# FAA Aerospace

Forecast

Fiscal Years 201 5 - 2035

OK 15-0814FAA Aerospace Forecast Fiscal Years 2015-2035



## Table of Contents

FORECAST HIGHLIGHTS

........................................................................................................................................................ 1

REVIEW OF 2014

.................................................................................................................................................................. 3

U.S. ECONOMIC ACTIVITY

........................................................................................................................................................ 5

WORLD ECONOMIC ACTIVITY

.................................................................................................................................................. 8

COMMERCIAL AVIATION

.......................................................................................................................................................... 9

World Travel Demand

.......................................................................................................................................................... 9

U.S. Travel Demand

........................................................................................................................................................... 15

Commercial Air Carriers

– Passenger

................................................................................................................................................. 16
Domestic Passenger Markets

............................................................................................................................................................ 18
International Passenger Markets

...................................................................................................................................................... 22

Commercial Air Carriers

– Cargo

........................................................................................................................................................ 24
International Air Cargo Revenue Ton Miles by Region

...................................................................................................................... 25

U.S. Commercial Air Carriers 2014 Financial Results

......................................................................................................... 26
U.S. Commercial Air Carriers 2014 Aircraft Fleets

.............................................................................................................. 29

GENERAL AVIATION

............................................................................................................................................................... 31

FAA OPERATIONS

................................................................................................................................................................... 34

FAA AEROSPACE FORECASTS

............................................................................................................................................. 38

FISCAL YEARS 2015

– 2035

................................................................................................................................................. 38

ECONOMIC FORECASTS

.......................................................................................................................................................... 40
World Economy

.................................................................................................................................................................. 45

AVIATION TRAFFIC AND ACTIVITY FORECASTS

....................................................................................................................... 47

Commercial Aviation Forecasts

.......................................................................................................................................... 47

Domestic Markets

............................................................................................................................................................................. 48

International Markets

........................................................................................................................................................................ 53 U.S. and Foreign Flag Carriers

............................................................................................................................................ 53
U.S. Flag Air Carriers

.......................................................................................................................................................... 55

Commercial Air Carriers

– Air Cargo

.................................................................................................................................. 57
Commercial Aircraft Fleet

.................................................................................................................................................. 58

General Aviation

................................................................................................................................................................ 60
FAA Operations Forecasts

.................................................................................................................................................. 65

FAA and Contract Towers

.................................................................................................................................................................. 65

En-route Centers

............................................................................................................................................................................... 66

UNMANNED AIRCRAFT SYSTEMS

........................................................................................................................................... 68

UAS Test Sites

..................................................................................................................................................................... 68
UAS Center of Excellence

................................................................................................................................................... 68
Section 333 Exemptions

..................................................................................................................................................... 69 Certificates of Waiver or Authorization (COAs)

................................................................................................................. 69

UAS in the Arctic

................................................................................................................................................................ 70

UAS Forecast

...................................................................................................................................................................... 70

UAS Small Commercial Forecast

........................................................................................................................................ 70

COMMERCIAL SPACE TRANSPORTATION

............................................................................................................................... 71

Overview

............................................................................................................................................................................ 71
Review of 2014

................................................................................................................................................................... 72

Global Orbital Launch Forecast

.......................................................................................................................................... 73

Suborbital Reusable Vehicle Forecast

................................................................................................................................ 74

RISKS TO THE FORECAS TS

.................................................................................................................................................. 76

APPENDIX A: ALTERNATIVE FORECAST SCENAR IOS

........................................................................................................... 79

S CENARIO A SSUMPTIONS

............................................................................................................................................................. 80

A LTERNATIVE F ORECASTS

............................................................................................................................................................. 84FAA Aerospace Forecast Fiscal Years 2015

- 2035

Passengers

................................ ................................ ................................ ................................ ................................ ......... 84
Revenue Passenger Miles

................................ ................................ ................................ ................................ ................... 85

Available Seat Miles

................................ ................................ ................................ ................................ ........................... 85

Load Factor

................................ ................................ ................................ ................................ ................................ ........ 86

Yield

................................ ................................ ................................ ................................ ................................ ................... 87

APPENDIX B: FAA FOR ECAST ACCURACY

................................ ................................ ................................ ........................... 92

APPENDIX C: ACKNOWLEDGEMENTS

................................ ................................ ................................ ................................ 95

APPENDIX D: FORECAS T TABLES

................................ ................................ ................................ ................................ ....... 97FAA Aerospace Forecast Fiscal Years 2015

- 2035

1 

# FORECAST HIGHLIGHTS

201 5

- 203 5

Since its deregulation in 1978, the U.S. commercial air carrier industry has been characterized by boom

- to

- bust cycles. The volatility that was as sociated with these cycles was thought by many to be a structural feature of an industry that was capital intensive but cash poor. However the great recession of 2007

- 09 marked a fundamental change in the operations and finances of

U.S Airlines . Air carr iers fine

- tuned their business models to minimize losses by lowering operating costs, eliminating unprofitable routes, and grounding older, less fuel efficient aircraft.

To increase operating revenues

, carriers initiated new services that customers were w illing to purchase and started charg ing separately for services that were historically bundled in the price

of a ticket

. The industry experienced an unprecedented period of consolidation with four major

mergers in five years. These changes along with capa city discipline exhibited by carriers have resulted in a fifth consecutive year of profitability for the industry in 2014. Looking ahead there

is optimism that the industry has been transformed from that of a boom

- to

- bust cycle to one of sustainable profit s.

As the economy recovers from the most serious economic downturn since World War II and the

slowest expansion in recent history , aviation will continue to grow over the long run. Fundamentally, over the medium and long term, demand for aviation is dr iven by economic activity. The 2015 FAA forecast calls for U.S. carrier passenger growth over the next 20 years
to average 2.0 percent per year

, slightly lower than last year’s forecast

. The sharp decline in the price of oil in 201 5 i s a catalyst for a s hort lived uptick in passenger growth

. Although oil prices are projected to fall to around $60 per barrel in 2015, our forecast assumes that they will rise over the next five years to exceed $100 by 2021, keeping a lid on U.S. economic growth during

the sa me period. One of the many factors influencing the muted recovery is the uncertainty that

surround s the U.S. and the global economy. The global economy has been hit by a number of headwinds during the past few years, from recession in Europe to a “soft la nding” in China and inconsistent performance in other emerging economies. The uncertainty over the future course of oil prices is just one more item on the list . Although the U.S. economy has managed to avoid a double dip recession

, a prolonged period of faster economic growth (e.g. > 3%) may not be forthcoming

.

S ystem capacity in available seat miles ( AS Ms)

– the overall yardstick for how busy aviation is both domestically and internationally

– is projected to increase by 2.4 percent this year after

p osting a 2.2 percent increase in 201 4 ; it will then grow at an average annual rate of

2.5 percent through 2035

. In the domestic market, capacity growth in 2015 is forecast to be 2.8 percent and then grow at an average annual rate of 1.8 percent for the re mainder of the forecast period

. D omestic m ainline carrier capacity is projected to increase 2.6 percent in 2014 after rising 1.8 percent in 2014

. For the regional carriers

, domestic capacity growth is projected

to be 4.0 percent in 2015 after falling in each of the past three years, including a 1.5 percent

decline in 2014. Commercial air carrier domestic r evenue passenger miles (RPMs) are forecast

to increase 2.8 percent in 2015

, and then grow at an average of 1.9 percent per year through

2035 ; domestic enplanements in 2015 will increase 2.6 percent

, and then grow at an average

annual rate 1.6 percent for the remainder of the forecast period

.FAA Aerospace Forecast Fiscal Years 2015

- 2035

2 The average size of d omestic aircraft is expected to increase by 1. 1 seats in FY 2015 to 12 8

. 2

seats. Average seats per aircraft for mainline carriers are projected to increase by 1.2 seats as network carrier s 1 continue to reconfigur e their domestic fleets. While demand for 70

- 90 seat aircraft continues to increase, we expect the number of 50 seat regional jets in service to fall, increasing the average regional aircraft size in 2015 by 0.8 seats to 57.8 seats per mile. Passenger trip length in all domestic markets will inc rease by 2.8 miles during the same period

.

General aviation market continues its recov ery . In 2014, the turbo jet sector recorded its first increase in deliveries by U.S. manufacturers since 2008. For a third year in a row, s ingle engine piston deliveries have increased

. The long term outlook for general aviation is

favorable , and near t erm also looks promising especially for piston aircraft activity which is sensitive to fuel price movements. W hile it is slightly lower than predicted last year, the growth

in business aviation demand over the long term continues

. As the fleet grows , the number of general aviation hours flown is projected to increase an average of 1.4 percent per year through

203 5

.

After sputtering in the early part of 201 4

, the U.S. econom y began to show improvement in the

latter half of 2014 while the economies in th e rest of the world showed mixed results. With

lower energy prices, U.S. carrier profitability should remain steady or increase as an economy in its sixth year of recovery leads to strengthening demand and increased revenues

, whi le operating costs are fal ling or stable

. Over the long term, we see a competitive and profitable

aviation industry characterized by increasing demand for air travel and air fares growing more slowly than inflation , reflecting over the long term a growing U.S. economy

.

1 Alaska Airlines, American Airlines, United Airlines, Delta Airlines, and U.S. Airways.FAA Aerospace Forecast Fiscal Years 2015

- 2035

3 

# REVIEW OF 201 4

The year 2014 began with a good deal of uncertainty which never really let up. Despite the uncertainty surrounding the impacts of a government shutdown, severe winter weather, slow economic growth in Europe and Japan, 2014 saw the U.S. airline industry post solid results.

The changes that U.S. carriers have made since the start of the global recession in 2008 helped the industry to make a profit for the fifth year in a row. Many industry professionals see these changes as providing traction t owards profitability , even during future periods of uncertainty. The biggest change that U.S. passenger airlines have made is the shift in focus

from increasing market share to one of boosting shareholder return on invest ment

. The U.S. airline industry h as become more nimble adjusting capacity either upward or downward to seize opportunities or minimize losses

. U.S. airlines have developed additional revenue streams such

as charging fees for service s that used to be included in airfare (e.g. meal service ) , as well as

for charging for services that were not previously available (e.g

. premium boarding and fare lock

fees ). Th e impact from these initiatives gives reason for optimism as th e industry (passenger and cargo carriers combined ) p osted profits for th e fifth consecutive year in 2014

.

Demand for air travel in 2014 grew at a modest pace amid an improving economic

environment in the U.S. In 201 4 2 s ystem revenue passenger miles increased 2.5 percent as enplanement s increased 2.3 percent. Commercial a ir carrier domestic enplanements were up by 2 .1 percent, while international enplanements were up 3.4 percent. The system

- wide load

factor rose to 83. 4 percent (up 0. 2 points from 201 3 )

. Domestic enplanement m arket share

continued to rise for l ow

- cost , n etwork, and “other” carriers in 2014 while regional carrier share

decreased

. Domestic low cost carrier enplanement share increased by 0. 3 points to 29. 5 percent

, while the share of network and “other” carriers rose by 0. 4 points to 47. 4 percent

. Regional carrier share dropped by 0. 8 points to 23. 0 percent.

Improving yields helped by continued c apacity restraint by the carriers helped boost industry profits in FY 201 4

. Data for FY 2014 show that the reporting passenger carriers had a combined operatin g profit of $ 14

. 9 billion (compared to a $ 9

. 6 billion operating profit for FY

2013 ). T he network carriers reported combined operating profits of $ 11 .1 billion while the low cost carriers reported combined operating profits of $ 3

. 2 billion

, with all carrie rs posting profits

.

The general aviation market showed improvements in business jet and single engine piston segment s

, while declines in turboprop and multi

- engine piston markets translated into a slight overall improvement. Overall deliveries were u p by 1.0 percent in calendar year (CY) 2014 ; with a 5.6 percent increase in U.S. billings

. Single engine piston shipments were up for the

third year in a row, by 6.2 compared to the previous year. Because of a 10 .0 percent decrease

in the smaller multi

- e ngine category, total p iston aircraft shipments by U.S. manufacturers went up by 4.5 percent

. Business jet shipments increased by 12.3 percent. However, an 11.2 percent decline in the turboprop deliveries generated a 2.1 percent decrease in t urbine aircr aft

2 All stated years and quarters for U.S. economic and U.S. air carrier traffic and financial data and forecasts are

on a fiscal year (FY) basis (October 1 through September 30). All stated years and quarters for international economic and world traffic and financial data are on a calendar year (CY) basis, unless otherwise stated.FAA Aerospace Forecast Fiscal Years 2015

- 2035

4 shipments ( total of turboprop and business jets) by U.S. manufacturers in CY 201 4

. Turboprop shipments, which had increased by 13.8 percent in 201 3, were nearly back to their 2012

levels. G eneral aviation activity at FAA and contract tower airports r ecorded a 1. 1 percent

decline in 201 4

, which was caused by a decrease in itinerant activity; local operations were slightly down (0. 6 percent) compared to previous year

.

Total operations at FAA and contract towers fell again in 2014 by 0.9 percent

, as a ctivity decline s in the air taxi, general aviation, and military categories offset an increase in air carrier activity

. Activity at large hub s fall by 0. 5 percent, while medium hubs and small/non hub airports saw

declines of 1.6 percent and 0.9 percent, r espectively. With increasing numbers of regional and business jets in the nation’s skies, fleet mix changes, and carriers consolidating operations in their large hubs, we expect increased activity growth which has the potential to increase controller

work load

.FAA Aerospace Forecast Fiscal Years 2015

- 2035

5 

## U.S. ECONOMIC ACTIVITY

U.S. economic performance in 2014 continued to be mixed with modest growth in real GDP

and real incomes , a falling unemployment rate, and oil prices and consumer inflation remain ing

in check. The economy grew at an ave rage annual rate of 2. 6 percent in fiscal year ( FY ) 2014 after expanding 1

. 8 percent in FY 201 3

. GDP growth was strong in the second half of the year after shrinking in the second quarter due to the negative effects of the polar vortex. T here

were favora ble signs in the data as the stock market entered record territory, and the labor

market saw steady improvement with almost 2. 8 million new jobs created during the year, the best figure since 1999

.

0.1 2.7

1.8 4.5

3.5

- 2.1 4.6 5.0

-3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0

2012 Q4 2013 Q1 2013 Q2 2013 Q3 2014 Q4 2014 Q1 2014 Q2 2014 Q3 Annualized Percent Change

Year/Qtr



### U.S. Real Gross Domestic Product Seasonally Adjusted Annualized Growth

Fiscal Year 2013 Fiscal Year 2014 Source: IHS Global InsightFAA Aerospace Forecast Fiscal Years 2015

- 2035

6 Much had been written about the weak rate of job creation and the slow improvement of the nation’s unemployment rate during the course of the current economic recovery. In FY 2014, the rate of job creation picked up, and t he improvement in the labor market was reflected in the falling unemployment rate . At the beginning of FY 2014, the nation’s unemployment rate stood at 7.2 percent and steadily fell throughout the year, falling to 5.9 percent in September 2014, a 1.3 point decline over the course of the year, the largest annual decline in the current expansion

.

9.0 8.6 8.3 8.2 8.0 7.8 7.7 7.5 7.2 7.0 6.6 6.2 6.1

- 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00

2011 Q3 2012 Q1 2012 Q3 2013 Q1 2013 Q3 2014 Q1 2014 Q3 Percent Unemployed 

### U.S. Civilian Unemployment Rate

Year/Quarter
Source: IHS Global Insight, 10 Year Baseline ForecastFAA Aerospace Forecast Fiscal Years 2015

- 2035

7 The price of oil, as measured by the U.S. Refiners’ Acquisition Cost (for West Texas

Intermedia te , or WTI)

, remained relatively stable in FY 201 4 , averaging $ 97.76 per barrel,

down 3 .0 percent from the FY 201 3 figure of $10 0

. 7 8

.

Finally, con sumer prices increased at a modest rate in 201 4

. C ore inflation (excluding food and

energy ) was moderate ( 1. 7 percent ); while headline inflation (including food and energy ) was up
1.6 percent as energy prices increased just 0.4 percent

. 60.6 101.5

54.7 74.6 96.0 102.8 100.8 97.8

- 20.00 40.00 60.00 80.00 100.00 120.00

2007 2008 2009 2010 2011 2012 2013 2014 $ Per Barrel of (WTI) Oil 

### U.S. Refiners' Acquisition Cost

Fiscal Year Source: IHS Global Insight, 10 Year Baseline ForecastFAA Aerospace Forecast Fiscal Years 2015

- 2035

8 

## W ORLD ECONOMIC ACTIVITY

Based on preliminary figures, 3 the U.S. and rest of the world economies both grew 2. 5 percent

in 201 4

. T he advanced economies (U.S., Western Europe, Japan, Australia, New Zea land, and Canada) expanded 1.7 percent overall

.

All world regions saw their economies grow . The combined economies of the Asia

- Pacific region grew the fastest (4.3 percent), Europe (1.4 percent) and the U.S. had only moderate growth, while Latin America and the Caribbean had the lowest growth (0.9 per cent) Among the

countr ies with the largest economies , China, India and Indonesia grew the fastest (7.3, 5.9 and 5.1, respectively) while Japan only grew 0.2 percent

. In Europe, Ireland had the largest growth at 5.0 percent , followed by Poland at 3.3 perce nt. Canada slightly edged out the U.S. at 2.4
percent. 4

Overall, the Asia

- Pacific, region excluding Japan, is still the world leader in GDP growth (5.7 percent), followed by Sub

- Saharan Africa (4.5 percent), then Central Europe and the Balkans (2.6 percent). The Non

- OECD countries (4.1) percent) had an almost four fold increase over the OECD countries (1.7) in 2014. 5

3 IHS Global Insight.

4 I bid.

5 Ibid

. 2.7

1.8

(0.3)

(2.8) 2.5

1.6 2.3 2.2 2.2 4.4 4.3

1.8

(1.7) 4.3

3.0

2.4 2.5 2.5

(4.0) (3.0) (2.0) (1.0) - 1.0 2.0 3.0 4.0 5.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 Annual Percent Change

Calendar Year



### U.S. and World Real Gross Domestic Product

U.S. Rest of World

Source: IHS Global InsightFAA Aerospace Forecast Fiscal Years 2015

- 2035

9 

## COMMERCIAL AVIATION

Worldwide c ommercial aviation continued a slow recovery in 2014 as stable jet fuel prices

offset relative ly disappointing global economic growth

. T he U.S. industry posted a net profit in

2014 , with a similar outcome predicted for foreign carriers. After registe ring net profits of $ 10.6

billion in 2013 , g lobal industry net profits for calendar year 2014 are expected to be $ 19.9

billion

. 6 All global regions are projected to see a n increase in profits as fuel costs fell

.



### World Travel Demand

Based on data compiled by the International Civil Aviation Organization (ICAO), world air

carriers are expected to pos t a nother moderate growth performance in CY 2014 as demand for

air travel continues to re cover from the depressed levels recorded during 2009

. Preliminary traffic results for full year 2014 released by ICAO show worldwide revenue passenger kilometers (RPK s) increase d 5. 9 percent , a 0. 4 percentage point increase compared to last year’s growth rate. 7

6 IATA Economic Performance of the Airline Industry, End Year Report , December 201 4

. 7 ICAO press release dated December 18 , 201 4

.

