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CAEPSG.20082.IP.02.3.en.doc

COMMITTEE ON AVIATION ENVIRONMENTAL PROTECTION (CAEP)

STEERING GROUP MEETING

Seattle, 22 to 26 September 2008

Agenda Item 3: Forecasting and Economic Analysis Support Group (FESG)

FESG CAEP/8 TRAFFIC AND FLEET FORECASTS

(Presented by the FESG Rapporteurs)

SUMMARY

This report presents the FESG CAEP/8 traffic and fleet forecasts developed

for passenger and cargo services over the period 2006 to 2036. It also outlines

the methodology, the assumptions and the inputs used to develop the forecasts,

including a description of the approach used to add a 10-year estimate to the

20-year based forecast, to develop the aircraft retirement curves and toconduct the sensitivity analyses around the forecasts.

1. INTRODUCTION

1.1 At the CAEP/7 meeting held in Montreal (Canada) in February 2007, the FESG was assignedseveral tasks, including the task to produce a new traffic and fleet forecast over a 30-year time horizon 1.

Based upon the discussions that took place at that meeting, it was concluded that the forecast had to be

available by the end of 2007 to allow for all the CAEP-related work requiring the FESG forecast to be

completed within the CAEP/8 cycle.

1.2 At its first meeting held in Toulouse (France) in May 2007, the FESG has formalised a task groupto carry out the task of developing the new forecast for CAEP/8: the Forecast Task Group (FTG). The

FTG is composed of forecasting experts from ICAO, (aircraft and engine) manufacturers, government aswell as airlines and airports representatives.

1.3 In preparation for the update of the forecast, the FESG had prepared in CAEP/7 a documentoutlining the methodology to be used to develop the new air traffic and fleet mix forecasts, including a

1 Ref: [CAEP/7 WP/68]. Final Report of CAEP/7 held in Montreal from 5 to 16 February 2007. Appendix F. Forecast and Economic Analysis

FESG, Work Items, p. 4F-1. Task F.01. 1).

International Civil AviationOrganization

INFORMATION PAPER

CAEP-SG/20082-IP/0221/08/08

English only


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description of the method to add a 10-year estimate to the 20-year base forecast, and to conduct a

sensitivity analysis around the forecast. This document was submitted as an information paper to

CAEP/72. The CAEP/8 traffic and fleet forecasts have been developed following mainly this

methodology.

1.4 Past FESG forecasts3 were developed solely for the scheduled operations of commercial civilaviation aircraft4. In response to a request made by the MODTF5 to take into account non-scheduled

operations as well, FESG has included charter flights in the development of the CAEP/8 forecast.

However, other non-scheduled operations (that is general aviation and military operations) have not been

included.

1.5 In addition, past FESG forecasts did not comprise aircraft with less than 20 seats. As a number ofengines considered in the analysis of the NOX stringency options for CAEP/8 are fitted to these aircraft, at

the Steering Group meeting held in Zurich (Switzerland) in November 2007, FESG was asked to reflect

this category of aircraft in its analysis. The MODTF indicated that a forecast was needed for these aircraft

in order for the environmental goals to be developed.

1.6 Furthermore, as significant growth has been observed in business aviation in recent years (interms of number of flights) and sustained growth is expected in this segment of general aviation, FESG

has also been asked to try to develop a forecast for business jets6.

1.7 Since the last Steering Group meeting7, the FESG has completed the development of the CAEP/8traffic and fleet forecasts (both for passenger and cargo services). The forecasts cover an overall time

horizon of 30 years. New aircraft retirement curves have been developed and sensitivity analyses were

conducted around both the passenger and freighter forecasts. As requested, a forecast has also been

developed for aircraft with less than 20 seats. Finally, to ensure the transparency and the reproducibility

of the forecasts, the methodology, the inputs as well as the assumptions used in the development of the

CAEP/8 traffic and fleet forecasts have been documented.

1.8 The forecast results as well as the assumptions and inputs used in the development of the FESGCAEP/8 forecasts were passed on to the MODTF at the beginning of the summer 2008.

1.9 The reconciliation8,9 of the 2006 baseline of the adjusted OAG (Official Airline Guide) databaseused in the development of the FESG CAEP/8 forecast and the MODTF Common Operations Database

2 Ref. Report of the FESG Forecast Task Group, [CAEP/7-IP/3] submitted to the CAEP/7 meeting held in Montreal (Canada), February 5-16,

2007.3 Forecasts developed in CAEP/4, CAEP/5 and CAEP/6.4 Defined as aircraft operated by airlines.5 Former WG2 TG2 (WG2 Operations, TG2 Modelling and Assessment) established as the Modelling and Database Task Force [MODTF]

under the CAEP/8 structure.6

The use of the wording scheduled and non-scheduled operations of commercial civil aviation aircraft to describe the universe covered by theFESG forecast has generated some issues (at the Steering Group meeting held in Zurich, (Switzerland) in November 2007) as it is believedthat some business aviation could fall under this definition of the universe. In the context of the FESG forecast, commercial civil aviation

aircraft is defined as aircraft flown by airlines, while business aviation is considered, as in many countries, as a segment of general aviation.7 Held in Zurich (Switzerland), November 26-30, 2007.8 In response to a request made by the MODTF at the beginning of the CAEP/8 cycle, the FESG Forecast Task Group evaluated the possibility

of using the MODTF Common Operations Database (COD) in the development of the CAEP/8 forecast (instead of the Official Airline Guide

(OAG) database used in the development of past FESG forecasts). After reviewing a sample of the COD, the FESG FTG came to the

conclusion that it would not be possible to make the CAEP/8 forecast available in early 2008 if the COD was to be used. Ref. [CAEP-

SG/20071-IP/1] Position Paper on the Use of the MODTF Common Operations Database in the Development of the FESG CAEP/8Forecast. Information paper submitted at the Steering Group meeting held in Zurich (Switzerland) on November 26-30, 2007. As the Steering

Group was concerned with the possible gaps and inconsistency that might be generated by the use of two databases (OAG/COD) the

meeting agreed that it was very important to understand the differences resulting in the use of these two databases and identify areas wherereconciliation was needed. The FESG and MODTF were therefore jointly tasked to examine the issue. Ref. [CAEP-SG/20071-SD/1]

Summary of Discussions and Decisions of the First Meeting of the Steering Group, Monday, 26 November 2007, p.5. paras 4.7 and 4.8.


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(COD) has been initiated with the delivery of the forecast. FESG and MODTF have been working in

coordination towards the completion of this task before the fall.

1.10 This report presents the FESG CAEP/8 traffic and fleet forecasts developed for passenger andcargo services over the period 2006 to 2036. The forecast results are summarized in Section 2. The

methodology, assumptions and inputs used in the development of the forecasts are outlined in Section 3.

For ease of reference a table of contents has been appended on page 4.

9 Ref. FESG CAEP/8 work programme. Task F.06. Examine and reconcile, if appropriate, the differences between the 2006 baseline data in

the MODTF Common Operations Database (COD) and the baseline data in the FESG fleet forecast.


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1. INTRODUCTION

2. CAEP/8 TRAFFIC AND FLEET FORECASTS

2.3 Passenger Traffic Forecast

2.4 Passenger Fleet Mix Forecast

Passenger aircraft retirement curves

Issue with the forecast for the 20-50 seat category

Fleet growth and replacement

2.5 Forecast of Aircraft with less than 20 seats

2.6 Freighter Forecast

Freighter traffic forecast

Freighter fleet forecast

3. METHODOLOGY, INPUTS AND ASSUMPTIONS USED IN

THE DEVELOPMENT OF THE FESG CAEP/8 FORECAST


Methodology used to develop the passenger traffic forecast

Inputs and assumptions

Process followed to develop the global air traffic (demand) forecast

Sensitivity analysis around the passenger traffic forecast


Methodology used to develop the passenger aircraft fleet mix forecast


Process followed to develop the passenger aircraft fleet mix forecast

3.6 Forecast of Aircraft with less than 20 Seats

2006 Year-end fleet

Scope of coverage

Forecasting approach

3.7 Freighter Forecast

Methodology used to develop the freighter forecast


Process followed to develop the freighter forecast

Sensitivity analysis around the freighter forecast

APPENDIX A Definition of the route groups and geographical areas used in the development of

the CAEP/8 forecastAPPENDIX B Assumptions underlying the passenger traffic forecasts by route group

APPENDIX C Detailed forecast of business jets

APPENDIX D Breakdown of the conversions and new freighter fleet

Freighter forecast by stage length and trips/day

APPENDIX E Stored passenger aircraft as of August 2007

APPENDIX F Airbus frequency/capacity split model

APPENDIX G Evolution of the turboprop fleet of aircraft with less than 20 seats operated by

commercial air carriers, 1990-2007

APPENDIX H List of FESG Forecast Task Group members


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2. CAEP/8 TRAFFIC AND FLEET FORECASTS

2.1 Air traffic and fleet forecasts form a basic requirement for the various analyses related to aviationenvironmental protection developed by CAEP working groups. Such analyses include the estimation of

engine emissions and of the population around the world airports affected by aircraft noise (by noise

level) as well as the economic and financial assessment of available policy options to limit or reduce the

impact of international civil aviation noise and emissions.

