- Both Airbus and Boeing will achieve record sales this year;
- Order books full well into second half of next decade;
- Airlines probably speculating on aircraft prices;
- 2008 likely to be much more subdued.
A good proportion of the record numbers can be attributed to Middle East buyers, who have, in a single year, ordered more than 700 aircraft between the two manufacturers - over 60% of the 1,160 units that Boeing predicted the region would require over the next 20 years, or three quarters of Airbus’ long term projections.
The exact order figures for the year will depend on the conversions from, for example “commitments” to firm orders. But at this stage those are mere details in the running battle for pre-eminence between Boeing and Airbus. The simple fact is that this year will be an all-time record for sales – but the prospects of it being repeated in the near future are remote.
Because of the steep rise in demand over the past three years – with around 6,000 orders between them - neither of the manufacturers has been able to gear up to deliver anywhere as fast as airlines would like.
Order books for the B787 for example are full until well into the second half of the next decade. The model has generated pre-flight orders of 762 to date, an all time record for a new type. The B787’s direct competitor, the Airbus A350XB, will not even begin production until 2013, but, after announcing only 12 months ago that it would be proceeding with the new model, Airbus has already taken 316 orders.
The Airbus A380 has not enjoyed such numerical success yet, but airline interest is growing as, firstly, the aircraft enters service after a horror period of delay and secondly as the potential for high density (and therefore low cost and high “green” credentials) seating on the Airbus flagship attracts greater attention.
This sustained rush of orders since 2005 has driven up prices, both for new and used aircraft, so that lease prices for almost all types are at all time highs. This is making life difficult for any proposed new entrant and has steeply raised the bar for entry. This is good for the incumbents, particularly those which were able to order before the demand rush began.
There is little doubt that, as well as seeking to consolidate their position, some airline investors are actually gambling on the value of their orders appreciating as supply dries up. History however, has shown this to be a dangerous proposition.
Boeing for example is considering introducing a second production line for the B787. And, of course, there is the apocryphal boom and bust syndrome which tends to afflict the airline business, more gently described as cyclical.
2007 will indeed be a record year for sales, but 2008 will certainly see a pause for recovery, after this year’s order binge.
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