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Airbus, Boeing get a boost from Asia's appetite for air travel
[TOULOUSE] Asia's hunger for travel gave a lift to Airbus Group SE and Boeing Co on Day 1 of the Farnborough Air Show. Carriers in China and Vietnam ordered new planes while those in India and Malaysia are zeroing in on the manufacturers' workhorse single-aisle jets.
Xiamen Airlines agreed to buy 30 Boeing 737 Max 200s worth US$3.39 billion at list prices, while Donghai Airlines followed up by saying it will get 25 Max 8s valued at US$2.75 billion.
Jetstar Pacific in Vietnam signed a memorandum of understanding for 10 Airbus A320 ceos, while Standard Chartered Plc's leasing arm ordered 10 current-generation 737-800s worth US$960 million.
Malaysian discount giant AirAsia Bhd is meanwhile poised to order as many as 100 Airbus A321neos valued at US$12.6 billion, and Go Airlines India Pvt is examining the purchase of 70 smaller A320neos worth about US$7.5 billion that could also come at the show, according to people familiar with their plans.
"Asia is very important to Airbus and Boeing," said Mohshin Aziz, an analyst at Malayan Banking Bhd in Kuala Lumpur. The airlines "that are showing strong growth are in Asia. They are looking at the long-term growth with their orders."
Asian carriers are making the running in Farnborough as economic growth spurs demand for new routes and extra frequencies. The trend is prompting low-cost operators that have already amassed large order backlogs to add even more planes, with India's SpiceJet Ltd also weighing an order for as many as 100 737s or A320s, though 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," Mr Leahy said, adding that by 2035, 75 per cent of people in what are currently viewed as emerging nations 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 per cent from a year earlier, predicting demand for 39,620 new jetliners worth US$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, Randy Tinseth, a Boeing vice president for marketing, said in an interview at the air show.
"The part that's growing above expectations is where aviation falls," he said.
Xiamen's memorandum of understanding envisages the supply of Max 200s - based on the 737 8 but with an extra door that permits a capacity of 200 - to its low-cost Jiangxi Airlines and Hebei Airlines units, according to a statement issued at the show.
The airline, a subsidiary of state-backed China Southern Airlines Co, already had 737 Maxs on order and operates an all-Boeing fleet.
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.
Shenzhen-based Donghai Air's letter of intent also includes five Boeing 787-9 Dreamliner wide-bodies, giving the order a total value of more than US$4 billion.
India Takes Off
The AirAsia deal may be announced as early as Tuesday, 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 per cent last year, versus 10 per cent in China and less than 5 per cent in the US, International Air Transport Association figures show.
AirAsia is already the top Airbus customer by aircraft numbers, and at the 2014 Farnborough show bought 50 A330-900neos in one of the year's biggest deals.
Vote of Confidence
GoAir, 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 are offering new planes. The 2015 Paris show, with which the UK event alternates, ran up more than US$100 billion of deals.
Top-up deals for upgraded narrow-bodies aside, the Airbus A350 and Boeing's competing 777X and 787 wide-bodies 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 US$4.4 billion includes eight planes purchased outright and four to be sourced from Air Lease Corp, with an option on a fifth, according to the UK airline. Los Angeles-based Air Lease separately announced orders for three A350-900s and an A321.