And That Concerns Boeing And Airbus
It took a little longer... but record-high oil prices have
started to take their toll on carriers outside the United States,
as well. On the same day Air Canada announced it plans to reduce capacity and
cut jobs before the end of the year, comes news a
number of profitable foreign airlines are also feeling the
pinch.
Qantas, Cathay Pacific and low-cost carrier Ryanair are among
the overseas airlines looking to park planes or reduce orders,
according to the Chicago Tribune. Of even greater concern to
airlines -- and planemakers Boeing and Airbus -- are signs record
growth in a number of hot markets is starting to cool.
Passenger growth is beginning to decline in the Middle East,
India, and China, according to a recent report by JPMorgan
Securities analyst Joseph Nadol. Manufacturers in particular have
looked to those regions to keep their streaks of record sales
alive, even as the US economy slumps.
"There's no question it's a difficult situation," said Boeing
Commercial Airplanes Marketing VP Randy Tinseth. The news comes at
a particularly irksome time for the American planemaker, as recent
difficulties with its upcoming 787 Dreamliner appear to be solved,
and that plane moves closer to first deliveries.
The Dreamliner has a healthy sales backlog, with close to 900
gross orders for the composite-bodied plane. Most of those orders
have come from overseas carriers... who may not be inclined to
accept all their planes in coming years, should a global slump in
air travel take firm hold.
More encouraging for Boeing and Airbus is a report by Paul
Nisbet, an aviation analyst with JSA Research. Nisbet says even if
growth does slow in the Mideast and Asia, it should still be
healthy... just not at the breakneck pace seen in recent years.
The analyst also notes most foreign airlines have their fuel
costs hedged -- and even if they don't, those airlines don't have
to pay their fuel bills in US dollars. That's a significant reason
behind current woes in the American airline industry.
Both Airbus and Boeing have about seven years of production
backlog on their books... so even if they do lose some orders,
Nisbet said, it shouldn't hurt them too much. "I don't see many of
Boeing's orders likely to be in jeopardy, not at this point," he
said. "They could lose several hundred and it wouldn't mean an
awful lot."
Boeing's Tinseth adds even as US carriers look to park their
oldest planes to reduce capacity, new orders may still be on the
horizon... as airlines try to move to more efficient aircraft. A
spokeswoman for American Airlines confirmed that carrier is
stepping up deliveries of new 737s, to replace its old MD-82 and
MD-83 airliners.
"With this combination of overbooking and airlines willing to
move forward, we've been pretty well protected," Tinseth said.
Airbus Chief Operating Officer John Leahy echoed those statements,
saying Airbus' upcoming strategy will focus on "overbooking and
very actively managing the order book.
"So far it is handing the airline crisis well, but if the fuel
price 'bubble' were to soar to $200 per barrel, than all bets would
be off," Leahy cautioned.