PARIS LIGHT ON ORDERS BUT COMMITMENT HEAVY

Victoria
By Victoria June 18, 2013 10:09

PARIS LIGHT ON ORDERS BUT COMMITMENT HEAVY

Thus far Paris has been the show of LOIs and MOUs with few orders thus far. The highlights today came from Korean Air, which announced a commitment to purchase five 747-8 Intercontinentals and six 777-300ERs – list price of this lot is around $3.6bn but that is of course not what is going to be paid and Korean knows that it will be able to screw down a very good price for the 747-8Is. If today’s order is finalized, Korea’s flag carrier will have 10 747-8Is on order. The airline has taken delivery of three of its seven 747-8 Freighters on order already.
Meanwhile Boeing and Air Lease Corp signed an MOU for three 787-9 and 30 787-10Xs – the latter after GECAS paved the way yesterday. ALC expects to begin taking 787-10X deliveries in 2019.
It is clear that the manufacturers are booking everything at Paris this year as orders on their websites but this is of course not the case and a great deal can change between LOI/MOU and order signing. So there remains this year a great deal of uncertainty around just how well the manufacturers are doing at their annual hurrah. There is no doubt though that the 747-8I “agreement” will be a most welcome boost to the flagging fortunes of the type, but that said five aircraft is not enough for Boeing on this one and indeed our sources imply that Korean has made a wise move choosing the 747 passenger aircraft here and now due to price reductions that guarantee economics.

Easyjet (see below) was perhaps the most interesting announcement of the day and we all await that shareholder meeting with interest to see if Sir Stelios with stick to his guns and freak out over a possible large aircraft order and lead a shareholder revolt – but given that the order carries a substantial discount such a move would be folly. Here we think the upgrade from the A319 to the A320 and the A320Neo is a very wise move given the load factor data to hand for Easyjet. A319s can be deployed on new routes with the A320s replacing 19s on existing more popular routes before the 19s are phased out.

I would argue that what we are seeing at Paris this year is a more savvy ordering process from airlines and lessors than in past years which taken together will lead to a hit for the manufacturers as they are pinned down on price. It is a buyers’ market out there and thus I feel 2013 is a good airshow for the airlines and lessors making their play now.

Victoria
By Victoria June 18, 2013 10:09
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