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Our Airshow analyst, Philip Abbott talks about the orders and announcements at this year’s Farnborough International Airshow:
The expectation for orders at FIA 2016 was that while they might be relatively strong, it was unlikely that the numbers would match those of FIA 2014. After all, 2014 was the record year for commercial aircraft and engine orders but, since then, demand has slowed. In 2014, a total of 3,439 large commercial jet aircraft and 5,950 large civil jet engines were ordered. In both segments, these were the largest number of aircraft and engines ever ordered in a single year and by the end of the year there were over 12,920 large commercial jet aircraft and over 21,800 large civil jet engines on firm order (up 14% and 11% respectively on the figures at the start of the year).
The significance of the year-end backlog figures is that, at the time, they represented well over nine years of work-in-hand for both the aircraft and the engine manufacturers. Some aircraft programs may have had a little less work-in-hand while others might have had a little bit more. The point is that by the end of 2014, anyone ordering new aircraft would theoretically be unlikely to take delivery for several years. But demand for new aircraft and especially for those new aircraft with more fuel-efficient engines was already weakening. Lower fuel prices meant that many airline operators no longer had an urgent desire to replace older aircraft.
This is particularly relevant to the FIA 2016 order intake. Weaker demand for new aircraft and engines meant that in 2015, orders for large commercial jet aircraft fell by 40% to the lowest annual level since 2010. Similarly, demand for large civil jet engines fell by 48%, also to the lowest annual level since 2010. In addition, First Half orders have been falling year-on-year. In the six months prior to FIA 2014 there were orders for 1,089 aircraft and 1,918 engines. In the same period this year there were orders for 612 aircraft and 1,596 engines. These figures are lower than in the First Half of last year which includes orders taken at the Paris air show.
The aircraft order intake in the First Half of this year was the lowest for a First Half since 2010. The engine order intake was the lowest for a First Half since 2011. While it is true that the month in which a major European air show is held tends to have one of the highest order intakes of any month in that particular year, the point here is that demand for new aircraft has been slowing. Going in to Farnborough this year, one might have expected the aircraft order intake to be more or less the same as in FIA 2012. The expectation for the engine order intake would have been higher than the figure four years ago simply because the engine companies are now taking more engine orders for aircraft that were ordered some time ago. (At the end of June there were over 2,300 large commercial jet aircraft on firm backlog order still without engine selections.)
In the event, while the FIA 2016 aircraft order intake was down by roughly one quarter on the FIA 2014 figure, and the engine intake was down by just over a fifth, more aircraft and engines were ordered this year than four years ago. Now turn to the value of those orders - compared to FIA 2014 the aircraft intake value was down 39% and the engine intake value was down 35%. But compared to FIA 2012, the aircraft intake value this year was up by more than half and the engine intake value was more than double.
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