2.2 The traffic and fleet forecasts developed by FESG in support to the work of CAEP workinggroups for CAEP/8 are presented in the following sections. The FESG CAEP/8 forecast, developed both

for passenger and freight services, comprises the following elements:

Passenger traffic forecast Passenger fleet forecast Forecast of aircraft with less than 20 seats Freighter traffic and fleet forecast


2.3.1 The FESG consensus-based passenger traffic forecast is an unconstrained10 forecast that has beendeveloped over a 20-year time horizon (from 2006 to 2026). A 10-year estimate has been added to the 20-

year base forecast to extend the forecast time horizon to year 2036 (to cover an overall time horizon of 30

years).

2.3.2 The passenger traffic forecast, expressed in terms of average annual growth of revenue passenger-kilometres, has been developed for 23 major route groups. The main factors influencing the traffic growth

on each of these route groups are described in Appendix B of this report.

2.3.3 The FESG CAEP/8 passenger traffic forecast pertains solely to the scheduled and charteredoperations of commercial civil aviation aircraft, defined as aircraft operated by airlines.

2.3.4 For presentation purposes, the forecast has been broken down in two 10-year periods (plus theextension). A sensitivity analysis has also been conducted around the passenger traffic forecast providing

high and low scenarios of passenger traffic growth.

2.3.5 The total international and domestic passenger traffic forecasts are presented in Table 1,expressed in terms of average annual growth rate, and in Table 2, in revenue passenger-kilometres. In the

most likely scenario (central forecast), the world passenger traffic, expressed in revenue passenger-

kilometres, is expected to grow at the average annual growth rate of 4.9 per cent over the forecast period

and at 4.4 per cent over the extension period. These growth rates fall to 4.2 per cent and 3.6 per cent

respectively under the low scenario (pessimistic) and increase to 5.4 and 4.8 per cent respectively under

the high scenario (optimistic).

2.3.6 Tables 3, 4 and 5 illustrate the detailed forecast by major route group for the most likely (centralforecast), high (optimistic) and low (pessimistic) scenarios respectively.

10 That is, there are no physical or operational constraints that limit the growth of traffic at airports (implicitly assuming that sufficient investment

is made over time in the infrastructure (e.g. airports and air traffic management systems), the technology, the operational measures, etc. to

accommodate the traffic growth).


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Table 1. CAEP/8 Passenger Traffic Growth Rate Forecast[1]

Central Forecast and Sensitivity Analysis

Most likely, High and Low Scenarios

2006 2016 2026 2006 2006

Scenario / Sector -2016 -2026 -2036 -2026 -2036

High Scenario (Optimistic) [% growth]

Total International 5.9 5.5 5.0 5.7 5.5

Total Domestic 5.0 4.7 4.4 4.9 4.7

Global [International + Domestic] 5.5 5.2 4.8 5.4 5.2

Most Likely Scenario (Central Forecast)


Total Domestic 4.5 4.3 4.1 4.4 4.3


Low Scenario (Pessimistic)

Total International 4.8 4.4 4.0 4.6 4.4Total Domestic 3.6 3.2 2.8 3.4 3.2


Table 2. CAEP/8 Passenger Traffic Forecast Central Forecast and Sensitivity Analysis

Most likely, High and Low Scenarios

Revenue passenger-kilometres [RPKs]

Actual CAEP/8 Forecast

Scenario / Sector 2006 2016 2026 2036

High Scenario (Optimistic) [billions]

Total International 2 682.6 4 744.9 8 075.8 13 216.7

Total Domestic 1 588.4 2 585.0 4 098.8 6 314.1

Global [International + Domestic] 4 271.0 7 329.8 12 174.6 19 530.8


Total International 2 682.6 4 551.3 7 416.1 11 592.6

Total Domestic 1 588.4 2 474.3 3 782.5 5 657.2


Low Scenario (Pessimistic)

Total International 2 682.6 4 276.8 6 559.6 9 672.6Total Domestic 1 588.4 2 257.2 3 091.3 4 074.3


[1] Average annual growth rate of revenue passenger-kilometres.


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Table 3. CAEP/8 Passenger Traffic Growth Rate Forecast[1]

Most likely scenario (Central forecast)

2006 2016 2026 2006 2006

Sector / Route Groups -2016 -2026 -2036 -2026 -2036

International [% growth]1. North Atlantic 4.8 4.3 3.8 4.5 4.2

2. South Atlantic 5.8 5.6 5.3 5.7 5.6

3. Mid Atlantic 5.8 5.3 4.8 5.5 5.2

4. Transpacific 6.4 5.6 4.9 6.0 5.6

5. Europe Asia/Pacific 5.8 5.3 4.8 5.5 5.2

6. Europe Africa 5.5 5.5 5.5 5.5 5.5

7. EuropeMiddle East 6.4 5.6 4.9 6.0 5.6

8. North America South America 5.4 4.6 3.9 5.0 4.6

9. North America Central America and Caribbean 4.7 4.7 4.7 4.7 4.7

10. Middle EastAsia / Pacific 6.5 5.7 5.0 6.1 5.7

11. Intra Africa 6.0 6.0 6.0 6.0 6.012. Intra Asia/Pacific 6.3 5.8 5.3 6.0 5.7

13. Intra Europe 4.3 3.8 3.3 4.0 3.7

14. Intra Latin America 6.0 6.0 6.0 6.0 6.0

15. Intra Middle East 5.8 5.3 4.8 5.5 5.2

16. Intra North America 3.8 3.3 2.8 3.5 3.2

17. Other International Routes 5.2 5.2 5.2 5.2 5.2


Domestic

18. Africa 5.8 5.6 5.3 5.7 5.6

19. Asia/Pacific 7.4 6.6 5.9 7.0 6.6

20. Europe 3.8 3.3 2.8 3.5 3.2

21. Latin America 6.1 5.9 5.6 6.0 5.9

22. Middle East 4.6 4.4 4.1 4.5 4.4

23. North America 3.0 2.5 2.0 2.7 2.4

Total Domestic 4.5 4.3 4.1 4.4 4.3




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Table 4. CAEP/8 Passenger Traffic Growth Rate Forecast [1] High Scenario (Optimistic)

2006 2016 2026 2006 2006


International [% growth]

1. North Atlantic 5.0 4.5 4.0 4.7 4.5

2. South Atlantic 6.5 6.3 6.0 6.4 6.3

3. Mid Atlantic 5.9 5.4 4.9 5.6 5.3

4. Transpacific 6.5 5.7 5.0 6.1 5.7


6. Europe Africa 6.3 6.3 6.3 6.3 6.3






13. Intra Europe 4.7 4.2 3.7 4.4 4.2






Domestic

18. Africa 5.9 5.7 5.4 5.8 5.7

19. Asia/Pacific 7.5 6.7 6.0 7.1 6.7

20. Europe 4.5 4.0 3.5 4.3 4.021. Latin America 6.7 6.5 6.2 6.6 6.5

22. Middle East 5.6 5.4 5.1 5.5 5.4

23. North America 3.6 3.1 2.6 3.3 3.1

Total Domestic 5.0 4.7 4.4 4.9 4.7




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Table 5. CAEP/8 Passenger Traffic Growth Rate Forecast [1] Low Scenario (Pessimistic)

2006 2016 2026 2006 2006


International [% growth]1. North Atlantic 4.0 3.5 3.0 3.7 3.5

2. South Atlantic 4.4 4.2 3.9 4.3 4.2

3. Mid Atlantic 4.9 4.4 3.9 4.7 4.4

4. Transpacific 5.8 5.1 4.3 5.5 5.1


6. Europe Africa 4.9 4.9 4.9 4.9 4.9






13. Intra Europe 3.3 2.8 2.3 3.1 2.8






Domestic

18. Africa 5.5 5.3 5.0 5.4 5.3

19. Asia/Pacific 5.5 4.7 4.0 5.1 4.7

20. Europe 2.7 2.2 1.7 2.5 2.2

21. Latin America 5.1 4.9 4.6 5.0 4.9

22. Middle East 4.2 3.9 3.7 4.0 3.9

23. North America 2.6 2.1 1.6 2.3 2.1

Total Domestic 3.6 3.2 2.8 3.4 3.2




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2.4.1 The FESG CAEP/8 passenger fleet mix forecast has been developed over a 30-year time horizon(2006 to 2036) using the corporate model of Airbus, specially calibrated with assumptions and inputs

provided by the FESG11.

2.4.2 The passenger traffic forecast is an input in the development of the fleet mix forecast. A numberof key assumptions have also been made regarding among others, the generic seat categories, the

evolution of the load factors and the average aircraft utilization over the forecast time horizon.

2.4.3 The FESG CAEP/8 passenger fleet mix forecast has been developed for nine (9) generic seatcategories: 20-50, 51-100, 101-150, 151-210, 211-300, 301-400, 401-500, 501-600, and 601-650.

Aircraft with less than 20 seats have been treated separately.

2.4.4 A maximum load factor has been established for each of the 23 defined route groups. It isexpected that load factors will continue to increase as air carriers enhance the management of the capacity

offered. The overall maximum has been set at 85 per cent.

