Boeing: Aviation industry remains strong

THE Boeing Company is bracing for a challenging aviation market in the short to medium term, but the manufacturer is optimistic that the industry's fundamentals remain strong.

Randy Tinseth, its commercial airplanes vice-president for marketing, said so far this year there has been only one cancellation for a Boeing 737, and an undisclosed number of deferrals, particularly from airlines in the US.

At the same time, however, other airlines outside the US have moved to take these positions and secure earlier delivery of their planes. Boeing is sitting on a firm backlog of more than 3,600 planes worth US$271 billion (RM878 billion).

"There have been 196 cancellations in the last 10 years. At the same time, we have received 500 orders, and the backlog is well-balanced across regions," Tinseth said at a briefing to Malaysian media at the Farnborough International Air Show 2008 in the UK recently.

He said Boeing has seen a rise in orders from airlines in the Middle East, where rising oil prices have led to prosperous and growing economies.

"Asia-Pacific is the biggest market for us, going forward. The economies in that region will continue to be robust," Tinseth said.

"We're seeing an increasing share of airplane deliveries to the Asia-Pacific region, as well as the Middle East, Latin America and the Commonwealth of Independent States (CIS)," he added.

This is a much more geographically balanced and stable long-term market, which is less vulnerable to swings in regional economies or other variations in demand.

He said Boeing's major concern in the long term is the global oil prices, which if continue to rise will affect economic growth and air travel. The International Air Transport Association estimates that airlines this year may lose between US$2 billion (RM6.48 billion) and US$6 billion (RM19.4 billion) from rising fuel costs.

"Looking at the fundamentals, we believe if oil prices settle down at US$70-US$80 (RM227- RM259) per barrel, it is sufficient to cover the margin and cost of bringing in new sources of fuel. Unfortunately in the near term, we expect prices to stay high and volatile," Tinseth added.

The Farnborough Airshow, which celebrated its 60th anniversary this year, attracted tens of thousands of visitors and over 1,500 exhibitors, making it the largest show to date.

Boeing signed orders for more than 150 planes at the event, including 35 B737-800s for Malaysia Airlines, which will be delivered beginning 2010.

The aircraft maker delivered 441 planes in 2007.