A big buying spree by Gulf oil states prevented aircraft orders from going into freefall at this week’s Farnborough Airshow, but it has left little for Airbus and Boeing to scrap over for the rest of the year. Between them, Airbus and Boeing managed to post 444 firm orders worth almost 40 billion euros.
Airbus’ chief salesman, John Leahy, told EuroNews that the airlines have no choice but to replace their fleets: “This continues to be a strong year for aircraft sales, despite the fact that there are record fuel prices, despite the fact that there are airlines that – with these fuel prices – are losing money. The reason for that is because they have to replace the old aircraft. Today there are about 16,000 aircraft flying around the world with 100 seats and above and 3,000 of them are old technology aircraft, burning a lot of fuel, they’re over 20 years of age. The airlines rapidly need to replace those, with fuel over $140 dollars a barrel.”
One reason oil prices are rising is the weakening dollar. That also causes problems for Airbus which mostly buys material and pays its workers in euros but get paid for its planes in dollars.
Leahy explained: “Every ten cents that the dollar weakens or the euro strengthens costs us one billion euros a year from the bottom line. That means we have to find a way of reducing costs across the board and also getting more dollar based components.”
How well Airbus cuts its costs will have a significant effect on the value of its shares.