2.4.5 The average daily aircraft utilization of the world scheduled commercial air carriers in the year2006 is estimated at 9.4 hours. This average utilization had been increasing in the past but not steadily. It

has been assumed that air carriers would continue to increase their aircraft utilization by 5 per cent by the

year 2026. The pace of improvement will however flatten out over the 2026-2036 period at the end of

which the average aircraft utilization is expected to be 6 per cent higher than the 2006 average.

2.4.6 The CAEP/8 passenger fleet mix forecast by seat category is presented in Table 6 for the mostlikely scenario. The fleet of passenger aircraft is expected to grow by an average annual rate in the range

of 3.0 to 3.2 per cent between 2006 and 2036. As a result, the size of fleet will almost double by 2026 and

the size of the 2036 fleet is expected to be more than 2.5 times that of 2006.

Table 6. CAEP/8 Passenger Fleet Mix Forecast by Seat Category


Seat category 2006 2016 2026 2036

20-50 [1] 4 053 2 975 3 042 3 643

51-100 1 813 4 152 5 697 7 650

101-150 5 896 7 542 9 309 11 445

151-210 3 984 6 294 8 593 11 375

211-300 2 003 3 040 4 446 6 499

301-400 824 1 314 2 048 3 261

401-500 159 405 950 1 723

501-600 41 120 307 938

601-650 65 394 969

Total 18 773 25 907 34 786 47 503

[1] The issue with the decline observed in this seat class is discussed in paragraph 2.4.11.

11 In 2007, Airbus has extended the capabilities of its model to convert traffic into a fleet over a 30-year time horizon. Therefore there was no

need to develop an approach (based on expert judgment) to extend the fleet forecast time horizon.


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2.4.7 Although the fastest growth is expected to be observed in the fleet of aircraft with more than 400seats, their share in the total fleet (in terms of number of aircraft) will be about 5 and 7.5 per cent in 2026

and 2036 respectively. The lowest growth is expected to be in the 101-150 seat category that will still

represent 27 and 24 per cent of the total in 2026 and 2036 respectively. The fleet of aircraft in the 51-100

seat category is expected to grow at an average annual rate of about 5 per cent up to 2036, making the 20-

50 seat-category shrink slightly from its 2006 size.

Passenger Aircraft Retirement Curves

2.4.8 Four (4) retirement curves have been developed to project the retirement of the in-servicepassenger aircraft fleet. One for each of the following technologies:

Newer generation aircraft (Narrow-body two person flight crew aircraft) Wide body aircraft (excluding MD-11 aircraft) Boeing 707 and 727 aircraft [B707/B727]12 McDonnell Douglas MD-11 aircraft

2.4.9 These retirement curves are shown in Figure 1.

2.4.10 Figure 1 shows that the wide-body aircraft are retired from passenger service faster than thenarrow-bodies. About 60 per cent of the narrow-body aircraft remain in passenger service for 30 years

compared to a little more than 10 per cent for the wide-bodies. Although, the Boeing 707 and 727 average

life in passenger service is longer than that of the other wide-bodies, it is shorter than that of the narrow-bodies. For simplicity purposes and due to their declining number, it has been assumed that the retirement

of MD-11 of passenger service was following almost a linear trend.

Issue with the forecast for the 20-50 seat category

2.4.11 In Table 6, there is an abrupt decline in the number of aircraft in the 20-50 seat category from2006 to 2016, from 4 053 to 2 975 aircraft. This can be explained by the following two factors:

12Narrow body three person flight crew aircraft.

Figu re 1. CAEP/ 8 FESG Passenger A ircraft Ret iremen t (Sur vivo r) Curves

0%10%20%30%40%

50%60%70%80%90%

100%110%

0 5 10 15 20 25 30 35 40 45 50

Aircraft Age (years)

Percen

tRemainingin

PassengerService

Narrow Body aircraft

(2-man flt crew)Wide Body Aircraft(Less MD-11)

B707 / B727

MD-11


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The use of aircraft in the 20-50 seat category by air carriers is limited. As traffic grows, aircarriers switch to bigger aircraft as reflected in the fast growth of the 51-100 seat category.

The existing fleet remained in passenger service for a longer period of time than usual, asillustrated in Figure 2 due to the non-availability of replacement aircraft.13

Figure 2. Retirem ent of the 20- 50 seat-category aircraft

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

0 5 10 15 20 25 30 35 40 45 50


PercentRemainingin

PassengerService

Narrow Body aircraft (2-man flt crew)Wide Body Aircraft (Less MD-11)B707 / B727MD-11Russian Built TP/Jet aircraftAircraft with 20-50 seats

Fleet growth and replacement

2.4.12 The number of passenger aircraft remaining in service over the forecast time horizon wasdetermined by applying the retirement curves to the year-end 2006 in-service fleet. Figure 3 illustrates the

results obtained.

2.4.13 A total of about 11 500, 26 300 and 44 500 new aircraft will be needed by 2016, 2026 an 2036respectively, between 60 and 65 per cent of which will be for growth and the remainder for replacement.

This represents an average annual number of new aircraft of about 1 150, 1 480 and 1 815 aircraft for

each decade respectively.

2.4.14 Of the year-end 2006 fleet of aircraft in service, about 77, 45 and 16 per cent are expected toremain in passenger service in the 2016, 2026 and 2036 respectively.

13 Although it was initially suggested to develop a specific retirement curve for aircraft in this seat category to address the issue, it did not turn

out to be feasible. On the one hand, aircraft retirement curves are developed by type of aircraft (technologies) not by seat category. On theother hand, the dispersion of the observations (data on retirements of aircraft in the 20-50 seat category) is too wide to allow for a curve to be

fitted into the scatter plot (Ref. Figure 2). Therefore, the decision was made not to make an adjustment to the retirement curves, simply to note

the issue.


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Figure 3 . Passenger Aircraf t Fleet Forecast Growt h and Replacement Cent ral Forecast

2.5 Forecast of Aircraft with less than 20 seats

2.5.1 FESG was asked to develop a forecast for aircraft with less than 20 seats. However, due to the

lack of information available on the operations of these aircraft, it has not been possible to develop aforecast at the same level of details as for the other seat categories.

2.5.2 The forecast was developed over the same time horizon as the other forecasts (2006 to 2036) forthe number of departures, hours flown and fleet in service.

2.5.3 FESG had initially considered developing a forecast for the following two types of aircraft:

Turboprops and piston aircraft(aircraft operated by airlines commercial civil aviation operations)

Business jets (business aviation)

2.5.4 Due to the lack of information on aircraft with less than 20 seats used for commercial civilaviation operations (i.e. aircraft operated by airlines) and the non-availability of global forecasts forturboprop and piston aircraft, it has not been possible to produce a forecast for these aircraft.

2.5.5 The impact of excluding these aircraft from the scope of coverage of the forecast is not believedto be critical (due to their declining number and typically short-range operations) and their contribution to

global emissions, not likely to be significant.

2.5.6 The FESG business jet forecast has been developed for 6 regions, assuming an average annualaircraft utilization of 400 hours and average trip length of 1.3 hours per aircraft movement.

Growth

3 037

8 480

14 41618 773

15 73610 293

4 357

28 730

16 014

7 133

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2006 2016 2026 2036

Number of passenger aircraft

34 787

25 906

Replacement

Retained in service

47 503


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2.5.7 The fleet forecast for business jet aircraft is presented in Table 714.

Table 7. CAEP/8 Forecast of aircraft with less than 20 seats

Forecast of Business Jet Aircraft - Fleet in service

Regions 2006 2016 2026 2036

Africa 248 429 807 1 445

Asia/Pacific 390 980 2 711 5 334

Europe 1 736 3 631 7 100 11 566

Middle East 221 296 556 906

Latin America and Caribbean 1 178 2 190 4 117 6 706

North America 10 273 12 872 17 642 23 709

Total 14 046 20 398 32 933 49 666

2.5.8 Freighter Forecast

2.5.9 The freighter traffic and fleet forecasts were developed using a modified version of themethodology Boeing uses to produce its own corporate forecast. The development of the freighter

forecast is a process that is reliant on the output of the passenger fleet mix forecast15.

Freighter traffic forecast

2.5.10 The FESG CAEP/8 freighter traffic forecast has been developed over the same time horizon asthe passenger forecast (from 2006 to 2036). High and low scenarios of growth have also been developed.

2.5.11 In contrast to the passenger forecast (developed by route groups), the freighter forecast has beendeveloped for 6 regions16. The forecast, expressed in revenue tonne-kilometres, is presented in Table 8.

Table 8. CAEP/8 Freighter Traffic Forecast by Region of domiciliation[1]


Revenue Tonne-Kilometres [millions]

Regions 2006 2016 2026 2036

Africa 3 321 6 107 10 823 19 657

Europe 46 833 75 681 120 115 204 542

Middle East 9 834 21 791 38 769 69 597

Latin America 5 035 9 258 16 408 29 008

North America 61 315 105 298 176 068 305 167

Asia 58 553 121 865 240 378 434 586Total 184 890 340 000 602 560 1 062 557

[1] Cargo carried in passenger services lower-hold and freighter services main deck.

14 The detailed forecast of business jet aircraft (less than 20 seats), covering the flight hours and the number of aircraft movements is appended asAppendix C.

