European Company Airbus Sees Horrible Year Ahead

European aircraft manufacturing giant Airbus warned on Thursday of a "horrible" year ahead which will see its orders halved as the global economic crisis hits the airline industry.

This year "may be much more horrible from the customers point of view than 2008," Airbus head Thomas Enders said, citing the impact of soaring fuel prices in the first half, followed by the recession and credit crunch of the second.

Enders said he expected a sharp drop off in orders for Airbus, with plane deliveries this year likely to surpass the number of orders for the first time since 2003. "We all know that 2009 will be a very challenging year for the aeronautics industry. At Airbus we are well prepared and confident," he said.

Airbus commercial director John Leahy told reporters the company expected 300 to 400 orders this year, less than half the number won in 2008. Last year, Airbus overtook US aerospace giant Boeing with 777 orders and 483 deliveries compared to its arch rival’s 662 orders and 375 deliveries.

Memories of 2007 are still fresh when the two took a record 2,754 orders — Airbus 1,341 and Boeing 1,413 — but the market has changed dramatically as airlines slash capacity to survive the worst global downturn in years.

On Thursday, Singapore Airlines (SIA), one of the world’s most profitable airlines, said passengers carried fell 7.5 percent in December to give a capacity loading of 79.9 percent, down 4.4 percentage points over last year.

"The prevailing global financial turmoil has dampened demand across all route regions, translating to weaker uplifts," SIA said. Cargo volumes dropped 17.7 percent in December and the airline filled only 55.2 percent of available freight space, down 6.8 percentage points.
SIA, one of Airbus’s most important customers and the launch airline for the key A380 super-jumbo, said the "weak economic outlook dampened demand over the traditional year-end festive season." SIA’s three month to September net profit slumped more than 36 percent.

China, a key market for both Airbus and Boeing, earlier this month announced a huge loan package for its main aircraft maker and tax breaks for its airlines which face massive losses.
Airline industry group IATA said recently it expects the industry to lose 2.5 billion dollars in 2009 due to the economic crisis after losses of some 5.0 billion dollars in 2008.

Demand for flights has fallen sharply as recession bites in many leading economies.
In November last year, the last month for which data is available from IATA, passenger numbers were down and freight plunged by a "shocking" 13.5 percent, the worst drop since the September 11 terror attacks.

Airbus also said Thursday that it expected to deliver 18 A380 planes this year, having recently conceded that it would not likely meet the target of 21. The A380 project has suffered numerous technical problems, forcing delays for customers and extra costs for Airbus.

The company said that its ‘Power 8’ restructuring programme — announced in February 2007 at least partly in response to the A380 problems — had exceeded its targets in 2008 with cost savings of 1.3 billion euros.

Power 8 is supposed to deliver cost savings of 2.1 billion euros in 2010, with an additional plan bringing another 650 million euros by 2012.
Enders also issued a warning on Thursday about the A400 military transport project, saying that current contract conditions threatened the company with disaster if it continued without changes.

"I am absolutely convinced that we can not and should not continue the programme under the current circumstances," he said.

The A400M has suffered delays and technical problems since the project was launched in 2003 to supply 180 planes to Germany, France, Spain, Britain, Turkey, Belgium and Luxembourg.

On Friday, Airbus said first deliveries would follow three years after the first test flight but no date for this crucial step has been set, with the company saying it cannot fix a timetable until technical issues are resolved.