ISTAT Jetrader - Autumn 2021 - 38

AVIATION HISTORY
LEFT: An Airbus A350900
model signed by
John Leahy.
RIGHT: An airplane
model signed by Boeing's
Jim Albaugh after Adam
Pilarski won a bet.
did not understand that human behavior
changes as circumstances change.
The same wrong approach was
RIGHT:
Adam Pilarski at the
2020 ISTAT Americas
in Austin, Texas.
sideline the late Henry Hubschman,
who was, at that time, the head of
GECAS and confirmed Steve's view of
the plane. Together these two leaders
represented the two largest lessors
in the world and a huge potential
market for the new plane. And Steve,
in his presentation (made public by
Dominic), also put a definite deadline
on his demand. If Airbus goes with
the existing plans for the A350, they
will have a good product but will only
capture a small part of the market.
So, Steve warned, they only had a
short time to choose either to have
the solid design based on the A330
(though using new engines and a
lighter airframe because of more use
of composites) or come up with a real
new design. And, Steve warned, " You
have to come up with the new plane by
the Farnborough Air Show in July, " not
in the long term. As a reminder, ISTAT
Americas was in March.
Airbus listened to what their
customers said at the conference,
and the rest is history. The traditional
A350 (which, based on further B737
developments, I call the " classic A350 " )
was replaced by the all-new A350
XWB (or extra widebody) launched in
July 2006. We were there first to get
the outline of the product plans of a
38 * THE OF F I C I AL PUBL I CAT I ON OF ISTAT
major manufacturer. This was not just
listening to a standard presentation. It
was witnessing history in the making
and progress being made.
Bold Predictions
While the Udvar-Hazy monumental
pronouncement in 2006 is not a
common event, many participants
of our conferences learn new things
that help them with their jobs. There
are many examples of that, but my
favorite memories are centered on
ISTAT Americas 2011. I gave an address
that made two bold predictions that
actually materialized in the time frame
I predicted. One was about the longterm
future of oil prices, and the other
was about Boeing's product strategy
for 2011.
Predicting oil prices has been one
of my favorite hobbies for a long time.
Many people take a fixed-resources
approach. At the end of the 19th
century, Stanley Jevons predicted that,
since we had only a limited amount of
coal in the world, we would run out of
it, and he predicted it would occur the
middle of the 20th century. Similarly,
Thomas Robert Malthus predicted
that global population growth would
eventually outstrip food production
leading to starvation. Those economists
used with oil price predictions. " Since
we have only limited resources, we
must eventually run out of oil and
its price will have to go up " was the
common and, in my opinion, mistaken
view held for a long time. All my time as
a professional economist/forecaster, I
faced that mistaken view. And any time
I would tell my customers/audiences
that oil prices may be temporarily high
because of special circumstances and
that they eventually would have to come
down because of market realities was
met with skepticism. We simply had
and continue to have enough oil to last
us decades, same as is the case with
other raw materials.
Around the middle of 2006, oil
prices rose to a level of over $100/
barrel. Oil prices are critically important
in aviation since they are a major
element of cost and thus a key driver
of industry profitability and even what
kind of airplanes should be produced.
Since the oil industry is definitely not
a competitive one (the name of OPEC
where " C " stands for cartel is a dead
giveaway) and depends heavily on
political developments in the world,
predictions are more difficult. Oil
prices continued their merry way above
$100/barrel and reached a maximum
of around $150 in 2008. At that time,
the accepted wisdom was that prices
would continue to only go up, and the
industry spent a lot of resources to
come up with new forms of propulsion
and new aircraft that would save money
since they would consume less of the
precious oil that we were running out
of. This led to a new set of planes that
were supposed to help the industry to
become more profitable.
In March 2011, I told the audience
that there was no way oil prices would
stay at such high levels and presented
evidence that oil prices would inevitably
fall. The obvious question from every
audience I ever faced was " when "
and " what level will be reached? "
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