Airbus and Boeing are on course to ship more than 1,000 aircraft this year, but can the airlines absorb all these new jets?
Airlines will digest more new mainline airliners than ever before in 2011, as deliveries rise by 5% and surpass four figures for the first time.
Shipments were effectively flat last year, as Airbus's slight increase was offset by a small decline in deliveries from Seattle. Airbus again out-produced its rival - for the eighth year in succession - delivering 510 aircraft.
This breaks its previous all-time output record of 498, set the year before. Boeing's deliveries fell slightly from 481 in 2009 to 462, with the absence of 787 shipments beginning to tell on the airframer's output. As a result, the two rivals' combined delivery tally, 972 aircraft, was down slightly on the 979 delivered in 2009, which at the time was an industry record.
However, this will change in 2011 as the two manufacturers ramp up output across both their single-aisle and widebody lines. Boeing should finally begin to ship Dreamliners to customers, as well as the stretched 747-8.
Airbus's chief salesman John Leahy shrugs off the pessimistic outlook that, he says, was prevalent a year ago. "A lot of experts were talking about a 30% reduction in our production and Boeing's production, and that it was inevitable there was going to be a double-dip recession," he says.
Even the International Air Transport Association "was predicting the airlines would have the worst year they had ever had in the history of international aviation. Well, none of that turned out to be right," points out Leahy, adding that the industry is "resilient" and is "coming back".
The 780 narrowbodies produced by Airbus and Boeing last year accounted for about 80% of their total deliveries.
Both manufacturers are progressively ramping up to reach a combined output of almost 80 single-aisle aircraft a month within the next two years, based on already announced increases. And both are evaluating further boosts which could take their combined monthly rates into the 90-100 aircraft range.
"Even though the market has been able to digest 800 narrowbodies a year, any further rate increases will make the manufacturing industry vulnerable to a traffic drop, or anything that weakens airline profits," warns Richard Aboulafia, Teal Group's vice-president analysis.
Airbus expects its deliveries this year will rise to about 520-530 aircraft, while Boeing forecasts 485-500 shipments - its final tally dependent on how successful it is getting series production of the 747-8 and 787 under way. Whatever happens, production should surpass 1,000 units for the first time.
"The market's increased preference for new equipment has resulted in premature obsolescence for many older jets, weakening companies that depend on aftermarket margins for the bulk of their profit," says Aboulafia.
"If we do see traffic weaken but narrowbody rates stay high, that problem will get even worse.
"Right now, airline profits and passenger traffic look strong so there's not much risk other than a double-dip recession or sustained, very high fuel prices," adds Aboulafia.
"But there are certain areas of concern. Both Airbus and Boeing are using new, very high A330 and 777 rate plans as a way of hedging against a successful 787 ramp-up. But the market does not need 10 a month of all three types, particularly if the A350 XWB arrives on time."
Before 2009-10, when mainline airliner production has been at its highest, the industry's output previously peaked at 914 units in 1999. During that year, Boeing shipped an impressive 620 aircraft as production of its then newly acquired McDonnell Douglas plant in southern California was still in full swing.
From a sales perspective, Airbus and Boeing's combined order total is heading back towards the boom times of the last decade, but at 1,104 units is still well short of 2007's peak, when their net sales exceeded 2,700 aircraft. Airbus's usual late orders spurt again enabled it to leapfrog its rival and end 2010 as top dog. The airframer's salesmen managed to add more than 200 orders in December, taking its net order tally beyond Boeing's 530 aircraft, to 574.
The two companies suffered 165 cancellations between them, with Boeing coming off worse on 95. The combined order backlog rose slightly during 2010 to 7,000 aircraft - or roughly seven years of production at current rates.
This will be heading back towards the industry's all-time high of 7,500 orders when it peaked in 2008, as both manufacturers look likely to sell more aircraft than they build this year.
- After a strong rebound last year, what will 2011 have in store?
Source: Airline Business