25% Of Aircraft Orders At Risk

A new analysis finds that a quarter or more of the commercial aircraft backlog at Boeing Co. and Airbus could be at risk as high oil prices continue to batter airlines.
The two aircraft builders have taken comfort that the hardest-hit segment of the industry--U.S. airlines--accounts for just 12% of their backlogs. But Robert Stallard, a director at Macquarie Capital, warns that orders from undercapitalized startups in Asia and Europe and carriers with overly aggressive growth plans also are at risk. He believes 25-30% of the backlog of commercial aircraft orders could be deferred or canceled.
Take SpiceJet Airlines, a low-cost Indian startup. Stallard questions whether the carrier has a strong enough balance sheet to secure credit for the 16 Boeing 737-800s it has ordered and says SpiceJet might not even qualify for a sale/leaseback. "The question that has yet to be answered is not whether there will be a downturn, but how bad it will be," says Stallard.
There are two schools of thought on how to answer. Optimists believe that with backlogs equal to seven years worth of production, Boeing and Airbus can afford to lose orders and still make it to the industry's next up-cycle with minimal pain. They argue that demand for air travel should continue to grow in places like China and India, making up for declines in other regions.
The second, more negative answer is that a step change in global energy demand has created a permanent era of high prices and sent the airline industry into uncharted territory.
20/06/08 Joseph C. Anselmo/Aviation Week, NY

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Categories: Foreign Jun 2008, Indian Aviation- In General Jun 2008