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Airbus, Boeing deals slump

February 17, 2016

The world's two biggest planemakers have announced only modest orders at the Asian aviation trade fair - a sign of slowing demand after the 2014 show hauled in more than $30 billion (26 billion euros) of deals.

Singapur Luftfahrtmesse Boeing
Image: Reuters

On the sidelines of the Singapore Airshow, European planemaker Airbus on Wednesday announced an order for six A350-900 planes, valued at $1.8 billion at list prices from Philippine Airlines (PAL). Its biggest rival, Boeing, said it had landed a deal for 12 of its 737 jets with a privately-owned Chinese carrier, Okay Airways, valued at $1.3 billion.

PAL president Jaime Bautista said the planes would be used for non-stop, long-haul flights from the Philippines to the United States, Canada and Europe, and would support the airline's goal of becoming "a full service five-star airline in five years."

Fleet modernization was also the goal of China's low-cost carrier Okay Airways, said the airline's president Wang Shusheng, adding that his company's order was not part of a deal Boeing signed with China last year for 300 aircraft worth $38 billion.

Slowing demand

Boeing and Airbus made their announcements on the second day of the Singapore Airshow, which brings together more than 1,000 aerospace companies. The previous show in 2014 generated deals worth $32 billion.

Ahead of the event, Tony Tyler, director-general of the International Air Transport Association (IATA), said, however, that airlines in the region may try to push back their orders this year, due to softer profits.

Airline savings from low fuel costs were being eroded by hedging losses and a strong US dollar, Tyler said, noting that the greenback climbed 20 percent over the past 18 months.

Other industry experts also said they expected a significant downturn in orders, citing the recent slump in global oil prices.

"One of the reasons why the order books are full is because the fuel price was high, so there was an incentive to buy the more fuel-efficient planes and get rid of the old ones," said David Stewart, an aviation and aerospace adviser at ICF International. "But now the fuel price is low, so some airlines will keep their older planes longer, and therefore not need the new [ones]. It's a quiet time for all of us," he told the news agency AP.

Airlines might also be deterred by the filled order books of both Airbus and Boeing that could mean a long wait for the delivery of airplanes, Stewart added.

Airbus chief executive Fabrice Bregier, however, brushed off fears of a downturn in the industry at a press conference Tuesday. He said his company forecast demand for 12,810 new airplanes in the Asia-Pacific area, valued at $2 trillion over the next 20 years. That would represent 40 percent of predicted global demand for about 32,600 airplanes over the same period.

Airbus expects passenger numbers in Asia to rise by 5.6 percent annually, with China forecast to post double-digit growth.

Boeing also said that it had no deferrals of orders in Asia, with demand in southeast Asia estimated at 3,750 airplanes, valued $550 billion, over the next two decades.

In other Singapore deals, a US leasing firm ordered 20 aircraft from Japan's Mitsubishi Aircraft in a transaction potentially worth more than $900 million.

uhe/ng (AFP, AP)