STRONG ORDERS FROM APAC AS BOEING BOOSTS EXPECTATIONS FROM THE REGION AS RUSSIA SIGNALS UNEXPECTED U-TURN ON EU AIRLINE STATUS

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By TESTCustomwebLP TESTCustomwebLP June 17, 2011 13:23

STRONG ORDERS FROM APAC AS BOEING BOOSTS EXPECTATIONS FROM THE REGION AS RUSSIA SIGNALS UNEXPECTED U-TURN ON EU AIRLINE STATUS

Russia’s deputy transport minister said yesterday that it is ready to start relaxing its opposition to recognizing the whole 27-country bloc as one “nationality” for airlines, rather than the traditional system of recognizing individual member states. A draft of the law has already been written and will become legislation by October.

Many countries, including the US and Canada, have agreed to this. The change allows flights, such as a French flight to Los Angeles from London and a British flight from Paris to New York. So this is highly significant. It is likely that the initial draft will be limited but it is a foot in the door for the EU and could lead to much needed expansion for Russian airports. It is highly unlikely that Russia will be opening up domestic routes to foreign airlines in time for the winter Olympics there in 2014, however.

Meanwhile it is all go in the APAC region: Word is that Boeing is in frantic final talks with MAS to conclude a deal to exercise options on 20 737-800s so that the deal can be announced on Tuesday at the Paris Air Show. MAS is also in talks with Airbus for 10 additional A330-300s. MAS is still undecided as to which manufacturer will get an order for 30 narrowbodies for FireFly its LCC arm, so this is the one to watch out for.

The biggest deal on the cards for Paris is by far the expected AirAsia order for around 200 Airbus aircraft which will most likely be A320neos at around $14.5bn, the deal is in the final stages and Airbus is desperate to get this one out for Monday.

The A320neo collected another great sale yesterday in the form of the Wadia-group backed, budget carrier, GoAir, which placed an Rs 32,400-crore aircraft purchase order for 72 A320neo aircraft. The deliveries will begin from 2015, with an induction rate of 15 aircraft per year. This means that GoAir will be adding some 2,700 seats every year to 2020.

Prior to this, the airline had placed an order for 20, A320s and these aircraft will be delivered over the next 24 months. With the latest deal, the total aircraft on order with GoAir is 92. Currently, GoAir operates 133 daily domestic flights in India with a fleet of ten A320 aircraft. Can GoAir fill these seats and in so doing cope with such an aggressive expansion rate? If the answer is yes then you have to worry a great deal for the future of air India as all of these orders coming out of the region are eating into its market share as the government divers over a bailout for the giant.

Staying with APAC, Boeing yesterday unveiled its latest 20 year market outlook ahead of the Paris Air Show and made it quite clear that the commercial aerospace industry’s future lies with the APAC region.
Worldwide, Boeing expects 39,530 aircraft to be in service by 2030, more than double the 19,410 today, and much of that new jet demand will come from rapidly growing economies like China. After the $1.5 trillion in demand it expects from APAC (11,450 planes), Boeing says the next-largest region will be Europe with $880 billion, followed by North America ($760 billion).

The Middle East market is also lucrative for aircraft makers, given the demand from airlines there for new, large aircraft. Overall, Boeing projects a $4 trillion global market for 33,500 new planes over the next 20 years.

Shares of Boeing were up 0.4% on the news yesterday as investors digested its updated outlook. But if you refer to the newly-released Airline Economics Finance & Leasing Guide next week you will note that passenger demand across the globe is weakening rapidly as inflation takes hold in all regions and consumers feel the tightening grip on their finances take hold. This is reflected in the fleet movements of the past few years in all regions other than the USA/Canada and it is here where there could be a dramatic fall in demand soon. Boeing is saying that the long-term outlook is good and it always will be so long as war and epidemics remain off of the agenda but it fails to signal the fact that the short- to-medium term of the next five to ten years is uncertain if not downright worrying.

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By TESTCustomwebLP TESTCustomwebLP June 17, 2011 13:23
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