x Abu Dhabi, UAE Thursday 20 July 2017

Unrest puts damper on jet sales

Airbus has lowered its sales expectations for this year due to the regional unrest.

The Middle East subsidiary of Airbus aims to sell as much as 100 aircraft this year. Above, a worker inspects an A320 being built in Tianjin, China.
The Middle East subsidiary of Airbus aims to sell as much as 100 aircraft this year. Above, a worker inspects an A320 being built in Tianjin, China.

Unrest in parts of the region is dampening airlines' appetite to buy new aircraft, with Airbus lowering its sales forecast by dozens of orders in the Middle East this year.

But the European aircraft maker is still expecting a strong showing from the region, with sales to almost double compared with last year.

Airbus's Middle East subsidiary aims to sell between 80 and 100 aircraft this year to Middle East and North African carriers, up from 52 planes last year. The subsidiary's territory also includes the Indian subcontinent, Ethiopia and Afghanistan.

"Before the unrest I would have said 150, easily," said Habib Fekih, the Airbus president for the Middle East. "The potential was there at the beginning of this year in some countries where there is unrest today."

Since January there have been protests in parts of the Gulf, and regime changes and civil war in North Africa, causing a decline in business and leisure travel within the region.

As a result, Mr Fekih believes some of Airbus's anticipated orders could be put back by several months or into next year. "The unrest will create a slowdown but the recovery will be very fast," he said.

"In Egypt, in Tunisia and other countries, the fundamentals are there, and the business needs are there.

"Consequentially, the orders will only be pushed out by six months, nine months to one year, depending on the speed of the recovery."

He acknowledged some airline customers may decide to delay the delivery schedule for a small number of Airbus aircraft this year due to the unrest. Aircraft makers receive most of their payment at the time of delivery.

"We have some deliveries planned for August and September, and we will have to wait until then - the customer does not yet know how the unrest will affect them," Mr Fekih said.

Boeing, locked in a two-way race with Airbus, has a different perspective for this year.

Marty Bentrott, the regional vice president of sales at Boeing's commercial aeroplanes division, said airlines had largely filled most of their fleet needs in the years before the economic downturn.

"I don't see this year as big order numbers out of the region," he said. "We were never overly bullish about units out of this region based on the commitments airlines have already made and the backlog that needs to be delivered on."

Boeing last year maintained its almost 50 per cent market share, Mr Bentrott said, a performance highlighted by a US$9 billion (Dh33.05bn) order from Emirates Airline for 30 777 jets.

Despite the dampened demand, Mr Fekih said the airline industry had bounced back in strong fashion from recession before, and he maintained the long-term forecast for aircraft sales remained extremely positive.

"Thanks to strong growth from China, India and the Middle East, wealth and rising GDP is generating more opportunities for air transport. Whatever crisis we faced, it is quickly recovered by high rates of growth."

The rising price of jet fuel, which some airlines are passing on to passengers through higher ticket costs, could also stimulate demand for new aircraft as airlines choose more fuel-efficient jets, Mr Fekih said.

* with Bloomberg