5.6 8.8

1.5

- 1.4 8.2

5.1 4.6 5.3 5.0 6.9 8.0

1.9

- 1.1 7.9

6.3

5.1 5.5 5.9

-2.0 0.0 2.0 4.0 6.0 8.0 10.0

2006 2007 2008 2009 2010 2011 2012 2013 2014E Annual Percent Change

Calendar Year 

### World Passenger Demand (International and Domestic)

Passengers RPKsFAA Aerospace Forecast Fiscal Years 2015

- 2035

10 F or calendar year 2014 , preliminary data from ICAO show passengers were up 5. 0 percent

over calendar year 2013

. Data f or the same period shows c apacity , as measured by a vailable seat kilometers (ASKs)

, to be up 5. 7 percent

.

Traffic and capacity data from the Association of European Airlines (AEA) for calendar year 201 4 showed year over year gains in RPKs ranging between 1.5 percent to 6.1 percent an d year over year changes in ASKs ranging between 0.4 percent to 5.2 percent.

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year over Year Percent Change

Month



### European Carriers Capacity and Traffic

Calendar Year 2014

ASKs RPKsFAA Aerospace Forecast Fiscal Years 2015

- 2035

11 The Association of Asia Pacific Airlines (AAPA) reported an increase of 4.7 percent in

international RPKs and a 6.0 percent increase in international ASKs ; i nternational pa ssengers in the region were up 4.8 percent during the same period. 8

8 Association of Asia Pacific Airlines, “Asia Pacific Full Year 2014 Traffic Results”, Press Release dated 28 January 2015, Issue 2 015: 02. 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year over Year Percent Change

Month 

### Asia Pacific Carriers International Capacity and Traffic

Calendar Year 2014

ASKs RPKs

Source: Association of Asia Pacific AirlinesFAA Aerospace Forecast Fiscal Years 2015

- 2035

12 In CY 201 4 , U.S. and foreign flag carriers transport ed an estimated 1 95

. 7 million passengers

b etween the United States and the rest of the world, a 5.5 percent in crease from 201 3

. Year

over

- year g rowth occurred in all markets (up 4.6, 7.4, 4.9, and 3.5 percent, respective l y , for Atlantic, Latin America, Pacific, and Canada Transborder ).

50 53 57 55 56 58 61 63 66 47 49 50 48 53 57 61 65 70 26 26 26 24 27 28 31 32 34

21 22 22 20 22 23 25 26 27

0 50 100 150 200 250

2006 2007 2008 2009 2010 2011 2012 2013 2014E Millions of Passengers

Calendar Year



### Total Passengers To/From the U.S. American and Foreign Flag Carriers

Atlantic L. America Pacific Canada Transborder

Source: US Customs & Border Protection data processed and released by Department of Commerce; data also received from Trans por t CanadaFAA Aerospace Forecast Fiscal Years 2015

- 2035

13 Worldwide air cargo d emand increased strongly i n 2014

. According to ICAO

, worldwide fre ight

to n kilometers were estimated to increase 4.6 percent in calendar year 2014 compared to

2013

. Freight ton kilometers ( FTKs ) of AEA member carriers fell 2.0 percent in calendar year

2014 while the international FTKs of AAPA member carrier s rose 5.4 pe rcent

.

The International Air Transport Association ( I ATA ) reports that world air carriers (including U.S. airlines) are expected to register a n operating profit of $ 38.3 billion for 2014

. IATA estimat es global airline industry net profits to be $ 19. 9 billion for the same period with all regions to be in

the black. Based on financial data compiled by ICAO and IATA

, between 200 4 and 2014 world airlines produced cumulative operating profits of $ 172 .8 billion (with ten years out of eleven posting gains) and net profits of $ 41.5 billion (with seven years out of eleven posting gains). 9

9 IATA Financial Forecast , December 201 4

.

2.5 6.2 6.3

- 3.3 - 0.7 19.2

1.4

- 1.4 2.3 4.1

2.5 6.3

4.7

- 0.7

- 8.8 19.4

0.4

- 0.9 0.6 4.6

-15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 20.0 25.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E Annual Percent Change

Calendar Year 

### World Air Cargo Demand

Tonnes RTKs

Source: IATAFAA Aerospace Forecast Fiscal Years 2015

- 2035

14 4.4 15.0 19.9

(1.1) 1.9 27.6

19.8 18.4 25.3 38.3

(4.1) 5.0 14.7

(26.1) (4.6) 17.3

8.3 6.1 10.6 19.9

(30.0) (20.0) (10.0) - 10.0 20.0 30.0 40.0 50.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E Billions of Dollars

Calendar Year 

### World Air Carrier Profit/Loss

Operating Net

Source IATAFAA Aerospace Forecast Fiscal Years 2015

- 2035

15 

### U.S. Travel Demand

By year end of FY 201 4 , the U.S. commercial aviation industry consisted of 1 6 scheduled

mainline air carriers that use d large passenger jets (over 90 seats) and 70 regional carriers

that use d smaller piston, turboprop, and regional jet aircraft (up to 90 seats) to provide connecting passengers to the larger carriers. Mainline and regional carriers offer domestic and international passenger se rvice between the U.S. and foreign destinations, although regional carrier international service is confined to the border markets in Canada, Mexico, and

the Caribbean

. Twenty

- six all

- cargo carriers were providing domestic and/or international air

cargo s ervice at the end of 2014

.

S haping today’s commercial air carrier industry are three distinct trends : (1) continuing industry consolidation and restructuring ; (2 ) continued capacity discipline in response to external

shocks , and (3) the proliferation of ancillary revenues

.

The restructuring and consolidation of the U

. S

. airline industry that began in the aftermath of the terror attacks of September 11, 2011 continued in 2014

. During the year, Southwest continued to integrate the former AirTran network into its operations while American and US Airways moved ahead with combining their networks and reservations systems. Consequently, when compared to
2007, 5.7 percent fewer domestic ASMs were flown and 2.9 percent less passengers were carried

domesticall y in 2014

. This has had clear implications on the size of the aircraft being used and the load factors, topics that will be discuss ed later in this document.

One of the most striking outcomes of industry restructuring has been the unprecedented period of capacity discipline, especially in domestic markets. Between 1978 and 2000, ASMs in domestic markets increased at an average annual rate of 4 percent a year, recording only two years of

decline

. Even though domestic ASMs shrank by 6.9 percent in FY 20 02, following the events of September 11, 2001, growth resumed and by 200 7 , domestic ASMs were 3

. 6 percent above the FY 2000 level. However, since 200 7

, U.S. domestic market ASMs have decreased by 5.7 percent , as the industry responded first to the sharp rise in oil prices (up 155% between 2004 and 2008) and then the global recession that followed (2009 to the present)

.

The 5.7 percent reduction in domestic c apacity since 200 7 ha s not been shared equally between the mainline carriers and their regional counterparts. To better match demand to capacity, the mainline carriers contracted out “thin” routes to their regional counterparts because they could provide lift at a lower cost , or else they simply removed the capacity altogether

. In 2014

, the

m ainli ne carrier group provided 6.3 percent less capacity than it did in 200 7 ( and carried 3

. 6
percent fewer passengers )

. C apacity flown by the regional group has shrunk by 1.9 percent over the same period ( with passengers carried down 0.7 percent)

.

T he most recent trend to take hol d is that of ancillary revenues

. Carriers generate ancillary

revenue s by selling products and services beyond that of an airplane ticket to customers

. This

includes the un

- bundling of services previously included in the ti cket price such as checked bags and on

- board meals , and by adding new services such as boarding priority

. As noted earlier, U

. S

. passenger carriers post ed net profits for the fifth consecutive year in 2014 with ancillary revenues a contributing factor to the favorable outcome

.FAA Aerospace Forecast Fiscal Years 2015

- 2035

16 Commercial Air Carriers

– Passenger

U.S. commercial air carriers’ traffic and capacity in 201 4 showed mild growth for the second year in a row which is an improvement over 2013

. System

, that is, the sum of domestic plus

inter national capacity

, increased 2.2 percent to 1.02 5 trillion ASMs while RPMs increased 2.5
percent to 855.1 billion. During the same period system

- wide enplanements increased

2.3 percent to 756.3 million ; U.S. mainline carrier enplanement growth was 3.0 per cent while regional carrier s carried 0.2 percent fewer passenger s . In the domestic market

, mainline enplanements saw an increase for the fourth consecutive year, up 2.9 percent , marking the

first time since 2000 that the industry recorded four consecutive years of passenger growth in

the domestic market

. Mainline passengers in international markets post ed a fourth year of growth

, up 3.6 percent

.

Even though the recession was officially over in June 2009 10

, carriers continued to face economic uncertainty in 201 4 as corporate travel budgets remained strained

, unemployment

wa s still high relative to the early 2000s, the housing market remain ed volatile, and government spending remain ed sta gnant. In such an uncertain , but slowly improving, environment, indu stry capacity growth was restrained (up 2.2 percent) , after only a 0.8 percent

increase in 201 3

. Given the minimal increase in seats available to the travelling public,

carriers were still able to raise airfares despite the slow growth in demand. Higher airfares and ancillary revenues, coupled with flat to rapidly falling fuel prices resulted in U.S. carriers

finish ing up 201 4 with a net profit

.

S ystem load factor and trip length continued to edge slightly upwards in 201 4

, even as seats per aircraft mile increased

. The average l oad factor reached a record

- breaking 83. 4 points

, up
0. 3 points from 201 3 while passenger t rip length increased 2.4 miles

, to 1,13 1 miles. S eats per aircraft mile increased to 145.2 seats ( up 2.3 seats per aircraft mile) , the highest level

since 1999

.

10 According to the National Bureau of Economic Research.FAA Aerospace Forecast Fiscal Years 2015

- 2035

17 (3.4) 0.9

(2.0)

(8.4) (1.3) 0.2

(1.6) (2.0) (1.6) (0.2) 2.7

1.4

(7.3) (0.5) 3.4

0.1 0.8 2.2

-10.0 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0

2006 2007 2008 2009 2010 2011 2012 2013 2014E Annual Percent Change

Fiscal Year



### U.S. Commercial Air Carriers System ASMs and Aircraft Operations

Operations ASMsFAA Aerospace Forecast Fiscal Years 2015

- 2035

18 Domestic Passenger Markets

Domestic 11 ASMs increased 1.4 percent in 201 4 after increasing just 0. 8 percent in 201 3

. D epartures were down 1.9 percent for the year after falling 2.1 percent in FY 201 3

. Mainline

carrier ASMs w ere up 1.8 percent for the year, while regional carrier ASMs fell 1.5 percent. At

the end of FY 201 4 , d omestic ASMs were still 5.7 percent below pre

- recession levels (2007) with departures down 17.3 percent.

11 The 50 states, Puerto Rico, and the U.S. Virgin Islands

.

2.7 3.9

0.8

(7.1) 2.1 3.6

0.9 1.5 2.5

0.4 3.2

(0.6)

(7.2) 1.1 2.7

0.8 0.4 2.3

-8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0

2006 2007 2008 2009 2010 2011 2012 2013 2014E Annual Percent Change

Fiscal Year 

### U.S. Commercial Air Carriers System RPMs and Enplanements

RPMs EnplanementsFAA Aerospace Forecast Fiscal Years 2015

- 2035

19 In a turnaround from 201 3 , dome stic passenger enplanements grew at a faster rate than ASMs

in 201 4

, up 2.1 percent for the year . M ainline carrier enplanements were up 2.9 percent for the year while regional carrier enplanements fell 0.2 percent

, continuing the downward trend that began in 201 1

. -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0

Oct-13 Nov Dec Jan-14 Feb Mar Apr May Jun Jul Aug Sep Year over Year Percent Change

Month



### U.S. Commercial Carriers Domestic Capacity*

Fiscal Year 2014

Departures ASMs

*Scheduled and Non

- ScheduledFAA Aerospace Forecast Fiscal Years 2015

- 2035

20 Domestic RPMs also grew faster than ASMs in FY 2014 with domestic RPMs up 2.5 percent

and m ainline carrier RPM growth was 2.8 percent, while regional carrier RPMs increased 0.5
percent

.

Domestic carrier load factor increased 1.1 point s to 84.4 percent, with both the mainline and regional carriers groups posting record high load s

. Mainline carrier load factor increased 0.8 points from FY 201 3 to 85.0 percent

, while regional carrier load factor increased 1.6 points to

80.0 percent.

S ince FY 200 7 , total domestic capacity has decrease d by 5.7 percent. Mainline carriers have

reduced their domestic capacity by 6.3 percent with cutbacks by network carriers more than offsetting the growth of low

- cost carriers , while regional carrier capaci ty has declined by a

smaller amount (down 1.9 percent since 2007)

.

During the same period, mainline carrier RPMs have decreased 0.9 percent

, while enplanements have fallen 3.6 percent. In comparison, over this same period, regional carrier

RPMs increase d 4.0 percent while enplanements have fallen 0.7 percent. As a result, mainline

carrier domestic capacity share has fallen from 87.6 percent in 2007 to 87.1 percent in 201 4

, with the share of domestic RPMs flown by mainline carriers dropp ing from 88.3 pe rcent to 87.7 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

Oct-13 Nov Dec Jan-14 Feb Mar Apr May Jun Jul Aug Sep Year over Year Percent Change

Month 

### U.S. Commercial Carriers

Domestic Traffic*

Fiscal Year 2014

Enplanements RPMs

*Scheduled and Non

- ScheduledFAA Aerospace Forecast Fiscal Years 2015

- 2035

21 percent during the same period

. In 201 4 the r egional carriers’ domestic enplanement share

was 23.2 percent, up from 22.6 percent in 2007

.

516 534 522 477 474 488 495 499 513 152 156 159

154 162 162 159 156 155

- 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0

2006 2007 2008 2009 2010 2011 2012 2013 2014E Millions

Fiscal Year



### U.S. Commercial Air Carriers Domestic Enplanements by Carrier Group

Mainline RegionalFAA Aerospace Forecast Fiscal Years 2015

- 2035

22 International Passenger Markets

U.S. carrier international ASMs were up 4.0 percent and depar tures were up 3.6 percent in

201 4 . ASMs in creased in the Latin

, Pacific and Atlantic market s

, up 8.4

, 1.2 and 2.8 per cent, respectively

.

U.S. carrier i nternational RPMs were up 2.6 percent and passenger enplanements were up 3. 4 percent in 201 4

. Th e Pacific market posted negative results , with RPMs falling 0.1 percent

while enplanements de creased 2.9 percent. RPMs and enplanements increased 7.7 and 7.5 percent, respectively, in the Latin American market

, while RPMs and enplanements increased

0.8 an d 0.6 percent, respectively, in the Atlantic market. -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0

Oct-13 Nov Dec Jan-14 Feb Mar Apr May Jun Jul Aug Sep Year over Year Percent Change

Month 

### U.S. Commercial Carriers International Capacity*

Fiscal Year 2014

Departures ASMs

*Scheduled and Non

- Scheduled Ops. Source: DOT

- F41FAA Aerospace Forecast Fiscal Years 2015

- 2035

23 T he international load factor decreased 1.2 percentage points overall in 201 4 to 81.4 percent

. Load factor de creased in all markets : in the Latin market the load factor went down 0.5 points

t o 80.6 percent ; in the Pacific market load factor was down 1.1 points to 82.0 percent and in

the North Atlantic market the load factor de creased by 1.7 points to 81.7 percent.

In 201 4

, 54 percent of the passengers flying abroad on U.S. flag carriers tra veled to the Latin

America market. The remaining 46 percent of international passengers was split between the Atlantic market ( 29 percent) and the Pacific market ( 17 percent) ; these percentages are unchanged from 2013. -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0

Oct-13 Nov Dec Jan-14 Feb Mar Apr May Jun Jul Aug Sep Year over Year Percent Change

Month 

### U.S. Commercial Carriers

International Traffic*

Fiscal Year 2014

Enplanements RPMs

*Scheduled and Non

- Scheduled Ops. Source: DOT

- F41FAA Aerospace Forecast Fiscal Years 2015

- 2035

24 Commercial Air Carriers

– Cargo

Air cargo traffic contains both domestic and international freight/express and mail. The demand for air cargo is a derived demand resulting from economic activity. Cargo moves in the bellies of passenger aircraft and in dedicated all

- cargo aircraft on bo th scheduled and

nonscheduled service. Cargo carriers face price competition from alternative shipping modes such as trucks, container ships, and rail cars.

U.S. air carriers flew 34.8 billion revenue ton miles (RTMs) in 201 4

, unchanged from 2013.

. Do mestic cargo revenue ton miles ( RTMs ) increase d 2.3 percent to 12. 7 billion. However,

international RTMs decreased by 1.2 percent to 22. 2 billion

.

Air cargo RTMs flown by all

- cargo carriers comprised 7 8.2 percent of total RTMs in 201 4 , with

passen ger carriers flying the remainder

. Total RTMs flown by the all

- cargo carriers decreased

1.8 percent in 201 4 from 27.7 billion to 27. 2 billion. Total RTMs flown by passenger carriers

were 7. 6 billion in 201 4

, 7.0 percent higher than in 201 3

.

16 16 15 15 14 12 13 12 12 13 13 20 23 24 25 24

19 23 25 24 22 23

- 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E Billions

Fiscal Year



### U.S. Commercial Air Carriers Cargo Revenue Ton Miles

Domestic RTMs International RTMsFAA Aerospace Forecast Fiscal Years 2015

- 2035

25 Internati onal Air Cargo Revenue Ton Miles by Region

U.S. carrier i nternational air cargo traffic can be divided into four components consisting of Atlantic, Latin, Pacific, and ‘Other International.’ In 2014 total international RTM s decreased

1.2 percent from 22 .4 billion to 22.2 billion with declines in the Latin and Other International regions more than offsetting increases in the Atlantic and Pacific region s

. The largest decrease was posted in the ‘Other International’ category where cargo RTMs fell by 12.1 pe rcent from

5.8 billion RTMs to 5.1 billion RTMs. The Latin market saw cargo RTMs fall by 2.7 percent

from 1.8 billion RTMs to 1.7 billion RTMs . T he Atlantic market posted a modest increase, up 3.4 percent from 6.7 billion to 6.9 billion while the Pacific region saw cargo RTMs rise from 8.2

billion RTMs to 8.4 billion RTMs a n in crease of 3.0 percent

.FAA Aerospace Forecast Fiscal Years 2015

- 2035

26 

### U.S. Commercial Air Carriers 2014 Financial Results

U.S. commercial air carriers posted a net profit of $ 1 5. 4 billion during FY 2014 after reportin g

a net profit of $ 5.2 billion one year earlier

.

Operating revenues (passenger and cargo) for FY 2014 were up 4.2 percent from FY 2013

. Passenger carriers saw their revenue increase 5.4 percent buoyed by rising yields and modest

increases in traffi c

. The increase in revenue underscored the ability of passenger carriers to push through fare increases and to offer value

- added services that leisure and business passengers were willing to buy

. R evenues for cargo carriers fell for the second year in a row, down 0.7 percent

, with the continued slowdown in cargo traffic after falling1.5 percent in FY

2013

.

