It should come as no surprise that airlines based in oil-producing nations were the main drivers of new aircraft orders last week at the biannual Farnborough International Air Show.
But if you think that oil producers are the only ones who can afford new jets, then think again. Indeed, according to executives at US aircraft manufacturer Boeing, the continued high price of oil won’t dent their business at all.
Boeing executives are genuinely upbeat about their future prospects, forecasting a global marketplace for new aircraft worth $3.2 trillion over the next 2 decades, with China—a net importer of oil—overtaking North America as the main market.
“The Chinese market today is very small but 20 years from now it will be bigger than today’s North American market,” said Randy Tinseth, vice-president of marketing.
High prices no problem
High oil prices will be no impediment to that growth, according to another Boeing executive. To the contrary, says Boeing CEO James McNerney, soaring oil prices are an “opportunity” that will actually speed up orders for new aircraft that consume less fuel.
“The high price of oil is speeding up the process of the oldest, least efficient planes being taken out of service because they are no longer profitable,” McNerney told the weekly Journal du Dimanche.
“We are already seeing it in the US and it’s starting to happen in Europe,” he said, adding that the phenomenon was “an opportunity” that “will speed up orders for more recent models, which consume 30%-40% less than the oldest planes still in service.”
He also told the paper that Boeing planned to launch a successor to its 737 “at the end of the next decade” with the aim of producing a plane “15% more economical” than existing aircraft.
Hardly was the ink dry on those reports when news emerged that Bombardier Inc. was expected to launch its long-awaited 100-130 seat C Series aircraft—which promises to be 20% more fuel efficient than similar aircraft—ahead of the Farnborough Air Show.
Attractive attributes
Why would that happen? According to industry insiders, it’s because the dramatic rise in world oil prices has made the aircraft’s fuel-saving attributes even more attractive.
Still not everyone in the airline industry sees a silver lining in the apparent gloom of higher oil prices.
While such manufacturers as Boeing and Bombardier see the silver lining, current airline operators in the US are still staring at the black cloud of high oil prices.
Indeed, a coalition of airline industry and other concerns last week called on Congress to stop what it called “rampant speculation” in the oil market. The 38-member group put the blame on institutional investors, such as pension funds, for buying into commodity index funds.
Said James May, head of the Air Transport Association, Congress should pass laws to put tighter limits on oil trading, and “shed light on this dark market.”
