Record Crop of Paris Orders Flies in the Face of Airline Balance Sheets

AIN Air Transport Perspective » June 27, 2011
The 2011 Paris Air Show generated record levels of new orders for airliners, ...
The 2011 Paris Air Show generated record levels of new orders for airliners, boosting industry confidence despite the fact that airlines are still struggling to achieve sustained profitability. (Photo: David McIntosh)
June 27, 2011, 8:58 AM

Paris Air Show organizers promised a feel-good factor from this year’s event, staged at Le Bourget Airport from June 20 to 26, and clearly they were in the know as to the deluge of new business coming their way. Airline bosses pitched up in the French capital with seemingly open checkbooks to order well over $100 billion worth of new aircraft and engines.

Unsurprisingly, much of the new business originated from carriers in key emerging markets such as India, China and South America. But a fair crop of new orders also came from airlines in regions that are not experiencing such prolific growth curves, such as the U.S. and Europe. The rising wave of fleet modernization and expansion appears doubly startling when one considers the current state of airline profitability, or rather the general lack thereof. Last month, IATA cut its profits projections for member carriers in 2011 by 54 percent, predicting a combined trading surplus of $4 billion, compared with the $8.6 billion it had envisioned as recently as last March.

Airlines continue to struggle with mounting costs, notably due to elevated fuel prices, and pressure on labor expenses, such as those felt at Virgin Atlantic Airways, where pilots have just voted in favor of taking strike action to contest a sub-inflationary salary increase. But, at the same time, airlines view the introduction of new, more-efficient aircraft as a long-term approach to confront some of the same cost issues. Furthermore, capital is now far more readily available to support such transactions, as evidenced by the high-level of purchase activity on the part of leasing groups at the Paris show.

Insofar as there really ever is a winner in the airshow-orders sweepstakes, the 2011 champion would have to be Airbus, which clocked orders and commitments for a record-breaking 730 aircraft worth $72.2 billion. Most significantly, the tally included 667 commitments for the new A320neo, taking the backlog for its re-engined narrowbody to 1,029. Boeing’s announced deals in Paris totaled 216 aircraft worth $20.4 billion.

ATR also enjoyed an epic Le Bourget salon, recording its highest ever tally of show sales there. ATR’s firm orders for 60 airplanes and options for 37 brings its year-to-date total for its twin-turboprop family to 88 firm and 42 options. Most of the latest contracts involved its newly certified ATR 72-600 model.

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