Nose up for aviation sector, bosses too

Orders nudge $100bn at the Farnborough Air Show and a new survey shows aviation chiefs are upbeat on growth prospects. Ciara Sutton asks whether, despite recent expectations, the sector may be heading for clearer skies ahead.

Published

6 months ago

Categories

Finance, Technology

Topics

Finance, Aviation

People

Ciara Sutton, Simon Derrick, Damien Lasou

Places

Russia, Europe, Asia, Latin America

Companies

PricewaterhouseCoopers LLP, AIR France-KLM, Boeing, Airbus, Lufthansa

Transcript

As the Farnborough Airshow draws to a close, Airbus and Boeing orders soar close to the $100 billion mark. The big demand for new passenger jets comes despite already full order books. Recent profits warnings from airlines such as Lufthansa and Air France-KLM had stoked fears of a slowdown in demand for new aircraft. But expanding middle classes in Asia and emerging markets such as Latin America have boosted travel demand, after the aviation industry suffered deep losses after the 2008 downturn. Aviation Analyst Damien Lasou. (SOUNDBITE) (English) ACCENTURE AVIATION ANALYST, DAMIEN LASOU, SAYING: "The economy is still growing in those countries and this is the underlying driver of the new aircraft orders." Prior to the air show, Boeing had a comfortable lead in orders over rival Airbus this year. But Europe's Airbus has racked up over $60 billion in orders, boosted by demand for its re-engined and more fuel-efficient A330. Shares in Airbus did take a tumble this week however, dropping 2.5 percent after the company said it may cut A330 output. It's focussing on a transition towards an upgraded model launched at the show. The overall mood at this year's sell-out show was high. And that optimism is also reaching the airlines, according to a study by PriceWaterhouseCoopers. The survey of CEOs from different sectors revealed airline CEOs to be the most confident about a boost in revenue over the coming year. The global industry is expected to earn a net profit of $18 billion this year, up from an estimated $10.6 billion last year, as they focus on joinT ventures driving growth. BNY Mellon's Simon Derrick says transport stocks could be taking a turn for the better. (SOUNDBITE) (English) HEAD OF GLOBAL CURRENCY RESEARCH AT BNY MELLON, SAYING: "There's plenty of other sectors that people have enjoyed, technology most obviously. But at a time when those other sectors, a lot of people feel are overvalued and people are looking for something relatively better, maybe transport is starting to come back. Certainly in a global economy that feels, despite things like Europe and what's happening in Russia, feels a little healthier, then maybe transportation is the time to get back in there." But while the airlines may be hedging their bets on mergers and joint ventures driving growth, analysts warn cross-border regulatory hurdles remain a challenge.