Boeing and Airbus: Airlines Expected to Weather the Recession Well

According to an article in this week’s The Economist, officials at Boeing and Airbus are not deeply concerned about their airline customers’ fate in light of the current crisis in the world credit markets. Manufacturers of general aviation aircraft are likely hoping lenders will take a similar view to customers seeking financing for personal and business aircraft. According to the magazine, which spoke with Boeing senior executive Randy Tinseth and Airbus chief salesman John Leahy, order backlogs stretching out to 2015 might see some deals deferred, but they do not find it likely there will be significant cancellations. Leahy told the magazine there is still “a lot of liquidity in the market” and that banks recognize aircraft as good credit risks because they are, according to the author, “mobile, have a long life and are standardized products.” Leahy further stated that a credit crunch is far less threatening to airlines than the high fuel prices they suffered in the first half of the year. Under current conditions, cutting capacity can restore profitability, meaning that airlines might defer orders, but outright cancellations are less likely. Boeing’s Tinseth told The Economist he had seen only two cancelled orders. The world’s top airliner builders are each said to have more than 3,700 aircraft on back order. Whether or not smaller aircraft manufacturers can show themselves to be similarly recession proof is open to question. It could depend on whether a sizable portion of Leahy’s “lot of liquidity in the market” directs its attention to the lighter side of the aviation industry.