Aircraft Orders Overflow, Undeterred By Economic Worries Following The Pandemic: Report

Airbus SE EADSY, a European aerospace company, is reportedly seeing overflowing orders for its aircraft even as global economic growth remains wobbly.

What Happened: At the Paris Air Show last week, the company announced a record commercial order for its 500 A320 aircraft, valued at $55 billion, by Indian budget airliner IndiGo.

“There is economic slowdown, but airlines do not see a slowdown of bookings,” said Guillaume Faury, CEO of Airbus, the Wall Street Journal reported.

“And they continue to see a very strong demand with high prices,” Faury added.

The surging orders have left aircraft manufacturers such as Airbus and Boeing Company BA with production issues, the Wall Street Journal said. These manufacturers are facing issues with supply of engines, chips and workers, among other things, that may be required to clear large-order backlogs.

It is these constraints that have forced airlines to reserve planes in advance.

“We cannot make planes fast enough to satisfy the demand,” said Faury, adding that “a reservation of slots in the backlog, indeed are for a resource that is scarce.”

Boeing CEO David Calhoun reportedly echoed a similar sentiment at a press conference ahead of the Paris Air Show. The executive said that, while ordering, customers are accounting for the fact that manufacturers' supply chains may not stabilize until the end of 2024.

See Also: How To Buy Boeing (BA) Stock

What's Driving Demand: The travel industry, which went into a limbo amid the COVID-19 pandemic, is now seeing pent-up demand. As air travel restrictions were removed, travelers began to increasingly take to skies, the report said.

Airlines, therefore, scrambled to hire back laid-off staff and resume grounded services. These companies are now transitioning from growth to recovery mode, the report said. So far this year, airlines and airplane lessors have ordered 1,429 Airbus and Boeing jets, which is more than the 1,377 in 2019, data from aerospace research firm Agency Partners showed.

Airbus now has an edge in the narrow-body airplane market, with a 62% share compared to Boeing's 38%, with the former's CEO Faury expecting its dominance to last for a while.

But Boeing is the leader in the market for bigger jets, the Wall Street Journal said. Faury acknowledged the fierce competition there and said, “The backlogs are much shorter, there is capacity available much earlier, and for those years there is a tough competition and both sides trying to win the campaigns and dominate.”

Boeing closed Friday's session at $205.41, down 0.10%, and Airbus shared that traded over the counter settled down 1.63% at $34.34, according to Benzinga Pro data.

Read Next: Fuel Efficiency Boosts Demand For Boeing’s 737 Aircraft Despite Production Challenges, Analyst Sees Upside

Photo: Shutterstock