel over the next 20 years

Asia-Pacific

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