The Strategist

Aero Industry: There's No Crisis In Southeast Asia

02/16/2016 - 12:36

Demand for civilian aircraft in Southeast Asia (SEA) will grow, and the region will buy 3,750 new airplanes worth $ 550 billion over the next 20 years. This is an opinion of senior vice-president of Boeing for sales in Southeast Asia and India Dinesh Keskar. Single-aisle aircraft such as Boeing 737 or Airbus A320 will be most popular.

Dave Sizer
Dave Sizer
Before opening of the Singapore Airshow, one of the two largest players in the market - The Boeing Company - presented its forecast of the market development in the SEA region. According to a perhaps the most knowledgeable in these issues person, a senior Boeing vice president of sales in the countries of Southeast Asia and India Dinesh Keskar, the region will need 3,750 airplanes worth $ 550 billion during the next 20 years. Given characteristics of the market, approximately 76% of the orders will fall on single-aisle aircraft such as Boeing 737 or Airbus A320. Great demand is projected by development of regional low-cost airlines and increasing demand in fast-growing markets such as Indonesia, Vietnam, and Burma (Myanmar). As for all the planes, the region will take 14 550 of them, i.e. more than a third from 39,050 aircraft required by the world market.  

However, procurement practice has been undergoing certain changes, according to Mr. Keskar. Large one-off contracts, when a company just bought 100 aircraft, are giving way to smaller orders - 35-40 aircraft - or even leasing.

"Airlines are getting smarter. People have understood, at least in our case, that if you want to make a big order, then you have to make a large deposit. But why do you make a deposit for a plane, which you get only in 2030? "- said Mr. Keskar at a press conference in Singapore. According to him, airlines increasingly tend to SLB scheme (the sale agreement and then leasing).

"One do not need to plan for such a long time. If you need 737 MAX in 2018, I can give it to you, because there are some leasing companies that have already bought such airplanes", - explained Mr. Keskar.

As for financial condition of the Asian airlines, then, according to Mr. Keskar, they feel good. If anything, no Boeing client contacted him with a request to postpone delivery or payment. "Quite the contrary. They all want to get their planes quickly. We ourselves have problems with supplies. There is wating list for more than 5 thousand aircraft, and we cannot speed up the delivery. "

According to Boeing’s data, passenger traffic in Asia grew by more than 9% over the past five years. In the next 20 years, passenger traffic in the region will grow by 7.7%.

In turn, IATA CEO Tony Tyler a little earlier warned that over-ambitious plans of several major Asian carriers are risking suffering from growing competition in the market, relatively low profitability of operations and problems in the financial markets.