Airbus forecasts demand surge from burgeoning Asian travel market

Airbus sees worldwide demand in the next 20 years of 22,700 new aircraft worth $2.6 trillion, as demand for air travel explodes in Asia, the European aircraft manufacturer said Wednesday.

By AUDE LAGORCE, MARKETWATCH
November 23, 2006 07:15
3 minute read.

 
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MarketWatch: In-depth global business coverage Airbus sees worldwide demand in the next 20 years of 22,700 new aircraft worth $2.6 trillion, as demand for air travel explodes in Asia, the European aircraft manufacturer said Wednesday. At a press conference setting out the company's long-term forecasts, John Leahy, who is chief operating officer for customers, said Airbus expects long-haul traffic to triple and regional traffic to double by 2025. That growth will be driven by a massive increase in demand for air travel in countries such as China and India, where the emergence of a larger middle class eager to travel abroad will be a key factor. The region will also see the launch of more low-cost carriers, whose market share in the region is set to rise to about 25 percent from 9% this year. "If there is a risk to our forecast, it's that we've underestimated the growth of demand in China and India," Leahy said. Growing airport hubs in the Middle East and the need for airlines to operate more fuel-efficient jets are also expected to power demand. The new overall forecast represents an increase of 5,400 aircraft over the company's last such projection in 2004. The upbeat assessment comes at the end of a difficult year for Airbus, a unit of European aerospace and defense giant EADS. The company earlier this year announced two rounds of delays to its flagship A380 superjumbo program. The news precipitated a management crisis that saw the demise of two CEOs in less than four months and forced EADS to book a charge of €1 billion in the third quarter. Leahy said those setbacks have had little impact on demand for the superjumbo, which airlines such as Emirates and Singapore Air Lines will likely receive with a two-year delay. He noted that customers are talking about compensation rather than cancellations of their A380 orders, which he said "is a testimony to how good this aircraft is, because we're making them wait an awfully long time." Only parcel-shipping company FedEx Corp. has cancelled its order for 10 A380 freighters since the delays first emerged. In the segment for very large aircraft, which includes the A380 and US rival Boeing's 747-8, Airbus forecasts demand for 1,263 planes, almost double what Boeing expects in the same segment. The US company, which is seeing swift sales of its mid-size 787 aircraft, is betting on the growing importance of point-to-point travel to fuel demand for its planes. The 787 is perfectly suited to that market and particularly appeals to low-cost airlines such as Ryanair Holdings. Airbus, whose market for the A380 will depend on the importance of hubs in the next 20 years, said it expects the number of very large airports to rise, particularly in Asia. Airbus sees hub-to-hub traffic nearly doubling in the next 10 years. Both Boeing and Airbus agree that the single-aisle segment will see the most growth in the next two decades. Airbus said it sees demand for 15,330 aircraft in that category. So Airbus must launch a successful rival to Boeing's 787. The European group unveiled the wide-bodied A350-XWB at the Farnborough air show near London this summer after customers complained that the original A350 wasn't competitive enough against the 787 Dreamliner. Airbus is expected to make a decision on the final design of the A350XWB by the end of November. EADS finance chief Hans Peter Ring cautioned investors during a third-quarter conference call earlier this month that the commercial launch of the XWB would depend on Airbus successfully pushing through planned cost reductions and ensuring it could deliver on all programs at the same time. Airbus on Wednesday admitted that its share of new orders by value has shrunk to about 36% this year from 45% last year as Boeing grabbed more sales for medium-sized jets. Leahy said he expects 2006 to be Airbus' second-best year for orders in its 35-year history. Boeing is on course to win more orders than Airbus this year for the first time since 2000. Leahy said that "To sum up, this has been one of the best of years, but it's also been one of the worst of years." MarketWatch: In-depth global business coverage

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