Farnborough defies ‘double-dip’ fears

Viewpoint

1st Sep 2010


This year’s Farnborough International Airshow was a dramatic, upbeat contrast to the gloom of 2008, when the global financial crisis was beginning to take hold. With passenger and cargo traffic figures consistently showing a rebound in demand, Airbus and Boeing between them notched up 290 firm aircraft orders and more than 200 commitments.


“The air transport recovery is well underway,” said Teal Group analyst Richard Aboulafia – not generally known for seeing the world through rose-tinted spectacles. Airbus’s top salesman John Leahy – habitually far more inclined to optimism – echoed that thought.


“The recession is definitely over [and] airlines are flying full again,” Leahy said, a statement that seems solidly backed by the pleasing traffic figures released in recent months by the International Air Transport Association (IATA).


Nevertheless, there are good reasons to remain cautious. Even as Farnborough’s organisers hailed the industry’s “mood of strong optimism”, the international press was reporting fears of a ‘double-dip’ recession as unemployment soars and massive debt holds back a real recovery. By the end of July, Goldman Sachs raised its odds of a double-dip recession to 25 percent, while Moody’s Economy.com said there was a one-in-three chance – compared with a one-in-five probability earlier in the month.


IATA Director General and CEO Giovanni Bisignani acknowledged the need for caution.


“The recovery in demand has been faster than anticipated. But, as we look towards the end of the year, the pace of the recovery will slow,” he said. “The jobless economic recovery is keeping consumer confidence fragile, particularly in North America and Europe. This is affecting leisure markets and cargo traffic.”


Growth from now on will largely depend on consumer spending, “which remains weak”, Bisignani said.


But analysts point out that there are key regions of the world where economies are in rude health, notwithstanding the gloom in the US and Europe. China is growing at a double-digit pace, while India, too, is cited by aircraft manufacturers as a likely key driver of demand for new aircraft over the next two decades. The Middle East is also likely to experience continued strong demand for aircraft.


Manufacturers were delighted by orders for 125 aircraft from the legendary founder of International Lease Finance Corp, Steven Udvar-Hazy, who now heads Air Lease Corp (ALC). Udvar-Hazy has always been known for his astute understanding of the market and many will have found his boldness reassuring.


Aboulafia, however, was not one of those people, expressing reservations that “about 85 percent” of the orders at Farnborough came from aircraft leasing companies. He points out that orders from lessors retain a degree of separation from actual travel demand – and the fact that the airlines themselves are not placing these orders suggests they may still be wary of the macroeconomic environment.
“The disconnect between a booming air transport industry and a shaky world economy might not last,” Aboulafia said. Even so, Teal is not anticipating a downturn in deliveries and forecasts healthy long-term growth. Still, the risk remains and “irrational exuberance is not warranted”.


Reed, Asian Aviation introduce industry awards


The next Asian Aerospace International Expo and Congress, being held on 8-10 March 2011 in Hong Kong, will be a doubly special occasion for this publication as we prepare – together with show organiser Reed Exhibitions – to host the first Aviation Awards Asia.


The goal is to create a truly Asia-focused event that aims to recognise excellence and outstanding achievements in the Asian commercial aviation industry. With aircraft manufacturers and analysts predicting that the Asia-Pacific market will be a primary growth driver for aviation and aerospace over the next two decades, the goal is to raise the profile of the key players in the market, rewarding innovation, excellence, professionalism and best business practices.


The awards will be presented against the background of a show that, in 2009 – even as the global slowdown took hold – attracted 12,616 attendees and 356 exhibitors from 28 countries. The eyes of the global industry will be focused on Hong Kong for the Expo, providing award winners with a valuable platform from which to draw the attention of peers, partners and customers to their achievements.


Awards will be handed out in six categories: Full-Service Airline; Low-Cost Carrier; Business Aviation; Maintenance, Repair and Overhaul; Technology & Environment and Airport of the Year.


Entrants may nominate themselves under the following conditions: they must show a measurable achievement in the calendar year 2010; the achievement should have had a positive impact on the Asian aviation industry; they should demonstrate a superior standard of products and services; and they should have a proven track record in shaping and leading the industry in their particular field. Entry is free of charge with the completion of an entry pack, available on-line or by e-mail.


Entries will be accepted starting in September, with the judges taking into account a range of factors, including: impact on business performance, originality, effect on operational safety, customer service and contribution to aviation in the Asia-Pacific region.
 

Asian Aviation at a glance