Airline analysts are confident the backlog of aircraft will be sustained during the next few years, even if fuel prices remain high.
Addressing the audience at the Flightglobal's Ascend Finance Forum 2012 in London, Guy Brown of Oriel Securities says the current backlog of more than 8,000 Airbus and Boeing aircraft represents seven to eight years of production and six years of increased production rates.
Airbus reached rate 40 on its A320 Family aircraft in the first quarter and is looking at 42 aircraft a month by 2014. The Boeing 787 will reach rate 10 by the fourth quarter of 2014. Brown adds that A330 rate 11 is examined for the second quarter of 2014, while rate 50 for single-aisle aircraft is being assessed by Airbus and Boeing.
"The key issue is whether the OEMs can deliver technically, but their backlog is supported by high fuel costs. Since 2003 fuel costs as a proportion of airlines' operating costs has more than doubled. The industry is offering a solution: new fuel efficient aircraft," he comments.
Brown supports his view of the industry essentially having three years of sustained production growth on historical trends. "In the last downturn delivery slots got massaged. Middle East and Asian carriers took the unwanted slots. It gives me confidence now that even if some airlines are not taking all those slots, lots of Western airlines with strong balance sheets will move to more fuel efficient fleets."
Equity analyst Tim Marshall acknowledges that there have been more deferrals and cancellations this year compared with last year but argues that US carriers' fleets need replacement. "That's part of the orderbook that has not been there over the past few years," he says.
"Now the question for the financial community would be whether it could be used or new aircraft, but there are lots of leasing companies with slots without customers yet," he adds.