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How are rising fuel costs and environmental regulations influencing cabin design?
Rising fuel costs and new environmental regulations, such as the Emissions Trading Scheme (ETS) in Europe, have made weight, energy efficiency and onboard space utilisation more critical than ever for cabin designers and manufacturers. Fuel today constitutes more than 30% of an airline’s operating costs, more than a threefold increase over the last 10 years, having an increasingly negative impact on profitability. In Europe the effect is going to be even higher following the ETS implementation, starting from 1 January 2012. As fuel prices fluctuate and are rather unpredictable, airlines are now looking at lowering their fuel consumption levels and pass on part of the responsibility to cabin interior manufacturers. It is important to underline that manufacturers have to come up with new solutions that are not just more fuel efficient and environmentally friendly, but at the same time offering superior comfort.
How is the demand for retrofit and linefit interiors projected to grow/decline?
Frost & Sullivan expects the demand for cabin interiors to grow at a compound annual growth rate (CAGR) of 8.7%. Unprecedented growth in new aircraft orders over the next 10 years is going to drive linefit interiors, with most of the revenue opportunities presenting themselves post-2016, when new aircraft programmes are introduced and the Boeing 787 and A350 reach their full production levels. The demand for linefit cabin interiors is expected to grow at a CAGR of 12.6%. At the same time, the retrofit market will be fuelled by a significant number of retrofit programmes, especially in Western Europe and North America, and grow at a CAGR of 5.8%. Both demand types will have their own growth paths driven by different factors.
How will the next generation of aircraft types affect the market?
New aircraft types will not offer as many opportunities for customisation to airlines, since aircraft manufacturers streamline their supply chain to bring efficiencies. On the other hand, an increasing number of cabin interior modules are now designated buyer furnished equipment (BFE), and with an increasing focus on marketing differentiation to drive yields, airlines will engage with tier two OEMs far more frequently. Retrofit is of course key, but we feel that the airlines that seek customisation and are non-conformists in the way they approach cabin design are also the ones that have the youngest fleets and drive the linefit market (for example, Emirates, Qatar and SIA). It is necessary to point out too that new aircraft types feature interior modules with much higher life-cycles, thereby reducing the demand for retrofit solutions in future.
Which geographic areas will experience the most growth? What kind of cabins will the emerging markets favour?
Demand for aircraft cabin interiors is going to rise across global regions. Nevertheless, some present more growth potential than others. The markets of Western Europe and North America are gradually losing their positions as the most important cabin interior markets. The Middle Eastern, Chinese and Indian markets will together comprise 27.3% of global demand for cabin interiors by 2020. We believe that most of the demand, particularly in Asia, will come from emerging low-cost carriers, thereby driving demand for economy-class products. Cabin interior manufacturers with lightweight economy solutions will therefore see a higher demand in emerging markets. That is not to say customisation in economy and business class will not play a role. In that we feel more local players will have an impact in the medium to long term.
How is the balance of full-service and low-cost carriers expected to change? How might this affect manufacturers?
A rapidly changing global economic environment is already driving airlines towards consolidation and restructuring of their business models. Although demand for low-cost travel will intensify, we see a gradual shift towards hybrid airline business models, aiming at more customisation at the front of the aircraft and more standardisation in the back. We believe that manufacturers will also adapt to this phenomenon and will fill gaps in their portfolio through inorganic growth. New and innovative solutions offering more opportunities for customisation in the front will need to be complemented by lightweight and compact standardised solutions in the back.
Do you foresee increased demand for more regional airliner types?
That demand will mostly come from emerging markets, where domestic aircraft integrators bring new regional programmes to market.
What cabin technologies/equipment are gaining popularity?
LED lights, flat-bed seats, lighter economy seats, fully composite trolleys and bigger overhead bins are all seeing higher adoption rates. Solutions that decrease the total cost of ownership for an airline, which includes both acquisition and operating/maintenance costs, will have the most success.
How is the balance of seat classes projected to change? What is the outlook for premium economy?
More demand will come from economy-class seats going forward. Premium economy is a great concept and one that has seen some success, albeit starting with such a small installed base that has no real effect yet.
Monika Lawrzecka is an industry analyst at Frost & Sullivan, and author of ‘Market Insight on The Global Commercial Aircraft Cabin Interiors Market – New Aircraft Deliveries and Retrofit Programs to Drive the Market’.