IBA Comments on the Implications of Asia Pacific Aircraft Orders and Deliveries Ahead of Key Hong Kong Aviation Finance Events
Hong Kong, November 3rd, 2014: On the eve of the biggest aviation gathering of the year in Hong Kong, International Bureau of Aviation (IBA) predicts continued growth in aircraft financing and leasing in Asia, supported by the strong order book from airlines and lessors. This view is endorsed by David Yu, IBA's Executive Director, Asia, who states “Deliveries and ordering activity across Asia have been impressive year to date and the region will continue in its upward trajectory. The Association of Asia Pacific Airlines (AAPA) recently affirmed that sustained regional economic growth resulted in a 4.6% increase in the number of international passengers (190.6 million) carried by the regions airlines during the first nine months of the year. Freight demand also grew by 5.3% during the same period – continuing the positive momentum. Clearly such growth requires optimised capacity, hence IBA has been taking a closer look at the backlog and aircraft deliveries to the Asia Pacific region."
With both the Euromoney and Airline Economics Asia Pacific aviation finance conferences opening their doors in Hong Kong this week and record numbers of delegates from the airlines, banks and lessors expected to attend, Dr Stuart Hatcher, IBA’s Head of Valuations and Risk, comments: “The Asia Pacific region is set to become the largest air travel market in the world. According to Boeing, it is estimated that by 2033 the region will have absorbed almost 14,000 new aircraft valued at more than $2,000 billion. Low cost carriers will take on a much greater market share driving the need for single aisle aircraft and international operators will boost demand for wide-bodies.”
“The improved affordability provided by LCCs, who themselves are developing new business models that challenge traditional operational structures to maintain efficiency and accessibility, will itself stimulate increasing demand as they meet the travel ambitions of the emerging middle classes.”
IBA’s online commercial aircraft database, JetData (www.jet-data.com), shows that 41.8% of all aircraft deliveries so far this year were to Asia Pacific, with a total of 485 aircraft, including 147 Boeing 737-800,115 A320 and 40 A330-300 aircraft. Unsurprisingly, China represents the lion share of the deliveries, with 218 aircraft received to date in 2014. Comparatively, over the same period in 2013, the Asia Pacific region accounted for 510 deliveries (48.5% of worldwide deliveries). IBA would opine that capacity increase has been constant in the last few years. Looking at the outstanding backlog, impressively the region accounts for 62% of the current A330-300 backlog, 42% of the A330-200’s and 34% of the A350-900’s. It also represents a quarter of the future 777 and 787 deliveries.
Airframe manufacturers welcome such demand to compensate for the sluggish growth of more mature aviation markets. However, orders like the largest ever single order for planes recently placed by IndiGo for 250 A320neo family do attract some disbelief, but the airline did in the past honour its previously large order for 100 A320-200 placed in 2005. On the flip side, Skymark recently cancelled some A380 aircraft it had on backlog, which instils a sense of caution as to the region’s liquidity and financing capabilities.
