There’s no bubble in commercial airlines: Execs

July 14, 2014 |

In an industry known for its boom and bust cyclical patterns, executives running the world’s largest airplane makers and suppliers said they don’t see a downturn coming anytime soon.

“The challenge is always sustaining the increased production rates, but I do not see an easing of demand in the next five to 10 years,” said Louis Chenevert, chairman and CEO of United Technologies, at the Farnborough International Air Show.

Chenevert, whose company owns airplane engine maker Pratt & Whitney, isn’t alone in his belief that more airlines will need new planes.

Leon Neal | AFP | Getty Images The Airbus A330-900 NEO aircraft in model form.

Leon Neal | AFP | Getty Images
The Airbus A330-900 NEO aircraft in model form.

Just last week Boeing released its forecast for global aircraft demand for the next 20 years. Its conclusion: They will need more than 36,000 new planes in that time frame.

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“We track deferrals and cancellations and they are below historical averages right now,” said Boeing CEO Jim McNerney. “We see ongoing strong demand and we’re going to produce to it.”

Boeing has been steadily raising production rates for the 737 and 787 model planes. Despite those increases, the company still has a backlog of more than 5,200 orders.

Further evidence of strength in the commercial airplane business was driven home at Farnborough, when Airbus announced plans to build a new plane.

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The A330neo will debut in the fourth quarter of 2017 with the promise of being 14 percent more fuel efficient per seat than the current A330.

Airbus CEO Fabrice Bregier said demand for a fuel-efficient wide-body plane is so great that he expects a slew of new orders by the end of the air show.

“We listened to our customers,” Bregier said. “If Steve Hazy [CEO of Air Lease Corp] tells us ‘you can sell more than 1,000 aircrafts,’ I believe he’s right.”

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The industry’s interest in fuel-efficient planes stems from several profitable years, and the expectation of strong customer demand around the world. Klaus Kleinfeld, CEO of Alcoa, called the movement a race to lower fuel burn.

“People in the west are going for more planes that are fuel efficient,” he said. “The new engines have 50 percent better fuel efficiency.”