The price of oil has doubled off its low of only a few months ago, closing Friday (May 23) at around $61bbl. This is actually good news for Airbus and Boeing (and Bombardier and Embraer) as these companies struggle to protect their skyline (order backlog) over the balance of 2009 and in 2010.
Based on the forecasts that the airline industry will recover in 2010 and 2011, and on the hope that the financial markets will improve next year, Airbus and Boeing have been engaged in high-profile efforts to maintain production rates of the A320 and 737 lines in particular and the A330 and 777 lines as well.
Airbus previously announced it will reduce production on the A320 line from 36 to 34 beginning in October and that it froze rates on the A330/A340 line at 8.5/mo. Boeing previously announced it will reduce rates on the 777 line from seven to five a month from June 2010. Aerospace analysts believe Airbus and Boeing have to bring the narrow-body lines down into the mid-to-upper 20 range (or in some cases, even lower).
Airbus suprised reporters at its Airbus Innovation Days presentation in Hamburg this month when John Leahy said he thinks it possible the A320 rates could be increased to 40/mo by year-end 2010.
Increasing oil prices, while bad for the airlines and the consumer, are good for the aircraft manufacturers. This means airlines need to maintain plans to acquire fuel efficient airplanes to retire older equipment.
Scott, I understood that the problem for some airlines was not the airline’s lack of desire to buy new aircraft but rather the lack of funding. If this is true, then increased fuel prices will make little difference to these airlines (with no funding in place).
Unless of course the economy is recovering faster than expected and people are getting ready to loan large sums of money again.
Have I missed something?
Financing is a major concern, to be sure, but 2009 looks like it is financable; 2010 is more uncertain. But the global economy and the collapse of business premium traffic is where the fundamentals of the business raises the big concern about to take delivery or not.
Airbus and Boeing, by hook of by crook, will do what they can to be sure airplanes are financed. But if the global traffic tanks too deeply, financing airplanes won’t be as relevant as “nobody” to fly in them.