Battle hurts aircraft makers

Profitability at aircraft manufacturers Boeing and Airbus is being hit hard by the battle for market share between the two. The situation could force fundamental changes at Airbus, according to analysts at the US Teal Group. ‘The inherent cyclicality of the market has been exacerbated by a vicious market share war between Boeing and Airbus,’ […]

Profitability at aircraft manufacturers Boeing and Airbus is being hit hard by the battle for market share between the two. The situation could force fundamental changes at Airbus, according to analysts at the US Teal Group.

‘The inherent cyclicality of the market has been exacerbated by a vicious market share war between Boeing and Airbus,’ said lead analyst Richard Aboulafia.

Meanwhile, the Asia crisis will hurt wide-body demand, with an almost 50% fall in the number and value of aircraft delivered in 1999 and 2002.

‘This market share war is slashing profitability at Airbus and Boeing,’ said Aboulafia. ‘It will be particularly traumatic to Boeing, which has been heamorrhaging cash through the present ‘up’ cycle. The battle could also force fundamental changes at Airbus.’

Noting that the present largely premature and unprofitable upturn will result in future pain, Aboulafia quotes John Walsh, head of Walsh Aviation: ‘The battle for market share that Boeing and Airbus are currently engaged in will result in an oversupply of aircraft of El Nino proportions.’

However, Teal predicts little change in market share, with Airbus’s share staying at around 30% until 2007. The analysts forecast that Boeing will be number one for the foreseeable future, with a now steady 60-70% market share.

The group’s latest report forecasts that 5,625 commercial jet aircraft, worth US$373.1bn (£228.9bn), will be built between now and 2007. The figure includes 3,593 narrow-bodied transports worth $140bn, and 2,032 wide-bodied airliners worth $233bn.

The forecast covers all jet transports with over 100 passenger seats, including two major former Soviet aircraft, which are the only non-Airbus and Boeing players on the world market.

Teal predicts that 750 commercial jet transports will be built this year, followed by a peak in 1999, when some 799 airliners will be delivered. Production will then drop to just 402 aircraft in 2002, peaking once more with 575 in 2005, and dropping again to 497 in 2007.