"The rigidity of supply enables easy forecasting of cycle changes in the sector, demand being more volatile." (Pebereau, Michel) .
"On average, there is a two-year period between orders and deliveries (of aircraft). This reflects numerous factors: aircraft manufacturing lead-times, aircraft manufacturer's production schedule and staggered deliveries." (Pebereau, Michel) However there is a one-year lag time before the airlines place the orders for new aircraft, because they prefer to see if profits sustain. Say an airline puts down a deposit for an aircraft and then the market suffers before they pay-off and receive the new craft, supply suffers. If for example an airline has paid off/bought new fuel efficient, faster aircraft, that allow them to get you from one destination to another non-stop, they not only have a greater supply, but the fact that they are supplying the consumers with new technology will draw in more fliers and raise demand. If that same airline is suffering at the time of delivery, then they bury themselves with debt. Not only are they in debt but they can not charge the fare that need to because they can not offer new technology or reason for consumers to pay. In 2003, "certain airlines, notably, modest-sized or low-cost carriers that previously would have expanded their fleet with second-hand aircraft have actually ordered new aircraft. Several factors explain this apparently irrational behavior on the part of the fleet planners." (Pebereau, Michel) New aircrafts are more fuel efficient and lower maintenance costs, not to mention manufacturers offering discounts. Those orders are expected to be filled next year, raising market supply. .
"Based on Airline Monitor forecasts: old aircraft retirements -300 units, traffic growth +9% and capacity growth +7%, the supply/demand balance indicator should follow a downward slope indicating that overcapacities are being reduced.
