Airbus sees signs of recovery after rocky spell

Airbus' chief salesman John Leahy said Thursday he is optimistic that the airline industry is recovering - although he warned that financing conditions remain tight.

"Recessions begin, they have a middle and an end. We think we're about the middle," he said during a presentation in London.

"We're seeing the recovery starting, but there are still some dark clouds on the horizon because the airlines are in weaker financial condition."

Airlines are suffering from persistently high fuel prices, weak demand, and falling fares. They are struggling to fill seats, especially in business and first class, as the recession has hit air travel.

Airbus expects some cancellations and deferrals as airlines, who slashed prices in recent months to keep planes full, struggle to raise cash.

"This is going to be a difficult winter," said Leahy. Airlines "didn't build up the war chest" to pay for planes as yields dropped over the summer, he said.

"We're expecting some airlines will say 'I'd love to take this airplane but I can't afford it'," he said.

In its global market forecast, Airbus said that it expects its airline customers to see passenger volumes recover next year with as much as 4.6 percent growth in a "best case scenario," or with zero growth in the worst case.

That's more optimistic than the International Air Transport Association, which on Tuesday predicted global airline losses of $3.8 billion in 2010.

Leahy said IATA figures don't include low-cost carriers, or domestic American and Chinese traffic.

Airbus said it expects a decline this year between 2 and 4 percent in volumes measured in revenue passenger kilometers, a key measure of demand.

Airbus itself still expects to deliver around the same number of airplanes - 480 - this year and in 2010 compared to 2008, Leahy said. He expects around 300 gross orders this year.

In the next 20 years, Airbus said volumes will "remain resilient to the cyclical effects" of the economy, with 4.7 percent yearly growth in revenue passenger kilometers.

Airbus is banking that interest in larger aircraft such as its A380 superjumbo and competitor Boeing Co.'s 787 wide-body jetliner will buoy global demand for planes.

It forecasts that 25,000 new passenger and freighter aircraft valued at US$3.1 trillion will be delivered from 2009 to 2028.

That's a 2.8 percent increase from a February 2008 forecast for 24,300 new planes valued at US$2.8 trillion in the 20 years to 2026.

Boeing, in a 20-year outlook in June, said it expects a market for 29,000 new passenger and cargo jets valued at $3.2 trillion over the next two decades. That's down 1.4 percent from a forecast last year of 29,400 planes, also valued at $3.2 trillion.

Shares of Airbus parent EADS closed up 6.3 percent at euro16.21.

Overall, Airbus' latest 20-year forecast has swelled by 700 aircraft. Laurent Rouaud, head of market strategy, said he cut 700 planes from his previous forecast due to lower traffic growth, but that drop has been more than compensated for by higher expectations of airlines retiring old planes due to higher fuel bills and replacing them with new, more efficient ones.

Airbus said that emerging economies, low-cost carriers and a growth in the number of mega-cities will drive demand, combined with the need to replace older, more fuel-hungry aircraft.

The greatest demand for passenger aircraft will be from airlines in the Asia-Pacific region and emerging markets, accounting for 31 percent total demand compared to 25 percent for Europe, and 23 percent from North America.

Diogenis Papiomytis, an aerospace analyst with Frost & Sullivan, said the forecast was "just a small correction from the previous one."

While he agreed that the Asia-Pacific region is the key growth area and that wide-bodies are "the most important sector over the next 10 years," he said the forecast was optimistic.

"The prediction of demand of 1700 (very large aircraft) is quite high, I see the figure more like 700-800 for 20 years," he said.

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Associated Press writer Rachel Kurowski in Paris contributed to this report.