SINGAPORE – The world's biggest planemaker Boeing expects nearly half of the world's air traffic growth will be driven by the Asia-Pacific region over the next 20 years, but is monitoring local currencies to assess airlines' ability to meet orders. On the eve of the Singapore Airshow, Boeing forecast the fleet of aircraft in the region would triple in size over the next two decades, sparking demand for close to 13,000 more planes valued at $1.9 trillion. Air travel has surged in the region, driven by a rise in disposable incomes and low airfares offered by budget carriers, notably in Southeast Asia. But Randy Tinseth, vice-president of marketing at Boeing Commercial Airplanes, sounded a note of caution, saying market conditions were being monitored closely for any signs of overcapacity. "We are watching what's happening here in terms of currencies and in terms of economic growth," he told Reuters television. After years of explosive growth, the region's budget carriers now face the possibility of overcapacity as deliveries accelerate, airlines expand into each other's markets and currency weakness threatens to dent economic growth. By the end of the year, airlines in Southeast Asia will have 1,800 planes, while their order book is set to surpass the 2,000 mark. This week's Singapore Airshow, Asia's biggest aerospace event, attracts the world's major commercial and defense manufacturers, as well as buyers in the form of airlines and military top brass. Billions of dollars in deals are likely to be finalized. A spat between hosts Singapore and neighbor Indonesia has cast a slight pall over the event, and a series of meetings between their military leaders this week have been cancelled. Boeing estimated Asia-Pacific's fleet size would blow out to 14,750 over the next 20 years, from 5,090 in 2012. "Asia Pacific economies and passenger traffic continue to exhibit strong growth," Tinseth told a media briefing. "Over the next 20 years, nearly half of the world's air traffic growth will be driven by travel to, from or within the region." Similarly, rival Airbus sees Asia-Pacific as a lucrative market. It says planes on order make up 36 percent of the world total and the figure is rising. Both Airbus and Boeing have committed to record production rates for their most popular models, but executives are closely watching the financial turmoil in key aviation markets, such as Indonesia and Thailand. Asia Pacific is home to some of the world's biggest long-haul carriers and budget carriers AirAsia and Lion Air have placed aircraft orders valued at billions of dollars and are among the biggest customers of Boeing and Airbus. "They (low-cost carriers) have been able to provide a service to a part of the population that couldn't fly before. And so what they are able to do is, to reach into a country and help stimulate demand, very similar to what a Southwest or a Ryanair did over time," said Tinseth. "Their growth is being bolstered by both the growth in income we see, growth in the economy, but also the fact that they are able to push their product into a greater base." Full service carriers are also getting in on the act. Singapore Airlines is weighing a potential order for up to 40 of wide-body jets as it compares Boeing's revamped 777X against Airbus A350, sources familiar with the matter said. The airline is looking at a potential order for as many as 40 777X aircraft in a deal potentially worth $15 billion at list prices, the sources said, asking not to be identified. Garuda Indonesia is looking to tie up a long sought deal with Airbus for around 10 A330 aircraft, a source familiar with the matter said, echoing a Bloomberg report. Tinseth said the boom in low-cost carriers and demand for intra-Asia travel have fuelled a substantial increase in single-aisle airplanes. Boeing's data projects that passenger airlines in the region will rely primarily on single-aisle planes such as the Next-Generation 737 and the 737 Max, a new engine-variant of the 737, to connect passengers. Single-aisle airplanes will represent 69 percent of the new airplanes in the region. Carriers in Southeast Asia are due to take delivery of about 230 aircraft worth over $20 billion this year. "As we would move forward, we are going to be watching that capacity growth very closely and asking ourselves, 'Will it change the yield market and the revenue market?'," said Tinseth. "We see the capacity that's coming into the market within the bounds of our forecast, which is good but it's aggressive growth. And so you have to watch, especially as they open up new markets, where those markets will be and whether they will be successful." — Reuters