During the same period, o perating expenses for all carriers rose 1.2 percent following a 0.8
percent de crease in FY 2013

. The small rise in opera ting expens es during FY 2014 was driven in large part by a 2.6 percent fall in the price of fuel for the year

.

In FY 2014 , passenger carriers reported operating income of $ 14.9 b illion and net income of $ 1 4. 4 billion , while air cargo carriers reported a n operating profit of $ 1. 9 billion and a net income

(1.2) 5.6 10.2

(2.0) 0.8 9.6

7.6 7.5 10.8 16.8

(11.7) (0.2) 5.9

(18.6) (7.8) 3.4 2.0

0.2 5.2 15.4

(25.0) (20.0) (15.0) (10.0) (5.0) - 5.0 10.0 15.0 20.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E Billions of Dollars ($)

Fiscal Year



### U.S. Commercial Air Carriers Operating and Net Profit/Loss

Operating Profit/Loss Net Profit/Loss

Source: DOT Forms 41 & 298CFAA Aerospace Forecast Fiscal Years 2015

- 2035

27 of $ 1.0 b illion

. In the domestic market, p assenger carriers generate d an operating profit of $ 10.5

b illion and net income of $ 10.2 billion

. I n the international market , this carrier group post ed operati ng and net profit s of $ 4.4 b illion and $ 4.2 b illion, respectively. Cargo carriers post ed an operating profit of $ 4. 7 b illion and a net income of $ 3.0 b illion in domestic markets

. In international markets, the cargo carriers reported an operating loss of $ 2.8 b illion and net loss of $ 2. 0 b illion.

The industry’s financial results in FY 2014 reflected the strong results posted by the passenger carriers, especially the network carrier s

. After posting a net profit in FY 2013 of $ 3.6 b illion , this

carrier group posted operating profits of $ 11 .1 billion a nd net income of $ 12.1 billion

. For the eight

re porting low

- cost carriers

, operating profits totaled $ 3.2 b illion and net income totaled $ 2.1

billion for the full year

.

Solid demand growth buoyed by t he improving economy coupled with continued capacity discipline by the mainline carriers led to healthy increase in mainline carrier passenger yield for the year

. D omestic mainline carrier passenger yield increased to 15.12 ¢ in 2014, up 4.8
percent from t he 2013 level of 14.44 ¢

.

Of the reporting r egional carriers

, operating profits totaled $ 376 m illion and net income totaled $ 99 million for FY 2014

, despite domestic yield falling 2

. 8 percent

. As the industry continues to

12.4 12.5 13.1

12.0 12.9 13.6 14.1 14.4 15.2 19.7 19.9 21.2

17.2

15.8 15.2

13.3

11.8 11.4

- 5.0 10.0 15.0 20.0 25.0

2006 2007 2008 2009 2010 2011 2012 2013 2014E Revenue Per Mile ( ¢)

Fiscal Year



### U.S. Commercial Air Carriers Domestic Passenger Yield

Mainline RegionalsFAA Aerospace Forecast Fiscal Years 2015

- 2035

28 restructure

, network c a rriers have negotiat ed contracts with their regional partners that shift

mo re of the financial risk of contract flying to the regional carriers

. Since 200 7

, r egional carrier yield is down 50 percent in real terms (compared to a n increase of 5.7 percent in mainline

carrier yield for the same period )

. In addition

, longer trip length s ( due to a growing number of larger and faster regional jet aircraft entering the fleet ) and higher load factor s have also contributed to the drop in regional yield

. All other things being equal, a n i ncrease in either the trip length or the load factor results in a drop in yield since fee

- for

- departure revenues are spread over a broader base of RPMs.FAA Aerospace Forecast Fiscal Years 2015

- 2035

29 

### U.S. Commercial Air Carriers 2014 Aircraft Fleets

The commercial passenge r carrier fleet is undergoing transformation. The m ainline carriers are retiring older, less fuel efficient aircraft (e.g. 737

- 300/400/500 , 757/767, and MD

- 80) and replacing them with more technologic ally advanced A320 and 737

- 700/800/900 aircraft. T he

r egional carriers are growing their fleet of 70 to 90 seat regional jet aircraft and reducing their

fleet of 50

- seat jet aircraft

.

The total number of aircraft in the U.S. commercial fleet (including regional carriers) is

estimated at 6,676 for 2014

, a de crease of 57 aircraft from 2013 . This includes 3, 7 70 mainline air carrier passenger aircraft (over 90 seats), 758 mainline air carrier cargo aircraft, and
2,148 regional carrier aircraft (jets, turboprops, and pistons).

3,770 3,779 3,735 3,730 3,722 3,694 3,784 3,982 3,897

2,148 2,213 2,340 2,566 2,613 2,653 2,682 2,780 2,732

758 741 838 870 850 841 960 974 1,012

- 1,000 2,000 3,000 4,000 5,000 2014E 2013 2012 2011 2010 2009 2008 2007 2006

Number of Aircraft Calendar Year 

### U.S. Commercial Air Carriers

Aircraft Fleet

Cargo Regionals Mainline ACFAA Aerospace Forecast Fiscal Years 2015

- 2035

30 The mainline carriers’ passe nger jet fleet decreased by 9 aircraft in 2014

, following a 44 unit

increase in 2013

, as both network carriers and low cost carriers added to their fleets. With the

decrease in the fleet in 2014

, t he main line carrier fleet now stands at 16.0 percent below ( 723 aircraft) the level it was in 2000. L ike the mainline carrier fleet, the regional carrier fleet shrank

in 2014 , falling by 65 units . Since reaching a peak in 2007, the U.S. regional carrier fleet has been reduced by more than 22 percent ( 632 units)

. Consolidation among r egional carriers and high fuel prices continue to spur retire ments of 50 seat and smaller regional jets as well as small piston and turboprop aircraft

.FAA Aerospace Forecast Fiscal Years 2015

- 2035

31 

## GENERAL AVIATION

The g eneral aviation industry continued its modest growth in 2014

, especially with the help

from growth in business jet and single engine piston deliveries. The strong growth of turboprop and multi

- engine piston segments in 2013 slowed down to closer to their 2012

levels. Based on figures r eleased by the Gener al Aviation Manufacturers Association (GAMA), U.S. manufacturers of general aviation aircraft delivered 1

, 631 aircraft in CY 201 4

, 1.0 percent

more than CY 201 3

. This was the fourth year of increase in shipments

. Overall piston

deliveries increased by 4

. 5 percent, with single

- engine deliveries up 6.2 percent but the much

smaller multi

- engine category down 10.0 percent. In the turbine categories

, turbojet deliveries

were up by 12.3 percent

. T urboprop deliverie s went down by 11.2 percent in 2014

. U.S.

bi llings in CY 201 4 we re totaled $ 11. 7 billion, up 5.6 percent from 201 3

.

General Aviation o perations at combined F AA and contract towers decreased 1. 1 percent in

201 4

, led by a 1.4 percent decline in itinerant operations . Local operations fell 0. 6 per cent

. General aviation activity at consolidated traffic facilities (FAA TRACONs) fell 0.2 percent, while the number of general aviation aircraft handled at FAA en

- route centers increased by 4.7
percent.

The FAA uses estimates of fleet size, hours flown

, and utilization from the General Aviation and Part 135 Activity Survey (GA Survey) , which has been conducted annually since 1977

, as baseline figures upon which forecast growth rates are applied. Beginning with the 2004 GA Survey, there were significant improvements to the survey methodology. These improvements

2,857 3,147 3,279

3,079

1,585

1,334 1,465 1,518 1,615 1,631 8.7 10.4 11.9 13.3

9.1

7.9 8.3 8.0 11.1 11.7

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0

- 500 1,000 1,500 2,000 2,500 3,000 3,500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Billings ($B) Shipments

Calendar Year 

### General Aviation U.S. Manufacturers Shipments and Billings

Shipments Billings ($ Billion) Source: GAMAFAA Aerospace Forecast Fiscal Years 2015

- 2035

32 included conducting 100 percent samples for turboprops and turbojets, all rotorcraft, all aircraft in Alaska and all aircraft operating on

- demand under Part 135. In addition, the sample design

wa s revised to stratify by aircraft type (1 5 categories), FAA region (9 categories), whether the

aircraft was manufactured in the past 5 years (2 categories)

, and whether the aircraft operates

under a Part 135 certificate (2 categories). Furthermore, a larg e fleet reporting form was incorporated to allow owners/operators of multiple aircraft to report aggregate data for their entire fleet on a single form. In 2005 an additional aircraft category (light sport aircraft) was

added. As a result of these change s the sample size nearly doubled. Between 2003 and 2005 large changes in both the number of aircraft (turbojets up by 22.8 percent, total rotorcraft up by 33.7 percent) and hours (single

- engine piston down by 17.6 percent) in many categories

occurred. Th e results of 2011 survey were not available to use. Therefore, estimates of 2011 fleet and hours were based on estimated number of general aviation aircraft in the FAA civil

aircraft registration database by the end of CY 2011, and past rates of active ai rcraft and utilization by type of aircraft and age of the fleet. The results of the 201 3 Survey, the latest one
available, we re consistent with the results of past surveys since 2004. This reinforces our belief that methodological improvements have broug ht about superior estimates relative to those in the past and they are used as the basis for our forecast.

In 2010 FAA issued a Rule for Re

- Registration and Renewal of Aircraft Registration. According to this rule, all aircraft regist e red in the U.S. h ad to re

- register over the three

- year period from 2011 to 2013, and afterwards registrations must be renewed every three years.

The effect of this Rule was initially recorded in the results of the 2012 GA Survey that saw the

number of active GA aircraft fa ll by 6.4 percent, from 223,370 in 2010 to 209,034 in 2012. The 2013 GA Survey showed a further decline of 4.4 percent to 199,927 total active aircraft. The biggest decline was in the piston aircraft category, in which the number of active aircraft

decre ased 11.4 percent from 155,419 in 201 0 to 137,655 in 2013

. In individual segments, other aircraft category (including balloons and gliders) recorded the largest decline by 24.8 percent, from 5,684 to 4,277 aircraft, followed by the experimental aircraft b y 16.0 percent, from 29,662 to 24,918. Piston rotorcraft segment also show ed a significant fall by 12.6 percent, from 3,588 aircraft in 2010 to 3,137 in 2013.

G eneral aviation flight hours de creased by 7 .8 percent from 24.8 million in 2010 to 22.9 mil lion

in 2013

. The largest percentage decline was observed in the piston rotorcraft segment with 20
percent from 794,000 hours to 636,000 hours . Utilization rate in this category fell by 8 percent, from 221 hours per year to 203 hours. Turbine rotorcraft hours declined by 11 percent, from 2.6 million to 2.3 million, while utilization in this segment fell by 13 percent from 401 hours per year to 349 hours. S ingle engine piston aircraft hours declined by 12 percent from 12.2 million

in 2010 to 10.7 million in 2013, the largest component of the overall drop in GA flight hours. The decline in the size of the single engine piston fleet was the primary reason for the fall in hours during this period as utilization in this segment f e ll only by 1 percent from 87 to 86 hours

. There were increases in turboprop ( up 11%, from 2.3 million to 2.6 million ) , turbojet ( up 3%, from 3.4 million to 3.5 million), and special light

- sport aircraft hours ( up 25%, from 138,000 to 173,000), but not large enough to offset the decl ine in other areas. The turboprop utilization rate increased by 8 percent from 248 to 269 hours, and the turbojet utilization rate increased by 2 percent, from 294 to 300 hours.

Student pilots are important to general aviation and the aviation industry as a whole. Student pilot numbers had been in decline for many years

, but in 2010 the FAA issued a rule thatFAA Aerospace Forecast Fiscal Years 2015

- 2035

33 increased the duration of validity for student pilot certificates for pilots under the age of 40 from 36 months to 60 months. As a result, a ccord ing to statistics compiled by the FAA’s Mike Monroney Aeronautical Center, the number of student pilots at the end of 2010 increased by

64 .8 percent , or approximately by 47,000 pilots, compared to calendar year end 2009

. While

t he impact of the new rule o n the long term trend in student pilots has yet to be fully

determined , the number of student pilots slightly increased by 0. 2 percent from its 201 3 level to
120, 546

. The average age of a U.S. pilot in 201 4 was 44.8 years old.FAA Aerospace Forecast Fiscal Years 2015

- 2035

34 

## FAA OPERATIONS

In 2014

, a ctivity at FAA facilities declined for the s eventh consecutive year. Commercial a ir traffic activity fell for the sixth time in seven years as increases in air carrier activity were more than offset by declines in air taxi activity

. Noncommercial activit y also declined as both general aviation and military levels fell. The decline in annual totals were driven primarily by the impacts of the unusually severe weather in January

- March 2014 quarter, as total operations at FAA and contract tower airports post ed year over year gains in six of the remaining nine

months of FY 2014.

Total activity at combined FAA and contract tower airports (the set of 516 towers where FAA provides service, ranging from Chicago O’Hare (the busiest with 879 ,000 operations ) to towers

with as few as 7,200 operations (Branson, MO ) was 49. 6 million operations in 201 4 , down 0. 9 percent from 2013 and 27. 8 percent below the peak activity level recorded in 2000. In 2014

, commercial activity (the sum of air carrier and commuter/air tax i) at combined FAA and contract

towers fell by 0.6 percent. Air carrier operations were up 1.9 percent while commuter/air taxi operations declined 4.1 percent. Commer cial operations in 2014 were 17.7 percent lower than their peak in 2005.

Non

- comme rcial activity (the sum of general aviation and military) at combined FAA and contract

towers decreased 1.1 percent in 2014 after a 0.8 percent de crease in 2013 . G eneral aviation activity ( 25.6 million) was down 1.1 percent while military activity ( 2.5 mi llion) was down 1.4 percent. At the end of 2014 , non

- commercial aircraft activity was 34.1 percent below the activity

in 2000

.

In FY 2014 , t otal operations at the large hubs decreased by 0.5 percent to 12.5 million , and

constituted 25.2 percent of all towered operations . Activity at the medium hubs fell by 1.6
percent to 4.9 million while activity at the small and non

- hub towers decreased by 1.1 percent,

from 32.6 million to 32.3 million. The share of total towered operations at the medium, and small

and non

- hub towers in FY 2014 were 9.8 and 65.0 percent, respectively. Since 2000, operations at large hubs have declined by 13.3 percent, while operations at medium hubs have fallen by

42.8 percent, and operations at small and non

- hub towers have decline d by 29. 5 percent.FAA Aerospace Forecast Fiscal Years 2015

- 2035

35 The FAA pays close attention to the trends occurring at the “Core 3 0 ” airports. These airports represent the top 3 0 airports in the country in terms of passenger activity (except Memphis which is a major freight hub ) and accou nt for about 7 0 percent of commercial passengers. C ommercial activity at the Core 3 0 airports peak ed in 2005, but subsequent industry restructuring has resulted in a drop in combined commercial activity at these airports since then . In 2014

, commercial a ctivity at the Core 3 0 airports fell by 0.9 percent from the previous year and was
11.1 percent below 2005 activity levels. Of the Core 3 0 airports, ten recorded in creases in activity from 2013 with the largest increases occurring at Seattle ( up 6.1 perce nt) and Honolulu ( up 5.2 percent) . The largest de creases in activity occurred at Memphis ( down 10.9 percent),

and Detroit ( down 6.3 percent ). Only six of the Core 3 0 airports exceeded 200 5 peak activity levels during FY 2014

, unchanged from the number in prior three years

.

36 36

34

31

29 29 29 28 28

25 25 25

22 22 22 22 22 21

- 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 Millions

Fiscal Year 

### Aircraft Activity

at Combined FAA and Contract Towers

Non Commercial CommercialFAA Aerospace Forecast Fiscal Years 2015

- 2035

36 Since 200 5 there has been a pronounced shift in demand which is reflected in the relative growth of commercial operations across the Core 3 0 airports. Commercial operations at San

Francisco (up 2 6.7 percent), New York

- Kenned y (up 18.5 percent), and Charlotte (up 8.0 percent) have increased the most relative to their 2005 activity levels. Commercial operations

at Dulles (down 45.5 percent) and Memphis (down 45.4 percent ) have show n the largest

declines from 2005 levels. These activity level shifts reflect the impact of airline industry restructuring

. The demise of Ind ependence Air and United’s continu ing restructuring of its

network r esulted in a dramatic reduction of operations at Dulles ; while the bankruptcy of Delta

, its s ubsequent merger with Northwest , and the restructuring of the combined network has led to a dramatic shrinking of operations in Memphis

.

Non

- commercial activity, 91 percent of which is in general aviation, decreased 1.1 percent in

2014 with general avi ation activity falling by the same amount

. Breaking down the general aviation activity by hub size, general aviation activity at large hubs and medium hubs rose by 1.5

and 1.3 percent

, respectively , while activity at small and non

- hubs decreased by 1.2 pe rcent. However, general aviation activity at all hub categories has fallen substantially since 2005, down

39.5

, 37.8 , and 28.4 percent, respectively, at large, medium, and small/non hubs. Rising fuel prices, stagnant household income s , falling household wealth, and a shrinking pilot population

are all viewed as contribut ing to the long run decline in general aviation activity.

In 2014 , total activity at FAA en

- route centers ( 41.3 million) increased for the first time since

2011

, up 3.5 percent from 20 13 levels , and 12.9 percent below their peak in 2005. Commercial activity in creased 2.9 percent with air carrier aircraft handled up 4.7 percent while commuter/air

taxi aircraft handled fell 1.9 percent , respectively. Non

- commercial activity was up 5.6 p ercent for the year as general aviation activity w ent up 4.7 percent while military activity in creased 9. 2 0 20 40 60 80 100 120 140

SFO JFK CLT MIA DEN DCA LAX SEA HNL EWR IAH DFW LGA ORD ATL BOS SAN LAS MDW MCO BWI FLL PHX PHL MSP DTW TPA SLC MEM IAD Percent of 2005 Ops

Airport 

### Only Six of the Core 30 Airports Are Above 2005 Activity Levels FY 2014 vs FY 2005 Commercial ActivityFAA Aerospace Forecast Fiscal Years 2015

- 2035

37 percent . In 2014

, air carrier operations were 2.9 percent below their 2005 activity levels and air taxi/commuter operations were 15.4 percent below activity levels for 2005 . O perations for the general aviation and military user groups were 19.5 and 54.8 percent below their 2005 activity levels, respectively.

12 12 11

9 10 9 8 8 9 34 35 34

31 31 32 33 32 33

- 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 Millions

Fiscal Year



### Aircraft Handled at FAA En Route Centers

Non Commercial CommercialFAA Aerospace Forecast Fiscal Years 2015

- 2035

38 

# FAA AEROSPACE FORECASTS

FISCAL YEARS 201 5

– 203 5

Developing forecasts of aviation demand and activity levels continues to be challenging as the aviation industry evolves and pr ior relationships change. In times of amplified volatility, the

process is filled with uncertainty , particularly in the short

- term. Once again, t he U.S. aviati on industry has shown that the demand for air travel is resilient as it rebounds from its most recent downward spiral c aused by th e Great Recession

. As 2015 begins

, lingering question s remain.

