PLANNING FOR THE FUTURE
It’s reassuring to see many of our customers prospering as the airline industry reports stronger bottom line results. As much as it may be tempting for carriers to start adding bigger airplanes as demand strengthens and costs stabilize, our business is cyclical and things can change quickly.
We’ve seen how too much capacity and a strategy to capture more market share can, in some cases, be a tradeoff for weak yields and low return on assets. The airline business is very capital intensive which makes it all the more imperative to have a business model that is sustainable since short-term strategies may carry undue risk. We welcome the emerging trend among airlines to focus on generating return on shareholder-invested capital as their main goal.
It’s one of the reasons why we continue to see new opportunities for the 70 to 130-seat jet segment, even a decade after our first E-Jet was delivered. Across the globe, there is a continuous need for more network connectivity and frequency: the tremendous traffic growth in Asia, greater disposable income among a rising middle class in Africa and Latin America, continued strength in the USA and economic recovery in Europe.
Planning for the future is always a tough challenge. Not only do airlines need to estimate their capacity requirements far in advance, they must also ensure that their investment in new equipment earns an acceptable return on those assets. Understanding how 70 to 130-seat aircraft influence that return is critical, especially as we enter a period of new growth.
I hope you find our Market Outlook informative and insightful.
Paulo Cesar de Souza e Silva
President & CEO | Commercial Aviation