15 That is, for the number of passenger aircraft available for conversion into freighters as well as the aircraft cargo hold capacity.16 The freighter traffic forecast by stage length and trips per day for the central forecast, high and low scenarios is appended in Appendix D.


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2.5.12 The freighter traffic is expected to grow at an average annual growth of 6.0 per cent from 2006 to2036, and at a rate of 5.4 and 6.8 per cent for the low and high scenarios, respectively. Figure 4 illustrates

the growth of the world air cargo traffic for the most likely (central forecast), high (optimistic) and low

(pessimistic) scenarios.

Figur e 4. Freight er Traffic Forecast, 2006-2 036

Freighter fleet forecast

2.5.13 The CAEP/8 freighter forecast was developed using essentially the same seating categories (interms of aircraft size) as for the passenger forecast17. Assumptions have been made in regards to the load

factors and the retirement age of freighter aircraft.

2.5.14 The load factorof passenger aircraft lower-hold has been established at 33% and at 50-70% ofthe main deck for freighter.

2.5.15 The average retirement age of freighters (express and general freighters combined) has beenestablished at 40 years.

2.5.16 Tables 9 and 10 present the freighter fleet forecast for the most likely scenario by seat categoryand by region of domiciliation, respectively.

17 Aircraft within the less than 50 seat configuration (in terms of aircraft size) have been amalgamated into one seat category. In addition, it

should be noted that no freighter forecast was developed for aircraft having more than 600 seats.

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

2032

2034

2036

Low scenario

High scenarioBase forecast

Historical 5.6% growth per yea r

Forecast (Base)

6.1% growth per yea r over 20 years

6.0% for 30 years

Millions of Revenue Tonne-Kilometres


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Table 9. CAEP/8 Freighter Fleet Mix Forecast by Seat Category


Seat category 2006 2016 2026 2036


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Figure 5. Retained/ convert ed and new freighter f leet br eakdown


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CAEP-SG/20082-IP/02 - 18 -

3. METHODOLOGY, INPUTS AND ASSUMPTIONS USED IN THEDEVELOPMENT OF THE FESG CAEP/8 FORECAST

3.1 The development of the FESG forecast generates two main products: the production of a trafficforecast (demand side) for the whole world and of a fleet forecast (supply side), both for passenger and

cargo services.

3.2 To ensure the transparency and the reproducibility of the forecasts, every attempt has been madeto fully document and describe the inputs and various steps leading to the elaboration of the forecasts, that

is the data sources used, the underlying assumptions, the methodology and the results.

3.3 The inputs and assumptions used and the process followed to produce the traffic and fleetforecasts for CAEP/8, both for passenger and cargo services, are outlined in details in the following

sections.


Methodology used to develop the passenger traffic forecast

3.4.1 The FESG passenger traffic forecast is a consensus forecast, developed from forecasts producedby ICAO and the industry18. It is the agreed results of discussions and debates among the forecasting

experts within FESG.

3.4.2 In its previous forecast, FESG did not use an econometric air transport demand model. Thedevelopment of such a model to replace the current consensus approach was not considered an effective

use of the groups limited resources, considering the level of effort and the additional resources that

would be required. Past experience has shown that results obtained from this consensus method wereconsistent with actual experience to warrant using this approach.

3.4.3 In the development of the passenger traffic forecast for CAEP/8, FESG has therefore used asimilar consensus approach.

3.4.4 The following sections describe the inputs and assumptions required, and the process followed todevelop the global air traffic forecast (demand for passenger services) for CAEP/8.


3.4.5 The development of the global air passenger traffic forecast requires a number of inputs that havebeen either derived through a consensus process within FESG, obtained from existing databases or from

ICAO and (aircraft and engine) manufacturers. That is,

Base year Regions and/or route groups Base year traffic data by route group Forecasts of passenger traffic growth rates from other sources Forecast time horizon Method to add a ten-year estimate to the consensus-based twenty-year forecast

18 ICAO forecast of the global demand for air services; Industry aircraft and engine manufacturers forecasts of passenger and freight traffic

growth rates for the world and major route groups.


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Forecast break down and extension

3.4.6 Base year. The base year used in the development of the CAEP/8 forecast is the year 2006. It hasbeen determined, through a consensus process within FESG, based on the availability of the year-end data

at the moment the forecast was produced and the representational character of the most recent year (for

which year-end data was available) in terms of aviation industry operations.

3.4.7 Regions and/or route groups. In the development of previous FESG forecasts, twenty-two (22)route groups were used: sixteen (16) major international route groups and six (6) major domestic regional

route groups. As significant growth has been observed on the route group Other International Routes,

the decision was made to further break down this route group to isolate the international sub-route for

which the strongest growth in traffic had been observed. As a result, the international sub-route Middle

East Asia / Pacific was isolated as a new major international route.

3.4.8 The CAEP/8 passenger traffic forecast (measured in revenue passenger-kilometres) has thereforebeen developed for twenty-three (23) major route groups: seventeen (17) international route groups and

six (6) domestic regional route groups. The definitions19 of these route groups are the ones used by ICAO.

International Domestic

1. North Atlantic 18. Africa

2. South Atlantic 19. Asia/Pacific

3. Mid Atlantic 20. Europe

4. Transpacific 21. Latin America

5. EuropeAsia/Pacific 22. Middle East

6. EuropeAfrica 23. North America

7. EuropeMiddle East

8. North AmericaSouth America

9. North AmericaCentral America and Caribbean

10. Middle East Asia / Pacific

11. Intra Africa

12. Intra Asia/Pacific

13. Intra Europe

14. Intra Latin America

15. Intra Middle East

16. Intra North America

17. Other International Routes

3.4.9 Base year traffic data by route group. The passenger traffic (measured in revenue passenger-kilometres [RPK]) for the base year (2006) for each defined route group has been derived by applying the

average passenger load factors20

by route group provided by ICAO (for that year) to the available seat-kilometres [ASK] retrieved from the adjusted OAG database 21.

3.4.10 The base year passenger traffic by major route group, as well as the available seat-kilometres,used in the development of the CAEP/8 traffic forecast are presented in Table 11.

19 The definition of the route groups is appended in Appendix A.20 The aircraft load factor is the ratio of the revenue passenger-kilometres to the available seat-kilometres on a given flight.21 Please refer to paragraph 3.5.5 and those following for further information on the adjusted OAG database.


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Table 11. Base Year Passenger Traffic and Available Seat-kilometres

2006

Sector / Route Groups Actual RPK ASK

International [billions]

1. North Atlantic 454.4 563.8

2. South Atlantic 82.9 98.4

3. Mid Atlantic 58.6 72.9

4. Transpacific 312.3 391.3

5. Europe Asia/Pacific 371.2 461.1

6. Europe Africa 129.4 173.0

7. EuropeMiddle East 73.2 104.0

8. North America South America 49.9 66.3

9. North America Central America and Caribbean 93.9 127.7

10. Middle East Asia / Pacific 108.9 140.9

11. Intra Africa 19.5 32.7

12. Intra Asia/Pacific 304.4 427.0

13. Intra Europe 484.5 710.4

14. Intra Latin America 27.5 39.3

15. Intra Middle East 19.6 29.6

16. Intra North America 35.0 49.3

17. Other International Routes 57.4 75.5

Total International 2 682.6 3 563.3

Domestic

18. Africa 24.5 33.2

19. Asia/Pacific 396.2 546.5

20. Europe 180.2 259.3

21. Latin America 77.5 117.7

22. Middle East 19.7 25.3

23. North America 890.2 1 122.5

Total Domestic 1 588.4 2 104.5

Global [International + Domestic] 4 271.0 5 667.8

RPK Revenue passenger-kilometres. ASK Available seat-kilometres.

3.4.11 Forecasts of passenger traffic growth rates from other sources. Forecasts of passenger traffic

growth rates by the twenty-three (23) major route groups were obtained from ICAO and (aircraft andengine) manufacturers (that is, Airbus, Boeing, General Electric, Pratt & Whitney and Rolls-Royce)22.

3.4.12 Forecast time horizon and methodology to add a ten-year estimate to the twenty-year baseforecast. At the end of the CAEP/6 cycle, the (adequacy/relevance of) decision to develop the CAEP

forecast over a 20-year time horizon was questioned. It was argued that although the costs resulting from

the implementation of new stringencies could be fully taken into account over a 20-year time horizon, it

22 Manufacturers specially rearranged their market forecasts to tally with the twenty-three (23) ICAO route groups.


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was not the case for the environmental benefits, as the latter take more time to realise. It was therefore

suggested to extend the forecast time horizon by an additional 10-year to fully capture these benefits.

3.4.13 However, practical considerations related to the approach used to develop the consensus trafficforecast restrict the ability of the FESG to produce a 30-year forecast. The different forecasts from which

the consensus traffic forecast is drawn all have a 20-year time horizon. This time horizon cannot be easily

changed by the different organizations producing the forecasts (i.e. ICAO and aircraft and engine

manufacturers) due to cost and data considerations. It was therefore decided to maintain the time horizon

of 20 years for the base forecast and to develop an approach to estimate an additional 10-year extension,

based on professional judgment.

3.4.14 Forecast time horizon and extension. The FESG CAEP/8 consensus-based traffic forecast wasdeveloped over a 20-year time horizon: from 2006 to 2026, and a ten-year estimate has been developed to

extend the forecast time horizon to year 2036.

