US Aircraft Manufacturers Supply ASEAN’s Growing Market


Last November, Boeing announced its largest ever commercial sale when it signed a deal with Indonesia’s Lion Air for 230 aircraft valued at $21.7 billion. The importance of the commercial aviation industry to the U.S. overall economy cannot be overstated. Slate reported that Boeing’s exports in 2009 made up 1.8 percent of total U.S. exports, to the tune of just under $29 billion, and the Federal Aviation Administration reported in August that, “Civilian aircraft engines, equipment and parts also contribute $75 billion toward the U.S. trade balance.” Now, U.S. aircraft manufacturers have set their sights on Southeast Asia, where booming economies will drive growth in commercial aviation – and demand for new aircraft – over the next few decades.

This boom is good for the U.S. economy. The agreement with Lion Air, Indonesia’s largest private airline, will help support over 110,000 U.S. workers at Boeing and its suppliers in 43 states, according to the White House. The sale of 201 Boeing 737 Max and 29 Next Generation 737EF aircraft will particularly help Washington State’s economy, as the Boeing factory in Renton will build the 737 Max. Washington’s economy is expected to outperform the national U.S. economy in 2012 partly as a result of the 737 Max contract, according to the Economic and Revenue Forecast Council, and the Seattle Times reported that Boeing added 8,000 jobs in Washington during 2011.

The demand for commercial aircraft in ASEAN countries is likely to continue on robust medium-to-long-term economic growth, resulting in increased demand for business and leisure—especially intra-regional—air travel. Bloomberg reports that Lion Air is now planning fights to China, Taiwan, and Korea after this latest deal.

Southeast Asia intra-regional flight frequency growth. Source: Boeing Current Market Outlook 2011-2030 Report

Southeast Asian nations are ramping up efforts to accommodate their aviation capacity. Boeing estimates that throughout Southeast Asia, “Twenty-seven projects to upgrade and expand airports have been completed, begun construction, or are being planned.” A recent report in the Wall Street Journal highlighted how Singapore Changi Airport includes family-friendly amenities, movie theaters, nap rooms, an amusement park, and even a bus tour of Singapore for passengers on overlay. According to the IATA 2011 Annual Report, Southeast Asian civil aviation authorities are taking other measures to attract business including reducing airline landing fees, initiatives adopted by both the Airports of Thailand Authority and Singapore Changi Airport.

Boeing’s Current Market Outlook 2011-2030 report estimates that the current fleet of 1,050 commercial aircraft in operation with Southeast Asian airlines will increase to 3,150 by 2030 to meet this growing demand, a potential market value of US$410 billion. Furthermore, Boeing predicts that, “During the next twenty years, approximately half of the world’s air traffic growth will be driven by travel to, from, or within the Asia Pacific region. Total air traffic for the region will grow by 6.7 percent per year during this period.” This will entail greater demand for long-haul aircraft, and according to Boeing, “Approximately 43 percent of large airplane deliveries over the next 20 years are expected to go to Asia, with China and Southeast Asia accounting for most of the delivery demand.” It is no coincidence that Boeing launched a six-month “world tour” for its 787 Dreamliner next generation passenger plane in Beijing, China, on December 4.

Projected Global Market Growth for New Airplanes 2011-2030 Source: Boeing Current Market Outlook 2011-2030 Report

Both Boeing and its European competitor Airbus—the world’s largest manufacturer of commercial aircraft—are competing for the Asia-Pacific emerging market. Boeing predicts that there is a potential global market for 33,500 new aircraft over the next twenty years, of which 11,450, or 34 percent, are destined for the Asia-Pacific. Of those, 2,750 are destined for Southeast Asia. In preparation for this increased demand the company is currently working with its suppliers in the United States to ensure that they are able to meet and maintain the inventory supply chain with increased orders.

Southeast Asia will remain a highly competitive market for both U.S. and European aircraft manufacturers for the foreseeable future. As the United States continues to deepen its economic engagement with Southeast Asia, exports of high-value and high-quality manufactured goods, such as commercial aircraft, are key components of this economic strategy. Singapore Airlines’ decision in August to buy an additional eight Boeing 777-300ER aircraft worth $2.4 billion, in addition to the 85 Boeing 777s that it has already purchased, reminds all why Southeast Asia is an important market for the U.S. commercial aircraft industry and its related suppliers.