For most of us, $52 billion wouldn't be a bad week's worth of work. But the decline in orders this year speaks to the caution even the ambitious lines in the Middle East and Asia currently have.
Source: Los Angeles Times
Author: W.S. Henigan
As one of aviation’s foremost showcases comes to a close, the world’s largest plane makers have secured fewer lucrative orders than last year because of ongoing concerns about the global economy.
Some of the largest deals this year that took place at the Farnborough International Airshow in England are expected to affect thousands of suppliers in Southern California that make aircraft parts.
Aerospace giants Boeing Co. and Airbus reported orders valued around $52 billion at Farnborough, which kicked off Monday and will run through Sunday. That’s a pittance compared with deals made at last year’s Paris Air Show — Farnborough and Paris alternate each year — where the plane makers racked up orders valued around $94 billion.
“There are a couple of factors for why sales weren’t quite as high as last year,” said Scott Hamilton, an aviation industry consultant and managing director of Leeham Co. in Issaquah, Wash. “The biggest reason is that the global economy is still limping along. Another reason is that orders for planes are backlogged up to seven years.”
European aircraft maker Airbus received 115 orders and commitments for passenger jets at Farnborough. Its Chicago rival, Boeing, landed 396 orders and commitments. Makers of smaller commercial jetliners such as Brazil’s Embraer and Canada’s Bombardier Inc. also struck contracts.
On opening day of the show, Los Angeles billionaire Steven Udvar-Hazy’s aircraft leasing company Air Lease Corp. announced a blockbuster order for jetliners valued at $7.2 billion from Boeing. Three days later, Chicago-based carrier United Continental Holdings and Boeing announced a deal for 150 airplanes with a total list price of nearly $15 billion.
Both deals involved Boeing’s upcoming fuel-efficient 737 Max jet, which is set for first delivery in 2017. The Max is a new-engine variant of the 737, the world’s bestselling airplane. Boeing says airlines operating the 737 Max will see that it burns 13% less fuel than today’s most fuel-efficient single-aisle airplanes.
Tom Captain, principal and vice chairman of financial advisory firm Deloitte’s aerospace and defense practice, said the new jets would sell for years to come.
“New fuel-efficient aircraft are making older aircraft obsolete,” he said. “We expect to see more orders for the new jets from all players.”
The demand is being fueled by an uptick in air travel in regions including Asia and the Middle East, he said.
“With shrinking budgets domestically, the U.S. aerospace industry is looking for business opportunities abroad, and the Farnborough Airshow once again proved a good place for companies of all sizes and nationalities to meet,” said Alexis Allen, a spokeswoman for the Aerospace Industries Assn., a trade and lobbying organization in Arlington, Va. “The show had an impressive display of U.S. technology underscoring the excellent prospects for U.S. companies in the global marketplace.”
Although Boeing snagged more deals than Airbus at this year’s show with its 737 Max, it is still well behind Airbus’ single-aisle offering, the A320neo. The A320neo, which is set for first delivery two years before the Max, has 1,454 firm orders — many made at last year’s Paris show. The Max now has 649 firm orders.
“Boeing has effectively done to Airbus what Airbus did to Boeing at last year’s Paris Air Show, with an overwhelming lead in narrow-body show orders,” RBC Capital Markets analyst Rob Stallard wrote in a research note. “Whether this reassures investors on the state of the aerospace demand environment remains to be seen, but we view this order as positive for Boeing and its suppliers.”
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