A re the U.S. and global econom ies on firm ground? Will oil p rices rebound sharply or remain at current levels for a sustained period in to the future? Have the structural changes undertaken by the industry over the past 5 years revamped the industry from one of boom

- to

- bust to one of

sustainable profits? Has indus try consolidation finished ?

T he FAA has developed a set of assumptions and forecasts consistent with the emerging trends and structural changes currently taking place within the aviation industry. The intent of these forecasts is to accurately predict future demand ; however

, due to the large uncertainty of the operating environment

, the variance around the forecasts is wider than it was in prior years.

The commercial aviation forecasts and assumptions are developed from econometric models that explain and incorporate emerging trends for the different segments of the industry. In addition

, the commercial aviation forecasts are considered unconstrained in that they assume there will be sufficient infrastructure to handle the projected levels of activity

. T hese forecasts do not assume further contractions of the industry through bankruptcy, consolidation, or liquidation. They also do not assume any drastic changes in federal government operations.

The commercial aviation forecast methodology is a blen ded one

. The starting point for developing the commercial aviation forecasts (air carriers and regionals) is the future schedules published by airlines through Innovata

. To generate the short

- term forecast ( i.e., one year out) current monthly

trends are used in conjunction with published monthly schedules to allow FAA forecasters to develop monthly capacity and demand forecasts for both mainline and regional carriers for fiscal and calendar year s 201 5

- 1 6

. The medium to long

- term forecasts ( 201 6

- 203 5 ) are based on the

results of econometric models.

The general aviation forecasts rely heavily on discussions with industry experts conducted at industry meetings, including four Transportation Research Board ( TRB ) meetings of Business

Aviation and Civil He licopter Subcommittees in May 201 4 and January 201 5 along with the results

of the 2013 General Aviation and Part 135 Activity Survey

. The assumptions have been updated by FAA analysts to reflect more recent data and developing trends, as well as further i nformation from industry experts.

The FAA also presents the draft forecasts and assumptions to industry staff and aviation associations, who are asked to comment on the reasonableness of the assumptions andFAA Aerospace Forecast Fiscal Years 2015

- 2035

39 forecasts. Their comments and/or suggestions have been incorporated into the forecasts as appropriate.FAA Aerospace Forecast Fiscal Years 2015

- 2035

40 

## ECONOMIC FORECASTS

For this year’s Aerospace Forecast, the FAA is using economic forecasts developed by IHS Global Insight, Inc. to project domestic aviation demand. Furthermore, the FAA uses world and individual country economic projections provided by IHS Global Insight, Inc. to forecast the

demand for international aviation services. Annual historical data and economic forecasts are presented in Tables 1 through 4. U.S. economic forecasts are presented on a U.S. government fiscal year (October through September) basis

, whereas i nternational forecasts are presented on a calendar year basis.

As the recovery is now entering its sixth year, the U.S. economy continues to face headwinds

that co uld limit growth over the next few years. While the decline in oil prices would normally lead to faster economic growth , a higher dollar, slower foreign economic growth, and reduced investment in energy drilling equipment and infrastructure, mitigates a s ignificant portion of the growth benefit from lower oil and gasoline prices. In the global economy, the outlook for Europe outside of the United Kingdom remains uncertain and recent data from China point to a GDP growth between 6.5 and 7 percent

. The do llar appreciated versus other major currencies in 2014 as U.S. economic growth accelerated while China slowed down and Europe and Japan stagnated. The stronger dollar will make U.S. exports more expensive and widen the

trade deficit. Falling oil prices a re curtailing investment in drilling equipment and infrastructure as revenue from oil production declines due to the falling prices

.

U.S. economic growth is projected to accelerate through most of FY 2015 as higher consumer spending kicks in spu rred on by solid gains in employment, improving consumer finances, and lower gasoline prices. Government spending will no longer be a drag on growth, unlike the past few years. On a quarter

- by

- quarter basis

, U.S. economic growth is projected to range

betw een 2

. 1 to 3. 1 percent on an annualized basis for the next two years.FAA Aerospace Forecast Fiscal Years 2015

- 2035

41 The modest pace of economic recovery has been most evident in the nation’s unemployment rate. Since peaking at 9.9 percent in the first quarter of FY 2010 , the unemployment rate has come down gradually, dropping to 6.1 percent in the fourth quarter of FY 201 4 . IHS Global Insight is projecting that with the pickup in economic growth, growth in employment will remain

solid and the unemployment rate will drop in FY 2015 , averaging 5.6 percent for the year. The growth in employment (and the accompanying fall in the unemployment rate ) will result in an uptick in income growth with real disposable income (income after taxes) projected to rise 3.0 percent in 2015 providing a boost to aviation demand in domestic markets , after increasing

1.5 and 1.2 percent in 201 3 and 201 4, respectively

In the medium term, (the three year period b etween 201 6 and 2019 ) , U.S. economic growth is projected to average 2.6 percent per year with rates ra nging between 2.4 and 2. 7 percent

. Income growth picks up during the same period averag ing 3.2 percent per year

. For the balance of the forecast period, annual average growth of U.S. real GDP growth and real

income slow to 2.4 and 2.5 percent , respectiv ely. The long

- term stability of U.S. economic growth depends on sustained growth in the workforce and capital stock a long with improved productivity and competitiveness

.

2.1 2.4 2.6

2.4

2.2 2.2 2.9 3.1

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 Annual Percent Change

Year/Qtr



### U.S. Gross Domestic Product Seasonally Adjusted Annual Growth by Quarter

Fiscal Year 2015 Fiscal Year 2016FAA Aerospace Forecast Fiscal Years 2015

- 2035

42 1.8 2.5 2.6

2.4 2.7

2.4 2.4

- 0.5 1.0 1.5 2.0 2.5 3.0

2013 2014 2015 2016 2017 2018 2019-2035 Annual Percent Change

Fiscal Year



### U.S. Real Gross Domestic Product

Source: IHS Global Insight

1.5

1.2 3.0

2.7 3.5

3.2

2.5

- 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

2013 2014 2015 2016 2017 2018 2019-2035 Annual Percent Change

Fiscal Year 

### U.S. Real Disposable Income

Source: IHS Global InsightFAA Aerospace Forecast Fiscal Years 2015

- 2035

43 After falling by 3 .0 percent in 201 4

, IHS Global In sight projects the price

, as measure d by the Refiners’ Acquisition Cost

, to fall s harply to $ 60 per barrel in 2015 ( down 38

. 1 percent from

201 4 ) as increasing supply (especially in the U.S. from new technologies) coupled with slowing global demand has resulted in a glut of oil

. IHS Global Insight believes the glut of oil in the world market is a long term situation as oil prices are forecast to not reach $100 per barrel until

2021

. For the remainder of the forecast period

, oil prices are projected to grow slightly faster

t han general inflation , reaching $ 162 per barrel by 2035

.

Inflation continues to remain in check as energy prices fall in 2015 . After increasing 1.6 percent in FY 2014 , the inflation rate (as measured by the CPI)

, is projected to rise only

0.3 perc ent but then accelerate to 1. 7 percent in 2016

. After 2016

, consumer price inflation is projected to grow between 2.0 and 2.5 percent per year for the balance of the forecast.

To reflect the uncertainty in the projection of economic growth, the FAA Ae rospace Forecast uses high and low economic growth cases along with the base forecast. T he optimistic and pessimistic economic growth cases are based on optimistic and pessimistic scenarios from

IHS Global Insight’s December 2014 U.S. economic forecast an d extend to 2024 . The optimistic case sees oil prices falling to around $45 per barrel by the end of FY 2015, driving down the price of gasoline and providing an additional boost to consumer spending. Recent moves by the European Central Bank (ECB) succe ssfully lift European growth and pent

- up demand in Europe is released. Emerging market growth also accelerates as these markets implement structural reforms to increase labor productivity. The stock market responds favorably to all these developments whi ch helps reinforce higher consumer spending. Employment and wage growth pick up further lifting consumer spending. Real GDP growth

between 201 4 and 202 4 in the optimistic case averages 3.0 percent annually compared to 2.5 percent in the base case. The pe ssimistic case assumes recent improvements in the labor

(2.0) (3.0)

(38.1) 7.5 9.4 9.0

3.8

(50.0) (40.0) (30.0) (20.0) (10.0) - 10.0 20.0

2013 2014 2015 2016 2017 2018 2019-2035 Annual Percent Change

Fiscal Year 

### Refiners' Acquisition Cost

Source: IHS Global InsightFAA Aerospace Forecast Fiscal Years 2015

- 2035

44 market don’t translate into wage growth while access to credit remains tight for many

. As a result, household formation continues to fall as do housing prices

. Declines in the stock

market weaken co nsumer confidence and the combination of falling equity values and declining housing prices lead to a slowdown in consumption spending. In addition, foreign growth is slow reducing demand for U.S. exports. In the face of slow consumption growth at

home a nd slow exports, private sector hiring slows and the unemployment rate climbs back up

over 6% in 2015. U.S. economic growth is below 2.0 percent in 201 5

- 1 8 before finally picking

up

. Real GDP growth in the pessimistic case averages 1.8 percent annually b etween 201 4

and 202 4

, 0. 7 percentage points lower than the base case

. Further details about the high and low scenarios can be found in Appendix A

.FAA Aerospace Forecast Fiscal Years 2015

- 2035

45 

### World Economy

After weathering the first contraction in global GDP since the Great Depression

, a ve ry slow recovery from the recession in Europe

, a sharp decline in energy prices, and political stalemates in the U.S. over what to do with the U.S. federal budget , w orldwide economic activity is estima ted by IHS Global Insight to have expanded by 2.5 perce nt in calendar year

201 4

, the same rate as 201 3 . The advanced economies (U.S., Canada, Western Europe

, Australia, New Zealand , and Japan) post ed growth in output ranging from a low of 0.2 percent

to a high of 3.1 percent. 12

The emerging market economi es gr e w 4.1 percent, 0.6 points lower than in 201 3 with the economy of China up 7.3 percent, India up 5.9 percent, Brazil remained stagnant with no growth

, and Russia was up 0.1 percent. In 201 5

, world economic growth is projected to increase slightly by 2.8 percent as employment levels improve , consumer confidence improves, and public sector austerity continues to ease in most countries. 13

While growth in the U.S. and in the emerging market economies edges up, the recovery in Europe continues to be wea k, especially in Russia, Greece, Italy, and Spain. 14

12 Source: IHS Global Insight, GDP Components Tables, Interim Forecast, Release date Dec ember 15, 2014

. 13 Ibid.

14 Ibid. 0.8 0.9 1.6 2.4

2.5 2.7

0.9 3.4 4.7 4.6

4.3 4.3

1.9 2.0 2.4 2.3 2.4 2.5 2.5 3.1

- 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

2012 2013 2014 2014-2035 Annual Percent Change

Calendar Year



### Real Gross Domestic Product by World Region

Europe/Africa/Middle East Latin America/Caribbean Asia-Pacific Canada World

Source: IHS Global InsightFAA Aerospace Forecast Fiscal Years 2015

- 2035

46 The Asia/Pacific and Latin America /Caribbean regions will continue to experience the world’s highest economic growth rates. These regions are expected to see their economic activity

grow at annual r ates of 4.3 and 3.4 percent a year, respectively, over the forecast period ( 2014

- 203 5 )

. China, which became the world’s second largest economy in 2009 (surpassing Japan), is projected to grow 5.6 percent a year

, while India, projected to see its GDP almos t quadruple in size, is grow ing at an average rate of 6.6 percent a year during the forecast period

. In contrast, Japan , recently hampered by a new sales tax hike, grows at just 0.8 percent a year
over the forecast horizon as structural impediments

, and a n aging population continues to limit growth 15

.

F rom 2014

- 2035, worldwide real GDP is projected to increase an average of 3.1 percent per calendar y ear. 16

15 Ibid.

16 I b i d

.FAA Aerospace Forecast Fiscal Years 2015

- 2035

47 

## AVIATION TRAFFIC AND ACTIVITY FORECASTS

Total traffic and activity forecasts for commercial air c arriers (the sum of mainline and regional carriers) are presented in Tables 5 through 9. These tables contain year

- to

- year historical data

and forecasts.

Mainline air carrier traffic and activity forecasts and the fo recast assumptions are displayed in

T ables 10 through 18, 2 1 , and 2 3 . These tables contain year

- to

- year historical data and

forecasts.

Regional carrier forecasts and assumptions are found in Tables 2 4 through 2 7 . These tables provide year

- to

- year historical and forecast data.

Table s 19 and 20 provide year

- to

- year historical and forecast data for cargo activity. Table 2 2 provides year

- to

- year historical and forecast data for the cargo jet fleet.

General aviation forecasts are found in Tables 2 8 through 3 1 . These tables provide year

- to

year historical data and forecasts.

Tables 3 2 through 3 4 provide forecasts of aircraft activity at FAA and contract facilities.



### Commercial Aviation Forecasts

System c apacity is projected to increase modestly (up 2.4 percent) in 201 5

. In the domestic market, m ainline carrier capacity expanded only slightly ( 1.8 percent) in 201 4 but is projected

to grow at a more robust rate ( 2.6 percent) in 201 5

, while c apacity for th e regional carriers is projected to post its first increase since FY 2011 ( up 4.0 per cent)

. In the i nternational sector

, capacity is forecast to increase slowly in the Atlantic and Pacific market s, respectively, and increase modestly in the Latin market

-- resulting in an overall international capacity increase

of 1.6 percen t in 2015. Pa ssenger demand growth is in line with capacity growth in 2015 with system RPMs forecast to grow 2.6 percent

.

Supported by a growing U.S. and world economy, y ear over year RPM growth is forecast to be 2.5 percent, on average, over the 2016

- 2035 period. Over the same time period, system capacity growth averages of 2.5 percent per year as well

.

System passengers are projected to increase an average of 1.9 percent a year, with mainline carriers growing at 2.0 percent a year , slightly higher than thei r regional counterparts ( up 1.6
percent ) . By 203 5 , U.S. commercial air c arriers are projected to fly 1.71 trillion ASMs and
transport 1.1 4 billion e nplaned passengers a total of 1.44 trillion passen ger miles.

P lanes will remain crowded, with load fac tor s projected to grow moderately during the early years of the forecast period then tapering during the mid to latter years to 84.2 percent in 203 5 (up 0. 6 points compared to the beginning of th e forecast period in 201 5 )

.FAA Aerospace Forecast Fiscal Years 2015

- 2035

48 Passenger trip length is fore cast to increase by more than 139 miles over the forecast period

to 1,270 miles in 203 5 . The growth in passenger trip length reflects the faster growth in the relatively longer i nternational and domestic trips as compared to shorter

- haul flights.

Do mestic Markets

After expanding slightly in FY 201 4 (up 1.4 percent)

, domestic capacity is projected to increase by 2.8 percent in 201 5

. For the remainder of the forecast period, d omestic commercial carrier capacity is expected to remain sluggish but st eady at an average of 1. 8 per cent per year as U.S. economic growth accelerates, with mainline carriers growing slower than regional carriers, 1.8 percent versus 2.0 percent.

0 200 400 600 800 1,000 1,200

2014 2017 2020 2023 2026 2029 2032 2035 Millions of Passengers

Fiscal Year



### U.S. Commercial Air Carriers System Enplanements

Mainline RegionalsFAA Aerospace Forecast Fiscal Years 2015

- 2035

49 Since economic growth is picking up in the U.S., U

. S

. carrier domestic R PM growth in 201 5 is projected to increase by 2.8 percent

. Mainline carrier RPM s are projected to increase by 2. 7 percent during 201 5 , while regional carrier RPMs are projected to increase at a faster rate ( 3.4
percent )

. T raffic growth remains steady fo r the next decade with annual RPM growth averaging 1. 8 percent as the econom ic recovery slowly gains steam

. For the balance of the forecast period ( 20 26

- 20 35 ) modest economic growth and falling real yield drive domestic

RPM grow th of 2.1 percent a year. Over the entire forecast period ( 201 4

- 203 5 ), domestic RPMs grow an average of 1.9 percent a year with m ainline carriers grow ing more slowly than the regional carriers ( 1. 8 percent a year versus 2.1 percent a year, respectively). 1.8 2.6

1.8

(1.5) 4.0

2.1

-2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0

2014 2015 2015-2035 Annual Percent Change

Fiscal Year



### U.S. Commercial Air Carriers

Domestic Available Seat Miles

Mainline RegionalsFAA Aerospace Forecast Fiscal Years 2015

- 2035

50 Enplanements are forecast to grow moderately ( up 2.6 percent) in 201 5 after a 2.1 percent

increase in 201 4 . Similar to RPMs, passenger growth is expected to remain steady in the next

decade (up 1.5 percent a year ) as the recovery gains momentum and then average 1. 8

percen t per year for the period 20 26

- 203 5 . Over the entire forecast period (2014

- 2035)

, domestic enplanements are projected to gro w at an average annual rate of 1. 7 percent with

mainline and regional carriers growing at the same rate.

The continued modest re covery in demand

, coupled with r estricted capacity growth

, provided pricing power for the mainline carriers during 201 4 , with nominal yield increasing 4.5 percent ( up 2.9 percent in real terms)

. In spite of slow demand growth

, continued tight capacity wil l provide support for higher fares in 201 5

, with a n increase in nominal yield of 3.0 percent ( 2.7 percent in real terms). For the entire forecast period, nominal yield is projected to increase at

a n average rate of 2.0 percent a year, while in real terms it is projected to decline at an

average rate of 0.1 percent a year. The decline in real yield over the forecast period assumes technological improvements, c ompetition between carriers, and the increasing convergence of

cost structures between network car riers and their low

- cost counterparts. The convergence in cost structures between the carrier groups arises from gains in productivity as network carriers

retire fuel inefficient aircraft and hold the line on labor costs while existing low

- cost carriers

c ontend with aging fleets, maturing work forces, and larger and more complex networks

.

Domestic commercial carrier activity (departures) at FAA air traffic facilities is projected to grow more slowly than passenger traffic over the forecast period ( 1. 0 percent per year for departures versus 1.9 percent for RPMs). This reflects increased carrier efficiencies in three operational measures : aircraft size, load factor, and trip length

. 2.8 2.7

1.9

0.5 3.4

2.1

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

2014 2015 2015-2035 Annual Percent Change

Fiscal Year



### U.S. Commercial Air Carriers Domestic Revenue Passenger Miles

Mainline RegionalsFAA Aerospace Forecast Fiscal Years 2015

- 2035

51 Overall domestic aircraft size increased by 2.0 seats to 12 6 .9 in 2014 as a result of the combination of the increased mainline carrier domestic capacity share and increases in the

aircraft size of the mainline carrier group. Mainline carrier aircraft size increased 1.2 seats with

the retirement of older aircraft (i.e. MD

- 80’s

, 737

- 300/ 400/ 500 , and 757’s )

. Regional aircraft

size increased by 0.9 seats as 50

- seat jet s were retired and replaced by larger 70

- 90 seat jet

aircraft enter ed the fleet. Domestic seats per aircraft are forecast to increase in 2015 ( up 0.9

seats ) as both mainline and regional carrier aircraft will increase in size . Over the balance of

the forecast ( 2016

- 203 5 )

, domestic seats per aircraft are projected to gradually increase to

13 7.5 seats by 2035

, an average increase of 0.5 seats per year

.

T he FAA’s projection of domestic carrier average aircraft size is greatly influenced by carrier fleet plans, publicly known aircraft order books

, and the FAA’s expectations of the changing domestic competitive landscape. In the near

- term (through 2016 ), th e forecast incorporates

several assumptions: 1) mainline carriers desire to keep ASM growth in line with GDP growth ; 2) the retirement of older inefficient aircraft (many of which are narrow

- body); 3 ) the shifting of

wide

- body and larger narrow

- body aircra ft to international services, and 4 ) growing use of 70

- 90 seat regional jet aircraft.

In the longer

- term, network carriers will replace their older narrow

- body aircraft (A320’s/B757

- 200/300) in their domestic route networks with next generation, narrow

- b ody aircraft like the

A320 Neo and the 737 Max

. The use of smaller aircraft

, like the 100

- seat Embraer 190, to supplement carrier route structure s will be limited . The use of the next generation, narrow

body aircraft will allow mainline carriers to bette r serve their customers by more closely matching supply (the number of seats) with demand (the number of passengers)

, and improve profitability through lower operating costs.

Mainline carrier domestic aircraft size in creased in 2014 by 1.2 seats to 155.1 sea ts, and is projected to increase by another 1.2 seats in 2015

. Domestic aircraft size for mainline carriers is projected to increase by 0. 6 seats in 201 6 and then gradually increase for the balance of the

forecast. Overall, average aircraft size for the mainline group will increase by 11

. 3 seats

between 201 4 and 203 5 , going from 155.1 to 166 .4

.

Regional carrier aircraft size flown domestically is projected to grow at a faster pace than that

of the mainline carriers . The faster growth in aircraft s ize for regional carriers is stimulated by

continued deliveries of 70 to 90 seat regional jet aircraft that are entering the fleet as well as

reductions in the 50

- seat and under jet fleet . The larger share of 70 to 90

- seat regional jets in

the fleet

, cou pled with 50

- seat jet and small turboprop retirements over the next few years

, increases the average seating capacity of the regional fleet from 57.0 seats in 2014 to 59.5

seats by 2017

. Over the course of the forecast, seats per aircraft for regional car riers

increases an average of 0.6 seats per year to 69.3 seats in 2035 . The changing aircraft fleet mix is narrowing the gap between the size and aircraft types operated by the mainline and regional carriers.

The c ommercial carrier domestic load fact or increased 1.1 points during FY 201 4 to an all

- time high of 84.4 percent, with re cord load factors posted by the mainline and regional carrier groups. Th e mainline carrier group posted a load factor of 85.0 percent , up 0.9 percentage points from 201 3

. Regional carrier load factor increased 2.1 points to 80.0 percent

. In 201 5

,FAA Aerospace Forecast Fiscal Years 2015

- 2035

52 the dome stic load factor is forecast to remain at 84.4

. Ther e after, the commercial carrier

d omestic l oad factor gradually rise s to 85.7 percent by 2035

.

In 201 4 the average do mestic passenger trip length increased by 3.0 miles to 895.4 miles in

total , after increasing by 8.8 miles in 201 3 . P assenger trip l ength is forecast to increase by 1.8

miles in 201 5 as carriers continue to restructure thei r networks and realign capacity. After

201 5 , trip length is projected to remain relatively stable for a number of years before steadily

increas ing from 2018 onwards , reaching 943.8 miles by 203 5

. The increase in trip length

reflects longer trips flown by the mainline and regional carri er group . Mainline carrier trip length increases as service in thinner, relatively shorter haul markets is dropped or relinquished to regional partners and replaced with longer domestic trips

. Regional carrier trip length increase s as flying in shorter ha ul markets is abandoned and/or reduced as more of the larger 70 and 90

- seat regional jets continue to penetrate thinner longer

- haul markets previously served with mainline equipment

.

Another key factor in predicting aviation activity relative to passeng er demand is the level of connecting versus non

- stop (origin

- destination) traffic. However, as the current cycle of U.S. airline industry restructuring unfolds and hub structures change, the impact on local communities and airport activity levels can vary significantly.

The FAA analyzes the ratio of passenger enplanements to origin

- destination (O&D) passengers over time to identify changes in connecting versus non

- stop traffic. This ratio is an indicator of the tendency of the average passenger to conne ct during a typical journey. The closer the ratio is to 1.0, the more passengers fly on a point

- to

- point routing. As the chart below shows, the overall ratio for the U.S. domestic industry peaked in 2002, and then trailed

downw ard to its lowest level (1. 32 enplanements for every O&D passenger) by 2007

. Th e decline in the ratio during this six year period is characterized by a drop in connectivity by the

network carriers and a rising passenger share for the low

- cost carriers

. As demand for air

travel fel l during the great recession and fuel costs skyrocketed, the ratio jumped up to over

1.34 in 2009. Between 2009 and 2013 the ratio fell between 1.341 and 1.351 enplanements

for every O&D passenger, but the 2014 figure fell below 1.34 to 1.335, the lowest figure since

2008. The FAA’s forecast recognizes the changing pattern of domestic traffic connectivit y and

t hese trends are captured in the forecast’s passenger enplanement totals.FAA Aerospace Forecast Fiscal Years 2015

- 2035

53 I nternational Markets



### U.S. and Foreign Flag Carriers

The FAA provides forecasts of total international passenger demand 17 for travel between the

United States and three world travel areas : Atlantic, Latin America (including Mexico and the Caribbean), and Asia/Pacific

, as well as for U.S.

– Canadian transborder traffi c. These forecasts are based on historical passenger statistics provided by the U.S. Customs and

Border Protection 18 and Transport Canada, and on regional world historical data and economic projections from Global Insight, Inc.

Total passenger traffic be tween the United States and the rest of the world is estimated to

total 195.7 million in CY 201 4

, 5.5 percent higher than in 201 3

. Passenger demand growth

slows in 201 5 and 2016 ( up 4.7 and 3.3 percent , respectively ) but picks up again i n 201 7 ( up
4.2 per cent ) as the U.S. and world economic recovery solidifies

. For the balance of the forecast period (201 7

- 35)

, stable worldwide economic growth leads international passenger s to grow at an averag e rate of 4.1 percent a year, totaling 452.9 million in 203 5

.

17 The sum of U.S. and foreign flag carriers.

18 Customs and border protection data is processed and released by the Department of Commerce. 1.29 1.30 1.31 1.32 1.33 1.34 1.35 1.36 1.37 1.38 1.39

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E Ratio

Fiscal Year 

### U.S. Commercial Carriers Domestic Enplanements Per

Origin

- Destination Passenger

Source: DOT T100 and O&D SurveyFAA Aerospace Forecast Fiscal Years 2015

- 2035

54 In the Latin America region

, sustained economic growth drives passenger growth to an

average rate of 4. 2 percent a year o ver the ent ire forecast period ( 201 4

- 203 5 ) . The highest growth is projected for Mexico (average annual growth of 4.7 percent) whil e the second largest market in the region, Brazil , grows at an average of 4.4 percent a year. The slowest rates of growth are projected to occur in the Bahamian and Jamaican markets (averaging growth of

zero and 3. 3 percent a year, respectively).

Eme rging economies in the Asia

- Pacific market boost passenger demand an average of 4.0 percent per year. Taiwan

, South Korea, India and China (passenger growth of 4.2 , 4. 5 , 4. 2

, and 6. 2 percent a year, respectively) are forecast to be the fastest growing ma rkets in the region. Growth in the Japan market (the largest and most established in the region) is projected to be well below the regional average at 2.7 percent a year

.

In the more mature Atlantic market

, the O pen S kies agreement between the European Union

and the United States a long with competition between global airline alliances helps fuel passenger growth of 3.9 percent a year over the forecast period

. Over the 2 0

- year forecast horizon, average annual passenger growth in the top four Atlantic co untr y specific markets

, the United Kingdom, Germany

, France and the Netherlands

, is 3.7 , 3. 4

, 2.9

, and 3.6 percent, respectively

.

Growth in the Canadian transborder market is forecast to be higher than that of the domestic

U.S. market 19 ( 1. 7 percent), a veraging 3.3 percent a year over the forecast period.

19 Mainline and regionals. 3.9 4.4

4.0

3.3

- 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

Atlantic Latin America Asia/Pacific Canada Transborder Annual Percent Change

Region



### U.S. and Foreign Flag Carriers Passengers to/from U.S.

Calendar Years 2015

- 2035

Source: U.S. Customs & Border Protection data processed and released by the Department of Commerce; data also received from Transport Canada.FAA Aerospace Forecast Fiscal Years 2015

- 2035

55 

### U.S. Flag Air Carriers

I nternational U.S. commercial air carrier capacity grew modestly in 201 4

, up 4. 0 percent from

201 3

. The Atlantic market recovered from a loss the previous year ( up 2.8 p ercent) after declining 2.9 percent in 201 3

. The Latin America market posted a solid 8.4 percent increase

while the Pacific market showed more modest growth, up 1.2 percent

.

In 201 5

, moderate demand and increasing competition between global alliances i s expected to

boost total international capacity by 1.6 percent as all markets are expected to grow. The fastest growth is projected for the Latin market (up 4.7 percent) , followed by the Pacific (up 2.6 percent) ; on the other hand, the Atlantic will show a slight loss ( down 1.3 percent)

. System

wide c apacity is projected to inch up in 2015 (up 1.6 percent) , fueled by stronger economic growth projected f or all world regions

, and is projected to average 3. 8 percent a year for the

remainder of the forecast period (2016

- 2035)

. Moderate growth over the forecast period reflects favorable U.S. and world economic activity as it recovers from the global contraction.

U.S. commercial air carrier international RPMs and enplanements increased 2.6 and 3. 4

perce nt, respectively, in 201 4

. I ncrease s in RPMs for the Latin market (up 7.7 percent ) and

the Atlantic market (up 0.8 percent) offset a de crease in the Pacific market ( down 0.1 percent)

.

In 201 5

, U.S. carrier international RPMs are expected to increase by 2.3 percent as increases

in the Latin American market (up 4.3 percent) compensate for the more anemic upticks in the Atlantic market (up 1.5 percent) and the Pacific market ( up 1. 2 percent)

.

2.8

(1.3) 3.1 8.4

4.7 4.5

1.2 2.6 3.7 4.0

1.6 3.7

(2.0) - 2.0 4.0 6.0 8.0 10.0

2014 2015 2015-2035 Annual Percent Change

Fiscal Year 

### U.S. Commercial Air Carriers

International Available Seat Miles

Atlantic Latin Pacific TotalFAA Aerospace Forecast Fiscal Years 2015

- 2035

56 For t he balance of the forecast (2016

- 2035) , RPMs increas e an average of 3.7 percent a year with the fastest growth in the Latin region ( up 4. 5 percent)

.

International e nplanement gro wth for 201 5 by U.S. commercial air carriers is projected to be

2. 4 percent as solid growth in both the Latin (up 4. 0 percent ) and Atlantic (up 1. 5 percent)

markets offset a decline in the Pacific region (down 1.5 percent ) where a slowdown in both China and India’s economic growth affects demand

. Over the balance of the forecast period ( 201 6

- 203 5 ) , enplanements are forecast to increase an average of 3.7 percent a year with the fastest growth in Latin and Pacific markets (up 4. 3 and 3. 7 percent a year , respectively ).

International enplanement g rowth in U.S. carrier over the period 201 4

- 20 3 5 compares favorably to the growth in overall international passengers by U.S. and foreign flag carriers ( 4. 1 percent a year , in cluding the U

. S

. - Canada transborder market )

. Forecasts of international

demand assume U.S. and foreign flag carriers will benefit from improving economic activity in

both the United States and world markets.

International load factor for U.S. commercial carriers was 81.4 percent in 201 4

, a de crease of

1.2 points from 201 3 . Load factor is expected to slightly increase to 8 1

. 9 in 201 5 as capacity

increases in li ne with demand . International load factor is projected to remain steady around

81.9 percent over the balance of the forecast period to 203 5 as traffic growth matches capacity growth in all three world markets.

0.8 1.5 3.1 7.6

4.3 4.4

(0.1) 1.2 3.7

2.6 2.3 3.7

(1.0) - 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0

2014 2015 2015-2035 Annual Percent Change

Fiscal Year 

### U.S. Commercial Air Carriers International Revenue Passenger Miles

Atlantic Latin Pacific TotalFAA Aerospace Forecast Fiscal Years 2015

- 2035

57 International passenger real yields for U .S. commercial carriers were down 0.8 percent in 201 4

as decreases in the Pacific market (down 3.4 percent) and in the Latin market (down 2.0 percent) offset an increase in the Atlantic market (up 1.3 percent). In 201 5 international real yield is expected to decrease by 0.5 percent ; f or the remainder of the forecast period, real yield

decreases an average of 0.6 percent a year. In nominal terms, international yields are forecast

to de crease 0.2 percent in 201 5

, and then grow at an annual rate of 1.5 per cent over the

remainder of the forecast. The decline in real yields assum es competitive pressures (including established and relatively new international carriers) and technological improvements will hold

the line on fare incre ases.



### Commercial Air Car riers

– Air Cargo

Historically, air cargo activity tracks with GDP. Additional factors that affect air cargo growth are fuel price volatility

, movement of real yields, and globalization. Significant structural changes have occurred in the air cargo ind ustry ; a mong these are air cargo security re gulations by the FAA and

TSA

, maturation of the domestic express market

, a shift from air to other modes (especially truck)

, use of all

- cargo carriers (e.g., FedEx) by the U.S. Postal Service to transport mail

, a nd the increased use of mail substitutes (e.g. e

- mail , cloud

- based services ).

The forecasts of Revenue Ton Miles (RTMs) are based on several assumptions specific to the cargo industry. First, security restrictions on air cargo transportation will remai n in place. Second, most of the shift from air to ground transportation has occurred. Finally, long

- term cargo activity will be tied to economic growth.

The forecasts of RTMs were based on models that link cargo activity to GDP. Forecasts of

domesti c cargo RTMs were developed with real U.S. GDP as the primary driver. Projections of international cargo RTMs were based on growth in world GDP, adjusted for inflation. The distribution of RTMs between passenger and all

- cargo carriers was forecast based on an analysis

of historic trends in shares

, changes in industry structure

, and market assumptions.

Total RTMs did not change in 201 4 but are forecast to grow 3.7 percent in 201 5 . Driven by steady

U.S. and world economic growth, total RTMs are proje cted to increase at an average annual rate

of 3.6 percent for the balance of the forecast period.

Domestic cargo RTMs increased 2.3 percent in 201 4 and are forecast t o grow 1. 7 percent in 201 5 as the U.S. economic recovery continues

. Between 201 5 an d 203 5 , domestic cargo RTMs are forecast to increase at an average annual rate of 0. 5 percent.

The freight/express segment of domestic air cargo is highly correlated with capital spending. Thus, this segment ’s growth will be tied to growth in the econo my. The mail segment of domestic air cargo will be affected by price and substitution ( e.g. e

- mail).

The all

- cargo carriers have increased their share of domestic cargo RTMs flown from 70. 1 percent

in 2000 to 88. 6 percent in 201 4 . This is because of the shrinkage of the domestic freight/express business for passenger carriers as they have responded to the substantial shocks to the aviation system during this time. Shrinking networks, elimination of unprofitable flying, and consolidation

have reduced opportunities for growth in their freight/express business

. The all

- car go share isFAA Aerospace Forecast Fiscal Years 2015

- 2035

58 forecast to grow to 90. 2 percent by 203 5 based on increases in capacity for all

- cargo carriers and ongoing security considerations.

International cargo RTMs fell fo r the third year in a row, down 1.2 percent in 201 4 as stagnation in Europe and a slowdown in China’s economic growth slowed worldwide trade. They are projected to grow 4.9 percent in 201 5 as global trade growth resumes. For the forecast period ( 201 4

- 3 5 ) international cargo RTMs are forecast to increase an average of 4.7 percent a year based on projected growth in world GDP.

The share of international cargo RTMs flown by all

- cargo carriers increased from 50. 3 percent

in 20 00 to 7 2.3 percent in 201 4

. Continuing the trend experienced over the past decade, t he

all

- cargo share of international RTMs flown is forecast to increase modestly to 78.6 percent by

203 5

.



### Commercial Aircraft Fleet

The number of commercial aircraft is forecast to grow from 6,676 in 2014 to 8,131 in 2035 , an average annual growth rate of 0.9 percent or 69 aircraft annually. The commercial fleet is projected to decrease by 2 aircraft in 2015 after shrinking by 57 aircraft in 2014 as the slow recovery in demand and rising fue l prices prompted carriers to prune their fleets. Since 2007,

the U.S. commercial airline fleet has contracted by 1, 056 aircraft. In comparison, the U.S.

2.3

1.7

0.5

- 1.2 4.9 4.7

-2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0

2014 2015 2015-2035 Annual Percent Change

Fiscal Year



### U.S. Commerical Air Carriers

Revenue Ton Miles

Domestic InternationalFAA Aerospace Forecast Fiscal Years 2015

- 2035

59 commercial fleet contracted by 262 aircraft between 2000 and 2003

, the last downturn in

aviation.

The number of passenger jets in the U.S. mainline carrier fleet fell by 9 aircraft in 2014 and is projected to rise by 49 aircraft in 2015 as network carriers continue to remove older, less fuel efficient narrow body aircraft. After 2015 , the mainline air carrier passenger fleet increases an average of 60 aircraft a year over the remaining years of the forecast period , total ing 5,015

aircraft in 2035 . The narrow

- body fleet (including E

- 190 ’ s at JetBlue and American Airways) is projected to grow by 38 a ircraft annually over the period 2014

- 2035 ; the wide

- body fleet grows by 21 aircraft a year as the Boeing 787 and Airbus A350’s enter the fleet.

The regional carrier passenger fleet is forecast to decrease by 57 aircraft in 2015 as increases in larger regional jets are more than offset by reductions in 50 seat and smaller regional jets and turboprops . A fter 2015

, the regional carrier fleet is projected to decrease by an average of

3 aircraft (

- 0.1 percent) a year over the remain ing years of the forecas t period, total ing 2,034

aircraft in 2035 . The number of regional jets (90 seats or fewer) at regional carriers is projected to grow from 1,593 in 2014 to 1,852 in 2035 , an average annual increase of 0.7 percent. All of the growth in regional jets over t he forecast period occurs in the larger 70 to 90

- seat aircraft . During the forecast period, all regional jets of 50 or less seats are removed from the fleet, reflecting the relaxation of scope clauses. The turboprop/piston fleet is expected to

shrink fro m 555 units in 2014 to 182 in 2035 . Turboprop/piston aircraft are expected to account for just 8.9 percent of the regional carrier passenger fleet in 2035 , down from a 25.8 percent share in 2014

.

Cargo large jet aircraft are forecast to increase by 6 aircraft in 2015 to 764 aircraft after increasing by 17 aircraft in 2014 primarily due to 757F’s to Federal Express. For the

1.1 0.8 1.5

- 5.4 - 0.5 - 0.1

- 11.7 - 0.3 2.4

-14.0 -12.0 -10.0 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0

2014 2015 2015-2035 Annual Percent Change

Calendar Year



### U.S. Commercial Aircraft Fleet

Calendar Years 2014

- 2035

Mainline AC Regional CargoFAA Aerospace Forecast Fiscal Years 2015

- 2035

60 remainder of the forecast period, cargo large jet aircraft at U.S. carriers are forecast to grow at an average annual rate of 1.8 percent to 1, 082 aircraft in 2035 . The narrow

- body , cargo jet fleet is projected to increase by 3 aircraft a year over the 2 1

- year forecast period as older 757’s and 737’s are converted to cargo service . The wide

- body , cargo jet fleet is projected to

inc rease by 13 aircraft yearly.



### General Aviation

The FAA f orecasts the fleet and hours flown for single

- engine and multi

- engine piston aircraft, turboprops, turbojets, piston and turbine powered rotorcraft, and light sport, experimental and

“ other ” (whic h consists of gliders and lighter than air vehicles) aircraft . The forecasts are carried out for “active aircraft,” 20 not total aircraft. The FAA uses estimates of fleet size, hours flown, and utilization from the General Aviation and Part 135 Activity Sur vey (GA Survey) as baseline figures upon which assumed growth rates can be applied. Beginning with the 2004 GA Survey, there were significant improvements to the survey methodology. Coinciding with the changed survey methodology, large changes in many ca tegories were observed, both in

the number of aircraft and hours flown. The results of the 201 3 GA Survey are consistent with the results of surveys conducted since 2004, reinforcing our belief that the methodological improvements have resulted in superio r estimates relative to those of the past. Thus, they are

used as the basis for our forecast. Because results from the GA Survey are not published until the following year, the 201 3 statistics are the latest available. A s an a dditional note , t he results

of the 2011 survey were not available to use. Therefore, estimates of 2011 fleet and hours were based on estimated number of general aviation aircraft in the FAA civil aircraft registration

database by the end of CY 2011, and past rates of active aircraf t and utilization by type of aircraft and age of the fleet. The 2013 GA Survey results reflect the majority of the anticipated

effect of the 2010 Rule for Re

- Registration and Renewal of Aircraft Registration. The complete effect of this Rule, which requi res all aircraft registered in the U.S. to re

- register within the

three

- year period from 2011 to 2013, will be noted after the 201 4 Survey

, when the residual Registry cleanup efforts are taken into account

. T he 201 3 Survey showed that between 2010

and 201 3 the number of active GA aircraft went down by 10.5 percent, from 223,370 to
199,927

. There may be an additional marginal decline in the active fleet due to cleaning of the Registry. General aviation flight hours for 201 4 are estimated based on the acti ve fleet and other activity indicators at 23.1 million , with a n increase of 0 .8 percent from the previous year

. A ctivity forecasts begin in 201 5 and continue through 203 5

.

After growing rapidly for most of the past decade, and then slowing over the pa st few years,

t he most recent shipment activity indicates the modest growth continues in the overall general

aviation aircraft market. While the recovery in the business jet market has been slow

, 2014 recorded the first increase in shipments by U.S. manuf acturers since 2008

. The forecast calls for robust growth in the long term outlook , driven by higher corporate profits and the growth of

worldwide GDP , though at rates slightly lower than those predicted last year

. C ontinued concerns about safety

, securit y

, and flight delays keep business aviation attractive relative to

commercial air travel

. As the industry experts and prior year’s survey results report a significant portion of piston aircraft hours are also used for business purposes, we predict

20 An active aircraft is one that flies at l east one hour during the year.FAA Aerospace Forecast Fiscal Years 2015

- 2035

61 busines s usage of general aviation aircraft will expand at a faster pace than that for personal

and recreational use. Increased demand for turboprop aircraft also contributes to increased

turbine fleet and hours.

The active general aviation fleet is projected to increase at an average annual rate of

0. 4 percent over the 21

- year forecast period, growing from an estimated 198,860 in 201 4 to 214,260 aircraft by 203 5

. The more expensive and sophisticated turbine

- powered fleet (including rotorcraft) is projected t o grow to a total of 45,905 aircraft at an average rate of 2. 4 percent a year over the forecast period, with the turbine jet portion increasing at 2.8 percent a

year , reaching a total of 20,815 by 2035

.

The number of active piston

- powered aircraft ( including rotorcraft) is projected to decrease at an

averag e annual rate of 0.5 percent from the 201 4 total of 139,890 to 125,935 by 203 5 , with declines in both single and multi

- engine fixed wing aircraft, but with the smaller category of piston

powered ro torcraft growing at 2.1 percent a year . Single

- engine fixed

- wing piston aircraft, which

are much more numerous within this group , are projected to decline at a rate of 0. 6 percent

, while

multi

- engine fixed wing piston aircraft are projected to decline by 0. 4 percent a year.

Starting in 2005, a new category of aircraft (previously not included in the FAA's aircraft registry counts) was created: "light sport" aircraft. At the end of 201 3

, a total of 2,056 active special light

- sport aircraft were estimate d in this category ( Beginning in 2009, experimental light

- sport aircraft category was reported in the FAA statistics as a separate category and u ntil

2012 report ed under light sport aircraft together with the special light

- sport aircraft

. Starting in
2012, this experimental light

- sport group was re

- classified within the experimental aircraft - 0.5 0.0 0.4

0.7 1.2 2.4

-1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0

2014 2015 2015-2035 Annual Percent Change

Calendar Year



### Active General Aviation Aircraft

Total TurbinesFAA Aerospace Forecast Fiscal Years 2015

- 2035

62 category) . The forecast assumes about 4. 3 percent annual growth of the fleet by 203 5 , to a total of 5,360 light sport aircraft.

The total number of general aviatio n hours flown is projected to increase by 1.4 percent yearly over the forecast period. The FA A project s faster growth in hours will occur after 2023 with increases in the fixed wing turbine aircraft fleet, as well as increasing utilization of both single

and multi

- engine piston aircraft as the aging of this fleet starts to slow down. In the medium

term, much of the increase in hours flown reflects strong growth in the rotorcraft and turbine jet

fleets

. It is also expected that declining fuel prices will slow down the decrease in piston flight

hours over the short to medium term.

Hours flown by turbine aircraft (including rotorcraft) are forecast to increase 2.9 percent yearly over the forecast period, compared with a decline of 0.3 percent for pist on

- powered aircraft. Although hours flown by piston rotorcraft are forecast to increase an average of 2.2 percent per year during the forecast period, they have a relatively small share (less than 10 percent) in this segment of hours flown by general avia tion aircraft; and thus have a small impact on the

overall trend. Jet aircraft are forecast to account for most of the increase, with hours flown increasing at an average annual rate of 3.6 percent over the forecast period. The large increases in jet hou rs result mainly from the increasing size of the business jet fleet, along with

continued recovery in utilization rates from recession induced record lows. Turboprop hours are also expected to continue their increase , as indicated by the 2013 GA Survey

.

Rotorcraft hours were less impacted by the economic downturn when compared to other categories and rebounded earlier

. However, the 2013 GA survey recorded declines in the

active rotorcraft fleet and utilization rates. It is uncertain if the decrease in utilization is
permanent

. The decline in oil prices ha s different effects on various segments of this sector. While decreasing activity is expected in oil exploration area, and some other functions such as aerial mapping/ photography, patrol, and surv eillance may see de creasing use of rotorcrafts

, yet other uses, including corporate, air taxi, air medical, and air tours, may experience offsetting increases. R otorcraft hours are projected to grow by 3.0 percent yearly over the forecast period with uti lization of rotorcraft projected to increase by 0.4 percent a year. T urbine

rotorcraft hours are forecast to grow at an average annual rate of 3.2 percent over the forecast period

.

Lastly, the light sport aircraft category , which now includes only th e special light sport (experimental light

- sport aircraft is now considered as part of the experimental aircraft category), is expected to see an increase o f 5.1 percent a year in hours flown

, primarily driven by growth in the fleet.FAA Aerospace Forecast Fiscal Years 2015

- 2035

63 The number of act ive general aviation pilots (excluding air transport pilots) is projected to be

4 48

, 40 0 in 203 5 , an increase of about 8 ,000 (up 0. 1 percent yearly) over the forecast period.

Between 2011 and 201 4 , there was a decline of 16,543 in the number of commercial pilots, accompanied by an increase of 10,422 in the number of air transport pilots (ATPs). A substantial part of the decline in commercial pilot certification s is thought to be a result of these pilots obtaining the higher level ATP certificates as requir ed by the Airline Safety and Federal Aviation Administration Extension Act of 2010. This Act mandated that all part 121 (scheduled airline) flight crew members would hold an ATP certificate by August 2, 2013. The FAA estimated there were about 13,000 airl ine pilots holding a commercial pilot certificate, most of which were serving at Second in Command positions at the regional airlines. Since airline pilots could no longer operate with only a commercial pilot certificate after August 2013 (excluding a lim ited number of special cases as specified by 2013 FAA Final Rule for Pilot Certification and Qualification Requirements for Air Carrier Operations), we have reduced the rate of increase of our commercial pilot forecast compared to the previous year s

. T hus , c ommercial pilots are projected to increase from
104,322 in 2014 to 113

, 35 0 in 2035 with an average annual growth rate of 0. 4 percent over the forecast period, compared to the 0.6 percent average growth rate of the past year ’ s forecast.

Our ATP forecast , while higher than previous year’s forecast during near to medi um term,

remains close to the last year’s forecast after 2024 , with a similar average annual rate of

increase (0.5 percent) overall

.

In other pilot certificate categories, t he number of stu dent pilots is forecast to decrease at an average annual rate of 0. 3 percent over the forecast period, declining from 120, 546 in 201 4 to

11 2

, 2 00 in 203 5

. The number of private pilots is projected to decrease at an average yearly

rate of 0.3 percent over t he forecast period to a total of 163,600 in 203 5, from 174,883 in 201 4

. 0.8 2.2

1.3

3.1 3.4

2.9

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

2014 2015 2015-2035 Annual Percent Change

Calendar Year



### Hours Flown in General Aviation Aircraft

Total TurbinesFAA Aerospace Forecast Fiscal Years 2015

- 2035

64 The number of rotorcraft

- only pilot certificates is forecast to increase at an average rate of 2.2 percent, from 15,511 in 2014 to 24,440 in 2035. In addition, the FAA is projecting that by the end of the forecast period a total of 14,950 sport pilots will be certified. As of December 31, 201 4

, the number of sport pilot certificates issued was 5,157 reflecting a steady increase in this new “entry level” pilot certificate that was on ly created in 2005.FAA Aerospace Forecast Fiscal Years 2015

- 2035

65 

### FAA Operations Forecasts

FAA and Contract Towers

Activity at the 516 FAA (264) and contract towers ( 252 ) totaled 49. 6 million operations in 2014

, down 0.9 percent from 2013 . Activity is projected to rise slightly ( 0. 4 percen t ) in 201 5

, with

increases in both commercial and non

- commercial activity . Growth in total activity at FAA and

contract towers accelerates in 201 6 ( 1.1 percent) and f or the balance of the forecast, activity grows at an average rate of 0.9 percent per year , reaching 59 .9 million operations in 2035

.

Most of the growth over the forecast period results from increased commercial aircraft activity (up 1.5 percent annually). Air carrier activity is projected to increase sharply ( 4.2 percent ) in

2015 as carrie rs swap in larger regional jets for smaller (50 seats or less) regional jets and increase capacity to meet growing demand

. Beyond 201 5 , air carrier activity is projected to increase an average of 2.7 percent per year over the forecast period. The increas e in air carrier activity is driven by combination of mainline carriers increasing capacity in response to growing demand as well as an increase in the operations of 70

- 90 seat jets which are counted in the air carrier category . Commuter/air taxi operatio ns are forecast to fall 4.9 percent in 2015

and de crease 1 percent a year for the balance of the forecast period as regional jets less than 50 seats exit the industry.

General aviation activity decreased 1.1 percent in 2014 as itinerant activity fell 1.4 percent

. Overall general aviation a ctivity is projected to increase 0.3 percent in 2015 reflecting the impact of an improving economy on flight hours and operations. For the entire forecast period, general aviation activity at towered airports is pro jected to increase an average of 0.4 percent a year, to 28. 0 million operations in 2035 . General aviation a ctivity at combined FAA/contract towers grows in line with the modest increase forecast for general aviation hours already cited. Most operations a t the smaller towers are in piston aircraft , while those at the largest airports tend to be turbine operations.

Military activity fell 1.4 percent in 201 4 and is assumed to remain at 201 4 levels (2. 5 million) throughout the balance of the forecast peri od

.

The forecasted growth in operations is not uniform across all facility categories. Over the forecast period, total operations at large hub airports (those airports that enplane 1% or more of total US enplanements) are projected to increase from 12. 5 million in 2014 to 17. 6 million in

2035 , an average annual rate of 1.7 percent a year. Operations at these facilities are overwhelmingly commercial in nature (95. 0 percent in 2014 ) and their growth will mirror the growth in total commercial operations. Total operations at medium hub airports (those airports that enplane 0.25 to 0.99 percent of total US enplanements) are projected to increase a bit slower than the large hubs, averag ing 1.5 percent a year over the forecast period , to total 6.5

million in 2035 . In the largest category, small and non

- hub airports, where 81.6 percent of the operations are non

- commercial in nature, total operations are projected to increase from 32. 3

million in 201 4 to 35.8 million in 203 5 , an average annual rate of 0.5 perce nt a year.FAA Aerospace Forecast Fiscal Years 2015

- 2035

66 Operations 21 at FAA TRACONs (Terminal Radar Approach Control) fell 0.4 percent in 2014

, the tenth year in a row. They are projected to remain steady in 2015 as declines in non

commercial activity offset a slight rise in commercial activity

. After 2015

, TRACON operations

are forecast to increas e at an average annual rate of 1.1 percent for the balance of the

forecast , reflecting the increasingly commercial nature of TRACON operations . For the entire forecast period, TRACON operations grow an average of 1. 1 percent per year, totaling 4 6.1

million in 2035

.

Over the forecast period, commercial aircraft operations at FAA TRACONs are forecast to

increase at 1.5 percent per year driven by growth in air carrier activity. General aviation operations at FAA TRACONs are projected to grow 0. 6 percent a year, reflecting the slow growth in the general aviation fleet and hours. Military activity is expected to remain at its 2014 level ( 2.2 million) of activity throughout the forecast period.

En

- route Centers

The number of IFR aircraft handled at FAA en

- route traffic control centers increased 3.4
percent to 41.3 million in 2014

, with increases in all categories except commuter/air taxi. In

2015 increase s in ai r carrier activity and general aviation activity

, result in en

- route center activity increas ing by 1.2 percent. After 2015 , through the balance of the forecast period, en

route activity increases 1.5 percent annually, reaching 56. 1 million aircraft handled in 2035

.

21 TRACON operations consist of itinerant Instrument Flight Rules (IFR) and Visual Flight Rules (VFR) arrivals and departures at all airports in the domain of the TRACON as well as IFR and VFR overflights.

- 0.2 0.0 1.1

- 0.6 0.4 1.5

-1.0 -0.5 0.0 0.5 1.0 1.5 2.0

2014 2015 2015-2035 Annual Percent Change

Fiscal Year 

### Tracon Operations

Total CommercialFAA Aerospace Forecast Fiscal Years 2015

- 2035

67 Between 2014 and 2 034 commercial activity is projected to increase at an average annual rate

of 1.7 percent, reflecting increases in the commercial fleet and aircraft stage lengths. During the same period, general aviation activity is projected to grow 0.8 percent per year , reflecting growth in business aviation. Military activity is held constant at the 2014 activity level throughout the forecast period.

Activity at FAA en

- route centers is growing faster than at towered airports because more of the activity at en

- route centers is from the faster growing commercial sector and high

- end (mainly turbine) general aviation flying. Much of general aviation activity at towered airports, which is growing more slowly, is local in nature, and does not impact the centers.

3.4

1.2 1.5

- 1.4 0.1 1.7

-2.0 -1.0 0.0 1.0 2.0 3.0 4.0

2014 2015 2015-2035 Annual Percent Change

Fiscal Year



### IFR Aircraft Handled at FAA En

- Route Centers

Total CommercialFAA Aerospace Forecast Fiscal Years 2015

- 2035

68 

## UNMANNED AIRCRAFT SYSTEMS

2014 has shown significant growth in Unmanned Aircraft Systems (UAS). Six UAS Test Sites were selected in late 2013 and are operational, the FAA is evaluating submissions for a UAS Center of Excellence (COE), and a Notice of Proposed Rulemaking (NPRM) for small UAS is being coordinated. All of these efforts help the FAA develop regulations and operational procedures to achieve the end goal of safe integration of public, commercial and civil UAS in the National Airspace System (NAS).



### UAS Test Sites

The FAA Modernization and Reform Act of 2012 (FMRA) directed the FAA to establish a Test Site program to further the integration of UAS into the NAS. The agency solicited proposals from public entities, including state and local governments and eligible universities, interested in operating the Test Sites. During 2014, all six Tests Sites became operational. The six Test Sites have affiliate states where they plan to conduct operations, shown below.

The Test Sites will provide valuable safety data along with operational expertise to enable the safe operation of aircraft in the NAS.



### UAS Center of ExcellenceFAA Aerospace Forecast Fiscal Years 2015

- 2035

69 This year, the FAA will establish a Center of Excellence (COE) for UAS. The COE will be a geographically disperse d consortium of university partners and their affiliates. Specific projects will be defined and funded through grants. The goal is to create a cost

- sharing relationship between academia, industry, and government that will focus on research areas of primar y interest to the FAA and the UAS community. The FAA expects the COE to perform short

- and long

- term basic and applied research through a variety of analyses, simulations, and prototyping activities.



### Section 333 Exemptions

Section 333 of the FMRA gr ants the Secretary of Transportation the authority to determine whether an airworthiness certification is required for certain UAS to operate safely in the NAS. This determination is based on the size, weight, speed and operational capabilities of the

air craft. After the Secretary makes this determination, a petition for exemption undergoes a safety evaluation by the FAA to determine what additional conditions and limitations are required for the proposed UAS operation.

In 2014, the Department of Trans portation and FAA made progress in furthering integration of UAS under the authority of Section 333 of the FMRA. As of January 30, 2015, there have been 24 approvals for commercial UAS operations in the United States granted under Section 333 authority. These approvals cover a wide range of operations including motion picture, flare stack inspection, crop survey and construction use.



### Certificates of Waiver or Authorization (COAs)

Since unmanned aircraft have no pilot on board, the ability to “see an d avoid” other aircraft is accomplished by an “Alternate Means of Compliance (AMOC)” with the applicable Chapter of FAA Order 8900.1, Flight Standards Information Management System, Volume 16, Unmanned Aircraft Systems. The Certificate of Waiver or Author ization (COA) is the mechanism used to provide that alternate means. COAs are issued to agencies wishing to operate unmanned aircraft for purposes other than hobby or recreation. A COA is not required for operations in restricted areas, warning or prohib ited areas. Public operators normally belong to government or state agencies and routinely conduct unmanned aircraft operations for strictly governmental purposes. These agencies include but are not limited to the Department of Defense, Department of Hom eland Security, state and local law enforcement agencies, and public

universities.

