Airshow - Boeing sees Asia-Pacific fleet nearly tripling over 20 years

SINGAPORE Mon Feb 10, 2014 7:45pm IST

The Boeing logo is seen on a Boeing 787 Dreamliner airplane in Long Beach, California March 14, 2012. REUTERS/Lucy Nicholson/Files

The Boeing logo is seen on a Boeing 787 Dreamliner airplane in Long Beach, California March 14, 2012.

Credit: Reuters/Lucy Nicholson/Files

Related Topics



SINGAPORE (Reuters) - The world's biggest planemaker Boeing (BA.N) expects nearly half of the world's air traffic growth will be driven by the Asia-Pacific region over the next 20 years, but is monitoring local currencies to assess airlines' ability to meet orders.

On the eve of the Singapore Airshow, Boeing forecast the fleet of aircraft in the region would triple in size over the next two decades, sparking demand for close to 13,000 more planes valued at $1.9 trillion.

Air travel has surged in the region, driven by a rise in disposable incomes and low air fares offered by budget carriers, notably in Southeast Asia.

But Randy Tinseth, vice-president of marketing at Boeing Commercial Airplanes, sounded a note of caution, saying market conditions were being monitored closely for any signs of overcapacity.

"We are watching what's happening here in terms of currencies and in terms of economic growth," he told Reuters television.

After years of explosive growth, the region's budget carriers now face the possibility of overcapacity as deliveries accelerate, airlines expand into each other's markets and currency weakness threatens to dent economic growth.

By the end of the year, airlines in Southeast Asia will have 1,800 planes, while their order book is set to surpass the 2,000 mark.

This week's Singapore Airshow, Asia's biggest aerospace event, attracts the world's major commercial and defence manufacturers, as well as buyers in the form of airlines and military top brass. Billions of dollars in deals are likely to be finalised.

A spat between hosts Singapore and neighbour Indonesia has cast a slight pall over the event, and a series of meetings between their military leaders this week have been cancelled.

Singapore's government has been angered by Jakarta's decision to name a new frigate after two Indonesian marines executed for a 1965 bombing in the city state that killed three people.

Boeing estimated Asia-Pacific's fleet size would blow out to 14,750 over the next 20 years, from 5,090 in 2012.

"Asia Pacific economies and passenger traffic continue to exhibit strong growth," Tinseth told a media briefing. "Over the next 20 years, nearly half of the world's air traffic growth will be driven by travel to, from or within the region."

Similarly, rival Airbus (AIR.PA) sees Asia-Pacific as a lucrative market. It says planes on order make up 36 percent of the world total and the figure is rising.

Both Airbus and Boeing have committed to record production rates for their most popular models, but executives are closely watching the financial turmoil in key aviation markets, such as Indonesia and Thailand.

Asia Pacific is home to some of the world's biggest long-haul carriers and budget carriers AirAsia (AIRA.KL) and Lion Air have placed aircraft orders valued at billions of dollars and are among the biggest customers of Boeing and Airbus.

"They (low-cost carriers) have been able to provide a service to a part of the population that couldn't fly before. And so what they are able to do is, to reach into a country and help stimulate demand, very similar to what a Southwest or a Ryanair did over time," said Tinseth.

"Their growth is being bolstered by both the growth in income we see, growth in the economy, but also the fact that they are able to push their product into a greater base."


Full service carriers are also getting in on the act.

Singapore Airlines (SIAL.SI) is weighing a potential order for up to 40 of wide-body jets as it compares Boeing's revamped 777X against Airbus A350, sources familiar with the matter said.

The airline is looking at a potential order for as many as 40 777X aircraft in a deal potentially worth $15 billion at list prices, the sources said, asking not to be identified.

Garuda Indonesia (GIAA.JK) is looking to tie up a long sought deal with Airbus for around 10 A330 aircraft, a source familiar with the matter said, echoing a Bloomberg report.

Tinseth said the boom in low-cost carriers and demand for intra-Asia travel have fuelled a substantial increase in single-aisle airplanes.

Boeing's data projects that passenger airlines in the region will rely primarily on single-aisle planes such as the Next-Generation 737 and the 737 Max, a new engine-variant of the 737, to connect passengers. Single-aisle airplanes will represent 69 percent of the new airplanes in the region.

Carriers in Southeast Asia are due to take delivery of about 230 aircraft worth over $20 billion this year.

"As we would move forward, we are going to be watching that capacity growth very closely and asking ourselves, 'Will it change the yield market and the revenue market?'," said Tinseth.

"We see the capacity that's coming into the market within the bounds of our forecast, which is good but it's aggressive growth. And so you have to watch, especially as they open up new markets, where those markets will be and whether they will be successful."

Southeast Asian airlines' share price performance:

Southeast Asia aircraft deliveries

(Additional reporting by Tim Hepher; Writing by Jeremy Laurence)



Reuters Showcase

Documents' Leak

Documents' Leak

India widens oil leaks probe to defence ministry  Full Article 

Jim O’Neill Interview

Jim O’Neill Interview

'India can become world’s fifth-largest economy by decade’s end'  Full Article 

Food Security

Food Security

India will not cut multi-billion dollar food handout programme - PM  Full Article 

Ola's Expansion Drive

Ola's Expansion Drive

Taxi group Ola steps up expansion drive  Full Article 

Sahara Saga

Sahara Saga

Sahara's Grosvenor House hotel in London put up for sale   Full Article 

Suzlon Energy

Suzlon Energy

Suzlon expects to turn profitable in fiscal 2016: chairman   Full Article 

Eicher Motors Stake

Eicher Motors Stake

Volvo selling up to $300 mln worth of Eicher shares  Full Article 

Beef Trade

Beef Trade

Maharashtra clamps down on beef trade through new act  Full Article 

Budget 2015

Budget 2015

Budget announcements and reactions from the industry  Full Coverage 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage