Comment: Oh, for perfect vision

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Published: September 26, 2011

Good news this week from Airbus, whose experts forecast the world’s air operators will buy nearly 28,000 new jets between now and 2030 – more than doubling the size of the fleet to the high side of 31,000.

While not quite as optimistic as arch rival Boeing, which back in June detailed its 20-year expectations for 33,500 deliveries, Toulouse and Seattle both agree that forecasts published last year needed revising upwards by nearly 3,000 units. This demand is so great that Airbus may increase output of its workhorse A320 narrowbody to an astonishing 50 aircraft monthly.

Things, it seems, can only get better.

But while it would be churlish to argue with either Airbus or Boeing – success suggests they know their market better than anybody – it should be remembered that forecasts are based on assumptions.

Boeing’s numbers, for example, are based on expectations of a 3.3% annual growth of the global economy, which is reasonably consistent with current conditions. But the risks are on the downside. As is painfully clear, the evolving debt crisis threatens to knock Europe and North America off the rails for many years to come, and it is far from clear that emerging markets can continue even their current – slowing – rate of growth, without these big motors firing at least on most cylinders.

Indeed, Brazil – the “B” lining up with Russia, India and China in BRIC nations – is looking wobbly, and while Chinese growth has more or less held up through the crisis, its rocketing economy will plateau, and in any case is highly vulnerable to domestic unrest and prolonged downturn in its major trading partners.

Another reason forecasting is riskier than ever is that some long-standing givens warrant serious reconsideration. The current downturn could easily prove to be not a cyclical dip, but structurally durable – like the 1930s, in shape if not scale. Particularly devastating for airlines – and, surely, suppliers like Airbus and Boeing – is the counter-intuitive persistence of high oil prices at a time of slow growth.

A more immediate cause for caution came from Airbus itself. While forecasting booming demand, it is openly talking about lending money to its customers, because crisis-hit European banks are struggling to raise the dollar finance they need to buy aircraft.

Growth of vendor financing is surely a sign of ­wobbly markets. Ultimately, Airbus and ­Boeing alike rely on customers – airlines – which face a financial hurricane of high fuel prices and slack demand for travel.

AIRLINES

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