Paris Air Show

Orders drop cuts delivery delay

 - June 14, 2009, 9:07 AM

There is an upside to the decline in airliner orders, according to Airbus CEO Thomas Enders. “Airlines don’t like waiting seven years for delivery,” he explained at an EADS press conference in Paris on Saturday.

Now holding orders for some 3,500 airplanes, Airbus expects “up to” 300 new sales this year, he added, notwithstanding the dismal net order count of 11 airplanes the company has registered so far. The company’s existing order backlog has declined only very modestly.

Enders went on to underscore the company’s three top priorities, principally to deliver 480 airplanes this year, which would essentially mean no change from last year in production rates. Although Airbus has created “watchtowers,” or groups of people who monitor the situation and predict scenarios for the next 18 months, it has not yet issued an estimate for 2010 deliveries.

“There’s a difference between the airlines who ordered for growth and those who ordered to replace older aircraft…the latter orders are more secure,” stressed Enders. By now, he said, Airbus has already written off the “weakest” customers, leaving a backlog populated by “high quality” delivery commitments.  

Turning to the vital issue of financing for orders, Enders said that European export credit agencies would back at least 40 percent of this year’s deliveries–a figure he said he believes more or less reflects Boeing’s reliance on the U.S. ExIm Bank. “Our own finances are available to airlines on a selective basis–but we are not a charity or a bank,” he said.

The Airbus CEO’s second priority–protecting Airbus employees from layoffs–hardly amounts to a purely humanitarian pursuit, as some recent problems to which Enders referred–notably the A380 and A400M delays–resulted from a shortfall in “certain skills and competencies” Airbus can ill afford to lose, according to the chief executive.

“We need to ensure that our suppliers don’t make their own assumptions about our delivery rates [and cut their production in advance],” stressed Enders. “We must stay in convoy. We will have intensive discussions about this with them at the show this week.”  

While some analysts have called for 30- to 50-percent cuts in production, Airbus has actually pared rates by 15 to 22 percent. “We have had a policy of overbooking orders, especially for single-aisle aircraft,” as a hedge against cancellations. “So that will help us next year, and especially in 2011,” said Enders.

The company’s third priority, he said, relates directly to maintaining a sharp focus on medium- and long-term prospects, which, he said, remain fundamentally strong. “Air traffic will still double in the next 15 years,” said Enders, who noted that Boeing has recently corrected its forecast, but only marginally. “We both agree on [average annual growth of] four to five percent.”

One of the most serious threats both manufacturers face, however, appears to have only gained strength. “Too many people are taking hasty and only partially informed decisions about our industry,” said Enders. “If we don’t participate fully in the debate [over aviation’s impact on the environment], we can’t tackle this threat.

Toward that end, Airbus recently commissioned a report from Oxford Economics that concludes if growth in passenger and cargo traffic turns out to be one percentage point lower than currently forecast for the next 20 years, the number of jobs supported by air transport would fall by six million to 44 million, resulting in a GDP loss of some $600 million.