In the 2012 FMRA Section 333, Congress provided guidelines that allowed civil UAS to operate in the NAS for commercial purposes. In late 2014, the first COAs for commerc ial purposes were issued to applicants in the film and movie making industry. Since that time the FAA has issued more than sixty

- three (63) COAs to various companies in a variety of industries to operate unmanned aircraft in the NAS. The COA provides spe cific operating areas and specific mitigations that help to ensure the safety of the NAS. The FAA predicts the number of COAs issued for commercial purposes will soon outpace the number of COAs approved for public operators.FAA Aerospace Forecast Fiscal Years 2015

- 2035

70 

### UAS in the Arctic

The first commercial beyond line of sight operations in the United States were authorized in the Arctic in 2013. The FAA is continuing to work with industry partners to evolve the maturity of beyond line of sight operations in remote operating areas.



### UAS Foreca st

FAA uses the Teal Group's 2014 World Unmanned Aerial Vehicle Market Profile and Forecast as the basis for our forecast. Teal points out that the current market for unmanned aircraft outside the military is extremely small but will be one of the faste st growing segments in aviation over the next ten (10) years. There is the start of a non

- military UAS market, but the size of the market will directly relate to regulations that are adopted. Once enabled, UAS weighing less than 55 pounds will become comme rcially viable.

The FAA is working to enable a new thriving industry to flourish while maintaining the safety of the NAS. Once small UAS are routinely authorized to operate in commercial markets, there will be a surge in the commercial applications of UAS. Potential markets will include aerial photography, precision agriculture and law enforcement.



### UAS Small Commercial Forecast

Today, unmanned aircraft are flying in the NAS under very controlled conditions, and operations range from ground level to above 50,000 feet, depending on the specific type of aircraft. UAS are authorized to operate only on a case

- by

- case basis in Class B airspace , which exists over major urban areas and contains the highest density of manned aircraft in the National Airspace System.

Once the regulatory structure is developed and industry standards have been established, the FAA expects a c ommercial UAS market to mature rapidly. Relatively inexpensive UAS systems weighing less than 55 pounds are economically viable from a commercial standpoint, and the expectation is that market demand for UAS will occur within the constraints of the regulat ory requirements. The number of small UAS forecasted is highly uncertain and is dependent on the regulatory structure finally adopted.FAA Aerospace Forecast Fiscal Years 2015

- 2035

71 

## COMMERCIAL SPACE TRANSPORTATION

Since 1989, the Department of Transportation/Federal Aviation Administra tion has licensed over 230 U.S. commercial space launches. The FAA has also granted over 30 experimental permit launches since 2006. Activity in the U.S. commercial sector is expected to increase for

both orbital and suborbital launches.

The F AA’s Office of Commercial Space Transportation (AST) licenses and regulates U.S. commercial space launch activity including launch vehicles and non

- federal launch sites authorized by Executive Order 12465 and Title 51 U.S. Code, Subtitle V, Chapter 509 (formerly the C ommercial Space Launch Act). Title 51 and the Executive Order also direct the Department of Transportation to encourage, facilitate, and promote U.S. commercial launches. AST’s mission is to license and regulate commercial launch and reentry operations and non

federal launch sites to protect public health and safety, the safety of property, and the national security and foreign policy interests of the United States.



### Overview

The FAA licenses several expendable vehicles used for commercial orbital launch es. The most frequently used orbital launch vehicles ar e:

 Falcon 9, an intermediate

- class launch vehicle built, operated, and marketed by Space Exploration Techno logies Corp. (SpaceX);

 Antares, Minotaur , and Pegasus vehicles built, operated, and marketed by Orbital

Sci ences Corporation (now Orbital ATK, Inc.);

 Zenit

- 3SL, a heavy

- class vehicle built by the Ukrainian company KB Yuzhnoye for the

Russian

- owned Sea Launch venture, launched from a floating launch platform based at Long Beach, CA ;

 Atlas V, a he avy

- class vehicle built by United Launch Alliance (ULA), a joint venture between Boeing and Lockheed Martin, and marketed by Lockheed Martin Commercial

Laun ch Services (LMCLS); and

 Delta IV, a heavy

- class vehicle built and provided by ULA.

Companies suc h as Armadillo Aerospace have also carried out suborbital licensed launches. In addition to launch licenses, e xperimental p ermits were f irst granted by the FAA in 2006.

Permits are used for subo rbital reusable vehicle development and test flights . Companie s that have been active in conducting permitted launches include Blue Origin, Scaled Composites, and SpaceX.

The FAA Office of Commercial Space Transportation does not license or grant permits for

amateur

- class rockets which are unmanned rockets that h ave less than 200,000 pound

seconds of total impulse and cannot reach an altitude greater than 150 kilometers above the

Earth’s surface.FAA Aerospace Forecast Fiscal Years 2015

- 2035

72 The FAA licenses launches or reentries carried out by U.S. persons inside or outside the

United States. The FAA doe s not license launches or reentries the U.S. Government carries out for the Government (such as those operated for and by NASA or the Department of Defense).

Nine commercial spaceports are currently licensed by the FAA. These are located in six states : Alaska (Kodiak Launch Complex) , California ( California Spaceport, part of Vandenberg Air

Force Base

, and Mojave Air and Space Port), Florida (Cape Canaveral Spaceport and Cecil Field Spaceport), New Mexico (Spaceport America) , Oklahoma (Oklahoma Spaceport )

, Texas (Midland International Air and Space Port), and Virginia (Mid

- Atlantic Regional Spaceport). Several other commercial spaceports around the Unit ed States have been proposed, including locations in Colorado, Georgia, and Hawaii.



### Review of 201 4

There w ere twelve orbital FAA

- licensed launch es in 20 14, an increase from seven in 2013. SpaceX’s Falcon 9 vehicle was used for six launches including two Dragon missions to the International Space Station (ISS), three missions to geosynchronous orbit, and one multiple satellite launch to low Earth orbit. There are nearly 50 future launches on the SpaceX manifest. Orbital Sciences conducted three launch attempts of the new Antares vehicle, two successful

and one resulted in a launch failure. ULA performe d two FAA

- licensed launches, one by an Atlas V and the other by a Delta IV Heavy. Sea Launch (a multinational launch provider) conducted one launch of the Zenit 3SL launch vehicle. SpaceX carried out two licensed reentry missions when both Dragon capsules returned from orbit for an ocean landing after being berthed at the ISS for about two weeks following launch. The third licensed reentry was of the Orion space capsule, successfully concluding the NASA EFT 1 test mission.

In addition, there were seven s uborbital flights during 2014 conducted under experimental permits. Five were carried out by SpaceX in Texas using its Falcon 9R Dev 1 test vehicle. Two permitted suborbital flights were performed by Scaled Composites with SpaceShipTwo; the

second test fli ght resulted in a failure. Other companies are preparing experimental permit flights in 2015.

Launch providers such as SpaceX plan an increased number of licensed orbital launches in 2015. The increase in the number of permit flights and the commenceme nt of licensed suborbital flights could take place in the years following 2015, depending on the results of the SpaceShipTwo launch failure investigation.

201 3 201 4 201 5 Forecast

Licensed Launches 7 12 16

- 18

Permitted Launches 7 7 7

- 10

FAA Lice nsed and Permitted Launches

Overall there were 92 civil, commercial and military orbital launches worldwide in 2014, compared to 81 in 2013. Of these, 23 were commercial launches, the same number as in

2013

.FAA Aerospace Forecast Fiscal Years 2015

- 2035

73 Launch providers in the United States led with 11 orbital commercial launches of U.S.

- manufactured vehicles in 2014, followed by six by Europe, four by Russia, one by India, and one by Sea Launch.

For more details, see the annual Compendium and Year in Review report s available onl ine at: http://www.faa.gov/about/office_org/headquarters_offices/ast/reports_studies/#accst



### Global Orbital Launch Forecast

In July 201 4 , the FAA and the Commercial Space Transportation Advisory Committee (COMSTAC) published their annual global forec ast for commercial launch demand, the 201 4 Commercial Space Transportation Forecasts

. The report calculates satellite demand and then applies models to estimate international commercial launch demand. Multiple satellites can fly

on one launch vehicle. The 2014 forecast estimated an average global demand of about 16 commercial launches per year to geosynchronous orbit (GSO) and a global demand of about 14 launches per year to non

- geosynchronous orbits (NGSO). The forecast covers the years

2014

- 2023. The 2014 forecast is up slightly down from the 2013 forecast for GSO and up for

NGSO destinations.

Combined 201 4 GSO and NGSO Historical Launches and Launch Forecasts

Commercial GSO launches are used for communications satellites with masses ranging from
2, 5 00 to over 6,000 kilograms. Demand for commercial NGSO launches spans a number of

markets and payload sizes , including resupply of the ISS, commercial remote sensing; science and technology demonstration; and replenishment and replacement of low Earth o rbit communications satellite systems reaching the end of their lifespan. The forecast shows a continuing trend in demand for medium

- to

- heavy sized launch vehicles. Many small satellites, including a rapidly growing number of very small satellites known as CubeSats, find rides

aboard medium

- to

- heavy lift launch vehicles as secondary payloads. The forecast demand forFAA Aerospace Forecast Fiscal Years 2015

- 2035

74 small launch vehicles is an average of only one launch per year; however, it is up slightly from only 0.3 projected in the 2013 forecast.

T he GSO and NGSO forecasts are not a prediction of what will actually be launched but instead represent s the expected demand for launch services, based on a variety of inputs. The complete forecast report is available at: http://www.faa.gov/about/office_org /headquarters_offices/ast/reports_studies/forecasts/



### Suborbital Reusable Vehicle Forecast

The most recent global forecast for suborbital reusable vehicles (SRVs) was completed in July 2012. A report prepared by the Tauri Group for FAA AST and Space Flor ida covered a 10

- year period that estimated demand once new suborbital vehicles begin flying. The goal of the study was to provide information for government and industry decision makers on the emerging SRV market by analyzing trends and areas of uncertain ty in eight distinct markets SRVs could address. The eight markets include: Commercial Human Spaceflight, Basic and Applied Research, Aerospace Technology Test and Demonstration, Media and Public Relations, Education, Satellite Deployment, Remote Sensing, and Point

- to

- Point Transportation. The forecast includes three demand scenarios: baseline, growth, and constrained. Instead of flights, the forecast estimates seat demand. The demand is either for one seat for a single occupant or a cargo equivalent of 3.3 lockers (based on the size of mid

- deck lockers used aboard the Space Shuttle).

Total projected demand for SRVs, across all eight markets, is estimate to begin at around 373 seat/cargo equivalents in Year 1 and increasing to 533 seat/cargo equivalents i n the tenth year of the baseline case. Year 1 represents the first year of regular SRV operations. Demand under the growth scenario, which reflects increases due to factors such as marketing, research successes, and flight operations, grows from about 1,10 0 to more than 1,500 seat/cargo equivalents over ten years. The constrained scenario, which reflects significantly reduced consumer spending and government budgets, shows demand from about 213 to 255 seat/cargo equivalents per year.

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total

Baseline

Scenario 373 390 405 421 438 451 489 501 517 533 4,518

Growth

Scenario 1,096 1,127 1,169 1,223 1,260 1,299 1,394 1,445 1,529 1,592 13,134

Constrained

Scenario 213 226 232 229 239 243 241 247 252 255 2,378

Total p rojected d emand for suborbital reusable vehicles by seat/cargo equivalents

Demand for SRVs is dominated by Commercial Human Sp aceflight. The analysis indicates that about 8,000 high net worth individuals from across the globe are sufficiently interested and have spending patterns likely to result in the purchase of a suborbital flight. The second largest

area of demand is Basic a nd Applied Research, funded primarily by government agencies, and also by research for not

- for

- profits, universities, and commercial firms. Aerospace Technology Test and Demonstration, Education, Satellite Deployment, and Media and PR generate theFAA Aerospace Forecast Fiscal Years 2015

- 2035

75 remainin g demand. The Remote Sensing and Point

- to

- Point Transportation markets are not

forecasted to drive launches at this time.

10

- year Suborbital Reusable Vehicle demand forecast

For more details, see the Suborbital Reusable Vehicles: A 10

- Year Forec ast of Market

Demand report available online at: http://www.faa.gov/about/office_org/headquarters_offices/ast/reports_studies/forecasts/FAA Aerospace Forecast Fiscal Years 2015

- 2035

76 

# RISKS TO THE FORECASTS

The forecasts in this document are forecasts of aviation demand, driven by models bu ilt on forecasts of economic activity. There are many assumptions in both the economic forecasts

and in the FAA models that could impact the degree to which these forecasts are realized.

T his yea r’s forecast is driven, at least in the short

- term, by a nu mber of factors including the strength of the economic recovery and any impact resulting from the U.S. government fiscal

situation

. Also

, a s numerous incidents in the past few years ( like the attempted bombing of a

Northwest airliner on Christmas Day 2009 , the discovery o f multiple devices on cargo flights out of Europe in October 2010) remind us, terrorism remains among the greatest risks to aviation growth . Any terrorist incident aimed at aviation would have an immediate and significant impact on the de mand for aviation services that would be greater than its impact on overall economic activity

.

Although o il prices remained high for most of 2014

, the recent volatility reminds us there is still considerable uncertainty as to th e future direction of oi l prices

. The FAA’s baseline forecast (derived from economic assumptions in IHS Global Insight ’s December 2014 U.S. macro

forecast and 30

- Year Focus released during the fourth quarter of 201 4 ) calls for a sharp

decrease in oil prices in 2015 to $60.5 0/bbl

. Over the next six years (2015

- 21) , the price of oil increases an average of 10. 8 % a year , to $112/barrel. After 2021, price increases moderate to average 2.7 percent a year for the remainder of the forecast period, reaching $162/barrel by

the end of the forecast period in 20 3 5. Some forecasters are calling for a more gradual

rebound in the price of oil. In January 2015, t he World Bank released its latest commodity price forecast. The forecast call s for oil prices to fall to $53/bbl in 2015 , t hen risin g to about $74 in 2020, and only exceeding $100/bbl in 2025 . The International Monetary Fund (IMF) also sees oil price increasing at a more moderate rate than the FAA’s base forecast, as its January 2015 forecast called for oil prices increasing from $51/ bbl in 2015 to only $68.5/bbl by

2020. Over the long run, lower oi l prices give consumers an impetus for additional spending, including air travel

, and should enhance industry profitability

. However lower oil prices could delay orders for new aircraft as carriers focus on maintaining and increasing cash balances and weigh the savings from new aircraft vs the cost s of operat ing an older fleet

.

The baseline forecast assumes that global econom ic growth will accelerate

, over the next few years, but we akness in certain areas may threaten the strength and sustainability of the expansion. The baseline forecast assumes that growth in the emerging market economies will be significantly higher than in the other large economies , in particular the U.S., Japan and the European Union. While economic growth appears to be picking up in the U.S.

, there are

concerns about the strength of demand in Japan and in the Euro pean Union as these areas continue to be constrained by structural economic problems and instituti onal constraints . In addition, many countries in the European Union are still grapp ling with the impacts of fiscal austerity policies , aimed at reducing government spending and debt

, implemented during the
past four years which have prolong ed the regional downturn

. Furthermore the steps that were

taken to resuscitate the global economy may prove to be excessive, since the resulting surge in liquidity growth may cause asset bubbles and exacerbat e existing global imbalance s

. TheFAA Aerospace Forecast Fiscal Years 2015

- 2035

77 current forecasts assume st rong passenger growth for travel between the United States and other world regions. Any slowing of worldwide economic activity could seriously inhibit the growth in global passenger demand.

With the merger of American Airlines and US Airways completed

, the outlook for further consolidation via mergers and acquisition s (M&A ) appears to be rather limited. Based on FY

2014 data, the Big 3 (American, Delta, and United) plus Southwest accounted for almost 77 %

of the U.S. airline industry capacity and traffi c

. Of the network carriers, only Alaska remains independent, although it does have code share agreements with both American and Delta. In the low cost carrier sector, the merger between Southwest and AirTran achieved full integration of the fleet and a s ingle ticketing system during 2014. Aside from Southwest and AirTran, there appears to be little scope for further consolidation as there are significant

obstacles

. In particular the financial situation of many low cost carriers limits the possibilities of additional merger activity. For many low cost carriers, the sheer size of merger transaction s or the amount of financial risk associated with a merger makes further merger activity unlikely. However, U.S. airlines are continuing to explor e other optio ns including global alliances. Many of the major carriers in the U.S. are members of global alliances that operate with some

measure of anti

- trust immunity from the U.S. DOT. While anti

- trust immunity may provide flexibility for airline operators across borders, it may create an anti

- competitive environment in the marketplace. These market consolidating vehicles, particularly the anti

- trust immunity provisions, may invite increased regulatory scrutiny. If such oversights are launched in the future, this will complicate the evolving structure of the airline industry and may impact demand via new regulations.

The forecast assumes the addition of sizable numbers of large regional jets (70 to 90 seats) into the fleet of regional carriers. However, the re gional carriers’ future is closely linked to those of the larger network carriers. As demand continues to slowly recover, financial pressures on regional operators have increased . Furthermore, as consolidation has occur red among the network carriers, man y regional carriers have found themselves either saddled with excess capacity or lack of sufficient capacity, or lack of feed traffic. The network carriers continue to make adjustments to the size and breadth of their networks, without providing opportuni ties for regional carriers to backfill the loss of the mainline service. Delta is well along

in its plans to reduce its small (read 50 seat) regional jet fleet and plans to retire another 50 to bring its total to just 125, down from almost 500 at the end of 2009. United is adding 85

Embraer 175’s to its partners’ regional fleet and reducing the number of small regional jets flown by its partners to 242 by the end of 2015 from an estimated 380 at the end of 2012.

Meanwhile the new American Airways is pla nning to reduce its small regional jet fleet by 21

aircraft in 2015 . While these actions may provide some opportunities for well positioned regional carriers, the overall impact of consolidation so far has been to reduce opportunities for regional flying substantially.

After suffering through a significant downturn in 2009

- 10 , b usiness and corporate aviation have

seen a partial recovery during the past four years , with promising increases in aircraft

deliveries in 2014

. The pace of the recovery in b usiness and corporate aviation is largely based upon the future prospects of economic growth and corporate profits. Future uncertainty in these leading indicators could pose a risk to the forecast, but the risk is not limited to these

factors. Public per ception of business and corporate aviation, potential environmental regulations and taxes, along with increased security measures placed on business jets, willFAA Aerospace Forecast Fiscal Years 2015

- 2035

78 place downward pressure on the forecast. On the other hand, while corporate profits are

current ly high, perceived economic and political uncertainties are causing companies to postpone their purchase of new business aircraft. Translation of this pent

- up demand into sales of business jets in the near future can create an upward impact on the forecas t

. The impact of fuel price decline on business aircraft demand is also uncertain. While a positive effect on corporate profits will increase the demand, revenue losses resulted from low fuel prices may move the demand in the other direction.

Other f actors, such as new and more efficient product offerings and increased competition from new entrant manufacturers, serve to broaden the potential of the industry. Estimates show that a record number of new business jet s are deliver ed over seas and, with th e potential easing of regulations on the use of airspace in foreign countries, the scenario for business jet manufacturers looks all the more promising. Raising the level of security restrictions, and the subsequent travel hassles placed on airline passen gers, could make corporate jet travel look increasingly appealing.

