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Analysts call attention to cracks in widebody demand

Aerospace analysts are calling attention to indications of easing demand for widebody aircraft, with some suggesting that manufacturers could eventually respond by trimming some production rates.

"We are in the correction decade" for widebody aircraft, Richard Aboulafia, vice-president of consultancy Teal Group, said last week. He notes that the market value of twin-aisle aircraft deliveries doubled between 2010 and 2017, but has since flattened.

"It's a mixed kind of year," he says of the aerospace market. "The theme is two thoroughbreds and a herd of donkeys."

The thoroughbreds are narrowbody passenger jets and military fighters, according to Aboulafia, while the donkeys include widebodies, regional aircraft and everything else.

Aboulafia spoke during the Pacific Northwest Aerospace Alliance annual meeting near Seattle.

“The widebody market remains under pressure, with over 80 cancelled orders during [2018], adding to sluggish sales and leasing demand," says a 2019 market outlook published by aircraft lessor Avolon. "Any remaining OEM ambitions to raise widebody production rates should be tempered by these market conditions, with rate cuts now a more likely, and desirable, outcome.”

In 2018, airlines cancelled orders for 35 Boeing widebodies, including 27 787s and eight 777s, according to Boeing's data. Carriers cancelled orders for 48 Airbus widebodies last year, including six A330-800s, four A330-900s and 22 A350-900s, Airbus reported.

That trend has continued into early 2019, with notable news last week that Emirates cut 39 aircraft off its A380 order, precipitating Airbus's decision to cease A380 production in 2021. Emirates, however, offset the A380 cuts by ordering 40 A330-900s and 30 A350-900s.

Airbus also last week said it is talking with Etihad about that carrier reducing its A350 order by 42 aircraft.

Despite cancellations, both Airbus and Boeing logged an uptick in widebody orders last year, with Boeing leading by a wide margin.

Thanks largely to 787 demand, the Chicago-based manufacturer added orders for 218 widebodies in 2018, up from 167 in 2017, Boeing reported.

Toulouse-based Airbus added 71 widebodies to its book last year on strong A350 demand, up from 55 widebody orders taken in 2017, it reported.

At the end of January, Boeing's widebody backlog stood at 1,194 aircraft, compared to the 1,027 widebodies on Airbus's books.

Aboulafia believes current demand supports Airbus's A350 production rate of 10 aircraft monthly and Boeing's plan to boost 787 production this year from 12 to 14 aircraft monthly.

But he and others question how long manufacturers will be able to support such rates.

In a 13 February research note, financial services company Canaccord Genuity noted that "questions on the sustainability of the higher 787 rates" will arise unless Boeing lands at least 94 787 orders this year.

But airframers remain optimistic. Boeing anticipates that in the next 20 years airlines worldwide will need 31,400 narrowbody passenger jets and 8,070 widebody passenger jets.

The company has had "nine strong years, and it looks like we are on the doorstep of the tenth", Boeing vice-president of marketing for commercial airplanes Randy Tinseth said at the Aerospace Alliance event.

Airbus likewise sees continues strong demand, though in January incoming chief executive Guillaume Faury said Airbus sees "a reduction in the speed of growth". But, he said airlines are better prepared than previously to cope with slowing conditions adding that demand for single-aisle aircraft will remain "robust".

Airbus, which delivered an average of 52 A320-family aircraft per month in 2018, aims to up production to 60 this year and 63 in 2021, it has said. Boeing likewise plans to increase 737 production from 52 to 57 aircraft monthly this year before possibly further ramping production.

While Aboulafia agrees narrowbody demand remains strong, he predicts a fall-off in the early part of next decade.

"Everyone will build too many planes," he says.

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