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Aircraft Makers Catch A Draft

Constance Gustke,|Special to CNBC.com
Friday, 17 Jun 2011 | 2:26 PM ET

Blue skies are returning for the global aviation industry.

Simon Battensby | Photographer's Choice RF | Getty Images

After two very lean years, strong travel bookings and surging global sales will translate into 1,040 commercial plane deliveries worldwide this year and 1,225 next year for the world's two biggest airplane makers, according to Wedbush Securities.

Both Boeing and Airbus are snapping up orders for their narrow body planes, where deliveries are forecast to grow 7 percent through 2014, according to the firm.

Boeing already produces the world’s most popular plane, the 737. And Airbus, a unit of EADS has its competitor, the A320.

And wide-body plane deliveries are also picking up. They’re forecast to more than triple through 2014.

Ahead of the Paris Air Show this week, Boeing, the second-largest plane maker, had logged 133 orders in the first five months of 2011, versus 97 for Airbus. According to industry watcher Gleacher & Company, Airbus expects to deliver a total of 545 orders this year; Boeing expects to deliver 495.

“Boeing and Airbus are in a heated competition,” says Peter Arment, a senior analyst at Gleacher & Company.

Business jet production is also beginning to recover from a deep swoon.

After peaking at 1,313 planes in 2008, production slipped to 763 business jets in 2010, according to the General Aviation Manufacturers Association.

Though no numbers are available yet for 2011, business is heading upward again. High-end planes that fly fast and far are most in demand.

“The corporations that buy them have weathered the recession,” says Brian Foley, an industry consultant based in Sparta, N.J. “Smaller planes like Cessna are struggling.”

In this niche, growth is also fueled by international clients, who are buying more than one-half of business jets, says Foley.

Climbing GDP, which generally tracks with plane orders, is giving Asia the boost, explains Arment of Gleacher. Asia’s 20-year GDP growth rate is 4.7 percent, compared to North America’s 2.7 percent. Fleet sizes in Asia are expected to triple by 2030, mostly fueled by jumbo jets that fly long distances.

Asia's fleet size is expected to grow 5.7 percent annually through 2030, versus 1.7 percent for North America, according to Wedbush Securities. Asia is mostly snapping up twin-aisle and large jets to transport its booming passenger traffic, set to grow 6.7 percent annually. Fleet sizes are expected to triple.

China, for example, is gobbling up planes at a fast clip. Hong Kong Airlines is adding the new- generation Airbus A380 superjumbo and long-range Boeing 787 jets to its fleet, as part of its efforts to fend off rival Cathay Pacific Airways. Its passenger loads are expected to double to 4 million this year.

Paris Air Show 2011 - A CNBC Special Report
Paris Air Show 2011 - A CNBC Special Report

Global Expansion

The global jet market will register 33,500 jetliner sales between 2011 and 2030, according to industry estimates. And analysts like the prospects for both business and commercial jets.

Canada-based Bombardier is the sales leader in business jets, says Foley. It’s best known for making executive jets like Learjet and Global Express aircraft, which sells for over $65 million apiece.

“Global Expresses are status symbols in China,” he says.

But Bombardier is also shooting for the hot narrow-body market, now controlled by Boeing and Airbus, with its new C-series of planes.

Brazilian plane maker Embraer is a new entrant in that market — the first since 1960. It makes executive jets like the Phenom; 145 were shipped last year, versus 20 in 2005.

“Embraer is making many new products and rapidly taking market share,” says Foley.

Also, both Embraer and Bombardier build regional jets where demand is strong, adds Arment.

“Planes are less and less likely to go to a hub these days,” he explains.

On the commercial side, Boeing's best-selling, 737 and Airbus' A320 remain in a dog fight over the $2 trillion narrow-body market.

“More people are flying on domestic routes,” explains Kenneth Herbert, an aerospace analyst at Wedbush Securities. “And low-cost carriers are also driving demand.”

Boeing’s new 787 Dreamliner, a long-haul jet that uses 20 percent less gas than other planes of its class, is one of them; it’s sold out through 2019. Boeing is upping production 40 percent by 2013.

EADS' Airbus is also seeing an uptick in sales, say analysts. Korean Air in May became the sixth airline to take delivery of the A380. As of May 2011, 234 firm orders had been placed.

“We’re in the early stages of recovery here,” says Herbert of the industry. “I’d expect double-digit order growth over the next few years.”

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