3.4.15 Forecast break down and extension. For presentation purposes, it has been decided to breakdown the 20-year forecast time horizon into two ten-year periods: 2006-2016 and 2016-2026. The

forecast extension covers the period 2026-2036. Results of the FESG CAEP/8 forecast are thereforepresented for the years 2006, 2016, 2026 and 2036.

3.4.16 Methodology to add a ten-year estimate to the twenty-year base forecast. Several approaches(based on professional judgment) were considered to add a ten-year estimate to the 20-year base

passenger traffic forecast, such as:

Adopt for the 10-year extension an approach similar to the one used for the 20-year baseforecast, that is to develop consensus-based traffic forecast growth rates by route group (for

the period 2026-2036)

Extend the forecast time horizon based on GDP growth ratios.

3.4.17 While the first approach did not turn out to be feasible due to the unavailability of traffic forecastsby route group over the extension period23, the second approach was tested and was not found to generate

sensible results, as there was no maturity effect observed over time.

3.4.18 The decision was therefore made to apply a certain decline, in terms of percentage points, to theconsensus-based traffic growth rate forecast on a given route group to reflect the maturity effect. This

decline has been established on the basis of the expected evolution of the market over time, that is, on its

status (over the period 2006-2026) and the anticipation of how it will mature (over the period 2026-2036).

This decline has been applied to each decade (2006-2016, 2016-2026 and 2026-2036).

3.4.19 The table below shows the decline, in terms of percentage point, that has been applied by route

group to each ten-year period as well as to the forecast extension.

23 Since neither ICAO nor manufacturers produce forecast extending beyond 20 years.


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Percentage point of decline[Maturity effect]

Status of the marketPeriod: 2006-2026

Expected evolutionPeriod: 2027-2036

0 Flat No change expected

0.25 Developing market Developing market

0.50 Maturing market Maturing market

0.75 Developing market Maturing market

3.4.20 Applying these percentage points of decline to the consensus-based traffic growth rates (both forthe base forecast and the extension) by route group has allowed to introduce a variation in the maturity

factor from one decade to the other and to reduce gradually the traffic growth over the forecast time

horizon (and the 10-year extension).

3.4.21 The decline, in terms of percentage points, applied to each individual route group over each ten-year period (including the forecast extension) are presented in Table 12.

Table 12. Passenger Traffic Forecast. Forecast Breakdown and Extension to Year 2036Percentage point of decline applied by route group to each ten-year period

Percentage point

Status of the market of decline

Sector / Route Groups 2006-2026 2026-2036 [Maturity effect]

International

1. North Atlantic Maturing Maturing 0.50

2. South Atlantic Developing Developing 0.25

3. Mid Atlantic Maturing Maturing 0.50

4. Transpacific Developing Maturing 0.75

5. Europe Asia/Pacific Maturing Maturing 0.506. Europe Africa No Change 0.00

7. EuropeMiddle East Developing Maturing 0.75

8. North America South America Developing Maturing 0.75

9. North America Central America and Caribbean No Change 0.00

10. Middle East Asia / Pacific Developing Maturing 0.75

11. Intra Africa No Change 0.00

12. Intra Asia/Pacific Maturing Maturing 0.50

13. Intra Europe Maturing Maturing 0.50

14. Intra Latin America No Change 0.00

15. Intra Middle East Maturing Maturing 0.50

16. Intra North America Maturing Maturing 0.5017. Other International Routes No Change 0.00

Domestic

18. Africa Developing Developing 0.25

19. Asia/Pacific Developing Maturing 0.75

20. Europe Maturing Maturing 0.50

21. Latin America Developing Developing 0.25

22. Middle East Developing Developing 0.25

23. North America Maturing Maturing 0.50


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Process followed to develop the global air traffic (demand) forecast

3.4.22 A consensus process was used within FESG to define the traffic growth rates on major route

groups over the horizon of the forecast, through the following steps:

1. Estimate historical growth rates on each defined route group

2. Collect forecasts for each route group from various forecasting sources

3. Summarize forecasts and determine maximum and minimum growth for each route group

4. Discuss the forecast for each route group as well as the main underlying assumptions

5. Agree on a consensus forecast for each route group covering the forecast time horizon

including the intermediate years

6. Determine the resulting global traffic forecast

7. Document the forecast

3.4.23 The consensus-based traffic growth rate forecasts by major route group are presented in Table 13.

Sensitivity analysis around the passenger traffic forecast

3.4.24 This section describes how the sensitivity analysis around the consensus-based passenger trafficforecast was conducted.

3.4.25 The process by which the consensus traffic forecast is developed limits the number of inputsand/or assumptions that can be directly varied to perform a sensitivity analysis. Many of these key inputs

and assumptions (such as GDP, fuel price, etc.) are imbedded in the different forecasts used in the

consensus process.

3.4.26 After reviewing all the critical assumptions that have an influence on the forecast and evaluating

the practicability of varying them, the FESG came to the conclusion in CAEP/7

24

that the sensitivityanalysis around the forecast was to be conducted by varying the assumption on the passenger traffic

growth rates by major route. Varying these growth rates assumes an implicit variation of the exogenous

key variables (e.g. GDP, yield, etc.) leading to these growth rates.

3.4.27 The sensitivity analysis was conducted at the time the consensus-based traffic forecast wasdeveloped. It was decided to do low and high scenarios using respectively for each defined route group,

the minimum and maximum traffic growth rate forecasts used in the development of the consensus-based

traffic forecast. It should be noted that although the resulting distribution is not symmetrical, it reflects the

span of views (most pessimistic vs. most optimistic) expressed by forecasters regarding future traffic

growth on each market.

3.4.28 Figure 1 shows for each route group the spread of the low and high scenarios with respect to thecentral forecast. The traffic growth rates by route group used to conduct the sensitivity analysis aroundthe passenger traffic forecast are reported in Table 14.

24 Ref. Report of the FESG Forecast Task Group, [CAEP/7-IP/3] submitted to the CAEP/7 meeting held in Montreal (Canada), February 5-16,

2007.


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Table 13. CAEP/8 Passenger Traffic Growth Rate Forecast

Revenue Passenger-Kilometres CAEP/8 Pas

Actual CAEP/8 Forecast 2006 2

Sector / Route Groups 2006 2016 2026 2036 -2016 -2

International [billions]

1. North Atlantic 454.4 723.1 1 097.2 1 586.3 4.8

2. South Atlantic 82.9 146.1 251.5 422.8 5.8

3. Mid Atlantic 58.6 102.5 171.2 272.3 5.8

4. Transpacific 312.3 579.4 1 002.6 1 613.8 6.4

5. Europe Asia/Pacific 371.2 649.2 1 083.2 1 722.6 5.7

6. Europe Africa 129.4 221.0 377.6 645.0 5.5





11. Intra Africa 19.5 34.9 62.5 112.1 6.0 12. Intra Asia/Pacific 304.4 558.2 976.3 1 628.6 6.3

13. Intra Europe 484.5 734.7 1 061.9 1 462.0 4.3





Total International 2 682.6 4 551.3 7 416.1 11 592.6 5.4

Domestic

18. Africa 24.5 43.3 74.5 125.3 5.8

19. Asia/Pacific 396.2 807.3 1 533.8 2 715.8 7.4

20. Europe 180.2 260.2 358.4 470.3 3.7

21. Latin America 77.5 140.6 248.9 430.5 6.1 22. Middle East 19.7 31.0 47.6 71.3 4.6

23. North America 890.2 1 191.9 1 519.3 1 844.0 3.0

Total Domestic 1 588.4 2 474.3 3 782.5 5 657.2 4.5

Global [International + Domestic] 4 271.0 7 025.6 11 198.6 17 249.8 5.1


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2

2.5

3

3.5

4

4.5

5

5.5

6

6.5

7

7.5

8

NorthAtla

ntic

SouthAtlantic

MidAtla

ntic

Transpacific

EuropeAsia/Pacific

EuropeAfrica

EuropeMiddleEast

NorthAmericaSouthAme

rica

NorthAmericaCentralAmerica/Carib.

MiddleEastAsia/Pacific

IntraAfrica

IntraAsia/Pacific

IntraEurope

IntraLatinAme

rica

IntraMiddleEast

IntraNorthAme

rica

OtherInternationalRoutes

Africa

Asia/Pacific

Eur

ope

LatinAmerica

MiddleEast

NorthAme

rica

Route Groups

Trafficgrowthrates

[%]

Optimistic

Pessimistic

Most likely

Figure 1. Consensus-based Passenger Traf fic Forecast . Cent ral Forecast and Sensit ivit y Analysis

Central forecast [Most likely], Low [Pessimistic] and High [Optimistic] scenarios


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Table 14. Consensus-based Passenger Traffic Forecast. Sensitivity Analysis Scenarios.

