ANALYSIS: Orders slow as deliveries soar in Southeast Asia

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The era of mega-orders from Southeast Asia’s airlines seems over for now, as attention turns to how those carriers will absorb the more than 1,600 jets slated for delivery in coming years.

That backlog has been boosted in recent years by major orders from the likes of AirAsia, which has nearly 330 A320s (including 264 A320 neos) on firm order. Not to be outdone, rival Lion Air last year ordered 234 A320 Family aircraft, in addition to its backlog of over 300 Boeing 737s.

The spending spree has not just been in narrowbodies, with AirAsia X ordering a further 25 A330-300s in November 2013. It also maintains an order for 10 A350-900s.

Those massive orders have created a large pipeline of commercial jets coming into Southeast Asia over the next 10 years. Data from Flightglobal’s Ascend Online Fleets database suggests that deliveries will peak next year with 227 commercial jets, before numbers settle down closer to the 100 mark over the remainder of the decade.

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Flightglobal Ascend

That has led to some concerns views about how the region's airlines, especially the low-cost carriers’, will be able to absorb all that capacity.

“Both AirAsia and Lion Air will need double digit traffic growth annually to profitably assimilate the capacity ordered for delivery through the end of this decade and beyond,” says Rob Morris, head of advisory at Flightglobal’s Ascend Advisory service.

But Rodger Roberston, a former aviation lecturer at the University of New South Wales, does not see major cause for concern.

“Even if the growth in fleet is more than the forecast growth in traffic, then two things happen: yields decline and growth is stimulated and/or the airlines sell the aircraft to others outside the region,” he says. “So it is not a doomsday outlook when there is a significant amount of capacity being ordered.”

The orders bonanza has also extended to regional stalwart Singapore Airlines, which placed two significant orders last year. As a result, it now has 120 aircraft on order, which eclipses its existing fleet of 102.

In May, the Star Alliance carrier announced an order for 30 additional A350-900s, taking its firm order backlog of the type to 70 with 30 options. That transaction was linked to its decision to return five A340-500s to Airbus as a result of its cancelling its nonstop services to Los Angeles and Newark.

SIA also became the launch customer for the 787-10, with an order for 30. That came as something of a surprise given its large A350 orders and the fact that it transferred its 20 787-9s on order to its longhaul, low-cost subsidiary, Scoot.

Morris says that purchasing both the 787 and A350 will allow SIA to maintain the status quo with its fleet, and diversify its risk between both manufacturers.

“The 787-10 appears to me to be an A330-300 replacement, offering similar payload-range performance on their ‘regional’ routes at substantially improved economics,” he says. “I guess the A350s will be used on regional routes currently served by 777-200s and some longer-range routes.”

While SIA has played a leading hand in those two aircraft programmes, it has not shown any interest in ordering the 777X or A350-1000 as future replacements for its 777-300ERs. Chief executive Goh Choon Phong said in November that it had not decided when it would issue a request for proposals for the two aircraft.

Who’s next?

It appears that there will be a number of competitions for new aircraft sales ahead in Southeast Asia, however they will not be in the same sorts of volumes as the AirAsia and Lion orders.

“Whilst there will inevitably be some element of further replacement orders from competing carriers in Southeast Asia it’s difficult to see similar large orders in the region for short and medium-haul operations,” says Morris.

Nevertheless, there are some carriers that are going to be in the market for the 737 Max, A230neo and CSeries to replace their narrowbody aircraft over the long term. Garuda Indonesia, Malaysia Airlines, Tigerair and Vietnam Airlines are among those expected to move soon.

Ascend tips that Garuda Indonesia and Philippine Airlines will soon have to look at ordering the A350 or 787 to replace their A330s. Lion is also rumoured to be looking at ordering additional 787s, which would join the five 787-8s it has on order.

Malaysia Airlines (MAS) is understood to be close to an order for the A330, A350 or 787 as replacements for its 777-200ERs, having already ruled out the 777X. The A330-300HGW is seen as the frontrunner due to the large number of A330s already in the carrier’s fleet.

MAS has also indicated that it could consider adding more A380s to the six it now has in service, although the airline’s commercial director Hugh Dunleavy told Flightglobalin November that there were some risks to that idea.

"At the moment, we're very happy with how the A380s are performing but from a business risk perspective, we also have to look forward to say what if there's a downturn and I have these big planes out there,” he says.

“We're keeping it under review to see if we receive more opportunities to fly it to new locations.”