Global slow­down fears over­shadow Sin­ga­pore avi­a­tion show

The Pak Banker - - BUSINESS -

Aero­space lead­ers gath­er­ing for this week's Sin­ga­pore Air­show face con­flict­ing pres­sures as they jug­gle grow­ing con­cerns over jet­liner de­mand while keep­ing record pro­duc­tion plans on track.

Wor­ries about the ef­fects of a fal­ter­ing global econ­omy and ten­sions in the South China Sea over­shadow the two-yearly event in Sin­ga­pore, which is both a ma­jor com­mer­cial travel hub and home to South­east Asia's most po­tent and best-trained air force. For now, air­line traf­fic con­tin­ues to grow rapidly, spurred by con­tin­ued growth in Asian house­hold in­comes, while air­line prof­its also ben­e­fit from low oil prices.

But as aero­space in­dus­try shares fall in step with tum­bling global mar- kets, an­a­lysts in­creas­ingly ques­tion the dura­bil­ity of an aero­space ex­pan­sion cy­cle now in an un­prece­dented eighth year. Af­ter a lack­lus­tre show in Dubai in Novem­ber, the in­dus­try's expo band­wagon rolls into the cru­cial South­east Asian re­gion with­out the car­ni­val at­mos­phere of pre­vi­ous years.

"All the thoughts that this is no longer a cycli­cal in­dus­try have dis­ap­peared. We are due for a down-cy­cle," said aero­space con­sul­tant Jer­rold Lundquist, man­ag­ing di­rec­tor of The Lundquist Group."(But) I don't think there will be any im­pact in the next 1824 months. It is when you get be­yond 24 months that you might see some soft­en­ing." South­east Asia is one of the in­dus­try's ma­jor driv­ers and has placed record or­ders in re­cent years, lead­ing to specu- la­tion of over­ca­pac­ity. Some car­ri­ers, in­clud­ing Philip­pine Air­lines, are ex­pected to ac­quire new air­craft this week.

But rather than count­ing up new or­ders, an­a­lysts say in­vestors' main con­cern this week will be to check for signs of wan­ing travel or jet­liner de­mand and whether an over­loaded sup­ply chain is in dan­ger of break­ing as man­u­fac­tur­ers work to turn a record back­log of or­ders into a smooth flow of de­liv­er­ies. "We will be keep­ing a close eye on traf­fic this year to see if we can de­tect emerg­ing signs of weak­ness," said Rob Mor­ris, head of con­sul­tancy at UK-based Flight­global As­cend.

Doubts over eco­nomic con­di­tions have not stopped Air­bus and Boe­ing pur­su­ing a bat­tle of wits over new de­signs. Air­bus, anx­ious to close the gap be­tween its new 369-seat A3501000 and the 406-seat Boe­ing 777X, is seek­ing an in­flu­en­tial cham­pion such as Sin­ga­pore Air­lines for a po­ten­tial big­ger ver­sion of its A350 se­ries, in­dus­try peo­ple fa­mil­iar with the mat­ter said. Boe­ing has said it will de­cide soon on a po­ten­tial new "mid-mar­ket" jet with about 240 seats to re­trieve lost mar­ket share for rel­a­tively small jets - a pro­ject that could lead to a small twinaisle jet with an un­usual, oval-shaped cross-sec­tion.

In­dus­try ex­perts will scour com­ments out of Sin­ga­pore from both man­u­fac­tur­ers for clues to what prod­ucts they in­tend to launch ahead of July's premier avi­a­tion event at Farn­bor­ough, south­west of Lon­don, co­in­cid­ing with Boe­ing's cen­te­nary.

A con­tain­er­ship is pic­tured at the load­ing ter­mi­nal Al­tenwerder in the har­bor.

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