Global air industry sees recovery but not this year

By Mariko Katsumura and Harry Suhartono

SINGAPORE (BestGrowthStock) – The global economy may be climbing out of recession but the air transport industry does not expect any significant pick up in orders this year, executives said on Wednesday.

“Cautious optimism” is the dominant phrase at the Singapore Airshow this week, the first major industry event of the year after a wretched 2009, when aircraft orders at both Boeing (BA.N: ) and Airbus (EAD.PA: ) were the worst in 15 years.

Amid a dearth of orders at the air show, both manufacturers said demand was likely to remain more or less flat in 2010. But there were some spots of good news elsewhere.

Brazil’s Embraer (EMBR3.SA: ) said it hoped to better the 2009 sales of 30 jets, but would fall short of the 100 sold in 2008.

Bell Helicopter, a unit of Textron Inc (TXT.N: ), said it saw revenue climbing around 16 percent this year, backed by strong demand by the U.S. military for its craft.

“Generally we see 2010 as the year of economic recovery and 2011 a year where airlines recover to profitability and as a result of that (we see) an increase in demand for airplanes in 2012,” said Randy Tinseth, vice president of marketing for Boeing Commercial Airplanes.

Boeing had gross orders from airlines for 263 planes in 2009, but net orders of 142 planes after cancellations. Airbus had gross orders of 310 planes and net orders of 271.

EADS subsidiary Airbus, however, was upbeat on prospects in the longer term and saw the rapidly growing Asia-Pacific region becoming the largest air transport market in the next 20 years.

“Everybody was talking about recession… but we actually think we are coming out the other side,” said Airbus sales chief John Leahy, who has predicted sales of 250-300 orders this year with about 25-35 percent from Asia.

Airbus expects up to 10 orders for its flagship A380 superjumbo after only four last year. With a list price of about $346 million, the A380 is the world’s biggest airliner.

The European planemaker expects the Asia-Pacific region to purchase 8,000 new aircraft, valued at $1.2 trillion, by 2028, about a third of total global demand for almost 25,000 new passenger and freighter aircraft valued at $3.1 trillion.

“I think it’s a year of recovery for the airlines, hopefully,” said August Wilhelm Henningsen chairman of the executive board of Lufthansa (LHAG.DE: ) Technik. “The Asian airlines are coming back, but the rest is still not.”


All bets however could be off if China’s escalating row with the United States begins to take a toll on trade, especially air cargo, and on Boeing.

China has reacted angrily to reports that U.S. President Barack Obama plans to meet the Dalai Lama, the exiled Tibetan Buddhist leader reviled by Beijing as a separatist for seeking self-rule for his mountain homeland.

The flare-up comes soon after Beijing lashed Washington over a $6.4 billion U.S. weapons package for Taiwan, the self-ruled island that Beijing deems an illegitimate breakaway province.

It also comes during Sino-U.S. tensions over the value of China’s currency, trade protectionism and Internet freedoms.

Boeing unit McDonnell Douglas builds the Harpoon Telemetry missiles that are part of the package of sales to Taiwan. China has threatened to punish the firms involved.

Tinseth declined to elaborate on any impact on Boeing sales to China arising from the row.

“It’s government-to-government and I’m just not going to speculate,” he told Reuters in an interview.

Cathay Pacific (0293.HK: ), Asia’s No. 4 airline and which bounced to profit in the first half of 2009, has said its growth is underpinned by growth in cargo traffic in and out of China.

“I’m cautiously optimistic,” CEO Tony Tyler told Reuters.

“We saw a recovering trend in the last quarter of 2009 and some of the strength in both the premium passenger market and the cargo market have carried through into the first quarter of this year. That gives us rather more comfort than we had last year.”

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(Writing by Raju Gopalakrishnan; Editing by Jean Yoon)

Global air industry sees recovery but not this year