Not only is the volume of aircraft operating at most large hubs expected to increase over the next 20 years, but t he mix of aircraft is changing for this same period. The expected increa ses in the numbers of regional jets and business jets will increase the impact on the national airspace system and make the FAA’s job more challenging. This change in the mix of aircraft will impact workload strictly due to the increasing demand for aviat ion services projected over the forecast period.

Although overall activity at FAA and contract towers fell in 2014 , activity at 10 o f the Core 30 airports increased in 2014 and delays remained at historically high levels at many U.S. airports

. As deman d recovers and workload increa ses, congestion and delays c ould become a critical limit to growth over the forecast period. FAA’s forecasts of both demand and operations are unconstrained in that they assume that there will be sufficient infrastructure to handle the projected levels of activity. Should the infrastructure be in adequate and result in

even more congestion and delays, it is likely that the forecasts of both demand and operations

would not be achieved.

There are c oncerns that aviation’s im pact on the environment could potentially restrict the ability of the aviation sector to grow to meet national economic and mobility needs. Airport expansion or new construction is often a contentious issue because of noise, air quality, and water qualit y concerns. There is also an ongoing effort to address the climate impacts of

aviation. A viation currently accounts for two to three percent of global carbon emissions

, but

this percentage is expected to increase with the grow th in operations unless mitig ated with

new technolog ies and standards , renewable fuels, operational improvements and potentially as a gap filler, market based measures. While certain measures to address climate impacts can result in reduced costs, such as increased fuel efficiency, o ther measures, such as m arket instruments could pose additional constraints on growth. Energy concerns are also rising, driven by spikes in fuel prices, supp ly and security issues, and concerns about fossil fuel

emissions contributi ng to global climate ch ange. Lack of progress in improving the environmental and energy outlook for the future fleet may result in more access restrictions or operating limit ations on the fleet in service which in turn may depress growth

. By contras t, breakthroughs in quieter, cleaner aircraft technologies and renewable fuels could reduce

environmental and ener gy constraints on the forecast, and enable sustainable growth.FAA Aerospace Forecast Fiscal Years 2015

- 2035

79 

# APPENDIX A: ALTERNATIVE FORECAST

SCENARIOS

Uncertainty exists in all industries, but especially in th e commercial air travel industry. As volatility in the global environment has increased, the importance of scenarios for planning purposes has increased. In order to help stakeholders better prepare for the future, the FAA

has begun to provide alternativ e scenarios to our baseline forecasts of airline traffic and capacity.

To create the baseline domestic forecast , economic assumptions for both U.S. and international regions from IHS Global Insight’s 10

- year and 30

- y ear U.S. Macro Baseline ( released in

December 201 4 ) were used to generate enplanements, mainline real yield and nominal yiel d. To develop the alternative scenarios, assumptions from IHS Global Insight’s 10

- y ear optimistic and pessimistic forecasts from their December 2014 Baseline U.S. Econo mic Outlook forecast

were used. Inputs from these scenarios were substituted for the baseline scenario inputs to create a “high” and “low” traffic, capacity, and yield forecast.

International passengers and traffic are primarily determined by countr y specific Gross Domestic Product ( GDP ) forecasts provided by IHS Global Insight. Thus, the baseline forecast of GDP for both the U.S. and international regions is modified using the optimistic and pessimistic forecasts of GDP described above in order to create a high and low case. Since only the ten

- year alternative GDP forecast s by Global Insight w ere available at the t ime of this analysis, the domestic and international alternative scenarios extend to 202 4 only.FAA Aerospace Forecast Fiscal Years 2015

- 2035

80 

## Scenario Assumptions

The FAA’s b aseline forecast assumes that the economy recovers from the current downturn

and experiences very low oil prices in the short term, suffers no major swings in macro

economic policy, or financial sector collapses

.

The FAA’s high case forecast uses IHS G lobal Insight’s optimistic forecast. The optimistic

forecast sees improved business confidence leading to renewed vigor in the labor market

, consumer spending, and sustained improvements in the housing sector as well as sustained

low consumer prices , high er real disposable income, relatively low Brent crude prices, and a high GDP. Furthermore, i n the optimistic case, it is assumed that fiscal deficits will diminish substantially in North America, Western Europe, and Japan. In this scenario GDP and real

d isposable income ( DI ) growth are about 0.6 7 and 0.8 7 percentage points , respectively, faster per year than the baseline forecast and unemployment averag es 0.8 points lower on an annual

basis than the baseline

. 22

Conversely, FAA’s low case forecast uses I HS Global Insight’s pessimistic scenario ; i n th is

forecast

, the same assumptions apply as in the optimistic case, only the U.S. economy

recover s at a much slower pace and the prices of Brent crude rise higher than in the base case. Moreover, the Eurozon e’s recovery will stall and growth in emerging markets will be less robust. Lastly

, GDP and real DI grow 0. 8 and 0. 3 percentage points , respectively, slower per year than

in the baseline ; and unemployment, on average, is 1.5 points higher on an annual bas is than in

the baseline

.

22 Real disposable i ncome and unemployment are used as an input variables to the FAA’s base, high and low forecasts of enplanements

.FAA Aerospace Forecast Fiscal Years 2015

- 2035

81 2.3

1.6 1.9 2.5 2.6 2.5 2.5 4.3

3.2

-0.5 0.5 1.5 2.5 3.5 4.5

2014 2015 2015-24 Annual Percent Change

Fiscal Year



### Real Gross Domestic Product

Pessimistic Baseline Optimistic

1.2 2.4 2.3

1.2 3.0 2.8

1.2 3.7

3.3

0.0 1.0 2.0 3.0 4.0

2014 2015 2015-2024 Annual Percent Change

Fiscal Year



### Real Disposable Personal Income

Pessimistic Baseline OptimisticFAA Aerospace Forecast Fiscal Years 2015

- 2035

82 O il prices a ffect the supply of

, and demand for

, air travel and have a direct impact on the profitability of the industry

. The pessimistic scenario does not feature a drop in the refiners acquisition cost (RAC) after 2014 due to a weaker dollar and lower productivity gains. The baseline features a large price drop in 2015 then an immediate rebound whereas the optimistic case shows a far more moderate drop in 2015 but continues dropping through 2017 before starting to climb again. The optimistic case is characterized by availability of energy, further gains in technology, and a stronger dollar ; all of these factors help to temper prices compared

to the baseline

.

In the baseline forecast, technological improvements act as a counterbalance to partially offset rising prices.

- 3.0

- 40.0 10.5

- 3.0

- 38.1 9.2

- 3.0

- 47.7 10.2

-60.0 -50.0 -40.0 -30.0 -20.0 -10.0 0.0 10.0 20.0

2014 2015 2015-2024 Annual Percent Change

Fiscal Year



### U.S. Refiners' Acquisition Cost

Pessimistic Baseline Optimistic Source: IHS Global InsightFAA Aerospace Forecast Fiscal Years 2015

- 2035

83 The price of energy is one of the critical drivers in the growth of consumer prices over the forecast period. In the optimistic case

, energy prices, wages, and import prices gro w more slowly than in the baseline. In the pessimistic case the opposite occurs with energy prices, wages and import prices rising more rapidly compared to the baseline. Please note that the annual rates amongst the alternatives do not begin to change sig nificantly until fiscal year 2018. - 20 40 60 80 100 120 140 160

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Price per Barrel ($)

Fiscal Year



### U.S. Refiners' Acquisition Cost

Pessimistic Baseline Optimistic

Source: IHS Global Insight

2.36 2.36 2.54 2.79 2.90

2.36 2.37 2.51 2.70

2.24 2.36 2.36 2.47 2.64

1.97

- 0.50 1.00 1.50 2.00 2.50 3.00 3.50

2014 2015 2018 2021 2015-2024 Annual Percent Change

Fiscal Year



### Consumer Price Index

- All Urban Consumers

Pessimistic Baseline Optimistic Source: IHS Global InsightFAA Aerospace Forecast Fiscal Years 2015

- 2035

84 

## Alternative Forecasts

Passengers

In the baseline forecast, system passengers are forecast to grow at an average annual rate of

1.9 percent a year over the forecast horizon of 201 4

- 202 4 (with domestic and interna tional

passengers up 1.6 and 3.7 percent, respectively).

In the optimistic case, passengers grow at a quicker pace, averaging 2.3 percent per year (up

1.9 percent domestically and 4. 8 percent internationally). This scenario is marked by a more

favorabl e business environment, lower inflation, and lower fuel prices which make the price of flying more affordable to business and leisure travelers. By the end of the forecast period in

202 4

, system passengers in the optimistic case are 4. 4 percent above the baseline , totaling 951 million, 40 million than in the baseline.

The pessimistic case is characterized by a period of weakened consumer confidence brought on by persistent unemployment, low consumer demand

, and higher inflation. In this scenario

passen gers grow an average of 1. 2 percent per year (domestic up 0.9 percent and international

up 2. 8 percent). In the pessimistic case, system passengers in 202 4 are 6.6 percent below the baseline case, totaling 851 million, 61 million fewer than in the baselin e

.

2.3 2.5

1.0 2.3 2.6

1.9 2.3 3.0

2.3

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

2014 2015 2015-2024 Annual Percent Change

Fiscal Year 

### System Enplanements

Pessimistic Baseline OptimisticFAA Aerospace Forecast Fiscal Years 2015

- 2035

85 

### Revenue Passenger Miles

In the baseline forecast, system RPMs grow at an average annual rate of 2.5 percent a year over the forecast horizon (2014

- 2024) , with domestic RPMs increasing 1.9 percent annually

and international RPMs growing 3.8 perce nt annually.

In the optimistic case, the faster growing economy coupled with lower energy prices drives RPMs higher than the baseline, with growth averaging 3.0 percent per year (domestic and international RPMs up 2.1 and 4.9 percent, respectively).

In the pessimistic case, the combination of a slower growing economy and higher energy prices

result in RPM growth avera ging 1.8 percent annually with domestic markets growing 1.1
percent a year while international traffic grows 3.1 percent annually.



### Available Seat Miles

In the base case, system capacity is forecast to increase an average of 2.4 percent annually

over th e forecast horizon with growth averaging 1.7 percent annually in domestic markets and

3.7 percent a year in international markets

.

In the optimistic case, capacity grows at a faster clip than in the baseline forecast, averaging

3.0 percent annually (up 2.1 percent domestically and up 4.9 percent internationally). Carriers increase capacity compared to the baseline forecast to accommodate increased travel demand

2.5

2.2

1.0 2.5 2.6
2.4 2.5 3.3

3.0

0.0 1.0 2.0 3.0 4.0

2014 2015 2015-2024 Annual Percent Change

Fiscal Year



### System Revenue Passenger Miles

Pessimistic Baseline OptimisticFAA Aerospace Forecast Fiscal Years 2015

- 2035

86 brought about by a more favorable economic environment and by the end of the forecast horizon, system capacity in the optimistic case is 6.3 percent above the baseline case.

In the pessimistic case, demand for air t ravel is lower than in the baseline, thus system capacity grows at a slower pace of 1.7 percent annually (domestic growth of 1.0 percent annually and international up 3.1 percent annually). Total system capacity in the pessimistic case in 202 4 is

5.9 perc ent below the baseline and 11.5 percent below the optimistic case.



### Load Factor

System load factors over the 10

- year forecast period are relatively similar for all three forecast

scenarios . In the base case and in the optimistic scenario , system l oad factor rises from 83.4 percent in 201 4 to 84.1 percent and 83.5 in 202 4 , respectively.

In all three scenarios it is assumed that carriers will keep load factors on the high side by actively managing capacity (seats) to more precisely meet demand (p assengers).

The domestic load factor increases over the forecast horizon from 84.4 percent to 85.3, 84.8,

and 83.7 percent in the baseline, optimistic and pessimistic scenarios, respectively

.

The international load factor forecast is slightly diff erent in the three scenarios, reflecting in part the relative growth in demand and capacity in the three (Atlantic, Latin, and Pacific) inter

national regions under each scenario.

2.5 2.4

1.6 2.2 2.4 2.4 2.2 3.8

2.9

0.0 1.0 2.0 3.0 4.0 5.0

2014 2015 2015-2024 Annual Percent Change

Fiscal Year



### System Available Seat Miles

Pessimistic Baseline OptimisticFAA Aerospace Forecast Fiscal Years 2015

- 2035

87 In the base case, international load factor is relatively steady, going from 81.4 percent in 201 4

to 81.9 percent in 202 4

.

In the optimistic scenario, international load factor is lower than in the other scenarios, falling to

81.2 percent by 202 4 , reflecting the faster growth in the relatively lower load factor Latin

Ame rica market.

In the pessimistic scenario, the load factor remains at 81.3 for the forecast period.



### Yield

In the baseline forecast, nominal system yield increases 2.2 percent annually, going from 14.79

cents in 201 4 to 18.36 cents in 202 4

. In domestic markets , yield in the baseline forecast rises

from 14.72 cents in 201 4 to 19.02 cents in 202 4 , while international yield rises from 14.94 cents

in 201 4 to 17.10 cents in 202 4

.

System yield rises more slowly in the optimistic case, up 1.3 per cent annually to be 16.84 cents at the end of the forecast period . D omestic yield increases to 16.68 cents while international yield increas es to 17.12 cents

. The slower growth in yield in the high case is due to advancements in technology, gains in prod uctivity, more favorable fuel prices, and lower inflation. Increased competition is also assumed in this scenario. In the domestic market

, fares

are driven lower than baseline levels due to increased levels of competition between low cost and legacy carr iers. In the international market, increased competition from growing liberalization puts downward pressure on fares.

In the pessimistic case, nominal yields rise more rapidly than in the baseline, growing an average of 1.9 percent annually, reaching 17.88 cents by 202 4 ( 18.32 cents domestically and

17.05 cents internationally). This scenario reflects higher general inflation and higher energy prices than in the baseline, forcing carriers to increase fares in order to cover the higher costs of fuel, labor, and capital.FAA Aerospace Forecast Fiscal Years 2015

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# APPENDIX B : FAA FORECAST ACCURACY

Forecasts, by their nature, have a degree of uncertainty incorporated in them. They involve not only statistical analyses and various scientific methods, but also judgment and relia nce on industry knowledge and the forecaster’s experience to incorporate industry trends not yet reflected in recent results. The FAA’s annual Aerospace Forecast is no exception. Given the volatile nature of the U.S. airline industry, it is not surprisin g that each year’s forecast would contain a certain degree of forecast variance. Therefore, FAA forecasters have tried to build forecast models that give a consistent and predictable pattern of results. Analysts relying on the forecasts produced by the m odels would then be able to adjust for the predictable variance

from actual results.

The table below presents an analysis of the variance from historical results for a primary forecast assumption along with five key forecast metrics during the FY 200 5

- 20 14 forecast period. Although this period has experienced industry upheaval, the FAA’s forecast methodology remained consistent during this time. For this reason, inclusion of prior periods in an analysis of forecast variance might lead to inconclusive or inaccurate implications about the accuracy of FAA’s current forecast methodology.

The table below contains the mean absolute percent errors for the projected values versus the actual results for U.S. carriers’ domestic operations along with the project ed values versus

actual results for U.S. GDP . Each metric has five values showing the relative forecast variance by the number of years in advance the preparation of the forecast took place. For example, the “3 Years” column for ASMs shows that the mean absolute percent error was 8.2 percent for ASM forecasts prepared 3 years in advance. For the period under examination, preparation of the forecasts for FY 200 5 through FY 2014 occurred in FY 2004, FY 2005, FY

200 6 , FY 200 7 , FY 200 8 , FY 200 9 , FY 20 1 0, FY 20 1 1

, FY 2012 , and FY 2013 respectively. 23

23 It should be noted that the first forecasted year for each respective fiscal year is that very same year. Therefore, FY 2003’s first forecas ted year is FY 2003, and the third forecasted year is FY 2005

.FAA Aerospace Forecast Fiscal Years 2015

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93 Presenting forecast variances from actual data in such a manner simplifies a review of longer

term trends. Typically, one would expect the variances to decrease as the forecast year is

closer to t he year the forecast is prepared. Presenting forecast variances in this way allows an examination of changes in the relative variances by time horizon, signaling when dramatic shifts in accuracy occur.

Examination of the forecast variances reveals sev eral items. First, the forecast variances for GDP, a key exogenous variable, are similar to the variances of the key traffic measures, Passenger Enplanements and RPMs. This suggests that a substantial amount of the forecast

variance for the traffic varia bles may be attributed to the forecast error in the exogenous

variables. Second , all the metrics examined show increasing variances as the forecast time horizon lengthens

. Third

, the ASM forecast variance being larger than the RPM forecast

variance indic ates a consistent underestimation of load factor s which is an important factor in translating passenger demand into aviation activity. All other things being equal, large

variances in forecasts of load factor can lead to large variances in the forecasts of ASMs which in turn will typically result in variances of aviation activity , as can been seen in the

variances of the IFR aircraft handled forecasts.

Furthermore, ASMs and aircraft handled are difficult to forecast beyond a relatively short time

h orizon, as carriers often react to changing market conditions not always tied to the general

economic trends that have long term impacts . The relatively large variances in the se forecasts beyond two years suggest that carriers have been permanently removi ng capacity by reducing flights and by changing the mix of aircraft to satisfy demand. In the short term, s uch capacity reductions can be identified by using advance schedule information. However, the FAA’s longer

- term forecasts rely on anticipated aircr aft deliveries and retirements as well as historic relationships between economic activity and capacity deployed. Given the volatile nature ofFAA Aerospace Forecast Fiscal Years 2015

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94 many of the factors that may influence longer term ASM and aircraft handled forecasts, a simpler approach to pro jecting ASMs , such as RPMs divided by load factor s , may improve the long run accuracy of the ASM and aircraft handled forecasts.FAA Aerospace Forecast Fiscal Years 2015

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# APPENDIX C: ACKNOWLEDGEMENTS

This document was prepared by the Forecasts and Performance Analysis Division (APO

- 100),

O ffice of Aviation Policy and Plans, under the direction of Mr. Roger D. Schaufele, Jr. The following individuals were responsible for individual subject areas:

Economic Environment Roger Schaufele (202) 267

- 3306

Commercial Air Carriers Passenger s Roger Schaufele (202) 267

- 3306

Katherine Lizotte (202) 267

- 3302

Cargo Nick Miller (202) 267

- 3309

General Aviation

Forecasts H. Anna Barlett (202) 267

- 4070 Survey Data H. Anna Barlett (202) 267

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FAA Workload M easures Forecasts Roger Schaufele (202) 267

- 3306

Data Forecasts and Performance Analysis Division, APO

- 100

Unmanned Aircraft Systems Michael Lukacs (202) 267

- 9641 Merideth Tracey (202) 385

- 4600

Commercial Space Mary Carolyn Thies Becker (202) 267

- 8863 Commercial Space Transportation, AST

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Text and Table Preparation Forecasts and Performance Analysis Division Staff

APO Websites

Forecasts/Statistical Publications http://www.faa.gov/data_stat istics APO Data System http://aspm.faa.gov

Email

APO staff first name.last name@faa.govFAA Aerospace Forecast Fiscal Years 2015

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# APPENDIX D: FORECAST TABLESFAA Aerospace Forecast Fiscal Years 2015

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