Sensitivity Analysis

Low Scenario Central High Scenario

2006 2006 2006 2006 2006 2006

Sector / Route Groups -2026 -2036 -2026 -2036 -2026 -2036

International

1. North Atlantic 3.7 3.5 4.5 4.2 4.7 4.4

2. South Atlantic 4.3 4.2 5.7 5.6 6.4 6.3

3. Mid Atlantic 4.7 4.4 5.5 5.2 5.6 5.3

4. Transpacific 5.5 5.1 6.0 5.6 6.1 5.7

5. Europe Asia/Pacific 5.4 5.1 5.5 5.2 6.3 6.0

6. Europe Africa 4.9 4.9 5.5 5.5 6.3 6.3

7. EuropeMiddle East 4.6 4.2 6.0 5.6 7.7 7.3

8. North America South America 4.9 4.5 5.0 4.6 5.2 4.9

9. North America Central America and Caribbean 4.0 4.0 4.7 4.7 2.0 5.0

10. Middle EastAsia / Pacific 5.8 5.4 6.1 5.7 6.6 6.211. Intra Africa 5.5 5.5 6.0 6.0 6.9 6.9

12. Intra Asia/Pacific 5.3 5.0 6.0 5.7 6.2 5.9

13. Intra Europe 3.1 2.8 4.0 3.7 4.4 4.2

14. Intra Latin America 5.1 5.1 6.0 6.0 6.4 6.4

15. Intra Middle East 4.2 3.9 5.5 5.2 7.2 6.9

16. Intra North America 3.0 2.7 3.5 3.2 4.5 4.2

17. Other International Routes 4.6 4.6 5.2 5.2 6.5 6.5

Total International 4.6 4.4 5.2 5.0 5.7 5.5

Domestic

18. Africa 5.4 5.3 5.7 5.6 5.8 5.7

19. Asia/Pacific 5.1 4.7 7.0 6.6 7.1 6.720. Europe 2.5 2.2 3.5 3.2 4.3 4.0

21. Latin America 5.0 4.9 6.0 5.9 6.6 6.5

22. Middle East 4.0 3.9 4.5 4.4 5.5 5.4

23. North America 2.3 2.0 2.7 2.4 3.3 3.0

Total Domestic 3.4 3.2 4.4 4.3 4.8 4.7

Global [International + Domestic] 4.2 4.0 4.9 4.8 5.4 5.2

3.5 Passenger Aircraft Fleet Mix Forecast

Methodology used to develop the passenger aircraft fleet mix forecast

3.5.1 The CAEP/8 passenger fleet mix forecast was developed using the corporate model ofAirbus, specially calibrated with the parameters (i.e. data, inputs and assumptions) provided by

the FESG.

3.5.2 At the FESG meeting held in Montreal (Canada) in February 2006, Airbusrepresentatives indicated that the manufacturer had decided to devote the resources necessary to

extend the capabilities of its fleet mix forecast model to produce a 30-year forecast. This model


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has been made available to CAEP and has provided FESG with a tool to convert traffic into a

fleet over a 30-year period for the development of the CAEP/8 fleet mix forecast.

3.5.3 The following sections describe the inputs and assumptions used and the processfollowed to develop the passenger aircraft fleet mix forecast (supply of passenger services) for

CAEP/8.


3.5.4 The development of the passenger aircraft fleet mix forecast requires a number of inputsthat have been either defined through a consensus process within the FESG, obtained from

existing databases or from ICAO and (aircraft and engine) manufacturers:

Base year operational data by route group Forecast time horizon Traffic demand forecast Generic seat categories Average load factor assumptions Average aircraft utilization assumptions Productivity improvement assumptions Parked aircraft Backlog Passenger aircraft retirement/survival curves

3.5.5 Base year operational data by route group. In the development of its previous forecasts,FESG has used the Official Airline Guide (OAG) as the primary source of information on the

fleet of aircraft currently in service and their operations.

3.5.6 The OAG provides detailed flight information for the major airlines operatingcommercial scheduled (passenger and cargo) services in the world, that is: schedule, aircraft type

and capacity (actual seats offered).

3.5.7 The OAG database has a number of shortcomings:

Not all airlines offering commercial scheduled services are covered. Only thosethat have accepted to submit their flight information to the OAG.

Not all civil aviation flights are included. Non-scheduled services are notcovered, that is charter flights as well as general aviation, military or state aircraft

movements.

No correction is made in the database for cancelled flights or aircraftreplacement.

3.5.8 In order to compensate for some of these shortcomings and include charter flights in thedevelopment of the CAEP/8 passenger traffic forecast, adjustments have been made to the

original OAG data in the base year. The version of the database that is used in the development of

the FESG forecast is therefore an adjusted OAG database. Adjustments made by Airbus to the

raw OAG data are done on a per airline basis. The adjustment process can be described as

follows:


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3.5.9 Step 1. For a given airline, the equivalent number of aircraft is computed from OAGoperations. The number of aircraft is a function of block time and frequency. The computation is

done:

from the calibration done the previous year if a forecast was done for this airline;

from the default value for a given region (airline domiciliation), computed from anaverage of the previous year forecast for airlines in the region.

3.5.10 Step 2. The number of aircraft computed from the OAG is then compared with the fleetin service extracted from Airclaims25. If the discrepancy is high then additional information isgathered (i.e. does the airline perform charter operations, is there a problem of declaration in the

OAG like for Air Asia not in the 2003 OAG):

If flight hours and cycles are available (Airclaims or ACAS26) additional operationsare added according to these parameters;

If flight hours and cycles are not available then reports from WATS27 (issued by

IATA) are used;

If the airline is not included in these reports other sources may be used (e.g. Websites, airports reports, etc.);

If no information is available at all it is assumed that the airline has a low utilisationof their fleet and additional operations are added by using discounted averages of

utilisation for a given region.

3.5.11 For all these additional operations, it is assumed that the aircraft perform a mission withan average distance. In all these cases, the split between flows where the aircraft is flying is done

from information collected on the Web, from Airclaims or from other sources.

3.5.12 Another adjustment is made for capacity in the OAG with CASE, JP Fleet or airlinesWeb sites in some cases. The OAG database used is for the month of September.

3.5.13 No adjustment is made to account for cancelled flights, as their number is considerednegligible.

3.5.14 Forecast time horizon. In 2007, Airbus has extended the capabilities of its model toconvert traffic into a fleet over a 30-year time horizon. Therefore there was no need to develop an

approach (based on expert judgment) to extend the fleet forecast time horizon. The passenger

fleet mix forecast has been developed over the period 2006 to 2036.

25 Airclaims is a database that provides information on all types and age of aviation operations (from general aviation to rotor wing

and heavy aircraft). It contains histories, accident data, technical data, hours and cycles, addresses, deliveries, storage information,etc. Source: www.airclaims.co.uk.

26 ACAS AirCraft Analytical System: Aviation market information system database covering Western built fixed wing civil aircraft

from 8 seats up to 747 / A380, including business jets, plus military transports. The ACAS application provides details of fleets,

utilization (hours/landings), history, orders, addresses, maintenance capability, inspection intervals, and forecasts for fleetutilization and maintenance.

27 WATS World Air Transport Statistics. Comprehensive digest that provides information on over 300 airlines. It contains analyses

on each airline, including performance indicators on passenger and cargo traffic, capacity, load factors for international, domestic,

and system wide operations, scheduled and charter services. It also provides information on IATA's members' settlement activities,

regional and service demand, forecast, safety, fleet utilization, environmental impact, etc. Source: www.iata.org.


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3.5.15 Traffic demand forecast. The traffic demand forecast, defined through a consensusprocess within FESG, that delimits the traffic growth rates for each of the twenty-three (23)

predefined major route group over the horizon of the forecast.28

3.5.16 Generic seat categories. A consensus process has been used within FESG to define thegeneric seat categories (seating capacity) used to categorize the global fleet of aircraft and the

break point of each of seating category.

3.5.17 For the development of the CAEP/8 forecast, nine (9) seating categories have been used:20-50 (i.e. aircraft having from 20 to 50 seats), 51-100, 101-150, 151-210, 211-300, 301-400,

401-500, 501-600, 601+ (for aircraft having more than 600 seats)29.

3.5.18 The Airbus fleet mix forecast model has been used, with frequency/capacityconsiderations, to assign a number of aircraft to each seat category needed to serve the forecasted

traffic demand.

3.5.19 Average load factor assumptions. The assumptions on the evolution of aircraft loadfactors used on each route group over the forecast horizon have been defined through a consensus

process, based on existing data and their evolution.

3.5.20 The process followed can be described as follows:

1. Estimate historical load factors on each defined route group

2. Discuss the assumptions regarding the future load factors over the forecast horizon

for each route group

3. Agree on consensus assumptions regarding the future load factors over the forecast

horizon for each route group

4. Document the results

3.5.21 The objective was to associate the demand (traffic) growth rates expressed in revenuepassenger-kilometres (RPK) to the industry response in terms of available seat-kilometres needed

to meet this demand.

3.5.22 The assumption was made that on any route group, the maximum load factor could notexceed 85% over the forecast time horizon. The load factors used in the development of the

CAEP/8 forecast are presented in Table 15. These factors were applied over the forecast time

horizon (up to year 2036).

28 Including the low and high scenarios of the sensitivity analysis conducted around the passenger traffic forecast.29 These seat categories are the same as the ones used in the development of the CAEP/6 forecast except for the first three (3) that

were set at the time at 20-49, 50-99 and 100-150. The break points of these three categories have been modified by one seat to be

consistent with the requirement regarding the number of cabin attendants on airplanes.


