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Are Airliner Sales Sustainable at this Current Growth Rate?

February 28, 2012 | Comments: 0 | Views: 203

It is amazing how many airline orders were secured, or committed to at the 2011 Paris Air Show. Indeed, I imagine this year's air show will also show significant sales for new airliners. During the last air show a top executive at Boeing actually predicted that Airbus would sell, or get commitments for up to 1000 aircraft, and they almost did. In fact in the subsequent weeks following the air show they did hit their thousand aircraft mark. Okay so, let's talk about this for a moment shall we.

Airbus has sold a tremendous number of their A320 Neo's, and has orders backed up for the next 5 to 7 years. Meanwhile, Boeing is now producing the 737 Max, which is just a slight variation of its current 737 upgraded model, with new engines, which are significantly more efficient thus saving more fuel, and putting out fewer emissions. The A320 Neo and the 737 Max are very competitive aircraft. Boeing also is producing nearly 40 aircraft a month on its 737 assembly line, and it is trying to add more capacity by 2012 or 2013. Of course, they also have orders from now up through the next eight years.

Still, who is to say what the airline industry will be need between now and the next decade? And realize, I'm not the only person to ask this question, as there was recently an article in the Wall Street Journal on February 23, 2012 entitled; "Warning Is Issued about Plane Glut" by Doug Cameron. The article stated; "there is a vast amount of over ordering, says CEO of aircraft leasing company," and it seems that several airlines are hedging their bet in case one or the other airline manufacturer cannot deliver on time.

This is unfortunate, but it is a reality of the airline industry, and it has happened in the past. For instance there have been delays on the A380, the 787, and some airlines are now suing manufacturers for not being able to deliver on time when they need the extra capacity. Both Airbus and Boeing are on a mad dash to increase capacity so they can fulfill these orders, but it's unlikely that they will be able to, at least to any significant degree in the near-term, and who is to say what the economy will be doing in the near future (3-5 years) or if the airlines will even need all those aircraft?

If the airline manufacturers cannot make or deliver the aircraft as promised on time, then the airlines are under no obligation to take delivery, so they can easily cancel. Which has happened before, and I suppose this will be a continuing trend, no skin of the nose of Boeing or Airbus at a nice place on top of the supply and demand curve currently, other buyers are waiting and eager to take delivery now.

Indeed, the airline manufacturing industry will be changing with lighter materials coming forward as well, and who is to say the newer aircraft will not be so much more efficient, that no one will want the orders that they previously have placed.

Further, who is to say that a Chinese aircraft manufacturer will not hit the scenes using the same technologies, similar designs, and same engines as Airbus and Boeing, but selling at half the cost? The industry is in a state of flux, and orders without payment are not any guaranteed forward-looking statement of future revenues in my humble opinion. Indeed I hope you will please consider all this and think on it.

Lance Winslow has launched a new provocative series of eBooks on Future Aviation Concepts. Lance Winslow is a retired Founder of a Nationwide Franchise Chain, and now runs the Online Think Tank;

Source: EzineArticles
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