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From: Jacob Snyder9/18/2009 11:13:11 AM
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Airbus Sees Healthy Long-Term Demand for New Planes

PARIS — While the world’s airlines will continue to suffer steep financial losses in the short term, Airbus predicted Thursday that demand for new aircraft would remain healthy over the next 20 years, based on expectations of steady air traffic growth in the developing world and the rapid expansion of low-cost carriers.

The company, the plane-making unit of European Aeronautic Defense & Space, forecast that airlines would buy nearly 25,000 new jets through 2028, with a market value of $3.1 trillion. That represented an increase of 2.7 percent from its previous forecast in February 2008, when air carriers were reeling from the initial brunt of the global economic crisis.

Airbus, which expects to secure orders for around 300 planes this year, also said the steep decline in world air traffic would probably stabilize in 2010 and could rise by as much as 4.6 percent — not far from the average 5 percent growth over the past 30 years. It forecast a decline in 2009 traffic of 2 percent to 4 percent.

“Air transportation is a growth industry and an essential ingredient in the world economy,” said John Leahy, the chief salesman for Airbus.

The International Air Transport Association said Wednesday that it expected the world’s airlines to lose a combined $11 billion this year on top of a $16.8 billion loss in 2008. But despite those hefty losses, Mr. Leahy said Airbus had seen relatively few order delays and cancellations.

“A lot of people have talked about massive cancellations in the recession, but that’s not really true,” Mr. Leahy said at a presentation in London. He said Airbus had received fewer than 40 cancellations this year, less than 1 percent of the company’s order backlog of around 3,600 planes. Still, he acknowledged that many customers were having difficulty securing financing and had postponed deliveries — some by several years.

“I think it’s going to be a difficult winter,” Mr. Leahy said, noting that while airlines had managed to fill most of their seats during the peak summer travel season, many had cut fares, leaving them with less cash.

“At some point, we see a continuation of some requests for deferrals, but even that is already included” in the 20-year forecast figures, he said. He declined to specify how many orders had been delayed so far.

The company’s U.S. rival, Boeing, has at least 64 order cancellations this year, almost all of them for its forthcoming 787 Dreamliner, which has been delayed more than two years by production snags.

Analysts have warned that the ballooning industry losses are almost certain to lead to additional delays and cancellations of orders in the months to come. Without steep cuts in production by both Boeing and Airbus, that could lead to significant surpluses of aircraft on the market, which could weigh heavily on jet prices. Analysts at UBS forecast last month that there would be a global surplus of 1,400 commercial jets by the end of this year.

“We’re still very cautious,” Mr. Leahy said by telephone, though he insisted that global overcapacity currently stood at no more than 350 planes. “Right now, there is more downside risk than upside potential.”

Airbus said it continued to see the greatest demand for passenger planes in the Asia-Pacific region, particularly in China and India. Asia was expected to account for 31 percent of new aircraft sales over the next two decades, followed by Europe, with 25 percent, and North America, with 23 percent. Sales in Europe and North America will largely be driven by the need to replace older, less fuel-efficient fleets, as well as by the continued expansion of low-cost carriers, which currently represent about a fifth of all seats sold.

More than two-thirds of the new planes to be sold will be single-aisle jets like the Airbus A320 and the Boeing 737, which are used heavily by low-cost airlines, Airbus said. Large twin-aisle planes like Airbus’s planned A350-XWB and the Boeing 787 will probably represent about 25 percent of the aircraft sold, while planes that seat 400 or more passengers — the A380 and the Boeing 747 — will be about 7 percent of the market.

The 20-year forecast from Airbus compared with one published by Boeing in June, which predicted sales of 29,000 commercial planes over the same period, down from a 2008 estimate of 29,400 planes.
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