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Table 15. Passenger Fleet Forecast. Passenger aircraft load factor assumption.

Sector / Route Groups 2006 Maximum

International

1. North Atlantic 80.6 85

2. South Atlantic 84.3 85

3. Mid Atlantic 80.3 85

4. Transpacific 79.8 85

5. Europe Asia/Pacific 80.5 85

6. Europe Africa 74.8 80

7. EuropeMiddle East 70.4 74

8. North America South America 77.3 80

9. North America Central America and Caribbean 75.3 80

10. Middle EastAsia / Pacific 73.5 78

11. Intra Africa 59.6 65

12. Intra Asia/Pacific 71.3 78

13. Intra Europe 68.2 78

14. Intra Latin America 70.0 78

15. Intra Middle East 66.1 70

16. Intra North America 70.9 75

17. Other International Routes [1] 76.0 79

Total International 76.0

Domestic

18. Africa 73.9 75

19. Asia/Pacific 72.5 80

20. Europe 69.5 78

21. Latin America 65.9 7522. Middle East 78.0 78

23. North America 79.3 83

Total Domestic 75.8

Global [International + Domestic] 75.8 85

Note: [1] Weighted average of the load factors of all the international routes.

3.5.23 Average aircraft utilization assumptions. Assumptions on the number of hours per dayaircraft are flown. The utilization of an aircraft depends on the type aircraft and how it is

operated.

3.5.24 A consensus process has been used within FESG to define the growth in the averageaircraft utilization over the forecast time horizon, based on existing data and their evolution.

3.5.25 The average aircraft utilization in 2006 was 9.4 hours per day. It has been assumed thatthe overall improvement in aircraft utilization would be 5% over the period 2006-2026 and 6%

over the period 2006-2036 (resulting respectively in an average utilization of 9.9 and 10 hours per

day over these periods).


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3.5.26 Productivity improvement assumptions. A consensus process within FESG is to be usedto define the aircraft productivity improvements (seating capacity and flight frequency) by route

group over the forecast horizon.

3.5.27 The growth in the available seat-kilometres requirements is accompanied by increases inaircraft productivity (seating capacity and flight frequency). These productivity improvements

may result from higher aircraft utilization, the evolution of non-stop air services, and expected

improvements in load factors.

3.5.28 Two of these key productivity improvement factors have previously been discussed: theload factors and the aircraft utilization.

3.5.29 The traffic growth is split between the existing network and the creation of new routes.The frequency/capacity split allocates the growth in available seat-kilometres, using a

combination of additional frequencies and increases in average seat size per aircraft (larger

aircraft).

3.5.30 For the development of the CAEP/8 forecast, the split between capacity and frequencywas based on an analysis of:

Historical data Airlines operational (competitive) environment on each route group The effect of capacity constraints or airport saturation

as well as on the minimum and maximum level of service desirable on each route group.

3.5.31 Frequency levels for the newly introduced (20-49) regional generic seat category, and the(50-99) regional categories were assigned higher frequency limits than the rest of the fleet greater

than 100 seats.

3.5.32 Parked aircraft. Airlines are likely to ground a number of aircraft within their fleet inorder to reduce capacity when faced with a significant decline in demand or sharp increases in

fuel prices.

3.5.33 At the time the forecast was developed, the composition of the fleet that was currently instorage was reviewed. There were about a thousand parked aircraft30 (i.e. aircraft in storage or

temporarily out of service). As these were mostly old aircraft31, the probability of their return to

passenger services was found to be very limited. As the number of parked aircraft that could

potentially return to service was low and would not have a significant impact on the overall in-

service fleet (and therefore the forecast), they were not included in the development of theforecast.

3.5.34 If at the time the forecast was produced, a significant number of aircraft with still someremaining useful life existed, it would have been necessary to determine the percentage of these

aircraft returning to passenger service by type of aircraft within a near future. This would have

involved the following steps:

30 The list of stored passenger aircraft as of August 2007 has been appended as Appendix C.31 There were about a hundred aircraft having less than thirteen (13) years of age.


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1. Determine the number of parked aircraft by type.2. Discuss the assumptions on the probability of return to passenger service of those

aircraft.

3. Agree on assumptions on the probability of return to passenger service of thoseaircraft.

4. Document the results

3.5.35 Backlog. Airlines renew their fleet over time with new aircraft. Known firm orders ofnew aircraft at the end of the base year have been considered in the development of the forecast,

as these aircraft will be placed in service within the forecast period.

3.5.36 Passenger aircraft retirement curves32. The passenger aircraft retirement curvesprojecting future retirements have been developed based on existing aircraft age and an analysis

of the historical and actual aircraft retirements. These curves have been applied to the existing in-

service fleet.

3.5.37 The process used to develop the aircraft retirement curves can be described as follows:

1. Define the level of detail at which retirement projections are to be done33.

2. Extract from commercially available aircraft fleet databases, for each aircraft type orgroup of aircraft types, actual historical aircraft retirement dates from passenger

services and its original delivery date.

3. Sort the data by aircraft type and original delivery date. If aircraft have been groupedby technology types (or some other means of grouping aircraft), complete the

grouping next, still sorted by original delivery date.

4. For each delivery year, determine the percentage of aircraft still in passenger service.From the original delivery year determine the current age of the aircraft for each

original delivery year.

5. Plot the percent of aircraft remaining in passenger service versus the age of the

aircraft.

6. Through regression analysis, apply a best-fit curve through the data of plotted in step.The results are the new passenger aircraft retirement/survival curve.

7. Apply the survival curves to the existing base year fleet used to develop the new fleetmix forecast by using the curves to project the percentage of surviving aircraft in

passenger service. The curve needs to be applied to the existing aircraft for each of

the original delivery years. For each forecast year, sum up the number of surviving

aircraft projected by the retirement curve applied to each of the original delivery

years. The result is the profile of the passenger aircraft remaining in-service for the

forecast period.

8. Document the results.

3.5.38 For the development of the CAEP/8 passenger aircraft retirement curves, FESG hasrelied upon the BACK/Lundkvist aircraft fleet database for the historical and base year fleet data.

The aircraft retirement curves have been developed by regrouping aircraft by technology level.

32 The passenger and freighter aircraft retirement curves have been developed by Pratt & Whitney.33 Theoretically, retirement curves could be developed for each aircraft type. However this would result in an excessive amount of

work that may not improve the accuracy of the fleet forecast. For the development of the CAEP/8 forecast, grouping aircraft by

type of technology level for the aircraft retirement projections made the development of the overall fleet mix forecast a manageable

process.


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3.5.39 Four (4) different survival curves were developed to project the retirement of the in-service passenger aircraft fleet: one for each of the following technologies:

Newer generation aircraft (Narrow-body two person flight crew aircraft) Wide body aircraft (excluding MD-11 aircraft) Boeing 707 and 727 aircraft [B707/B727]34 McDonnell Douglas MD-11 aircraft

3.5.40 Theses retirement curves are shown in the following figure:

3.5.41 The passenger aircraft to which the retirement curves have been applied are reported inthe Table below:

Process followed to develop the passenger aircraft fleet mix forecast

34 Narrow body three person flight crew aircraft.

Passenger aircraft retirement curves Passenger aircraft assigned to each retirement curve

Newer generation aircraft

(Narrow-body two person flight crew aircraft)

717, 737, 757, A320 Family, DC9, MD80, MD90, CRJ-

100 to -1000, EMB-135 to -195, F28, F70, F100,

BAC111, BAe146, AvroRJ, DO328JET, all turboprops

Wide body aircraft [1]

(excluding MD-11 aircraft)

747, 767, 777, A300, A310, A330, A340, A380, DC10,

L1011, Russian built aircraft, any newly introduced wide

body aircraft

Boeing 707 and 727 aircraft 707, 727, DC8

McDonnell Douglas MD-11 aircraft MD-11

Note: [1] Narrow body three person flight crew aircraft

CAEP/8 FESG Passenger Aircraft Retirement (Survivor) Curves

0%

10%20%

30%40%

50%60%

70%

80%90%

100%

110%

0 5 10 15 20 25 30 35 40 45 50


PercentRema

iningin

PassengerS

ervice

Narrow Body aircraft

(2-man f lt crew)

Wide Body Aircraft

(Less MD-11)

B707 / B727

MD-11


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3.5.42 The Airbus fleet mix forecast model is a bottom-up forecast model by airline, by route,by flight and by aircraft type. The fleet mix forecast process of this model is illustrated in the

following diagram.

A

IRBUSS.A.S.

Allrightsreserved.

Confidential

andproprietarydocument.

Current operation(OAG schedules)

GMF experience(13 regions)

Aircraft utilisation

Futurefleet

(genericcategories)

Ideal aircraft sizeTraffic growth &

cap/frequency model

Future operation

Future utilisation

Fleetmix(existing& generic)

Replacement& backlog

Fleet evolution

(Global fleet)

3.5.43 In terms of steps, this process can be described as follows:

1. Apply the traffic growth rate (evolution of the load factors taken into account) to thebase year operational data.

2. Calculate the next year demand of seats

3. Apply the frequency/capacity model based on historical analysis35

Minimum service level > all growth into frequency Maximum service level > all growth into capacity For most sectors somewhere in between

4. Calculate number of aircraft required based on utilization as function of block timeand region of domicile of the airline.

