Farnborough reels as Airbus slashes superjumbo output

An Airbus A380 aircraft is seen beside the runway during the Farnborough Airshow. (AFP)
Updated 13 July 2016

Farnborough reels as Airbus slashes superjumbo output

FARNBOROUGH: The aircraft sector hit turbulence as European giant Airbus slashed output of its A380 superjumbo because of weak demand, putting a lid on plane orders generally at Farnborough.
European planemaker Airbus revealed late Tuesday at Farnborough — one of the world’s largest civilian and defense airshows — that it would halve production of its enormous A380 to one a month from 2018.
CEO Tom Enders said Wednesday he hoped the cutbacks would last for “just a year or two,” adding he remained optimistic over the jet’s prospects.
“We are all pretty up optimistic about the longer term prospects of the A380 and I hope this is just a year or two and then we can raise production rates again,” Enders said at the airshow, south of London.
“We decided back in 2000 to launch the A380 (and) little did we know what the world would look like in 2010, 2015 or 2016.”
He added: “We believe in this aircraft, the company knows what to do. We are proactive and I am quite confident that we will be able to (again) raise production rates.”
Enders said Airbus needed “to work harder to convince airlines that this aircraft really pays off if you can fill it.”
“It’s a real money making machine,” he insisted.
In what has been a relatively quiet show for new orders of planes generally, Airbus’ US rival Boeing on Wednesday inked previously-announced jet deals worth a total of $3.79 billion (3.42 billion euros) with Air Europa of Spain and Ruili Airlines of China.
Airbus on Tuesday revealed firm orders for 129 aircraft worth a combined $15.6 billion before the usual discounts are applied.
The orders included a vast $12.5-billion deal for 100 single-aisle A321neo jets from Malaysia’s AirAsia.
However the shock A380 announcement has stolen the show and reminded participants about the gloomy economic backdrop.
The A380 is the world’s largest civilian airplane, carrying up to 544 passengers in a four-class configuration or 853 in just a single class.
The jet has a list price of $432.6 million but it has not registered any sales yet at the week-long Farnborough event.
Dubai’s Emirates airline is the biggest client for the A380, operating 81 with another 142 on order.
“Airbus still continues to face the challenge of securing new orders for the A380,” independent aviation analyst John Strickland said.
“Its best customer, Emirates, would order many more but only if Airbus upgrades its... capability. This is something that Airbus is reluctant to do when it is not making money on the aircraft.”
Strickland added that airlines have a wide choice of large-capacity aircraft built by Boeing and Airbus that are cheaper than the A380 because they require only two engines, not four.
The superjumbo was launched in 2007 and has since received 319 orders from 18 global airlines, of which it still has yet to deliver 126.
Jefferies analyst Sandy Morris said the A380 also faced competition from Boeing’s 777-300ER long-range aircraft.
“The A380 simply ran into a very good all-round competitor in the B777-300ER,” Morris told AFP, adding that Airbus’ target markets of the Indian sub-continent and the wider Asia region has a limited appetite for the superjumbo.
“Those markets have to grow to the point where such a large aircraft is needed,” he said.


Economists fear a US recession in 2021

Updated 14 min 39 sec ago

Economists fear a US recession in 2021

  • Trump’s higher budget deficits ‘might dampen the economy’

WASHINGTON: A number of US business economists appear sufficiently concerned about the risks of some of President Donald Trump’s economic policies that they expect a recession in the US by the end of 2021.

Thirty-four percent of economists surveyed by the National Association for Business Economics, in a report being released Monday, said they believe a slowing economy will tip into recession in 2021. 

That’s up from 25 percent in a survey taken in February. Only 2 percent of those polled expect a recession to begin this year, while 38 percent predict that it will occur in 2020.

Trump, however, has dismissed concerns about a recession, offering an optimistic outlook for the economy after last week’s steep drop in the financial markets and saying on Sunday, “I don’t think we’re having a recession.” A strong economy is key to the Republican president’s 2020 reelection prospects.

The economists have previously expressed concern that Trump’s tariffs and higher budget deficits could eventually dampen the economy.

The Trump administration has imposed tariffs on goods from many key US trading partners, from China and Europe to Mexico and Canada. 

Officials maintain that the tariffs, which are taxes on imports, will help the administration gain more favorable terms of trade. But US trading partners have simply retaliated with tariffs of their own.

Trade between the US and China, the two biggest global economies, has plunged. Trump decided last Wednesday to postpone until Dec. 15 tariffs on about 60 percent of an additional $300 billion of Chinese imports, granting a reprieve from a planned move that would have extended duties to nearly everything the US buys from China.

The financial markets last week signaled the possibility of a US recession, adding to concerns over the ongoing trade tensions and word from Britain and Germany that their economies are shrinking.

The economists surveyed by the NABE were skeptical about prospects for success of the latest round of US-China trade negotiations. Only 5 percent predicted that a comprehensive trade deal would result, 64 percent suggested a superficial agreement was possible and nearly 25 percent expected nothing to be agreed upon by the two countries.

The 226 respondents, who work mainly for corporations and trade associations, were surveyed between July 14 and Aug. 1. That was before the White House announced 10 percent tariffs on the additional $300 billion of Chinese imports, the Chinese currency dipped below the seven-yuan-to-$1 level for the first time in 11 years and the Trump administration formally labeled China a currency manipulator.

As a whole, the business economists’ recent responses have represented a rebuke of the Trump administration’s overall approach to the economy.

Still, for now, most economic signs appear solid. Employers are adding jobs at a steady pace, the unemployment rate remains near a 50-year low and consumers are optimistic. US retail sales figures out last Thursday showed that they jumped in July by the most in four months.