Asia’s mammoth appetite for aviation fast driving Airbus, Boeing

Bloomberg

Asia’s hunger for travel gave a lift to Airbus Group SE and Boeing Co. during the recently-held Farnborough Air Show. Carriers in China and Vietnam ordered new planes while those in India and Malaysia zeroed in on the manufacturers’ workhorse single-aisle jets.
Xiamen Airlines agreed to buy 30 Boeing 737 Max 200s worth $3.39 billion at list prices, while Donghai Airlines followed up by saying it will get 25 Max 8s valued at $2.75 billion. Jetstar Pacific in Vietnam signed a memorandum of understanding for 10 Airbus A320 ceos, while Standard Chartered Plc’s leasing arm ordered 10 current-generation 737-800s worth $960 million.
“Asia is very important to Airbus and Boeing,” said Mohshin Aziz, an analyst at Malayan Banking Bhd. in Kuala Lumpur. The airlines “that are showing strong growth are in Asia. They are looking at the long-term growth with their orders.”
Asian carriers made a good run in Farnborough as economic growth spurs demand for new routes and extra frequencies. The trend is prompting low-cost operators that have already amassed large order backlogs to add even more planes.
John Leahy, Airbus’s chief salesman, said at the show that a growing middle class in China, India and other emerging economies such as Indonesia will become increasingly central in driving demand for jetliners.
“When you have greater discretionary spending it’s been proven that you buy airline tickets with it,” Leahy said, adding that by 2035, 75 percent of people in what are currently viewed as emerging nations will be taking at least one flight a year. “That’s an awful lot of demand for seats in an awful lot of planes.”

Bullish Boeing
Boeing and Airbus were united in suggesting that recent economic turmoil, from Britain’s vote to leave the European Union to a commodities crash, will do nothing to dent long-term sales prospects.
Boeing lifted its 20-year forecast 4.1 percent from a year earlier, predicting demand for 39,620 new jetliners worth $5.9 trillion across the industry, with slightly more than half of that value coming from planes in the 737 and A320 category. Airbus sees a need for 33,000 more planes, with the overall in-service fleet
more than doubling from 19,500 to almost 40,000.
While a slowing of China’s economy has made headlines, travel has continued to expand at double-digit rates as the country undergoes a fundamental shift to consumption and services and away from industrial production, Randy Tinseth, a Boeing vice president for marketing, said in an interview at the air show.
“The part that’s growing above expectations is where aviation falls,” he said.
Xiamen’s memorandum of understanding envisages the supply of Max 200s – based on the 737 8 but with an extra door that permits a capacity of 200 – to its low-cost Jiangxi Airlines and Hebei Airlines units, according to a statement issued at the show. The airline, a subsidiary of state-backed China Southern Airlines Co., already had 737 Maxs on order and operates an all-Boeing fleet.
In the wide-body sector, billionaire entrepreneur Richard Branson’s Virgin Atlantic Airways Ltd. announced a long-awaited deal for Airbus’s largest A350 model as it seeks to replace aging A340s and Boeing 747 jumbos.
Shenzhen-based Donghai Air’s letter of intent also includes five Boeing 787-9 Dreamliner wide-bodies, giving the order a total value of more than $4 billion.
GoAir, among eight budget airlines operating in India, is one of only three carriers worldwide that have begun using the Neo upgrade of the A320, so that a follow-on order would provide a vote of confidence in a model dogged by issues with its Pratt & Whitney turbines since last year.