back 
In an unexpectedly strong year, airlines ordered a record 2,754 jets (with 100 or more seats) in 2007, up from the previous high of 2,057 in 2005. In total, Airbus and Boeing now have an order backlog for 6,821 planes – equivalent to approximately six years’ production.
Airbus forecasts that passenger and freight traffic will grow at an average annual rate of 4.9% and 5.8% respectively over the next 20 years. The highest yearly traffic growth is expected to come from developing countries, with 11.5% forecast for China, 8.4% for India and 6.8% for the Middle East. In the short term, however, there is some uncertainty caused by economic weakness and speculation that the long-expected consolidation among U.S. legacy airlines may shortly materialise.
Over the 2007-2026 period, world passenger traffic is forecast to increase by 4.9% per annum and the number of frequencies offered on passenger routes will more than double. With a high yearly traffic growth of 11.5%, China is expected to lead in world traffic by 2026.
Changing operating environment
The operating environment is expected to change considerably. While liberalisation (such as the Open Skies initiative) will reduce regulatory constraints, factors such as security, the environment, network evolution, oil prices and congestion will create new limitations.
Eco-efficient technology is becoming key, with aircraft manufacturers building lighter planes and experimenting with alternative fuels. The development of greener aircraft will accelerate the replacement of aging fleets.
High fuel prices are a threat to airline profitability. In the past two years, kerosene has roughly doubled in price. According to the Association of European Airlines, fuel has risen from around 12% of airline operating costs in 2003 to 23% today.
Increasing congestion is causing both Europe and the United States to develop new air traffic management systems. According to the International Air Transport Association, 93 airports, dealing with 63% of world traffic, are already slot-constrained.
Low-cost carriers are entering the next stage in their evolution. The sector is likely to polarise between operators focused on short-haul flights and service carriers gaining income yield from long hauls.
