Summary
It has escaped the attention of most of today's sensationalist aerospace-industry commentators -- even those who sometimes reflect for as much as a whole minute before hitting the keyboard -- that the most recent IATA forecast of a $9bn global airline loss for 2009 is actually a 13.5% improvement on 2008's $10.4bn loss, exchange-rate variations aside.
Analysis
Downturns turn back up again. Everyone knows that and it is always easier to bemoan one's fate on the one hand, just as it is to talk up the situation on the other in a blatant attempt to kick-start recovery. Where Jeff Immelt's interpretation of the state of the US economy fits on this scale will only be known in retrospect, but key global aerospace-industry indicators are definitely turning positive.
A Few Facts & Forecasts...
Boeing has not announced production rate cuts on any of its narrowbody or widebody aircraft for 2009. According to current plans, the 777 rate will be lowered from June 2010 with a resultant annual net gain of 10 aircraft compared to strike-affected 2008's output (71 vs. 61), assuming no further adjustments.
2009 build rate for the 777 and 777F is currently running at 7.2 aircraft/month, which Boeing intended to trim in line with the projected build-up of 787 production next year.
Pending a revised production timetable and assuming 787 deliveries do not start up until Q4 2010 as opposed to Q2, the net 777 reduction/787 build-up could result in 86 deliveries -- 71 777s and 15 787s -- in 2010. Contrast that with 2009's projected figure of, er, 86 (7.2 x 12) if current build rates are maintained (as mentioned above, Boeing has not announced plans to cut this year).
So, no change, and even although these figures are of course forecasts, they are based on current, factual aircraft-production data, not on ancillary or peripheral non-aerospace indicators.
Why are production rates important? Aside from the obvious supply-chain revenue-stream impact, stable OEM output helps regulate the aircraft-leasing market due to simple supply/demand economics.
Have aircraft lease rates collapsed across the board in 2009? 'Course not. They are in fact showing remarkable resilience as in-demand aircraft can still command a realistic lease rate in relation to 2008's figures (rates are maybe down 5% across the board, taking into account model-by-model variation), which again reflects relative stability allowing also for seasonal adjustments and current economic constraints.
As mentioned in a previous GLG News article however, there is no precipice -- aircraft markets and aircraft finance are holding steady, a situation which will be further strengthened if AIG/ILFC is able to re-enter the marketplace before the end of 2009 with more than just rhetoric.
On Airbus' side, the picture is one of managed stability, give or take the standard leaps of mathematical imagination necessary to understand what's going on here in Europe. Airbus has announced it will cut production of its narrowbodies, currently running at 32.4 aircraft/month, to 32 aircraft/month from October 2009. Net loss is therefore about seven narrowbodies this year, to be offset by the intended Chinese output of 11 A320s in 2H09.
Without going too deeply into the widebody side of the Airbus business, which from an industry perspective is expected to come under more pressure when the preliminary results of the June 1 Air France Airbus A330 crash are released by French investigators tomorrow, July 2, there is once again no sign of OEM panic. Like Boeing, Airbus is not currently anticipating a further downturn in the market, longer-running aircraft-finance concerns notwithstanding.
EADS ceo Gallois has already said Airbus will deliver more or less the same number of aircraft in 2009 as last year. That was 483, so 480-485 in 2009 seems reasonable and certainly reflects overall market stability. Again, as with Boeing.
Sure, huge challenges remain for Airbus in the second half of this year, as they do with Boeing and the 787: Airbus has only delivered three A380s in 2009 so far, which means it will need to deliver another 11 in the second half of the year to meet its latest revised 2009 delivery total of 14. If it misses this reduced total, it likely won't be by much and with such low production rates anyway, a couple of niche aircraft here or there won't make much difference to the overall market.
For the mainstream widebodies (A330/A340), Airbus' rolling 12-month production rate is 7.3 aircraft/month, with a 2009 figure to date of 6.6/month. Unless the crash investigations leads to a grounding of the two types (got to be highly unlikely) and the resultant strikes by Airbus workers, this production rate should see Airbus deliver maybe 84 or 85 A330/A340s in 2009 -- against 85 in 2008. Managed stability, somehow.
And the final fact: as of July 1, 2009, Airbus and Boeing intend to keep overall production in 2010 to 2009 levels, give or take an aircraft or two. Further stability, with all its supply-chain and financial implications, in other words
So, whether Jeff Immelt is jumping the gun or seeing over the wall is, in a sense, neither here nor there, but his guarded optimism does seem to find some support in the production outlooks of the industry's two biggest players, Boeing and Airbus. And they call the tune...
