You are here

Asia-Pacific will be key driver of growth — Airbus

By Reuters - Feb 12,2014 - Last updated at Feb 12,2014

SINGAPORE — Airbus claimed bragging rights as the Asia-Pacific’s dominant aircraft supplier this week, saying the region’s fast growing economies and rising passenger demand will continue to drive demand over the next 20 years.

The European plane-maker said that in 2013, it won 80 per cent of all new business in the Asia-Pacific with 379 firm orders.

It also delivered 331 new aircraft, or over half of all new planes that entered into service with the region’s airlines, it added.

Speaking at the Singapore Air Show, senior Airbus executives said they were optimistic about more orders from the region’s full-service carriers and budget airlines despite ongoing concerns about the health of emerging markets, many of which are located in the Asia-Pacific.

“The message from me is very clear. This [Asia-Pacific] is where the action will be for the industry in the coming years,” Fabrice Bregier, head of Airbus plane-making division, told a news conference.

There is demand for 11,000 aircraft worth $1.8 trillion in the 20 years to 2032, Airbus pointed out.

The total fleet size is expected to more than double to over 12,130 jets, based on average annual traffic growth of 5.8 per cent and replacement of nearly 3,770 aircraft in service today, it indicated.

According to the company, growing urbanisation means that 25 of the 89 mega-cities in 2032 will be in Asia-Pacific, where there will also be 90 cities with more than one million passengers.

China will also overtake the United States as the world’s largest domestic airline market by 2032, said Airbus sales chief John Leahy.

“There is no doubting the importance of the Asia-Pacific market both today and in the future,” he added.

Even though airlines from the emerging markets account for an increasingly large portion of its order book, Bregier said he is not too concerned about current worries regarding that market segment.

Airbus is also looking for more partnerships with companies in the region, Bregier remarked.

In China, where the company has a final assembly line in Tianjin for the current generation of the A320 family of aircraft, he noted that there remains the possiblity of assembling the upgraded re-engined A320neo variant.

Airbus has been promoting a “regional” variant of its A330 widebody aircraft, which it says will suit services between high-demand slot-restricted airports in countries like China.

Airbus received on Wednesday its first order of the year for its flagship A380 when leasing firm Amedeo signed an $8.3 billion deal for 20 of the superjumbos.

The purchase agreement, signed at the Singapore Air Show, put the European manufacturer on track to meet its target of 30 orders for the world’s largest passenger plane in 2014.

Airbus said more than 120 A380s are now in operation worldwide following its launch in 2007.

Leahy said the company wants about 30 orders for the A380 this year.

Airbus says it has received 814 orders so far from 30 countries for the A350-XWB, a wide-body plane due to begin service with Qatar Airways in the fourth quarter of 2014.

On Tuesday, fledgling carrier VietJetAir ordered 63 Airbus A320 jets with a list price of $6.4 billion in an expansion programme that underscores Asia’s central role in the future of world aviation.

The deal also covers rights to acquire or lease 38 more A320s, potentially boosting the budget carrier’s current fleet of 11 A320s tenfold.

Separately, the world’s biggest planemaker Boeing expects nearly half of the world’s air traffic growth will be driven by the Asia-Pacific region over the next 20 years, but is monitoring local currencies to assess airlines’ ability to meet orders.

Boeing forecast the fleet of aircraft in the region would triple in size over the next two decades, sparking demand for close to 13,000 more planes valued at $1.9 trillion.

Air travel has surged in the region, driven by a rise in disposable incomes and low air fares offered by budget carriers, notably in Southeast Asia.

But Randy Tinseth, vice president of marketing at Boeing Commercial Airplanes, sounded a note of caution, saying market conditions were being monitored closely for any signs of overcapacity.

“We are watching what’s happening here in terms of currencies and in terms of economic growth,” he told Reuters television.

After years of explosive growth, the region’s budget carriers now face the possibility of overcapacity as deliveries accelerate, airlines expand into each other’s markets and currency weakness threatens to dent economic growth.

By the end of the year, airlines in Southeast Asia will have 1,800 planes, while their order book is set to surpass the 2,000 mark.

Boeing estimated Asia-Pacific’s fleet size would blow out to 14,750 over the next 20 years, from 5,090 in 2012.

“Asia Pacific economies and passenger traffic continue to exhibit strong growth,” Tinseth told a media briefing. “Over the next 20 years, nearly half of the world’s air traffic growth will be driven by travel to, from or within the region.”

Both Airbus and Boeing have committed to record production rates for their most popular models, but executives are closely watching the financial turmoil in key aviation markets, such as Indonesia and Thailand.

Asia Pacific is home to some of the world’s biggest long-haul carriers and budget carriers AirAsia and Lion Air have placed aircraft orders valued at billions of dollars and are among the biggest customers of Boeing and Airbus.

“They (low-cost carriers) have been able to provide a service to a part of the population that couldn’t fly before. And so what they are able to do is, to reach into a country and help stimulate demand, very similar to what a Southwest or a Ryanair did over time,” Tinseth indicated.

“Their growth is being bolstered by both the growth in income we see, growth in the economy, but also the fact that they are able to push their product into a greater base,” he said.

Flag carriers weigh orders

Full service carriers are also getting in on the act.

Singapore Airlines is weighing a potential order for up to 40 of wide-body jets as it compares Boeing’s revamped 777X against Airbus A350, sources familiar with the matter said.

The airline is looking at a potential order for as many as 40 777X aircraft in a deal potentially worth $15 billion at list prices, the sources said, asking not to be identified.

Garuda Indonesia is looking to tie up a long sought deal with Airbus for around 10 A330 aircraft, a source familiar with the matter said, echoing a Bloomberg report.

Tinseth said the boom in low-cost carriers and demand for intra-Asia travel have fuelled a substantial increase in single-aisle airplanes.

Boeing’s data projects that passenger airlines in the region will rely primarily on single-aisle planes such as the Next-Generation 737 and the 737 Max, a new engine-variant of the 737, to connect passengers. Single-aisle airplanes will represent 69 per cent of the new airplanes in the region.

Carriers in Southeast Asia are due to take delivery of about 230 aircraft worth over $20 billion this year.

“As we would move forward, we are going to be watching that capacity growth very closely and asking ourselves, ‘Will it change the yield market and the revenue market?’,” said Tinseth.

“We see the capacity that’s coming into the market within the bounds of our forecast, which is good but it’s aggressive growth. And so you have to watch, especially as they open up new markets, where those markets will be and whether they will be successful,” he added.

Thai budget carrier Nok Air on Wednesday committed to buy 15 B737s from Boeing worth $1.45 billion.

up
208 users have voted.

Newsletter

Get top stories and blog posts emailed to you each day.