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DAE hands Boeing and Airbus 50 cancellations

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DAE-787-crop_560.jpgWhen it first announced orders for 200 jets at the 2007 Dubai Air Show, Dubai Aerospace Enterprise (DAE) grabbed headlines with its ambitious goal of becoming a massive Middle Eastern aerospace node, supplying aircraft to the region's rapidly growing fleets. The $27.2 billion deal was one of the largest in aviation history and embodied the seemingly endless demand from the region for commercial aircraft.

This week brought the realities of a shaky global economy to the forefront with the cancellation by DAE of 50 aircraft spread across four aircraft types from Boeing and Airbus. While Boeing and Airbus remain mum on the cancellations, the numbers tell the story. Airbus, reduced its DAE orders for the A350 XWB by seven to 23, and its A320 orders by 18 to 52, a $3 billion backlog hit.

Boeing's DAE listing on its order and deliveries website no longer show the 777-300ER and 787 orders booked in by the carrier, along with the airframer's undisclosed cancellation for 10 777-300ERs and 15 787s. Additionally, the listing also shows the sale/leaseback of 747-8Fs and 777Fs shifted from Emirates Sky Cargo to the DAE. Overall, DAE has slashed that 200 aircraft order by 25% amid its shaky financial status.
DAE-Jul10-backlog.jpgScott Hamilton at Leeham Co. has a fascinating chart mapping DAE's deliveries over the next decade using data from Ascend. DAE's deliveries grow steadily, rising toward 2017, peaking at 55 then come down sharply by 2019. Yet that anticipated steady growth leading up to that peak is what really matters.

What happens to the remaining orders in its near term backlog is somewhat unclear, but with production rates rising on virtually every Boeing and Airbus assembly line in the years to come and any sign of cracking in demand from the Middle East could trouble the waters for commercial aircraft manufacturers. 

Flight International penned a commentary shortly after the DAE order was announced in November 2007, asking some less-than-popular questions about the rapid regional growth and whether or not its grand ambition was truly sustainable. While the fleet and traffic growth of the region's airlines has continued unabated, nearly three years later, the comments ring eerily prophetic:
As more and more prospectors join this latter-day gold rush, the question few dare to ask is: can it all be sustainable? What would the effect be of a major Islamist terrorist attack on Dubai's image as the anything-goes, safe and prosperous Switzerland of the Middle East - and thus the growth trajectory of Emirates? What happens if the US credit crisis causes a slowdown in Asian economies - the expansion of which is driving much Gulf-based cargo traffic? Despite all the new airlines emerging the wider region, are there really enough takers for yet another leasing company with a fleet in the hundreds of aircraft? And, if the business is there, why are the likes of GECAS and ILFC not already plugging that gap?

These did not seem to be matters troubling the Dubai air show's big spenders last week, who are so bullish about their market predictions and their abilities to meet them that sceptics seem like wild-eyed prophets in the wilderness.
Photo Credit Boeing

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