Demand Solid In The 70-130+ Seat Segment

Embraer has released its 2016-2035 Market Outlook, which details forecasted deliveries of new aircraft over the next 20 years. The company projects market demand for 6,400 new jets in the 70-130+ seat capacity category (2,300 units in the 70-90 seat segment and 4,100 units in the 90-130+ seat segment), worth $300 billion, by 2035.

The global 70-130+ seat jet fleet in service will increase from 2,670 aircraft in 2015 to 6,690 by 2035, the fastest growing segment among all aircraft seat capacities. Market growth will drive 63% of total demand and the remaining 37% will be delivered to replace aging aircraft.

System-wide demand for air transport — measured in revenue-passenger kilometers (RPKs) — is expected to grow on average at 4.7% annually by 2035, fueled by stronger domestic demand in Advanced Economies and improvements in the macro environment in a number of distressed economies in Emerging Markets.

While region-specific outlooks may vary considerably, globally, the prospect for growth remains bright over the next 20 years driven by a gradual move from a share-driven market strategy to one of disciplined capacity growth with a commitment to strong earnings and return on invested capital.

Oil prices will continue to play an important role in the evolution of air passenger traffic and the deployment of aircraft capacity in the coming years. "Apart from the obvious near-term positive effect on airline balance sheets, the low price of oil may exacerbate the overcapacity problem by tempting airlines to stimulate demand with fuel cost pass-through. Greater control in matching aircraft capacity to market demand will be an ever-present strategy to keep revenues ahead of costs over the long run," said John Slattery, President & CEO, Embraer Commercial Aviation.

Sound financial performance via higher profits and strong non-fuel cost discipline is one of the main pillars to long-term sustainability. Right-sized aircraft call for a new, smarter approach that maximizes opportunities and optimizes revenues and returns with a more prudent solution to seek out untapped opportunities and to increase capacity and flight frequency, while preserving unit revenues.

"The E-Jets lie at the heart of the 70-130+ seat segment. As the most efficient family of aircraft in the segment, they are perfectly positioned to maximize profitability for both airlines and leasing companies," Slattery said.

(Source: Embraer news release. Images from file)

FMI: www.embraer.com