Flying in which direction?

Flying in which direction?

Reports suggest that the global airline industry will have trouble financing fleet expansions. Will the regional sector also be affected?

April 28, 2009 11:04 by Aarti Nagraj

According to a recent survey by global bank UBS, nearly 30 percent of airlines worldwide are likely to defer aircraft deliveries because of difficulties in securing finance. Only half of the airlines polled have obtained financing for aircraft deliveries this year and in early 2010, said the survey, which covered small and large airlines worldwide.

“Nearly all of our respondents are due to take new aircraft deliveries over the next 12-18 months with only half indicating that they have secured financing,” the report said. “Overall, financing looks to have deteriorated from our prior survey [in January] with 60 percent now indicating that they don’t believe financing is currently available.”

An aviation analyst with Standard and Poor’s, Shukor Yusof, sees the situation worsening: “There’s still some way to go before the situation stabilizes,” he told AFP.

Middle East-based airlines have been some of the major aircraft buyers in the recent past; During the Farnborough air show in the UK last year, Abu Dhabi’s Etihad Airways, the single highest buyer at the event, placed 55 firm orders with Airbus worth $12 billion, including 10 A380s and 25 A350s. Boeing received orders for 45 aircraft from Etihad worth $9.4 billion, including 35 787 Dreamliners and 10 Boeing 777-30.

While Dubai Aerospace Enterprise placed an order for 100 Airbus planes worth $12.6 billion, fly dubai, Emirates’ low cost carrier is buying 50 Boeing 737-800s worth around $3.7 billion at list prices. Saudi Arabian Airlines and Qatar Airways also placed big orders at Farnborough.

Emirates Airlines, which received its first A380 last year and expects 58 more, also placed an order for 60 Airbus planes worth around $12 billion in July last year.

Observers in aviation-financing circles suspect the airliner will withdraw its orders from Boeing and Airbus SAS, says the Chicago Tribune.

However, Emirates senior vice president Nigel Page told the paper that there have been no talks of any A380 cancellations, adding: “It is a time for being realistic. If we see that capacity is required, we put it into the market. We run an airline on the basis of being profitable.”

The International Air Transport Association (IATA) announced late last month that the air travel industry is expected to face a $62 billion (12 percent) fall in revenues this year. “Airlines will be making some tough decisions to stay afloat as we head for industry losses of $4.7 billion in 2009,” said Giovanni Bisignani, IATA’s director general and CEO.