More efficient and more capable narrowbodies means new routes are possible, and with cheaper tickets. This could drive a growth in PAX numbers that seemed impossible not long ago.
We'll see growth.
If the market is going to burst due to oversupply, it's probably wise to make as much aircraft as they can now and pocket the profit first before it burst and airlines cancels their order. They can always scale the production line back if airlines start cancelling their orders
Also, in a hypothetical scenario when NB aircraft become oversupply after Boeing making them at a rate of 57/month and Airbus making them at a rate of 70/month, it mean there will be more Airbus NB on the market after the saturation. This will only help Airbus in the future.
Who is going to fund lead time items, partly and fully built aircraft?
Also, if the bubble bursts, there will be shortage of funding for purchase and lease (lead financiers will stick around, but participants will dive for cover), margins increase, funding terms shorten, and conditions become more onerous. Even airlines with a sound business case may struggle to find competitive funding.
A lot of these orders are qualified, subject to funding on terms suitable to the purchaser. Airlines do not put in place funding for aircraft planned for delivery 2 years or further out.
The OEM's in increasing production rates are only responding to customers / orders. If airlines and leasing companies are being reckless in placing orders, that's a discussion that needs to take place between the OEM and customer.
As I pointed out last year, 2018-2020, OEM sales staff will spend as much time negotiating cancellations and deferrals, as writing new business.[/quote]
There will be differals, But if Airbus is increasing production, it is because of new demand.
There won't be an equal sharing of the pain when there is a downturn. Look at the MD-80 vs. 737 vs. A320, the MD-80/717 line took the brunt of the downturn.
The reality is that to keep selling, Airbus must increase production. The detractors note that the top Airline in India, Top Airline in Indonesia, and an airline doing very well in Eastern Europe.
The leasing companies should be concerned. The rapid rise of NEO production is going to result in used A320CEO values dropping. AerCap was thinking about NEOs... but by trying to sell their CEOs coming off lease.
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