Manufacturers will continue to be hit hard by falling orders

It was becoming clear before the 11 September attacks in the USA that 2001 was going to be bumpier than predicted. With the full extent and duration of the post-11 September passenger-traffic collapse still unclear, it may be impossible to pinpoint exactly when the cycle will bottom out.

Airbus and Boeing delivered 840 aircraft last year, up slightly on 2000. Based on their own estimates, manufacturers will see shipments tumble by 20% this year to around 660 units. A further drop to 600 aircraft is expected for next year.

A year ago, 2001 was expected to be the start of the next cyclical upturn as Airbus boosted output towards a target of 450 aircraft a year by 2003, and Boeing maintained its 500-plus level of 2001. Shipments for both companies were due to return to record levels of more than 900 aircraft by next year. However, by August 2001, manufacturers were already beginning to ease back the throttle, though still envisaging a growth in delivery numbers.

Last year, around 520 orders (net of cancellations) were secured by Airbus and Boeing airliners, resulting in a 10% fall in backlog. Clearly, the forecast for the order intake this year is bad, though numbers are uncertain. For reference, the last deep sales trough was in 1993-4, which saw orders fall below 300 net of cancellations.

One aerospace analyst described the industry in the immediate aftermath of 11 September as "uncertain, unpredictable and unforecastable". Although a pattern has emerged in the last three months, this observation is essentially still true, and explains why there are some wide discrepancies between output forecasts.

Lowest levels

Boeing says that Deutsche Bank, Goldman Sachs, Merrill Lynch and Morgan Stanley are predicting it will deliver around 340 aircraft next year, and Airbus around 260-280. However, Lehman Brothers is much less hopeful, saying that Airbus will ship only 200 aircraft and Boeing 260. If these estimates prove correct, output will be at its lowest levels since the post-Gulf War era of the mid-1990s.

Analysts are still trying to determine the impact of the events of 2001 on passenger traffic, and when business will recover to pre-11 September levels.

Boeing's "best-guess" is that world revenue passenger kilometres will fall around 5% year on year, compared to a 3% drop after the 1990-91 Gulf War - until now the only traffic decline since the inception of mass air travel. Recovery will also be hampered by low gross domestic product growth worldwide, only 1.3% last year, and expected to be around 1.5% in 2002. Barring any further catastrophes, analysts believe recovery is at least 18 months to two years away.

The US domestic network has been the worst affected by the attacks, and despite cutting capacity by 20-30% the airlines are still flying too many empty seats. Boeing calculates that as a result of ticket-price discounts, US airlines' break-even load factor post-11 September is a massive 88%. But the carriers are only averaging 61%. Clearly, if traffic doesn't start to recover quickly, more capacity cuts will be necessary.

The signs are that, at least over the festive period, traffic had begun to improve, with American Airlines, for example, having projected load factors "as high as the mid-80s". Although the airline said there were "encouraging signs that traffic is returning", it warned that it was "still losing millions of dollars every day because we're still selling seats at incredibly low prices".

The fall in demand forced Boeing to re-evaluate its commitment to the 717. But the slow-selling twinjet has been given another stay of execution with production to continue at a reduced rate. The fortunes of the latest Airbus narrowbody, the A318, due to start test-flights this month, have also suffered, as early customers such as British Airways and International Lease Finance seek to defer orders.

Airbus will be hoping that there is no decline in the industry's long-term confidence, as it endeavours to build on its 100-aircraft orderbook for the A380, and completes the design of the 550-seater. Similarly, Boeing will be keen to establish a clearer picture of airlines' future long-haul requirements as it works to define its Sonic Cruiser transonic airliner design ahead of formal launch commitment.

Regional sector

The regional market has been far less affected by the collapse, and, say analysts SH&E, US regional jet operations suffered only a 2.4% cutback after 11 September.

Last year, around 420 regional aircraft were delivered, of which 80% were regional jets and the remainder turboprops. Output is expected to fall by about a fifth next year, with the mix between the two categories staying the same.

It is in the regional sector where most of the action will be this year, specifically in the 70- to 100-seat market. Bombardier will work to complete flight-testing of its CRJ900 model, Embraer is scheduled to hand over the first example of its new170 model to launch customer Crossair, and Fairchild Dornier will roll out and fly the 728JET. But BAE Systems will wind up production of its 146/RJ model after20 years.

As the output figures show, the turboprop market continues to decline, as the demand for propeller-driven airliners slows to a trickle. Although there will still be niches where only a turboprop can work, it seems unlikely that any major new developments will be forthcoming in this sector as the availability of cheap, young, second-hand examples limits the market for new sales. This has been underlined by the fact that Raytheon has all but ceased production of the ubiquitous 19-seat Beech 1900D, leaving just ATR and Bombardier building turboprops.

Efforts to boost the fortunes of Russia's airliner industry took a positive turn last year, with state funding being approved for the lease of indigenously produced aircraft to the region's airlines. Whether this will enable production rates of newer generation types such as the Ilyushin Il-96, Tupolev Tu-204, and Tu-334 to achieve economically feasible levels could become clearer this year.

Source: Flight International