5. Store detailed results in database: operations-unit, forecast year, flights, aircraft-capacity, number required.

Before determining the required delivery of new generic aircraft by seat category,

consideration would have to be given to

The fate of parked (stored) aircraft The firm backlog

6. Apply the aircraft retirement forecasting methodology to determine the number ofbase year in-service passenger aircraft remaining in passenger service for each

forecast year.

7. Fill the remaining "gap" between capacity required and the remaining in-service fleetwith new generic aircraft by seat category.

35 More details on the Airbus frequency/capacity split model are provided in Appendix B.


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3.5.44 For example, for aircraft of more than 100 seats, when two manufacturers havecompeting models, the split would be 50-50 between them. The same would apply for the

existing different engine types.

3.6 Forecast of Aircraft with less than 20 Seats

3.6.1 FESG has been asked to develop a forecast for aircraft with less than 20 seats. This seatcategory was not covered by previous FESG forecasts. The inclusion of these aircraft in the

analysis for CAEP/8 has been justified by the fact that some of the engines fitted to these aircraft

may be subject to environmental stringencies. The intent being to include the environmental

impact of these aircraft in the long term projections carried out within the framework of CAEP/8

environmental goals assessment.

2006 Year-end fleet

3.6.2 The 2006 year-end global fleet of aircraft with less than 20 seats was about 28 700

aircraft including jets and turboprops. These aircraft were operated by non-airline corporations(11 305), government and military organizations (6 512), non-scheduled airlines (6 480),

scheduled airlines (1 634), fractional ownership schemes, leasing companies, brokers and part

dealers, overnight package carriers, private individuals and financial institutions. Executive

aircraft (jets) and turboprop aircraft accounted for 14 046 aircraft and 13 761 aircraft respectively.

The rest were regional jets and piston aircraft.

3.6.3 The main operators of the Executive aircraft (business jets) category comprise non-airlinecorporations (8 626), non-scheduled airlines (2 599), government and military organizations

(997) and fractional ownership schemes (925). The main operators of turbo-props includegovernment/military organisations (5 339), non-scheduled airlines (3 483), non-airline

corporations (2 588), scheduled airlines (1 483) and overnight package carriers (369).

Scope of coverage

3.6.4 Past FESG forecasts were developed solely for the operations of commercial civilaviation aircraft (i.e. aircraft operated by airlines). However, as business aviation has been a fast

growing segment of the industry in recent years (accounting for a steadily increasing number of

flights at airports), it has been agreed to consider, in addition to turboprops and piston aircraft,

business jets in the development of the forecast of aircraft with less than 20 seats.

3.6.5 The consensus-based forecast developed by FESG for the less than 20 seat aircraft wouldtherefore cover aircraft operated by commercial air carriers and by business aviation operators. It

would exclude aircraft operated by government and military organizations. Business aviation

operators (non-airline corporations, fractional ownership schemes and private individuals) operatemainly jet aircraft while commercial aviation operators (scheduled airlines, non scheduled airlines

and overnight package carriers) operate mainly turbo-prop aircraft. The Very Light Jets (VLJs)

were excluded from the forecast at the outset, due to limited availability of information on these

aircraft.


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Forecasting approach

3.6.6 Approaches to develop the forecast have been explored for commercial air carriers andbusiness aviation separately.

3.6.7 As there was very little information available on the operations of aircraft with less than

20 seats, it has not been possible to produce a consensus-based forecast at the same level ofdetails (i.e. by available seat-kilometres, revenue passenger-kilometres, etc.) as for the one

developed for the larger seat classes. Producing a forecast for the number of aircraft (units), the

number of hours flown and the number of aircraft movements was found to be a more realistically

feasible task.

3.6.8 Commercial air carriers. These carriers include scheduled airlines, non-scheduledairlines and overnight package carriers, and mainly operate turboprop aircraft.

3.6.9 An analysis of the 1990-2007 data on the turboprop fleet operated by commercial aircarriers36 showed that overall the size of the fleet is more or less constant (between 5 000 and 5

500 aircraft) over the period. There is, however, a significant decline in the number of aircraft

operated by scheduled carriers combined with an increase (of the same size in absolute terms) inthe number of aircraft operated by non-scheduled carriers.

3.6.10 Consequently and due the non-availability of global forecasts for the turboprop aircraftwith less than 20 seats, it was decided not to include these aircraft in the development of the

forecast. The impact of excluding turboprops operated by airlines from the scope of coverage of

the forecast was not believed to be critical (due to their declining number and typically short-

range operations) and their contribution to global emissions not likely to be significant.

3.6.11 Business aviation. In order to develop a consensus-based forecast for business jet aircraft(with less than 20 seats), a number of existing forecasts were reviewed. Forecasts were provided

by Rolls-Royce (2016-2026-2036), Embraer (deliveries 2008-2017) and the U.S. Federal

Aviation Administration (2008-2025 for the United States only).

3.6.12 After discussions and given the fleet forecast coverage, it was decided to use the Rolls-Royce forecast37 as the baseline business jet forecast, after cross-checking it with the 2008-2017

Embraer delivery forecast.

3.6.13 The forecasts of deliveries provided by both manufacturers were close except for NorthAmerica. The U.S. FAA delivery forecast for the United States market for the same period (2008-

2017), at 7 145, was about 15 per cent higher than Rolls-Royce forecast for the same period. The

Rolls-Royce forecast fell in the middle of a range of forecasts reviewed the U.S. FAA forecast

being on the high side and the one of Embraer on the low side.

3.6.14 Table 16 provides the comparison of deliveries between Rolls-Royce and Embraer.

36 The evolution of the turboprop fleet of aircraft with less than 20 seats operated by commercial air carriers over the period 1990-

2007 is presented in Appendix F.37 The Rolls-Royce forecast of the fleet of business jet aircraft has been developed by forecasters of their North American office. No

detailed information could be obtained on the methodology used to develop this forecast (as this information is proprietary). In

broad terms, Rolls-Royce has used a top down approach to split the world into separate geographic regions. In the short term, the

forecast is driven by known or inferred order backlog information. In the longer term, the growth in the number of business jet

aircraft deliveries is mainly driven by the evolution (growth) of a basket of stock market indices (e.g. S&P500 Standard and

Poors 500), as a correlation was found between the demand for business jet aircraft and these stock market indices.


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Table 16. Deliveries of business jet aircraft Embraer and Rolls-Royce

Region Embraer Rolls-Royce

North America 6 221

North America + Caribbean 4 600

Latin America 650

Latin America + Caribbean 1 522

Europe 2 550 2 480

Middle East 250 206

Asia Pacific 1 450 899

Africa 150 298

Total 9 650 11 721

3.6.15 In order to determine the number of hours flown and the number of departures,assumptions have been made on the average number of hours per aircraft and the average trip

duration. After examining a variety of sources (including survey data, discussions with industry

experts, and flight data provided by the U.S. FAA and Eurocontrol), an annual utilization of 400

hours per aircraft was assumed along with an average trip length of 1.3 hours per aircraft

movement.

3.7 Freighter Forecast38

Methodology used to develop the freighter forecast

3.7.1 The FESG CAEP/8 freighter (traffic and fleet) forecast was developed using a modifiedversion of the methodology Boeing uses to produce its own corporate forecast39. Furthermore, the

development of the freighter forecast is a process that is reliant on the output of the FESG

passenger fleet forecast.

3.7.2 The following sections describe the inputs and assumptions used and the processfollowed to develop the freighter forecast (demand and supply of cargo services) for CAEP/8.


3.7.3 The development of the freighter forecast requires a number of inputs that have beeneither defined through a consensus process within the FESG, obtained from existing data sourcesor provided by (aircraft and engine) manufacturers:

Base year and forecast time horizon Regions and/or route groups Base year traffic data by regions Average load factor assumptions Generic seat categories Number of passenger aircraft available for conversion into freighters

38 The freighter forecast has been developed by Boeing in collaboration with Rolls-Royce and FedEx.39 Some of the inputs, assumptions and methodology used in the development of the freighter forecast constitute proprietary

information (as it is part of Boeing corporate model) and could not be disclosed. The GDP (Gross Domestic Product) and

international trade forecasts used in the development of the freighter forecast were obtained from Global Insight.


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Aircraft cargo hold capacity Average aircraft utilization assumption Freighter retirement assumption Freighter forecast extension

3.7.4 Base year and forecast time horizon. The freighter fleet and cargo traffic forecasts have

been developed over the same time horizon as the passenger traffic and fleet forecasts, that is,over the period 2007 to 2026, using year 2006 as the base year.

3.7.5 Regions and/or route groups. In contrast to the passenger forecast (developed by routegroup), the CAEP/8 freighter forecast has been developed for six (6) regions40:

3.7.6 Regions of domicile were preferred over regional flows as cargo demand is typicallydirectionally dependant making directional predictions complex and prone to significant error

since cargo schedules and data by route group are neither widely available nor comprehensive ona global basis.

3.7.7 Historical and base year traffic data by regions. The base year data on freighter traffic(measured in revenue tonne-kilometres) as well as the hist

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