Welcome to the 2017 Market Outlook Report
A Message from John Slattery
I’ve always maintained that a versatile fleet helps an airline adapt to the cyclical nature of our industry. Even as carriers continue to benefit from growing traffic and the relatively stable price of oil, careful capacity management with right-sized aircraft is fundamental to earning healthy margins. Seeking maximum return on an expensive asset is just good business sense.
Airlines around the world have become remarkably more efficient and cost conscious since the 2008 financial collapse and record high price of fuel. Their new challenge is to maintain profitability in an environment where low-fare demand is growing. Since cost reduction has its limits, airlines are now tweaking the revenue half of the profit equation to try to improve the bottom line. We’re already seeing mainline carriers redesign their fare structures to attract more price-sensitive customers.
In this period of increasing numbers of low-fare travellers, cost control is more important than ever. While adding bigger aircraft with more seats may lower unit cost, the extra capacity doesn’t address declining yields or strengthen margins.
Yet smaller-capacity aircraft, by their nature, have a better mix of high-fare travellers, generate higher yields, and often have higher load factors. Aircraft in the category have proven to be essential in giving airlines the fleet versatility they need to compete in an ever-changing marketplace.
It’s why our twenty-year forecast for the 70 to 130-seat jet segment remains strong. And it’s why we’re building a new generation of Embraer airplanes for the decades ahead.
I hope you enjoy reading our Market Outlook.