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Aircraft orders predicted to halve this year

Orders for new aircraft are predicted to halve this year after hitting a record high in 2007, amid growing concerns of a downturn in travel.

The decline would follow three years of unprecedented demand for aircraft, driven by the low-cost boom and explosion of start-up carriers across Europe and Asia. However, a peak in deliveries will not occur until 2010/2012, threatening over-capacity.

Analysts expect a significant number of airlines to fail or be swallowed by rivals over the next three years.

Airbus commercial director John Leahy said last week he expects 600-700 orders this year compared with 1,450 in 2007.

Yet a slowdown would come too late for the sector, with many airlines likely to have too many seats to sell as they expand. New aircraft are far too expensive to leave on the ground and better filled at knock-down fares than flown half full. That could wreck tour operators’ attempts to keep capacity in line with the market.

The two biggest tourism groups, TUI Travel and Thomas Cook, are committed to raising their profit margins after listing on the London Stock Exchange last year and TUI has cut 25% from the capacity of the group now merged with First Choice – mainly on short-haul routes.

At the same time, European manufacturer Airbus and US rival Boeing are straining to meet a backlog of orders. Almost 1,000 aircraft were delivered last year, but several thousand are on order and the pair are raising production rates even as demand falls.

Analysts expressed surprise at the level of orders, with one predicting: “The bubble will burst.”

However, British Airways chief executive Willie Walsh downplayed the impact of any fall in demand.

“There is talk of recession in the US,” he said. “But the Chinese, Indian and Middle East economies are booming, and we can move capacity from one market to another.”

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