Abu Dhabi, UAEMonday 16 December 2019

Boeing sees Middle East aviation recovering in next two years

Middle East carriers will need 3,130 jets worth $725bn to meet demand, plane maker says

Randy Tinseth of Boeing says he sees demand for the types of plane being commissioned by Middle East carriers to smaller, wide-body aircraft. Leslie Pableo for the National
Randy Tinseth of Boeing says he sees demand for the types of plane being commissioned by Middle East carriers to smaller, wide-body aircraft. Leslie Pableo for the National

Boeing sees a trend towards smaller wide-bodies in the Middle East as airlines adjust their capacity amid challenging market conditions, creating further opportunities for its 787 twin-aisle jets in the traditionally wide-body dominated market.

Regional airlines, affected by factors from oil volatility and tense geopolitics to trade tensions, are expected to record below two per cent growth in passenger traffic in 2019 but set to recover over the next two years as the market fundamentals remain strong, Randy Tinseth, vice president of marketing at Boeing Commercial Airplanes, said in an interview at the Dubai Airshow on Sunday.

"The trend we see here towards slightly smaller wide-bodies continues both in the Middle East and on a global basis," he said. "Without question there has been a downsizing in [the market for bigger wide-body jets] and it will continue because airplanes of the 787 family give flexibility and versatility to our customers."

Boeing's 2019 Commercial Market Outlook report projects Middle East carriers will require 3,130 new jets worth $725bn over the next two decades, revising upward its earlier forecast of 2,990 aircraft, to meet growing demand for air travel.

Tough market conditions from unfavourable currency swings, low oil prices, uncertainty stemming from US-China trade tensions, fierce competition and a global economic slowdown have weighed on Middle East carriers' growth.

"But the fundamentals of the market are strong: What we see is the geographical position of major hubs continues to play a key role in the viability of growth of these airlines," he said. "The fact that things slowed down and they’re digesting that capacity is not necessarily a bad thing, it’s just where we are today in the market."

Mr Tinseth said he is optimistic about the long-term market in the Middle East and a near-term recovery fuelled by the airlines' solid business model.

"I’d expect recovery in the next couple of years," he said. "But the market continues to grow, so since the airlines here pulled down capacity, ultimately it means higher load factors."

In the near-term, Boeing is seeing airlines enter a replacement phase for some of their older aircraft, which creates opportunities for its new 777X wide-body jet.

"The 777X, especially the first few deliveries, are about replacing older 777s, older 777-300ERs, older Airbus A380s, so we’re well-positioned for that," he said.

Boeing is in talks with Emirates, the biggest operator of Boeing 777s and Airbus A380s, regarding delays in deliveries of its 777X.

Gulf airlines, which built their massive growth around the 'superconnector' model, are witnessing a change in the aviation landscape. A deeper partnership between Dubai-based Emirates and sister low-cost company flydubai is bringing commercial benefits, while a recent agreement will see Air Arabia establish a short-haul operation in Abu Dhabi to feed traffic to Etihad Airways.

Boeing is optimistic that such alliances between low-cost and full-service carriers could further whet appetite for new plane orders.

"What that means is that it creates profitable, strong customers and that’s probably the most important thing. When customers are profitable it allows them to buy new aircraft, which is a good thing," Mr Tinseth said.

Commenting on the US trade war with China, one of Boeing's biggest markets, Mr Tinseth said "we are happy both sides are talking and making progress" as Washington and Beijing aim to reach a trade agreement.

Boeing has reduced the production rate on its 787 wide-bodies in recognition of trade war risks challenging the market.

Regarding Boeing's grounded 737 Max, Mr Tinseth said the company is engaging potential new customers at the Dubai Airshow as well as talking to existing clients to share updates on changes to the plane and its return to service.

Updated: November 17, 2019 08:02 PM

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