Tuesday, September 9, 2014

Is The Boeing China Report Too Soft Or Too Hard.

Rnady Tinseth Boeing Marketing VP, recently made a forecast on China Airplane needs over the next 20 years.

Via Randy's Blog:

Over the next 20 years, we project China will need 6,020 new commercial airplanes valued at $870 billion. That accounts for more than 16 percent of the total global demand in terms of both new deliveries and market value.
image/photo
Some say this is too soft of a number since it does not take into account fleet renewals over the course of time. I personal cannot fathom not compiling in its forecast a variable for renewal as some kind of percentage occurring every year in the math model. Here is what IBA Had To Say.

IBA Calls Boeing Forecast For New Aircraft In China 'Too Conservative'


David Yu, IBA’s Regional Director - China, comments: “Whilst the new policies will stimulate growth throughout the region, it is also important to consider that over 900 aircraft are expected to be retired over this period. According to JetData, IBA’s commercial aircraft database, the current Chinese fleet is composed of over 2,400 aircraft, with an average age of 7.8 years. With a current outstanding backlog comprising 42 A320 family aircraft, 35 A330 aircraft, 24 A350 aircraft, 87 737 family aircraft, six 747 aircraft, 50 777 aircraft and 22 787 family aircraft, coupled with the predicted aviation industry growth over the next 20 years, there will be an abundance of opportunities created for the supply chain, and especially for local aircraft leasing companies who have steadily grown over the last five years. At present, 34% of the current fleet is on lease.” 
IBA sees significant opportunities for experienced support from global aviation consultancy companies to provide a range of services to the Chinese airlines, as well as lessors, investors and lenders who will finance the deliveries. Owen Geach, IBA’s Commercial Director explains: “The Chinese Government and many leading operators are engaging with expert advisors who have experienced the complex organisational and financial structures that such fast growth demands. As an independent adviser in the financial sector, IBA is aiding the management of new order delivery processes and works with stakeholders to create sustainable growth as the market expands both in terms of regional rates and in the number of aircraft. The Chinese aviation sector will need financing, so lenders, lessors and export credit agencies will seek asset management and advisory services to protect their exposure.” 
------------------------------------------------
Indices Check In Randy's Number and the IBA Statement.
All forecast take into account a seasonal affect on its mathematical projections. This seasonality will try to replicate affects of economy, demand and/or fleet retirements. Without knowing how Boeing compiled the seasonality factors it would be difficult to understand how Randy's people or the IBA reached its own conclusions. However, most forecast try to error on the side of conservatism, not to over exagerate a prediction. It is important when relaying a financial outlook for the industry, by not leading those who will be influenced on your remarks, with a large presumption for that outlook.