Heavy Orders For Airbus And Boeing Raise Backlog Questions

PARIS — The chief salesman for Airbus, John Leahy, ended one of the busiest years of his career with a quiet evening at home.

After a 2007 travel schedule that took him to see airline customers in “more countries than there are members of the United Nations,” Mr. Leahy, 57, said he spent much of the last two weeks of the year sleeping.

The last three years have been exceptional for Airbus and its American rival, Boeing, in terms of new orders. In 2005 and 2006 the two companies combined added more than 4,000 contracts, equivalent to at least four years of production.

For 2007, they probably booked firm orders for more than 2,800 aircraft — adding roughly three more years to their backlogs. At list prices, the combined total of deals signed since 2004 is $750 billion.

“The whole re-equipment cycle has been compressed into a period of about three years as opposed to the more normal five to six years,” said Doug McVitie, managing director of Arran Aerospace, a consulting firm in Dinan, France. “It’s been an exceptional climate for the industry,” Mr. McVitie said, but warned: “It’s not sustainable.”

Airbus is scheduled to disclose its final orders tally for 2007 on Wednesday, a figure that company executives say will be close to the record 1,413 planes that Boeing announced earlier.

But with Boeing and Airbus already scrambling to produce about 900 planes a year between them, analysts said the waiting lists — the average lag is approaching five years — are likely to start putting a brake on sales.

On top of that, the risks of a slowing economy, rising oil prices and tightening credit could mean that the interest of airlines in — and their ability to pay for — new planes could drop off.

“In this kind of a market, it’s not just about booking orders any more,” Mr. Leahy said. “You also have to be able to manage your order book. There’s a good chance that some airlines won’t be able to take delivery of all these aircraft.”

An explosion in air travel in recent years, particularly in Asia and Europe, has helped drive the thirst for new airplanes. Single-aisle jets like the Airbus A320 and Boeing’s 737, which can seat 110 to 180 passengers and have an average range of about 3,000 nautical miles, are especially popular because of their versatility and fuel efficiency.

These smaller planes make up close to half of the order backlog in unit terms and around a third in terms of value.

“The ambient level of global air traffic growth is around 7 percent,” said Peter Morris, chief economist of Ascend, a London aviation consulting firm. “In markets like Europe and Asia, it’s largely been driven by the low-cost carriers and new entrants.”

In countries like China and India, he noted, air traffic is increasing at rates in the high double-digits each year — nearly double the pace of economic growth.

Older, established airlines have also stepped up their buying after a lull that followed the terrorist attacks on Sept. 11, 2001.

The industry returned to profit in 2007 for the first time in six years, with net earnings of about $5.6 billion, according to the International Air Transport Association. That freed up cash for several carriers, including US Airways and British Airways, to make substantial investments in more efficient wide-body aircraft like the Boeing 787 Dreamliner and the Airbus A350 XWB, as well as the 555-seat A380.

A depreciating dollar has also increased the purchasing power of many carriers because they have found jets, which are priced in dollars, to be a relative bargain.

“Airlines are like lemmings,” said Paul Nisbet, an analyst with JSA Research in Newport, R.I. “The more that one airline orders, the more pressure that puts on those who haven’t yet ordered because of the need to get in line for production slots.”

The length and strength of the orders boom has far surpassed the expectations of the jet makers, which had originally expected orders in 2007 to ease back to the longer-term average of about 1,000 a year. Now Boeing and Airbus are finding themselves scrambling to ramp up their assembly lines.

Airbus produces around 34 A320 family jets a month and aims to increase that figure to 40 — an unprecedented rate for an aircraft program — by next year, helped by the addition of a new single-aisle assembly line in Tianjin, China, which will make four planes a month by 2011. Production of the A380 superjumbo is scheduled to more than triple from 13 planes this year to 45 a year by the end of 2010.

Boeing, meanwhile, is planning to make 480 to 490 planes in 2008, up from 441 last year, and 500 to 525 planes in 2009.

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