Thu, Dec 11, 2008
Backlogs May Dwindle For Manufacturers
Boeing and Airbus have both pointed to large order backlogs to
convince financial analysts their commercial aircraft production
operations will weather a recession just fine. Airbus recently
estimated that about a quarter of its backlog might be at risk of
cancellation in a deep recession, while Boeing would admit to only
a few percent of its orders being "iffy."
But regardless of the level of confidence, even firm orders are
just paper airplanes, if you'll excuse the expression. Now, we may
be about to find out just how robust those backlogs are.
Economists have debated whether the recent boom in China would
wither if the US fell on hard times. The Wall Street Journal now
reports China has urged its airlines to cancel or postpone 2009
aircraft deliveries following an abrupt downturn in the air travel
market there following the Beijing Olympics.
If the bottom fell out of the Chinese market, both Boeing and
Airbus could find it necessary to cut production. That would be
especially problematic for Airbus, given the European planemaker
recently opened a dedicated production line for its A320
narrowbody airliner in Tianjin.
In the dark days after the 9/11
attacks in the US, robust demand from China helped planemakers
offset depressed demand elsewhere in the world. This time, a feared
slump in Chinese demand coincides with decisions by even
financially sound airlines in other regions to cancel leases and
waive options for new aircraft.
Boeing insists it has "had no specific request" to defer or
cancel airplanes. An Airbus spokesman declined to comment to the
In its statement, China also announced reductions in fees and
taxes on its domestic airlines, including rebates of some 2008
payments already made. Some Chinese airlines are already asking for
more... in the way of a government bailout.
Call it the new capitalism.
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