Market fears of a new aircraft surplus are exaggerated in the face of falling oil prices, argues the chief economist at Flightglobal's Ascend consultancy
"I just don't see this huge capacity glut coming down the pipeline where the OEMs are pumping out aircraft even though the demand is not there," Peter Morris said today at the ISTAT Europe conference in Prague. "One thing we have not seen is a systematic cancellation when fuel prices halve – people are clearly committed because the new product is there."
It is "highly unlikely" that airlines would be looking to cancel aircraft simply because of a short-term change in fuel prices, he adds.
"I am really quite bullish, not based on any production rates clearly, but the manufacturers are not in the business of shooting themselves in the foot. If they find that they up production rates, and at those rates orders aren't coming, they will ease back again."
Morris likens demand for new-technology aircraft to that for the Apple iPhone.
"Who buys the old iPhone? There is an element of that here. Yes, you can perpetuate the business model for another year, if fuel prices stay down, but ultimately there is a better product in the marketplace being produced by the manufacturers," he says.
If there are any possible risks, he reckons they would be in a high-fuel price environment.
"The risk would be for the older aircraft, not the newer ones," he says. "But I am relaxed and think the manufacturers understand their marketplace. There is a lag involved in this orderbook anyway, and the manufacturers can calibrate accordingly."
For narrowbodies, Morris acknowledges there "may be a risk of supply exceeding demand", based on firm orders, but these gaps would appear towards the end of the decade, according to the Flightglobal Fleet Forecast for the next 20 years.
"Nonetheless, it does not look like there is a huge divergence between the manufacturer order plans for narowbodies and what we are projecting in our fleet forecast that presumes certain behaviours for aircraft retirements."
On the twin-aisle side, the surplus looks to be of a "slightly higher risk", but this could be a result of "factors involved given the cost of widebodies, so there is perhaps an expectation that people are a bit of more wary about orders than perhaps they would be for narrowbodies", he says, adding: "We do see a divergence between what we are putting in the marketplace in our forecast and what manufacturers are planning to do."
He takes a positive view of the make-up of the customers behind these aircraft orders: "What is interesting is the sheer number of different entities involved and the degree of diversity in the airline customer base."
Source: Cirium Dashboard
