Aircraft makers look to keep pace with demand

26th Feb 2014 17:37

With air travel showing every sign of being able maintain continuing good growth over 2014, it is not surprising that aircraft makers are experiencing greater demand as the confidence amongst carriers, not to mention their orders, feed through to them. Only last month ADS, the trade association for the UK aerospace and defence industries, revealed that 2013 was a record year for the global commercial aircraft industry, with orders increasing by 28% on 2012, resulting in a backlog of aircraft orders totalling more than 11,000 aircraft and 20,000 engines. That robust demand has spilled over into 2014, with ADS only yesterday revealing that year-on-year commercial aircraft deliveries increased by a record 14% in January. Its data showed that 84 aircraft were delivered in January 2014 compared to 74 in the same month last year. The backlog of orders now stands at 11,269 aircraft and 20,030 engines. The upturn for aircraft makers is accurately reflected by Airbus today announcing it will be increasing production of the A320 to 46 a month by the second quarter of 2016, up from the current rate of 42. "Based on the healthy market outlook for our best-selling A320 Family and following a comprehensive assessment of our supply chain's readiness to ramp-up, we are ready to go to a rate of 46 by the second quarter of 2016," said Tom Williams, Executive Vice President Programmes. Over the past five years, Airbus has steadily increased A320 Family production, going from a rate of 36 at the end of 2010 to a rate of 38 in August 2011, then up to a rate of 40 in the first quarter of 2012 to reach 42 per month in the fourth quarter of the same year.With over 10,200 Airbus single aisle aircraft sold and more than 5,900 delivered to nearly 400 customers and operators, the A320 Family, which includes the A318, A319, A320 and A321, is the world's best-selling and most modern single aisle aircraft family.With a total of 2,610 orders the A320neo Family has captured some 60% of the market, clearly demonstrating its leadership. Incorporating new more efficient engines and Airbus' "Sharklet" large wing tip devices, these new aircraft are set to deliver fuel savings of up to 15 percent.Across the pond, meanwhile, Airbus's US rival Boeing is increasing production of its competing narrow-bodied 737 family to 47 a month by 2017 from 42 in the first half of 2014.Confidence amongst aircraft makers owes much to the performance of airlines themselves as this impacts demand for new fleet. According to a January 2014 monthly business confidence survey by the International Air Transport Association (IATA), the trade association for the world's airlines, profit expectations among carriers remain strong.Airlines are also confident that air transport volumes will continue to grow over the next 12 months, with input costs and yields expected to remain stable. A majority (72%) of respondents to the IATA survey expect passenger travel to expand over the year ahead.With supply demand factors looking to be working very much in favour of aircraft manufacturers, investors will want to mull their exposure to the sector. While the like of Boeing and Airbus offer direct exposure, there are plenty of suppliers to consider too. Rolls-Royce, the world's No 2 commercial jet engine maker after Pratt & Whitney, supplies engines to both Airbus and Boeing. UK listed companies on Airbus's official list of suppliers include Cobham and GKN. Rolls Royce shares closed down 1.7% to 966.25 while Cobham ended the session off 0.03% to 295.5p. GKN closed 0.4% higher at 412.75p.