The headline risk here, folks, is that if you wait for your central banker to give you insight into ...
Aircraft Demand Soars in Middle East
12/05/2012 8:30 am EST
Middle East airlines will acquire 2,370 new airliners, worth an estimated $470 billion, over the next 20 years, according to a market forecast, writes David Black of The National.
A new survey by US plane maker Boeing (BA) shows that long-range, twin-aisle aircraft—such as Boeing's 777 and 787 Dreamliner and the Airbus A330—will lead the Middle East's order books, reflecting the global priorities of the region's leading carriers, Etihad Airways, Emirates Airline, and Qatar Airways.
It forecasts that from this year through 2031, 730 aircraft—equivalent to 31% of the region's fleet—will be bought to replace current aircraft. The remaining purchases will be driven by the rapid growth of air travel in the region.
The forecast comes after Boeing and Airbus said carriers would need to start turning to the capital markets to buy aircraft, as demand for financing will exceed $100 billion next year for the first time, while traditional funding sources decline.
Aircraft makers may also have to step up their own funding for customers. "The scope of changes, along with a sentiment of uncertainty, will pressure manufacturers to provide backstop financing for future deliveries," Boeing said in a report looking at the financing market over the next five years.
Delivery financing will rise to $104 billion next year from $95 billion this year, said Kostya Zolotusky, the managing director at Boeing Capital Markets. The figure will rise to $132 billion in 2017.
However, a bond deal to finance Airbus A380s for Emirates has opened the door to more capital markets arrangements, said Zolotusky. The Airbus parent company, EADS, also envisages a "significant increase" in export credit financing costs, Harald Wilhelm, the company's chief financial officer, told investors yesterday.
Airlines in the Middle East currently have a backlog of 882 aircraft awaiting delivery, 62% of which are long-haul, twin-aisle, and large models.
"The Middle East has consistently outperformed the global aviation market over the past few years, achieving traffic growth well above the world average," said Randy Tinseth, the vice president of marketing at Boeing's commercial division.
"As the region's leading carriers continue their global expansion plans, we are seeing demand for new, efficient, long-haul aircraft capable of connecting their hubs with any city in the world. The region's carriers have significantly more long-haul capacity than airlines in other regions, including Europe and Asia."
According to the Boeing forecast, twin-aisle aircraft will account for 46% of the region's demand for new aircraft deliveries over the 20-year period, compared with 23% globally.
Single-aisle airplanes, such as the Boeing 737 and Airbus A320, will account for 45% of regional deliveries, while large airplanes such as the Boeing 747 and Airbus A380 will account for 8% of orders. Regional jets are expected to account for the remaining 1%.
Globally, Boeing predicted a long-term demand for 34,000 new aircraft valued at $4.5 trillion. "These new aircraft will replace older, less efficient aircraft, benefiting airlines and passengers and stimulating growth in emerging markets and innovation in airline business models," said the survey.
As of October, Boeing had a backlog of 4,234 aircraft, of which 337 have been ordered by customers in the Middle East. Forty-four customers in the region currently operate 476 Boeing planes.
"The Middle East's continued success can largely be attributed to the strong business fundamentals of its airlines and their ability to successfully leverage natural geographic advantages," said Tinseth.
"We are confident that our range of market-driving products and solutions will continue to play a critical role in meeting the rapidly growing needs of the region's aviation industry."
Related Articles on GLOBAL
The S&P 500 Index peaked on August 29 and has been treading water since then. (See chart below.)...
Global dividends reached record levels in the second quarter of 2018, reflecting strong earnings and...
In the current environment, almost any stock purchase is speculative; our latest recommendation &mda...