August 15, 2022

Asian Airlines Top the List of Big Buyers at Paris Air Show

But before the ink had dried on what was the last of more than $72 billion in signed orders and commitments secured at this week’s Paris Air Show, the head of Airbus warned that major new investments would be required by the world’s aerospace suppliers to cope with the tsunami of aircraft deliveries that is expected to begin around 2015.

“The huge challenge for us over the next four years will not be to sell new aircraft, but to be able to deliver them in high quantity,” Thomas Enders, chief executive of the European plane maker, said during an interview.

Tony Fernandes, the chief executive of AirAsia, flew into Paris overnight to announce a huge order for 200 of Airbus’s revamped A320 single-aisle jet, the A320neo. The order — which Airbus said was the largest civil aircraft order by number in history and the third-largest ever by market value for Airbus — was initially agreed in February, but was not finalized until the early hours of Thursday morning.

The AirAsia order followed another order for 72 A320neo jets from GoAir of India, bringing Airbus’s total backlog for the plane, which is being equipped with more fuel-efficient engines, to 1,029.

“Travel is going to explode in our part of the world, and this is why we are doing this deal,” Mr. Fernandes told reporters at the air show here. He said he expected to receive between 12 and 18 of the planes per year beginning in 2016 and added that they would be financed out of the airline’s cash flow rather than through borrowings.

The AirAsia order surpassed a deal finalized Wednesday by the Indian budget carrier IndiGo for 180 Airbus single-aisle planes. That transaction, worth $16.6 billion at list prices, was for 150 A320neos and 30 classic A320s.

More than 90 percent of the 730 Airbus orders announced here this week were for the A320neo, a version of its popular A320 narrow-body plane. Airbus is revamping the A320 with a more aerodynamic wing and new engines that promise a 15 percent reduction in fuel burn over current A320 models. Neo stands for new engine option.

Those new orders come on top of an already significant order book for Airbus’s classic A320 planes, bringing the company’s total single-aisle order book to well over 3,000.

Airbus is already planning significant increases in the monthly production rates of all of its aircraft models, but the latest wave of orders puts particular pressure on its single-aisle assembly lines. Production of A320 family jets is set to rise from 36 per month to 38 in August and to 40 planes per month in the first quarter of next year. It will then step up again to 42 per month by 2013.

Mr. Enders said he would like to push those rates even higher, especially with the first A320neo deliveries looming from 2016. But he said one main constraint was the ability of aerospace suppliers to cope not only with Airbus’s surging demand, but also with the more than 2,100 single-aisle 737 planes on the backlog of Airbus’s U.S. competitor, Boeing.

“We are not the only manufacturers in the world,” Mr. Enders said. “Right now, I don’t know where the limit is” in terms of production rates.

Many of the companies that supply material from tiny fasteners to large structural components to Airbus and Boeing, as well as to Bombardier of Canada and Embraer of Brazil, are eager to invest in new plant and equipment to meet the surge in business from plane makers, Mr. Ender said. But those companies — many of them small and privately owned — are struggling to raise the money necessary to make those investments.

“It’s becoming more and more of a concern,” Mr. Enders said. “Everybody wants a healthy industrial structure, but financing is becoming more and more difficult. The rates that banks are currently charging for loans to our suppliers are outrageous.”

For now, there have been only isolated shortages of components. But analysts predicted that supply-chain concerns were likely to become a major topic of discussion soon.

“We expect this to be an ongoing theme for the next two-plus years,” said Philip Toy, a commercial aerospace analyst at AlixPartners in Southfield, Michigan.

Industry executives noted that while much of the current surge in jet orders was coming from the fast-growing economies of the Asia-Pacific region, there was also still significant pent-up demand in North America, where financial troubles have led the major carriers to postpone fleet-renewal programs for nearly a decade. Without additional supply-chain capacity, manufacturers could eventually find themselves squeezed when American airlines resume major new plane purchases.

Airbus and Boeing between them racked up a total of $93 billion in new jet orders and commitments in Paris this year, more than double the $42 billion in deals struck at the last major international aviation bazaar, in Farnborough, England, in July 2010.

Article source: http://feeds.nytimes.com/click.phdo?i=e7b96ed333b1636a9c8510faa06f7ce1

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