Warn Orders Could Disappear If Oil Prices Stabilize

Flush with cash from ever-increasing profits tied to oil production, it's no wonder airlines based in the Persian Gulf are driving the high order numbers seen at this week's 2007 Dubai Air Show... but planemakers had best not plan on delivering all those planes, according to two industry analysts.

Adam Pilarski is senior aviation analyst with Avitas, a consulting firm for the airline industry... and he's appealing for some common sense in the marketplace. "It doesn't make any sense," Pilarski told the Seattle Post-Intelligencer of the recent surge of orders from such carriers as Emirates. "This is loony tunes."

As an example, Pilarski notes Emirates has so many jets on order from Boeing and Airbus that every person in Dubai would have to fly 1,000 times each year, in order to fill all those seats. By contrast, the currently-booming US airline industry sees about 700 million passenger airline flights each year, for about 300 million residents.

As ANN reported, Emirates -- which has a current fleet of 100 passenger airliners, and 11 freighters -- signed on the dotted line this week for 80 Airbus A350 XWB widebodies, with options for 50 more. The carrier also has 58 mammoth Airbus A380s on order, as well as 55 Boeing 777s. Rival carrier Qatar Airways has a fleet of about 60 jets... and plans to add 27 777s, 80 A350s, a handful of A380s and 30 Boeing 787s over the next several years.

Some of those new planes will replace older models... but that's still a lot of additional capacity, no matter how you break the numbers down. To fill those seats, Middle East airlines will increasingly spread into markets now dominated by legacy airlines in Europe and Asia.

Teal Group analyst Richard Aboulafia says the order swell is "all about oil money" -- and warns carriers like Emirates and Qatar will have to drastically scale back their expansion plans if the "colossal bubble" in oil prices bursts.

Pilarski agrees. "They will not take many of those planes," he predicts. "I'm willing to have bets with people about that. In a few years, things will change. Oil prices will come back down to some semblance of normal, and people in the Middle East will realize this cannot continue."

Also fueling demand for new aircraft are the numbers of passengers visiting the region. For the moment, Dubai -- part of the United Arab Emirates, a comparatively Westernized oasis in the volatile Middle East -- has a reputation as a tourist mecca... but that, too, may not last.

"One act of terrorism and all the tourism goes away," Pilarski said.

FMI: www.airbus.com, www.boeing.com