Emirates believes Airbus can bow to demands on A380 program

Visitors walk past an Airbus A380 during this week’s Dubai Airshow. (Reuters)
Updated 14 November 2017
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Emirates believes Airbus can bow to demands on A380 program

DUBAI: Emirates believes Airbus can meet demands from the Dubai government to guarantee development of the A380 jet program, as it challenges the planemaker to see who will blink first in talks over a new $16 billion superjumbo plane order.
“I am sure that if we get closer to a further order, the Airbus board will make that undertaking,” Emirates President Tim Clark told reporters on Tuesday at the Dubai Airshow.
An anticipated order for A380 superjumbos worth $16 billion failed to materialize at the last moment on Sunday, forcing state-owned Emirates and Airbus into further talks.
Clark declined to speculate when a deal might be reached, but hinted on Monday it could be a matter of weeks or months.
Airbus CEO Tom Enders left the air show on Monday, though sales chief John Leahy stayed locked in Dubai meetings.
Delegates said the chances of a deal during the Nov. 12-16 event had faded after the two sides failed to agree in time for Sunday’s grand opening, but one did not exclude a last-minute patch-up that would bring Enders back for a signing.
Airbus declined to comment.
In the meantime, Clark stressed the Dubai government was serious about asking for guarantees that Airbus should keep the A380 in production for at least 10 years before Emirates placed a new order for the plane. The conditions were first set out in an interview with Reuters on Monday.
“The ownership of the business, the government of Dubai, the shareholder, needs absolute, absolute certainty,” he said.
Asked why this had become so important, he said, “because there has been a lot of talk” about the future of the A380, the world’s biggest passenger jet.
Emirates will take the 42 A380s it has on order after taking delivery of 100, he told reporters. However, he was skeptical about proposed efficiency improvements known as “A380plus.”
Since late 2014, there has been on-off speculation over the A380’s future as production twice had to be cut because of weak demand. Airbus is, however, lowering production costs in order to try to keep assembly running at reduced rates.
Clark said the question of guarantees at the center of the latest negotiations remained separate from the economic case for the aircraft itself, which continued to be the “poster” model for the Emirates network and a major profit-earner.
The giant jet generates new demand wherever it is used and pours traffic into Emirates’ Dubai hub from Europe, for example, to feed dozens of destinations to the east and south, he said.
On new aircraft developments, Clark suggested that either Emirates or discount carrier flydubai, which is also owned by the Dubai government, could be interested in a mid-sized jet that Boeing is considering developing.
“Whether it is in Flydubai ... or in Emirates, with the carriers working far closer than they have been for a long time, would it fit? Yes, I think possibly in certain routes,” Clark said.
Designed to reduce drag by shaving cargo space in the belly while carrying 225-275 passengers, the proposed jet would not work on routes where Emirates carries significant cargo.
But Clark said global aviation would welcome the new plane.
“I can see a place for it in Europe. I can see a place in transcontinental USA and Asia,” he said, adding it would suit markets with congested airports but relatively low freight traffic, where airlines may not be willing to bet on a traditional twin-aisle jet sitting more than 250 people.
“Looking at it from an industry point of view, I think there is scope for that,” he said.
Clark, 67, an influential industry figure who was knighted by his native Britain in 2014, deflected questions about whether he planned to retire, saying “I am still here.” He scoffed at a suggestion he might like to do anything as leisurely as golf.
But he said his eventual succession at Emirates would be assured and that the airline had a strong executive team.
— REUTERS


China’s real estate investment slows as caution sinks in

Updated 19 October 2018
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China’s real estate investment slows as caution sinks in

  • Property increases downside risks to economy
  • September new construction starts up by a fifth

BEIJING: Growth in China’s real estate investment eased in September and home sales fell for the first time since April, as developers dialled back expansion plans amid economic uncertainties and as additional curbs on speculative investment kicked in.
A cooling market could increase the downside risks to the world’s second-largest economy, which faces broader headwinds including an intensifying trade war with the United States.
However, while analysts acknowledge increasing caution in the property market, they say investment levels are still relatively high, suggesting a hard landing remains unlikely.
Growth in real estate investment, which mainly focuses on residential but also includes commercial and office space, rose 8.9 percent in September from a year earlier, compared with a 9.2 percent rise in August, Reuters calculated from National Bureau of Statistics (NBS) data out on Friday.
“I think overall, China’s real estate market is still resilient, and the decline in sales is within our expectations,” said Virginia Huang, Managing Director of A&T Services, CBRE Greater China.
“There is no sign that the government has relaxed their control, but it still has many methods and tools to support the market if the economy deteriorates rapidly,” Huang said.
Real estate has been one of the few bright spots in China’s investment landscape, partly due to robust sales in smaller cities where a government clampdown on speculation has been not as aggressive as it is in larger cities.
The market has struggled as authorities continued to keep a tight grip over the sector, ramping up control in hundreds of cities. Transactions fell sharply over the period dubbed “Golden September and Silver October,” traditionally a high season for new home sales.
Property sales by floor area fell 3.6 percent in September from a year earlier, compared with a 2.4 percent gain in August, according to Reuters calculations, the first decline since April. In year-to-date terms, property sales rose 2.9 percent in the first three quarters.
China’s central bank governor Yi Gang said last week he still sees plenty of room for adjustment in interest rates and the reserve requirement ratio (RRR), as downside risks from trade tensions with the United States remain significant.
The government has implemented four RRR cuts this year, releasing hundreds of billions in new liquidity to the market.
China has for several years pushed a deleveraging campaign to reduce financial risks, clamping down on shadow banking and closing many “grey” financing channels for real estate firms.
For many highly leveraged developers, there are already signs of increasing caution as exemplified by a surge in failed land auctions due to tight liquidity and thinning margins.
New construction starts measured by floor area, an indicator of developers’ expansion appetite, rose 20.3 percent in September from a year earlier, compared with a 26.6 percent gain in August, Reuters calculations showed.
That’s against the backdrop of seemingly looser funding conditions for China’s real estate developers, who raised 12.2 trillion yuan ($1.76 trillion) in the first nine months, up 7.8 percent from the same period a year earlier, the NBS said.
The growth rate compared with a 6.9 percent increase in January-August period.
“Many developers will face lots of maturing debt by the end of this year, and there are perceived risks in the economy, so they will be more cautious,” Huang said.
China’s housing ministry is considering putting an end to the pre-sale system that developers use to secure capital quickly, in an effort to crack down on financial risks in the property sector.
China’s home prices held up well in August, defying property curbs. But analysts expect additional regulatory tightening and slowing economic growth will soon take the wind out of the property market’s sails.
The National Bureau of Statistics will release September official home price data on Saturday.