Business | Aviation
Excess capacity hits profits
A lack of major orders at the Singapore Airshow could point to a deeper than predicted cyclical downturn for planemakers already smarting from delivery delays on new aircraft.
- Reuters
- Published: 01:05 February 23, 2008
Singapore: A lack of major orders at the Singapore Airshow could point to a deeper than predicted cyclical downturn for planemakers already smarting from delivery delays on new aircraft.
Manufacturers expect fewers orders in 2008, as the industry comes off a record year for sales and enters a period of ramped up production. Airbus said on Wednesday that its orders will halve to around 700 from a record 1,341 orders last year.
Boeing does not give forecasts, but said it expects orders to exceed the 475-480 planes it is targeting to deliver to customers this year.
But demand for new aircraft could be hit more than the Europe-based Airbus and US rival Boeing expect, as a growing global credit crisis curbs airlines' ability to finance purchases, and causes a drop in premium and business travel.
"Just like in the home mortgage sector, airlines need to put more equity into financing aircrafts. This will have a cash strain on the airline industry," International Lease Finance Corp chief executive Steven Udvar-Hazy said.
That might make airlines more cautious on increasing capacity by ordering new planes, said Udvar-Hazy, who runs the world's top plane leasing firm.
Falling orders
Airlines ordered slightly over $10 billion worth of planes at the Singapore Airshow, a far cry from the $100 billion in orders booked at the Dubai air show last year.
Analysts had earlier expected $15-$20 billion in orders, including major contracts placed by airlines from India and China, as they boost their fleets to meet booming domestic travel.
Air traffic growth in India and China is expected to grow at more than 11 per cent a year for the next three years, nearly three times the rate in the US and double Europe.
Boeing expects total plane orders from the Asia Pacific to reach 8,350 in the next 20 years, out of the 28,600 planes needed worldwide. Of these, nearly 2,000 will go to Southeast Asia and more than 1,000 to Southwest Asia -- mainly to India.
The lack of orders from Indian airlines in Singapore surprised some analysts. "We expected some orders from the India carriers. But we're probably seeing a lull in activity as doubts over the wider world economy make airlines pause," said Aviation International News senior editor Charles Alcock.
Airbus chief salesman John Leahy said the company hoped to sell at least 10 A380 superjumbo to Air India and an additional 15 jets to Singapore Airlines.
Chinese buyers were also noticeably quiet in Singapore amid uncertainty about how consolidation between heavyweights including China Eastern and Air China will shake out.
Airbus announced an order of five A330 cargo planes to BOC Aviation, the aircraft leasing unit of the Bank of China but none of the major passenger airlines confirmed orders.
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