Wednesday, January 11, 2017

Boeing 777X And Airbus A380 Orders Threatened By Slower Growth At Mideast 3 Airlines, Report Says

A new report says demand for Boeing and Airbus wide-bodies, particularly the 777X and the A380, could be impacted during 2017 by slowing growth at the three Middle East airlines.

“Emirates, Etihad and Qatar can’t continue to grow at their historic rapid rates forever,” said the report by consulting firm Airinsight. “When a slowdown comes, and it looks like it’s coming, there will be an impact on Airbus and Boeing.

“While we don’t expect a rapid change or economic disruption, we do expect an economic adjustment as lower yields lead to lower costs and trimming of unprofitable routes,” the report said. “That is likely to result in additional order deferrals in 2017.”

In recent weeks, Emirates said net profit declined 75% in the six months ending Sept. 20 and Etihad said it will cut capacity by 4% in 2017. Both carriers are looking to cut jobs, Reuters has reported.

Although Qatar Airways continues to expand, the International Air Transport Association estimates that Middle East airlines’ 2017 net profit will decline to $300 million from $900 million.

This week’s Airinsight report said Emirates, Etihad and Qatar account for 27% of current orders for new technology wide-body aircraft, particularly the Boeing 777X and the Airbus A380-800.

In the case of the 777-X, slated for a 2020 introduction, the Mideast Three carriers hold 77% of the 306 outstanding orders. Emirates has 150 orders, Qatar has 60 and Etihad has 25.

Overall, the Mideast Three account for about 10% of total Boeing orders.

In the case of the Airbus A380, Emirates is again the primary customer. Emirates has 49 of the outstanding 141 orders, while Qatar has eight and Etihad has six.

“Emirates recently deferred additional A380s, an indication of traffic and earnings weakness,” the report said.

“The success or failure of the A380 program will likely be determined in Dubai,” it said. “The most recent deferrals by Emirates have resulted in an additional production cut in Toulouse, with some analysts indicating that this will move the program back into red ink.”

As for other aircraft, the Mideast Three account for 65% of the orders for the A350-1000, 22% of orders for the A350-900, 20% of orders for the 787-10 and 14% of orders for the 787-9.

(Tim Reed - Forbes)

No comments: