The current transport market is the most challenging environment faced by the world's manufacturers in several decades. Customer demand is off because airline traffic and profitability are down, and the competitive landscape has been altered by discount carriers, to the detriment of the traditional major airlines. There is a savage market share war going on between the two manufacturers and that has contributed to diminishing their profitability.

Total world airline revenue passenger miles (RPMs) declined by 3.9% in 2001, and will stay flat in 2002. Load factor in 2001 declined to 69.4% from 71.4%, with a recovery forecast for 2002 based only on low equipment utilization. But the airlines' financial performance gives the most cause for alarm. The U.S. airline industry managed to accumulate $10 billion in operating (or $7 billion in net) losses in 2001, even with federal subsidies provided in the aftermath of the Sept. 11 terrorist attacks. The cash hemorrhage has scarcely abated, with a U.S. industry loss of about $8 billion forecast for 2002.

Unsurprisingly, jetliner orders have fallen off. There have been only about 300 net orders (considering cancellations) in the first three quarters of 2002. Net orders in 2001 came to 546, down from 1,081 in 2000. Clearly, the good days of the latest up cycle are over.

Meanwhile, the problem of parked aircraft still looms large. After climbing steadily since October 2001, the "Desert Air Force" reached a peak of 2,004 transports (or 13.7% of the total fleet) in March 2002, and has fallen only slightly since. By mid-October 2002, it stood at 1,813 (12.2% of the total fleet).

The worse news, however, is the number of these unused aircraft likely to re-enter service. Of those 1,813, some 296 are models currently in production. There are another 202 planes that can be termed "useful." These are economically viable aircraft, such as the 737-300/400/500 and MD-80/90 that will almost certainly not be retired, and will detract from total new demand.