WP3: Market Analysis

Lead: Oxford Economics

Involved partners: AIRBUS, EADS IW

Progress beyond the state of the art

Market analysis on high-speed airplanes have been performed in the past, and results need to be updated by taking into account the newest economic figures, contributing to further justifying the overall high-speed approach from an economy point of view.

Within HIKARI, estimation of the demand and operating costs, based on high-level requirements, was intended be performed in order to provide insights as to the economic viability of high-speed transport. This fed a second activity, which provided elements to justify the economic interest of high-speed transport and gain public acceptance.

Marketing Analysis Plan

Main Activities

3.1 Airbus Market Research & Forecasts will assess the market of a potential future High Speed aircraft. Relying on its expertise and its own forecast methodology, Airbus can provide the HIKARI project with an assessment of the demand for a given product with given specifications. When carried out in an early stage, this kind of activity allows to best refine the top requirements for a product based on market needs and therefore to converge towards an optimum compromising between product feasibility (technical, resources) and market requirements.

The demand forecast is based on a traffic forecast taking into accounts more than 160 regional flows modeled using econometrics and relying on an in-house modeling of the future airline networks. Based on this forecasted demand, and knowing key characteristics of a given product (i.e. range, capacity, operating costs, turnaround time, etc…) it is then possible to assess its market, identify a potential network and estimate how many could be sold.

The overall study will be compared with ZEHST results by EADS IW. To complete this study, and allow cross-checking of results, JADC will estimate the aircraft demand with its own method. JADC will also estimate operating cost.

3.2 In order to estimate the economic impacts of HST, a two stage approach will be performed.

Based on the output from WP3.1, the first stage of calculating the economic impact will be to estimate the direct economic benefits of HST. This will have two parts – estimating the value of time saved by passengers shifting from conventional to HST, and secondly the increase in GDP associated with any extra flights that may take place following the development of HST.

This will be performed by quantifying and evaluating the time savings made by travelers switching from conventional to high speed, and the new value added from additional flights. The Eurocontrol handbook for cost benefit analysis, Standard Inputs for Eurocontrol Cost Benefit Analysis, proposes value of time saved as a function of by passenger type and purpose of travel. These figures will have to be extrapolated to the year of interest and applied to the routes and passengers shifted from conventional to high speed. The second portion of direct economic benefits would aim to estimate the additional value added by the new flights that might take place as a result of shorter journey times, and hence the increase in passenger capacity. This would be achieved by examining the value added by existing flights, using data on value added in the aviation sector and flight numbers, adjusting the “value added per flight” upwards to reflect shorter travelling time.

The second stage of this activity will be to take a broader look at the impact that expanded air travel would have on Europe’s longer term economic prospects, and in particular trade and investment links with countries in geographically remote regions, such as the Americas, Asia and Australasia (indirect economic benefit). The idea is to econometrically estimate equations linking air transport flows to exports of goods and services, as well as bilateral investment flows between country pairs. A similar method will be used to estimate the relative importance of boosting air transport links to bilateral investment flows. From here an estimation of the increase in employment demanded by exporting industries and sectors that received inward investment will be made. EADS IW will confront this study with the lessons learned from ZEHST.

Estimating direct benefits of High Speed Air Transport (Source: Oxford Economics)

Expected Results

This work package is expected to provide a twofold analysis. First of all, it will allow setting some preliminary boundary conditions to ensure an economically viable high speed aircraft. To achieve that goal, an assessment of market demand will be made, as well as an estimation of costs. Secondly it will provide elements of quantification of how economy and people would benefit from travel time saving.

Within HIKARI the expected outcome will be to point out main drivers for commercial development in future economic scenarios and to set up criteria for possible profitable development of a future high-speed aircraft. Furthermore, a dedicated survey on time-saving benefits will be performed, which will eventually help build future innovative business cases.