Airbus Group reassures on jet market
Paris, July 31, 2014
Airbus Group moved to allay concerns over a wave of order cancellations yesterday, sparking a rally in its shares helped by better-than-expected half-year results.
“Global aircraft markets remained strong despite worries about an overheating in Southeast Asia and a number of order cancellations, which have concerned investors since this month's Farnborough Airshow,” chief executive Tom Enders was quoted as saying by the Gulf Daily News, or sister publication.
"We are not approaching the end of the cycle or a precipice. The commercial aircraft market is still very strong - certain regional weak spots notwithstanding, but we can deal with that," Enders said.
Lifting the veil on a growing but little-publicised part of the $100 billion market, Enders said about half of the underlying cancellations seen so far this year resulted from conversions to orders for different aircraft and 'overbooking'.
Most of the cancellations involve narrow-body jets, the busiest part of the market, where Airbus and rival Boeing are offering upgraded models such as the Airbus A320neo.
Just as most airlines overbook flights in anticipation of no-shows, planemakers sell more narrow-body models than they can make, knowing that some in the cut-throat airline industry will not take delivery.
That means they have to juggle orders in the year of delivery, pushing the less robust orders out to later dates.
Now that the new A320 is close to being delivered from 2015, buyers of the older model are being encouraged to take the new one instead. This triggers a cancellation offset by a new order. Of the 225 cancellations in the first half, 65 happened in this way, he said.
Enders said he expected to see more such cancellations and predicted Boeing would see the same issue when it gets close to introducing the 737 MAX, its own upgraded short-haul jet.
But he denied this represented a downturn in the market. The reshuffle, nonetheless, marks a change of policy by Airbus whose sales chief had said "virtually nothing" would be sold at the expense of existing business when launching the A320neo. – TradeArabia News Service