Boeing riding high as air travel booms

Boeing says it delivered more than 700 planes last year and is on track to do the same this year. Photo / Getty Images

Plane-maker says demand from emerging markets and need for smaller, more efficient jets boosting market.

Boeing says it is benefiting from unprecedented profitability among airlines.

The plane-maker said in the past five years airline profits had been around US$59 billion ($87 billion), with over half of that in the last year. This compared to no accumulated profits at all from across the entire commercial aviation sector for close to a century of flying.

Boeing managing director of marketing for the Asia-Pacific and India, John Schubert, said in the past year airlines had saved about US$40 billion in fuel costs.

"They're paying back their investors, they're buying new products and investing in themselves after a struggle of decades," Schubert said.

During the past five years there had been "tremendous growth" around the world.

"We've seen 6 per cent passenger growth in terms of revenue passenger miles, which is above the trend of the last 30-40 years [where] we've seen 5 per cent growth per year, and we project about 5 per cent going forward," Schubert said on the sidelines of the Pacific Asia Travel Association conference in Auckland.

Emerging markets were driving growth of airplane manufacturing and Boeing delivered more than 700 planes last year.

"We'll do the same this year, which are about two a day." Gross domestic product growth in China, India and Southeast Asia would be between 4.6 per cent and 6.4 per cent over the next 20 years according to projections Boeing uses.

Growth in Oceania was 2.6 per cent which was more in line with North America, Japan and more mature markets.

Schubert said the average airplane size was continuing to come down.

"This has driven our product strategy over the years, this is why we never built an A380, we improved the 747 to compete in that space, but we recognise its not a huge growth market."

Airlines had a choice of meeting this air travel growth with more frequencies and more non-stop markets, which is what most had done.

"They've met the growth not with bigger airplanes and again this drives our product strategy and this is why we build 787s and this is why we built the 777," he said.

With a 787 airlines can fly with just over 200 seats for 7000 nautical miles with lower trip cost than airplanes that were bigger in the past.

"It's economically opened up smaller cities to fly direct. You see that with Jetstar, you'll see it with Air New Zealand as they continue to expand in new markets. People generally don't want to go New York to London; they want to go London to Cleveland, Ohio, now they go direct it's economical."

Although most airlines he had studied wanted to fly smaller aircraft to a wider range of destinations. An exception was Emirates which has built up a huge fleet of Airbus A380s, although Schubert added they also have around 160 Boeing 777s.

"They've been able to make it work - 80 per cent of the world's traffic is within eight and a half hours of Dubai."

Schubert said Airbus was a strong competitor.

The competition has always been intense but in the last 15 to 20 years it had been very intense.

"They're a good competitor, they make good airplanes."

Boeing's 737s and Airbus's A320s had about 50-50 market share.

Production of the next model 777, the 777X was due to start in 2020.

Schubert said with continued 5 per cent growth in air travel there was also a challenge with infrastructure.

"You've got to have 5 per cent growth in hotels, you've got to have 5 per cent growth [in] airport movements and if you don't you're not keeping up and it's the same with airlines," Schubert said.