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Jet makers set to fly as Asia leads global shopping spree

(China Daily) Updated: 2016-07-13 10:34

Jet makers set to fly as Asia leads global shopping spree

Attendees make their way past an Airbus A380 aircraft on display at the Farnborough airshow in Farnborough, UK.[Photo/Agencies]

Asian airlines are providing a boost for Airbus SAS and Boeing Co at the July 11-17 Farnborough Airshow near London in the United Kingdom.

Carriers from China, India, Malaysia, Indonesia and other Asian countries are seeking to stock up on revamped versions of the manufacturers' workhorse single-aisle jets.

Standard Chartered Plc's leasing arm also ordered 10 current-generation 737-800s worth $960 million that will be deployed in northeast Asia.

Malaysian discount giant AirAsia Bhd is poised to order as many as 100 Airbus A321neos valued at $12.6 billion.

India's Go Airlines is examining the purchase of 70 smaller A320neos worth about $7.5 billion that could also come at the show, according to people familiar with their plans.

In the wide-body sector, billionaire entrepreneur Richard Branson's Virgin Atlantic Airways Ltd announced a long-awaited deal for Airbus's largest A350 model as it seeks to replace aging A340s and Boeing 747 jumbos.

But it is the Asian carriers that are making the running in Farnborough. Economic growth in Asia is spurring demand for new routes and extra frequencies across the continent.

The trend is prompting low-cost operators that have already amassed large order backlogs to add even more planes.

For instance, India's SpiceJet Ltd is weighing an order for as many as 100 737s or A320s, though it is not certain to reach a decision this week.

John Leahy, Airbus's chief salesman, said at the show that a growing middle class in China, India and other emerging economies such as Indonesia will become increasingly central in driving demand for jetliners.

"When you have greater discretionary spending it's been proven that you buy airline tickets with it," Leahy said, adding that by 2035, 75 percent of people in what are currently viewed as emerging economies will be taking at least one flight a year. "That's an awful lot of demand for seats in an awful lot of planes."

Boeing and Airbus were united in suggesting that recent economic turmoil, from Britain's vote to leave the European Union to a commodities crash, will do nothing to dent long-term sales prospects.

Boeing lifted its 20-year forecast 4.1 percent from a year earlier, predicting demand for 39,620 new jetliners worth $5.9 trillion across the industry, with slightly more than half of that value coming from planes in the 737 and A320 category.

Airbus sees a need for 33,000 more planes, with the overall in-service fleet more than doubling from 19,500 to almost 40,000.

While a slowing of China's economy has made headlines, travel has continued to expand at double-digit rates as the country undergoes a fundamental shift to consumption and services and away from industrial production, said Randy Tinseth, a Boeing vice-president for marketing. "The part that's growing above expectations is where aviation falls."

The AirAsia deal may be announced by Wednesday morning (Beijing time), with at least some of the A321s set to provide a stepped-up service to India, said one of the people, who asked not to be identified because talks are ongoing.

Indian passenger demand grew 20 percent last year, versus 10 percent in China and less than 5 percent in the US, International Air Transport Association figures showed.

AirAsia is already the top Airbus customer by aircraft numbers. At the 2014 Farnborough show, it bought 50 A330-900neos in one of the year's biggest deals.

Go Airlines, among eight budget airlines operating in India, is one of only three carriers worldwide that have begun using the Neo upgrade of the A320, so that a follow-on order would provide a vote of confidence in a model dogged by issues with its Pratt & Whitney turbines since last year.

Even with Asia sales, analysts don't expect an order rush at this week's expo since neither Boeing nor Airbus is offering new planes. The 2015 Paris show, with which the UK event alternates, ran up more than $100 billion of deals.

Top-up deals for upgraded narrow-body planes aside, the Airbus A350 and Boeing's competing 777X and 787 wide-body jetliners should help swell backlogs that have already reached record levels and pose a major manufacturing challenge.

Virgin Atlantic's agreement to take 12 A350-1000s worth $4.4 billion includes eight planes purchased outright and four to be sourced from Air Lease Corp, according to the UK airline.

Bloomberg

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