Tuesday, July 1, 2008

Farnborough '08

That time of year is coming up...July in the the UK...Wimbeldon and the Royal Henly Regatta (Go Columbia Lions!).

But for aviation industry execs and enthusiasts it also means the Farnborough International Airshow. As far as the commercial aviation sector is concerned the topics will revolve aroung one word: OIL.

Yep the price of black gold has airlines teetering on the edge of bankruptcy or in some cases total collapse. Two years ago no one was even talking about oil being near $150/bblbut going into this years airshow airline execs and the aerospace industry still have to find a way to survive in a world where oil can reach to $200 or even $250 per barrel.

As far as airline fleets are concerned, the industry has two ways of responding:

  1. Permanently park fuel inefficient fleets and reduce capacity system wide

  2. Replace older aircraft with newer fuel efficient aircraft

There is a fine edge between both options with many airlines retiring old airplanes but also deferring current orders and outright canceling them as evidenced by Air Deccan, Kingfisher, jetBlue and Skybus' fleet actions (well the later had to liquidate so it doesn't make sense to keep those A320 orders alive).

Some are moving forward with re-fleeting plans which includes buying up 787, 777, 747-8, A350, A330 and A380s as well as filling up on the narrowbodies.

American Airlines while now charging $15 for th first checked bag is also talking about accerating 737 deliveries in order to repalce the MD-80s that comprises the largest portion of its fleet. This is an example of what awaits aircraft manufacturers. The "healthy" airlines will move up purchases of new airplanes to get the older ones out of services while hte "sicker" airlines cannot simply afford to replace any airplanes and would rather cut services, capacity and routes while charging passengers higher fares and fees.

While cancellations and deferrals won't dominate the marketing efforts at Farnborough by Boeing and Airbus, they will undoubtedly will tout the new orders that will be announced there.

So who is in the market and who will order. Here's my prediction (or guesses):

ILFC - they've stated that they plan on ordering up to 150 airplanes from both manufacturers. I would see them buying up a lot of A320 especially in the light of several cancellations and deferrals for the type which has probably opened up early delivery slots. The 737 hasn't experienced a high cancellation rate yet...it may be a matter of time for that to happen. I also think that ILFC will be in big for more 787s and will try and take up more 777s

Ethiad - they're talking to both manufacterers for 50 - 100 airplens in both narrowbodies and widebodies. My predicition is that Airbus will take the narrowbody part of the order while Boeing will win the widebody with a mix of 787, 777 and 747-8I. There is an unidentified order for 35 787-9 and I think Ethiad might be the one who placed this order.

Emirates - these guys are posting profits and doesn't seem to be weighed down by the price of fuel. Must also help being funded by the rulers of Dubai who are just raking in the oil profits. I can see them buying more 777 and perhaps converting some of the 747-8F to 747-8Is.

British Air and QANTAS - rumors have been floating around that both British Airways and QANTAS will buy the 777-300ER to help solve a capacity shortfall due to the 787 delays. This maybe announced at Farnborough

Boeing may reveal the purchasers of several unidentifed orders including:

23 787-8 (probably Air Canada)

35 787-9s (Ethiad is my guess)

10 777-300ER (Emirates)

15 777-300ERs (not sure on this one)

737s....Boeing has a boat load of unidentified 737 buyers. Here is a list of them for 2007 and 2008:

Model Order Date Total
737-800 30-Mar-07 4
737-800 11-Apr-07 2
737-800 26-Apr-07 15
737-800 29-Aug-07 16
737-800 28-Sep-07 34
737-800 4-Oct-07 5
737-800 31-Oct-07 1
737-800 15-Nov-07 30
737-700 4-Dec-07 6
737-800 4-Dec-07 9
737-800 27-Dec-07 15
737-800 11-Feb-08 1
737-700 20-Feb-08 15
737-800 20-Feb-08 15
737-800 11-Mar-08 40
737-800 12-Mar-08 1
737-800 18-Mar-08 6
737-800 11-Apr-08 2
737-800 5-May-08 20
737-800 27-May-08 30
Various 737s June, 08 37


I'll rcap the days action from Farnborough on this blog site.

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