The atmosphere at the Farnborough Air Show is always electric – with the excitement of new aircraft types and the buzz of new orders. Plane manufacturers set out their stalls and airlines cluster round like bees at the aviation industry’s honey pot. But this year is there a danger of a shopping frenzy?
Ahead of the Show I caught up with Boeing’s VP Marketing, Randy Tinseth, who was in London to reveal the company’s Commercial Market Outlook. I wondered what he might see in his crystal ball? In fact, what Boeing does see is a need for almost 37,000 new aircraft over the next 20 years. Whilst 42% are seen as replacement aircraft, 58%, ( 21,000 aircraft) are for growth.
Much is explained by the increased frequency in direct flights enabled by smaller long haul wide bodies such as Boeing’s 787 and Airbus’s A350 – and much too by the continued rise of short haul Low Cost Carriers and growing Asian markets.
Of course a forecast is a forecast and Boeing does “caution” very effectively. Only time will tell how well current projections match reality but at present there is certainly evidence that there may be storm clouds on the horizon for at least some of the industry’s airlines.
I recently debated with one European CEO as to how and if the market can absorb the slew of short haul capacity coming its way with massive orders from amongst others, Ryanair, easyJet, Norwegian and IAG.
We’ve already had profit warnings from Air France KLM and Lufthansa, both worrying about excess capacity across the North Atlantic.
Lufthansa has revealed a new strategy to tackle its woes including capacity cuts and plans to launch a mini Long Haul Low Cost from late next year.
This move to long haul LCC is in itself a broader development that seems to becoming fashionable: Norwegian has started its US flights from Gatwick, Canada’s Westjet is trying some modest forays into Europe and talking about adding wide body capacity. Airbus’s decision to launch the new A330 NEO with its lower capital and seat costs could encourage others to join in too.
Add this to the melting pot of the Gulf carrier’s who are in my view more coherent in their expansion plans and it seems to me that in some cases – though not all – the need for capacity discipline is in danger of being overlooked.
Regarding Boeings’ market outlook, the long-term trend is always upwards – but can the industry succeed in retaining and improving on its historic but fragile profitability?
It’s issues like these that make Farnborough such a fascinating place to be in the summer.
Leave a Reply