Boeing buoyancy
World’s biggest planemaker lifts industry demand forecast at air show
Boeing raised its rolling 20-year industry forecast for passenger and cargo aircraft on Tuesday, as a steady flow of deals during the ongoing Farnborough Airshow underscored the industry’s resilience to rising global trade tensions.
The world’s biggest planemaker predicted 42,700 industry deliveries over the next two decades, up 3 percent from its estimate of 41,030 a year ago. The new forecast would be worth $6.3 trillion at list prices versus last year’s $6.1 trillion forecast.
The US group and European rival Airbus continued to rack up deals at the air show in southern England after a brisk opening day on Monday.
Strong demand
The Farnborough Airshow is typically one of the world’s most publicityfocused aviation business events, with aircraft giants and airline entrepreneurs battling to win headlines for striking big deals under the roar of aerobatic plane displays.
Russian airline Volga Dnepr committed to buying Boeing freighters worth $11.8 billion at list prices, while US leasing company Air Lease Corp committed to buying as many as 78 Boeing aircraft worth $9.6 billion.
In the meantime, Airbus listed orders for 80 A320neo narrow-body jets from an unidentified leasing company, another for 100 similar narrow-body aircraft, plus 14 large jets, including eight A350-900s and six A330neos.
On Tuesday, Reuters reported that the first order for 80 aircraft came from China’s ICBC Leasing.
Several industry sources said the largest order for 100 jets had been placed by Dublin-based global leasing giant Avolon, owned by China’s HNA Group.
But analysts cautioned that many deals firmed up provisional orders, changed existing ones, or disclosed previously unidentified buyers, making it harder to gauge the level of demand.
Rising oil prices and interest rates, trade tensions and uncertainty over Britain’s departure from the EU all pose a risk to an eight-year boom in civil aviation, which has boosted industry order books and share prices.
Boeing’s forecasts generally underscored the sector’s reliance on emerging markets, China in particular, making the US planemaker especially vulnerable should trade tensions between the world’s two biggest economies escalate into a full-on trade war.
Boeing, which calls itself America’s biggest exporter, delivered more than one out of every four jetliners it made last year to customers in China, one of the world’s fast-growing aircraft markets.
Boeing’s vice president of commercial marketing Randy Tinseth told a news briefing that China looks set to overtake the US as the world’s biggest domestic air travel market in 10-15 years time.
But he declined to be drawn into commenting on US trade policy, saying, “We are going to focus on what we can control.”
Intensifying competition
Dominating Boeing’s upbeat outlook was a 5 percent increase in the forecast for single-aisle aircraft, such as the Boeing 737 and Airbus A320 families, underpinned by an unchanged prediction for average global traffic growth of 4.7 percent.
The Chicago-based planemaker now sees 31,360 deliveries in the medium-haul, single-aisle category, the cash cow of the world’s top two planemakers and popular with lowcost airlines.
On July 6, Airbus raised its own rolling forecast for industry deliveries by more than 7 percent and revamped the way it predicts demand, introducing new plane categories from “Small” to “Extra-Large” and blurring the traditional boundaries between aircraft types.
Boeing’s Tinseth said Airbus sought to show it was winning a sizable share of the aircraft market.
“Let me make one thing clear,” Tinseth said. “By every measure, in every way, our wide-bodies are winning. Period.”
Even so, Boeing lowered its widebody delivery forecast by 140 aircraft to 8,070, saying higher deliveries over the last year and longer-range single-aisle planes ate into the rolling forecast.
Boeing saw a small increase in demand in the cargo market, a barometer of trade and business confidence, forecasting 980 new freighters from a projected 920 a year ago, fueled by the growth of e-commerce, particularly in China.
The planemaker unveiled a volley of freight orders in the first two days of the Farnborough show.
Boeing’s overall forecast tally is a bigger number partly because it counts aircraft with 90 seats or more, whereas Airbus starts at 100 seats.
The smaller-end of the aircraft market has seen its biggest shake-up in decades after Airbus closed a deal to buy Bombardier’s 110-130-seat CSeries jet, mirrored by Boeing’s tentative deal to acquire the commercial unit of Brazil’s Embraer SA.
Boeing and Embraer announced in June a $4.75 billion joint venture (JV), giving the former a controlling stake in the Brazilian aircraft manufacturer’s commercial aircraft arm.
The Boeing-Embraer alliance represents the biggest realignment in the global aerospace market in decades, strengthening established Western planemakers against newcomers from China, Russia and Japan, analysts say.
The JV thrusts Boeing into the lower end of the market, giving stiffer competition to the CSeries jets – now rebranded as the A220.
The partnership, which adds a 70to 130-seat family to Boeing’s lineup, is expected to boost the US firm’s earnings per share from 2020, generating annual pre-tax cost savings of about $150 million by the third year, both companies said.
The deal must still clear political and regulatory barriers before closing at the end of next year.
Boeing shaved its forecast for the regional jet fleet to 2,320 deliveries.
Analysts expect Boeing and Airbus to use their scale to heap pressure on suppliers to lower costs, which could trigger consolidation.
With the industry giants moving onto its turf, Japan’s big hope for the regional jet market, the Mitsubishi Regional Jet, was dealt a setback on Tuesday when it had to cancel a demo flight after the jet was hit by a truck.