Despite the gathering gloom, 1998 turned out to be another bonanza year for jet airliner sales. As the year-end totals rolled in, it became clear that Airbus and Boeing had managed to net the second largest bag of orders on record. That may raise few cheers from an airline industry waiting nervously for the downturn and already fretting about the prospect of over-capacity. But the figures are perhaps less worrying than they sound.
While the overall tally of orders swelled to 1,200, that is still well below the hysterical heights of the last boom. A decade ago, orders steamed past the 1,600 mark only to be shredded again a couple of years later as the bust came. And the gross numbers tell only part of the story.
Most of last year's gains came from an apparently still brisk trade in smaller narrowbodies, helped by thriving local markets in the West. The market for widebodies is a different tale. Crisis in Asia and its intercontinental fallout clearly left their mark. That left a string of widebody cancellations in its wake and a host of "deferrals", which may yet have to come off the books.
The biggest hit, as expected, came for Boeing and the 747 programme. Not only has Asian demand collapsed, but anxious customers have gebun trading down in aircraft size, with the talk now about adding frequencies rather than capacity. Even British Airways trimmed its 747-400 requirement, while singing the praises of the 777 as a same-size replacement for its classic 747s.
With few obvious large orders still to be placed, even the most optimistic aircraft marketeers concede that sales must now fall this year - although by how much will depend on the scale of the downturn if and when it turns up in western markets.
The scale of deliveries too is less frightening than it was a decade ago. Although output is due to hit a record peak of close to 900 units this year, nearly all of the increase will come from narrowbodies.
Boeing, chastened by the mess it made of its ambitious ramp-up over the past couple of years, has already announced plans to hit the brakes on widebody numbers. At the end of last year, it announced plans to begin the wind down in 2000 - bringing 747 output to only one per month and trimming the 777. By then too the McDonnell Douglas lines will finally be drawing to a close. On that basis the Boeing group's output would peak in 1999 at the 600 mark and then slip back below 500.
Airbus is still in the process of its long-term ramp-up, with an eventual ceiling of maybe 350 units per year. If it stays on track and the markets settle down, that could finally meet Boeing coming down over the next four or five years.
On the basis of its performance over the past couple of years, that ambition is beginning to look achievable. In last year's order battle the honours were virtually even across the core ranges, excluding the former Douglas products and the Boeing 717, against which Airbus has anyway now pitched its own A318 (already claiming 80 commitments).
After years with little more than a third of the world orderbook, Airbus also broke through the 40% barrier and will continue to gain share as Boeing works off its backlog faster than Toulouse.
There is at least one other factor which should help during this down-cycle. This time the world fleet has a sizeable cushion of ageing aircraft many of which are close to the end of their economic lives. Last time, the desert was awash with stored aircraft waiting to re-enter service once markets recovered. This time there is a good chance that older types will be retired.
Just over 2,500 narrowbodies are still in service that fail to meet current noise regulations, and another 1,000 first- or second-generation widebody classics. That represents a third of the world fleet.
So assuming that airline balance sheets permitted, virtually all of the current backlog of over 3,000 aircraft could be swallowed up by replacement rather than additional capacity. It is only a rough calculation, but may provide some comfort for those with a weather eye out for recession.
Source: Airline Business
