Advertising

The Seattle Times Company

NWjobs | NWautos | NWhomes | NWsource | Free Classifieds | seattletimes.com

Business / Technology


Our network sites seattletimes.com | Advanced

Originally published December 10, 2008 at 12:00 AM | Page modified December 10, 2008 at 11:52 AM

Comments (0)     Print

China encourages nation's airlines to cancel, delay jet orders

China, the world's second-largest aircraft market, will encourage carriers to cancel or postpone plane deliveries due next year as a cooling economy damps travel demand.

China, the world's second-largest aircraft market, will encourage carriers to cancel or postpone plane deliveries due next year as a cooling economy damps travel demand.

The government is also asking airlines to park unnecessary planes, retire old ones and return aircraft leased from overseas once the contracts are up, the Civil Aviation Administration of China (CAAC) said on its Web site today.

China will also scrap jet-fuel taxes and refund some facility fees to help carriers, it said.

An order slowdown may hit Airbus and Boeing, which are counting on emerging markets to offset cooling demand in the U.S. and Europe.

China wants to slow the growth of its commercial-aviation fleet after the nation's airlines racked up losses of $611 million in the first 10 months of the year.

Boeing spokeswoman Liz Verdier said company officials checked with the Chinese government and with its Chinese airline customers after the CAAC statement and that, as of Tuesday, had no information about any prospective deferrals or cancellations.

Verdier said Boeing had just six airplane cancellations so far this year. In addition, customers pushed back about 100 deliveries to a later date.

That level of deferred deliveries is just a little higher than normal, Verdier said, and in all cases other customers have taken the freed-up delivery slots so that the deferrals won't cause a near-term production gap.

China has begun to bail out airlines because of losses. The parent of China Southern Airlines, the nation's largest carrier, secured a $437 million cash injection last month.

China Eastern Airlines and Hainan Airlines, the nation's third- and fourth-biggest carriers, have both said their parents are in talks about financial aid.

Boeing said in October that China would likely order a total 3,710 aircraft, worth about $390 billion, over the next 20 years, making it the largest tally outside the U.S.

The company's European rival, Airbus, hasn't yet reported cancellations stemming from credit-market turmoil, "but I am sure that we will see more consequences next year," Louis Gallois, chief executive of Airbus parent European Aeronautic, Defence & Space, said Tuesday at a conference in London.

advertising

The order backlog remains "very strong" and production is overbooked until 2011, providing a "buffer" against any scrapped contracts, Airbus said.

The Toulouse, France-based company won orders for 756 airliners in the first 11 months of this year, two-thirds of the level for the year-earlier period, as the global recession weakened demand for air travel.

That compares with a 43 percent drop to 645 new orders for the period at Boeing.

Airlines are beginning to feel the effects of declining traffic and passengers' choosing economy class over first or business class, Gallois said. At the same time, carriers have been helped by falling oil prices, he said.

Worldwide airline traffic may fall 3 percent next year as economies contract, the industry's first decline since 2001, the International Air Transport Association said Tuesday. At the same time, carriers' combined losses may narrow by half in 2009, to $2.5 billion, as oil prices ease and U.S. airlines are helped by earlier reorganizations, the trade group said.

The group had predicted a $4.1 billion loss for airlines in 2009 as recently as Sept. 3, based on an average oil price of $110 a barrel.

With crude today trading at about $43 and the association estimating a price of $60 next year, fuel costs have eased for those carriers, many of them in the U.S., that were hardest hit in 2008 after struggling to secure hedging positions.

"The improvement is due to an extraordinary situation for North American carriers," association CEO Giovanni Bisignani said at a news briefing in Geneva. "With very little hedging, they were hit with the full impact of high fuel. To cope, they cut capacity early and are now benefiting from the full impact of low spot prices."

Even while describing 2009 as "another gloomy year," Bisignani said that North American carriers, likely to suffer a combined loss of $3.9 billion in 2008, will next year post a profit of about $300 million, less than 1 percent of revenue.

Regions other than North America will be unprofitable, he predicted.

Losses in the Asia-Pacific region will be highest at about $1.1 billion, with carriers there suffering most from a decline in cargo shipments.

Seattle Times aerospace reporter Dominic Gates contributed

to this report.

Copyright © 2008 The Seattle Times Company

More Business & Technology headlines...

Print      Share:    Digg     Newsvine

Comments
No comments have been posted to this article.

UPDATE - 09:46 AM
Exxon Mobil wins ruling in Alaska oil spill case

UPDATE - 09:32 AM
Bank stocks push indexes higher; oil prices dip

UPDATE - 08:04 AM
Ford CEO Mulally gets $56.5M in stock award

UPDATE - 07:54 AM
Underwater mortgages rise as home prices fall

NEW - 09:43 AM
Warner Bros. to offer movie rentals on Facebook

Advertising

Video

Marketplace

Advertising