Wednesday, May 29, 2024

Paris Air Show Ascends As Boeing & Airbus Grapple To Elevate Production Amid Skyrocketing Demand

By Aritra Banerjee

The aviation industry has encountered substantial transformations over the past four years since the last in-person occurrence of the prestigious Paris Air Show.

A concoction of a pandemic-ravaged travel sector, an exodus of skilled workers, and fluctuating demands for new jets have all substantially impacted the production rates of new aircraft.

Despite these challenges, the Paris Air Show, a seminal platform for businesses to display their innovative technology, commercial and military aircraft, and broker deals, makes a comeback on Monday. This resurgence occurs amidst a skyrocketing demand for air travel and a rampant appetite for jets among airlines. The challenge that lies ahead for aircraft manufacturing giants Boeing, Airbus and their myriad suppliers is whether they can sufficiently meet this accelerating demand.

“There’s increasing pressure on order books — this is driving up lease rates for used aircraft and compelling airlines to make concessions,” noted Andy Cronin, CEO of aircraft-leasing company Avolon.

Aviation analytics firm IBA predicted last week that the air show could witness orders for roughly 2,100 planes as airlines look to renew their ageing fleets and prepare for anticipated growth in air travel.

In the past year, Boeing has registered substantial orders or initial agreements from clientele including United Airlines, Saudia and the new Saudi carrier Riyadh Air. The colossal order placed by Air India earlier this year included aircraft from both Boeing and Airbus.

Turkish Airlines’ chairman informed journalists last month about plans to place an order for around 600 aircraft, comprising both wide-body and narrow-body planes. If executed, this order would represent the largest ever by a single airline, but it remains uncertain whether the deal will materialise in time for the air show.

Potential buyers at the show may include Delta Air Lines, Malaysia Airlines, and Air France-KLM, suggested IBA’s chief economist, Stuart Hatcher, in his June 15 forecast. Air Baltic could also consider increasing its Airbus A220 fleet, he noted.

“It may be premature to predict any Chinese expansion at this stage considering the current political climate, but I anticipate additional orders coming through,” Hatcher stated.

The prevailing challenge for manufacturers is elevating production rates. Booking slots for narrow-body jets such as Boeing 737s and Airbus A320s are filled for years. With the gradual return of long-haul travel, some airlines could be exploring expansion of their larger, long-range jet fleets.

However, global customers have been enduring longer than expected delays for new aircraft as Boeing, Airbus, and their supply chain across the world grapple to amplify production. This has constrained airline capacity, maintaining high airfare levels.

Qantas CEO Alan Joyce conveyed to CNBC last week his expectations of persistent supply chain issues extending into 2025.

In response to soaring demand, both Boeing and Airbus are scrambling to boost production rates for the upcoming years.

These production lags have also escalated lease rates for both new and older aircraft as airlines explore alternatives to increase flights.

IBA estimates reveal that new Boeing 737 Max 8 planes are leasing for approximately $350,000 a month in July, a rise from $305,000 in January 2020 at the onset of the pandemic. New Airbus 320s are leasing for $355,000, a jump from $325,000 over the same period. Lease rates for older models are nearing pre-pandemic levels.

“People just want their jets,” remarked Richard Aboulafia, managing director of AeroDynamic Advisory.

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