Forecasting demand is the prediction of
future performance based on available information about past performance,
political as well as economic condition, competitors’ behavior and so forth.
Devoting resources to demand forecasting allows companies to shape the supply
chain strategy and guide long-term business planning, which contributes to
their performance in the competitive markets and
increases the likelihood of success. Therefore,
forecasting demand can be applied to any industries, from petty retail trade to
large chains, from business to manufacturing industry. The following discussion
will be on the “Current Market Outlook(2014-2033)”, a long-term forecast
of air traffic volumes and airplane demand of Boeing.
Given the significance of forecasting demand, it embraces numerous
influential factors like economic growth, fuel prices, different modes of
transport, competitors, and so forth.
Economic growth, as measured by GDP, is a crucial element in
forecasting demand. An ascending economic condition indicates that the
government could invest extra capital in the aviation industry, and customer
spending will also increase due to robust income growth.
Moreover, different modes of transportation could also influence
the future demand of Boeing.
The tremendous expansion of low-cost airlines spurs demand of
airlines such as Boeing. Low-cost airlines typically means “operating at
secondary airports, flying a single airplane type, increasing airplane
utilization, relying on direct sales, offering a single-class product, avoiding
frequent-flyer programs, and keeping labor costs low”. Compared to traditional
carries, low-cost airlines reduce fares significantly and correspondingly stimulate
traffic.
Air freighter is the other mode of transportation which is
commonly used for shipments of high-value, time-sensitive, or perishable goods.
As international trade has intensified and business scale has enlarged, demand
for air freighter becomes more intensive and thusly request more airlines.
And for network carries, the primary mode of transportation, like American
Airlines or ANA, the order is always constant without dramatic fluctuation to
some extend.
Apart from the above, there are few other elements that have impact on
forecasting demand, including competitors, short-term effects like political issue and so forth. Under the combined effect of these
factors, Boeing arrives at the conclusion that demand for 36,770 new airplanes,
valued at $5.2 trillion. “15,500 of these airplanes will replace the older,
less efficient airplanes. And the remaining 21,270 airplanes will be for fleet
growth, which stimulates expansion in emerging markets and development of
innovative airline business models. Single-aisle airplanes continue to command
the largest share of the market. Approximately 25,680 new single-aisle
airplanes will be needed over the next 20 years.”[1]
Question: Will Boeing and Airbus, the world's two largest aircraft manufacturing companies, share the same forecasting process and outcome?
