Huge plane orders likely in Singapore

February 08, 2014 - 12:46:39 am

Workers set up exhibition booths near a model of an Airbus A380 aircraft ahead of the Singapore Airshow yesterday. 

SINGAPORE: Aerospace firms will finalise billions of dollars of deals at next week’s Singapore Airshow, hoping to ride out a storm in emerging markets whose prosperity is vital to their plans to keep producing record numbers of jets.

Asia’s largest aerospace gathering, from February 11 to 16, is usually a “show and tell” event where executives come to mingle with some of the world’s biggest long-haul carriers and Asia’s ambitious new travel tycoons, as well as the region’s busy military buyers.

After a record $200bn of deals at last November’s Dubai Airshow, few expect Asian buyers to be ordering in similar quantities — yet the event will test the appetite of one of aviation’s fastest growing regions.

“Asia is a huge market but has been somewhat eclipsed by the Gulf which has the same idea about how to pursue traffic and got to the orders race a few months before Singapore,” said aerospace analyst Richard Aboulafia, vice president at Virgina-based Teal Group.

Vietnamese, Indian and Thai carriers will place orders for over 100 Airbus or Boeing passenger jets worth $12bn at list prices, industry officials say. Malaysian Airlines could also place an order for Airbus long-haul and medium-haul jets.

Both Airbus and Boeing have committed to record production rates for their most popular models and have longer-term plans to produce more than 100 narrowbody jets a month between them — churning out a $100m jet every few working hours.

But executives will be looking out for any signs that financial turmoil in key aviation markets like Indonesia and Thailand will threaten economic growth, which directly determines the level of air traffic demand.

“The manufacturers might be getting ahead of themselves given the troubles in emerging markets,” said Aboulafia.

“Many of these markets are in some form of currency crisis or economic downturn and the focus will be coming back to the Middle East and a hoped-for North American resurgence.”

The world’s No. 1 plane-maker Boeing does not see its commercial jet business affected by weakness in emerging markets, Chief Executive Jim McNerney said this week. But he noted more divergence among such countries, and China and the Middle East remained strong. 

“Some perspective is very important. We have a short term blip in growth and the orders that are being placed are for the long term, for the requirements eight, nine or 10 years out,” said Peter Harbison, chairman of the aviation analysts CAPA.

Airbus and Boeing will face off for the first time with their latest lightweight long-haul jets, the 787 Dreamliner and the Airbus A350. The A350 will make its first full air show appearance.

As well as being a magnet for commercial aviators, next week’s event in Singapore is a weapons bazaar which has grown in importance as China’s increased military assertiveness has raised concerns.

US arms makers are counting on increased foreign sales to offset slower demand from US and European governments, whose military budgets are under increasing pressure.

While global military spending has been on the decline over the past few years, reflected in the Pentagon’s own budget cuts, Asian spending is on the up.

“Asia Pacific is the only region where from 2009 onwards we have seen a steady rise in defence expenditure,” said Craig Caffrey, senior analyst, IHS Jane’s Aerospace, Defence & Security, in a recent report.

“Based on IHS Jane’s Defence Budgets projections, Asia Pacific’s share of global budget spend will grow to 28 percent from its current 24 percent by the end of the decade, reaching $474bn.”    

Reuters

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