Airlines are placing their bets, looking beyond pandemic to renew fleets

Planes are on static display on day five of the Dubai Airshow in Dubai, United Arab Emirates on November 21, 2019. REUTERS / Christopher Pike / File Photo

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PARIS / SINGAPORE / SEATTLE, Dec. 15 (Reuters) – As the world shifts to Omicron, some investors might expect the global jet market to wilt. Far from there.

Business has started to buzz again as airlines seek to acquire the greener passenger and freight jets that they believe will give them an edge in a post-pandemic recovery driven by predicted travel demand and relentless increase. Online purchases.

From Arizona to Amsterdam, some of the industry’s most savvy buyers are eyeing efficient jets for the second half of the decade, in a bid to get ahead of long waiting lists they believe could derail their goals. growth and environment.

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Singapore Airlines (SIAL.SI) on Wednesday launched a trio of major decisions expected in the coming days, with an interim order to replace its cargo fleet with a new A350 light cargo aircraft offering from Airbus (AIR.PA) . Read more

Decisions to purchase small passenger jets are expected soon from Air France-KLM (AIRF.PA) and the Australian Qantas (QAN.AX) read more.

“People are thinking about long term fleet plans and in particular ESG (environment, social and governance),” said Rob Morris, Global Head of Consulting at Ascend by Cirium.

“It’s about, ‘If I don’t think about my replacement cycle now, am I going to be left behind,'” he added.

Airbus and Boeing (BA.N) were sold on benchmark medium-haul models until the middle of the decade after a much larger earlier order boom that lost momentum when the pandemic wreaked havoc.

But with such long delays before jets can be delivered, attention is now turning to the second half of the decade and a move to get ahead of the queue for future capacity.

“This is a buyer’s market and a great time to take advantage of it,” aviation consultant Brendan Sobie said.

The starting gun was fired last month when two industry heavyweights, Air Lease Corp (AL.N) executive chairman Steven Udvar-Hazy and a stable of airlines led by founder of Indigo Partners , Bill Franke, have ordered more than 300 planes at the Dubai Airshow.

‘FRENCH FOOD’

Some were skeptical, noting the public relations value of such events. But others said delivery dates indicated a preemptive strike.

“It’s pretty obvious that ESG considerations are going to be critical throughout this cycle. There’s a bit of binge eating again with people worried that they won’t be able to get enough slots,” Morris said.

Not everyone is hungry for new abilities. Singapore Airlines canceled some airliner orders even though it was ordering its new freighters. Asia is expected to be among the slowest regions to recover.

Nonetheless, the combined gross orders of Airbus and Boeing aircraft tripled to 1,439 in the first 11 months of the year, from depressed levels by the pandemic a year ago, also boosted by an increase of demand for the Boeing 737 MAX after being cleared to fly following a safety ban.

That figure is about 200 higher than at the same point in 2018, the last year of data undisturbed by the MAX crisis.

Whether investors betting on new jet purchases are correct depends on factors that remain difficult to assess. They include global travel demand, China’s strict border controls and the impact of the Omicron variant, analysts warn.

Eamonn Brennan, managing director of air traffic control agency Eurocontrol, warned that any delay in reopening the huge Chinese market beyond the fourth quarter of next year could delay the entire recovery by a year. aviation.

GREEN WAVE RISKS

Planners are achieving 15% emissions savings compared to most previous models, as the industry strives to achieve a net zero emissions goal by 2050. In the short term, industry depends also energy companies to manufacture more sustainable fuel.

Frontier Airlines CEO Barry Biffle highlighted the benefits of locking in those savings quickly, rather than waiting until 2050, when he took part in the Indigo Partners command in Dubai.

However, with a possible wave of green orders comes new risks for some companies in the aviation industry.

The combination of pent-up demand from the pandemic and pressure from investors and customers – especially in Europe – to cut emissions could take the previous generation out of service sooner than expected and wreak havoc on the industry’s economy.

It would be a payday for manufacturers who rely primarily on the sale of new products, but a blow to rental and engine companies whose profits are spread over the life of a jet.

Olivier Andries, director of French engine manufacturer Safran (SAF.PA), told reporters earlier this month that the average retirement age for single-aisle jets could drop from 23 to 20 or more once the dust settles of the pandemic.

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Reporting by Tim Hepher; Editing by Pravin Char

Our Standards: Thomson Reuters Trust Principles.

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