Boeing, Airbus Warn of Deep Declines in Orders

Boeing Co. and Airbus Industrie, the world’s only two makers of large commercial jets, warned Sunday that they expect deep declines in orders this year as recessions in Asia limit demand.

Boeing executives said the value of orders could drop as much as 40% industrywide, while the European consortium Airbus said its own total orders could drop 46% this year.

The forecasts, made at the biennial Paris Air Show, were the plane makers’ clearest warnings yet about the impact of the Asian economic crisis. Many carriers in Asia have canceled orders after seeing air travel slump. Boeing and Airbus together won orders for 1,212 jets worth more than $80 billion last year.

“In the short term, it’s a dramatic decline--but we’re coming down from a high point,” said Doug McVitie, managing director of Arran Aerospace Ltd., a consulting firm in Scotland. “Production lines are already running at high capacity, so in some ways the industry could use the break.”

Airbus has been winning the order race against Boeing so far this year, capturing 189 orders contrasted with 52 for its Seattle-based rival as of May 31. Airbus Chief Executive Noel Forgeard said the group expects to get about 300 orders for the full year. It had 556 last year.

Alan Mulally, president of Boeing’s commercial-airplane group, said orders industrywide will probably remain about the same in 2000 and the company is “cautiously optimistic” they’ll improve in 2001.

“Travel around the world will get better as the Asian economy improves,” he said.

Mulally initially appeared to warn of an even steeper decline of as much as 70% in his remarks to reporters. “We expect probably 30% to 40% of the total orders we had last year,” he said, a figure that would suggest a decline to as few as 197 from the 656 Boeing got last year.

Boeing later issued a statement clarifying his remarks. It said the value of orders industrywide will decline between 30% and 40% this year.

Neither Boeing nor Airbus announced any new orders at the show Sunday, though some are expected later this week. Boeing reportedly has been trying to sell International Lease Finance Corp., a Beverly Hills-based airplane-leasing company, as many as 100 jets. Airbus is hoping to announce an order for 30 single-aisle planes from Debis, the leasing and finance division of Germany’s DaimlerChrysler.

Orders still aren’t expected to be close to the number the plane makers won just nine months ago at the world’s last major air show, the Farnborough Air Show in England. At that show, Airbus announced orders worth $12 billion and Boeing unveiled orders worth $6.7 billion.

The lead in orders is rare for Airbus, which traditionally gets less than half of the world’s jet market. Many of the jets it has sold have been narrow-body A-320 and A-318 aircraft, however, which earn less money than Boeing’s bigger jets.

“Airbus is having a good year, particularly because of the A-318,” said Byron Callan, an aerospace analyst at Merrill, Lynch & Co. “That’s not a hugely profitable program, though.”

Both plane makers have been straining to cope with the surge in orders during the last few years. Boeing plunged to a loss in 1997 as it sought to double jet output. Airbus warned earlier this year that it could see some deliveries slip as it struggles to get enough parts to fill the orders.

A deep discounting war has also eroded profits for the two plane makers, which have both pledged to back away from a market-share battle. Asked whether more “rational” pricing had emerged, Mulally said, “You bet.”