Aerospace analyst thinks the jetliner boom is nearing an end

  • By Dan Catchpole Herald writer
  • Wednesday, February 10, 2016 5:24pm
  • Business

LYNNWOOD — The commercial jetliner industry is riding a historically high wave, and its biggest players are ramping up for blue skies and happy days ahead.

But warning lights are flashing, some industry watchers say.

Airlines have been on an unprecedented spending spree fueled, in part, by low interest rates, steadily growing numbers of passengers, and — until the past few years — high jet fuel prices. Emerging markets, especially China, have been among the biggest buyers.

China’s economy has stumbled, though. Fuel prices have dropped and stayed low, making newer, more fuel-efficient airplanes less attractive for some airlines. Investment dollars that had flowed to emerging markets in recent years dramatically reversed course in 2015, with hundreds of billions of dollars fleeing for more stable markets.

“The factors that got us here are no longer really in play,” industry analyst Richard Aboulafia told attendees at the Pacific Northwest Aerospace Alliance’s annual conference Wednesday.

Plans by Boeing and Airbus to take airplane production to record-high levels by 2020 are “powered by hubris,” he said.

Aboulafia is vice president of the Teal Group, a consulting firm based in Fairfax, Virginia.

“We have a couple more years of gentle growth,” but not enough to justify the production increases the two aerospace giants are ramping up, he said.

If Boeing and Airbus don’t trim their plans, “then we are left with the mother of all hangovers,” Aboulafia said.

So far, Boeing customers have not been delaying or downsizing existing orders, said Randy Tinseth, Boeing vice president for marketing.

Yes, China’s economy has softened, but the changes are driven by a more consumer-focused economy, which is good for commercial air travel, he said.

The country’s aviation market is still vastly underserved and is headed for double-digit growth, Tinseth said.

At the same time, Boeing Commercial Airplanes announced Wednesday plans to cut its workforce to keep costs down.

Airbus expects China’s economy to slow down a bit in the next few years, but not enough to throw off the European airplane makers’ plans to ramp up airplane production, said Simon Pickup, strategic marketing director for Airbus Americas.

The Airbus Group plans to increase production of its popular single-aisle A320 to 60 airplanes a month in 2019. Those plans include a new final assembly line in Hamburg, Germany, which will be designed and built by Lynnwood-based Nova-Tech Engineering.

The Airbus A321neo, a larger version of the A320 with new engines, first flew Tuesday, and is slated for its first delivery by the end of the year. The plane has made up more and more of orders for Airbus single-aisle airplanes in the past few years. In 2014, it accounted for 36 percent of those orders. That was up to 40 percent last year.

The company is confident that a long-range version of the A321neo can meet market demand that used to be served by Boeing’s 757, which is no longer made, Pickup said.

On Wednesday, Boeing Commercial Airplanes CEO Ray Conner told employees in a webcast that the company is still considering making a new airplane to compete for those sales. Boeing could decide as soon as this year, according to company employees who saw the webcast.

At the same time, he stressed the extreme cost pressure Boeing faces from competition with Airbus and other factors. That reality is pushing the company to begin cutting its workforce, which has already been on the decline in Washington. It has dropped from 87,023 workers in late 2012 to 78,247 as of Jan. 26.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

Lynnwood
New Jersey company acquires Lynnwood Land Rover dealership

Land Rover Seattle, now Land Rover Lynnwood, has been purchased by Holman, a 100-year-old company.

Szabella Psaztor is an Emerging Leader. (Olivia Vanni / The Herald)
Szabella Pasztor: Change begins at a grassroots level

As development director at Farmer Frog, Pasztor supports social justice, equity and community empowerment.

Owner and founder of Moe's Coffee in Arlington Kaitlyn Davis poses for a photo at the Everett Herald on March 22, 2024 in Everett, Washington. (Annie Barker / The Herald)
Kaitlyn Davis: Bringing economic vitality to Arlington

More than just coffee, Davis has created community gathering spaces where all can feel welcome.

Simreet Dhaliwal is an Emerging Leader. (Olivia Vanni / The Herald)
Simreet Dhaliwal: A deep-seated commitment to justice

The Snohomish County tourism and economic specialist is determined to steer change and make a meaningful impact.

Emerging Leader John Michael Graves. (Ryan Berry / The Herald)
John Michael Graves: Champion for diversity and inclusion

Graves leads training sessions on Israel, Jewish history and the Holocaust and identifying antisemitic hate crimes.

Gracelynn Shibayama, the events coordinator at the Edmonds Center for the Arts, is an Emerging Leader. (Olivia Vanni / The Herald)
Gracelynn Shibayama: Connecting people through the arts and culture

The Edmonds Center for the Arts coordinator strives to create a more connected and empathetic community.

Eric Jimenez, a supervisor at Cocoon House, is an Emerging Leader. (Olivia Vanni / The Herald)
Eric Jimenez: Team player and advocate for youth

As an advocate for the Latino community, sharing and preserving its traditions is central to Jimenez’ identity.

Nathanael Engen, founder of Black Forest Mushrooms, an Everett gourmet mushroom growing operation is an Emerging Leader. (Olivia Vanni / The Herald)
Nathanael Engen: Growing and sharing gourmet mushrooms

More than just providing nutritious food, the owner of Black Forest Mushrooms aims to uplift and educate the community.

Molbak's Garden + Home in Woodinville, Washington closed on Jan. 28 2024. (Photo courtesy of Molbak's)
Molbak’s, former Woodinville garden store, hopes for a comeback

Molbak’s wants to create a “hub” for retailers and community groups at its former Woodinville store. But first it must raise $2.5 million.

DJ Lockwood, a Unit Director at the Arlington Boys & Girls Club, is an Emerging Leader. (Olivia Vanni / The Herald)
DJ Lockwood: Helping the community care for its kids

As director of the Arlington Boys & Girls Club, Lockwood has extended the club’s programs to more locations and more kids.

Alex Tadio, the admissions director at WSU Everett, is an Emerging Leader. (Olivia Vanni / The Herald)
Alex Tadio: A passion for education and equality

As admissions director at WSU Everett, he hopes to give more local students the chance to attend college.

Dr. Baljinder Gill and Lavleen Samra-Gill are the recipients of a new Emerging Business award. Together they run Symmetria Integrative Medical. (Olivia Vanni / The Herald)
Emerging Business: The new category honors Symmetria Integrative Medical

Run by a husband and wife team, the chiropractic and rehabilitation clinic has locations in Arlington, Marysville and Lake Stevens.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.