Airbus, Boeing Call Recovery as Airlines Accept Jets (Update1)

Nov. 16 (Bloomberg) -- Airbus SAS and Boeing Co., the biggest commercial-plane makers, predicted airlines will emerge from a slump next year as the global economy rebounds from the worst recession in decades and fuels air travel.

Airlines have stopped pushing back deliveries, Airbus Chief Operating Officer John Leahy said at the Dubai Air Show yesterday. Boeing estimates economic growth in 2010 will help airlines repair their balance sheets, said Randy Tinseth, the company’s marketing chief for commercial planes.

“Next year will be a year of recovery, and in 2011 airlines will return to profitability,” Tinseth said. “The last air show in 2007 was absolutely a year about orders, and this year is more about working with our customers.”

The Dubai show reflects both a nascent industry recovery and a contrast to the boom years of previous expos. While Airbus scored a contract today with Ethiopian Airlines for widebody planes worth $2.8 billion at list price, orders announced by aircraft manufacturers on just the first day of the last show two years ago approached $40 billion.

Airline passenger traffic through September this year dropped 5.3 percent, and the International Air Transport Association, which represents 93 percent of all international traffic flown, predicts a combined loss of about $11 billion for the world’s airlines.

Maintaining Deliveries

Airlines including British Airways Plc and Deutsche Lufthansa AG in Europe, as well as AMR Corp.’s American Airlines and Delta Air Lines Inc. in the U.S. reacted by delaying deliveries to defer costs or parking aircraft.

Airbus and Boeing still managed to maintain or even increase deliveries this year. Boeing, which handed over 375 planes last year after a strike slowed production, expects to deliver 480 to 485 planes this year, Tinseth said yesterday. Airbus will match or beat its delivery of 483 planes last year, Leahy said.

Both manufacturers steadied production in 2009 by juggling order books, persuading some customers to advance deliveries as others gave up their slots.

At the Dubai show in 2007, Airbus signed a $31 billion contract with Emirates Airlines, Boeing won $6.1 billion in orders from Qatar Airways, and Brazil’s Empresa Brasileira de Aeronautica SA announced an order worth as much as $811 million.

Keeping the Pace

Airbus Chief Executive Officer Tom Enders said Oct. 30 that the company is more likely to lower than increase production rates, and sustaining the current monthly output of 34 single- aisle jets would be a success. EADS reiterated today in its third-quarter earnings announcement that for 2010 it’s “cautiously monitoring its production rates in a soft market environment.”

Boeing has maintained rates of 31 single-aisle 737s a month and will cut production of its 777s to five a month from seven starting in June.

Airline traffic will grow next year, Boeing’s Tinseth predicted, as markets including Asia and Europe show signs of recovery. That means a return to profitability for airlines in 2010 and 2011, followed by new orders as they replace older planes and expand fleets, he said.

Still, a recovery won’t prompt all airlines to expand their fleet. Emirates Airlines, the largest carrier in the Arab region, has orders for 53 double-decker Airbus A380s and 70 Airbus A350s and doesn’t predict additional purchase contracts any time soon, Chairman Sheikh Ahmed bin Al Maktoum said.

‘Very Positive’

“The market is very positive,” he said in an interview at the air show yesterday. “You can see it from our results, from the traffic growth of Dubai International Airport. For us it’s very positive and better than expected.”

The company may sell shares to the public in two or three years as carriers in the Middle East expand their market share and global air travel resumes, he said.

Supporting Emirates’ optimism is the resilience of Middle East carriers compared with those in other regions. Passenger traffic at Gulf region airlines including Emirates, Qatar Airways Ltd. and Abu Dhabi’s Etihad rose 9.4 percent in the first nine months. They boosted capacity faster than carriers in other regions and kept seats occupied by cutting fares.

Dubai Airports passenger traffic this year is ahead of target, up 8.3 percent, Chief Executive Officer Paul Griffiths said today in an interview. The number of passengers is expected to rise to 40 million this year from 37 million in 2008, he said.

Air Arabia PJSC, the United Arab Emirates’ biggest low-cost carrier, plans to add six new planes to its fleet next year and is discussing further options for new planes, including leasing, Chief Executive Adel Ali said in Dubai yesterday.

More from Africa

Ethiopian Airlines, which outlined the Airbus orders in Dubai, plans orders for new aircraft in 2010 to continue adding routes, Chief Executive Girma Wake said in an interview. He said the airline is keeping its order for 10 Boeing 787 jets in addition to the order placed today for 12 Airbus A350s.

“Everybody is talking about new orders, there is nobody talking about delays and cancellations,” said Airbus’s Leahy. “Six months or nine months ago, people were talking about delaying aircraft, talking about canceling aircrafts. At this juncture we see the market improving, not deteriorating.”

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net; Massoud A. Derhally in Dubai at mderhally@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net