Airbus revises up jet demand, warns of 'lose-lose' tariff war

Airbus raised its 20-year forecast for jetliner demand on Wednesday despite expected slower growth in traffic. (Reuters)
Updated 18 September 2019

Airbus revises up jet demand, warns of 'lose-lose' tariff war

  • Airbus expects airlines and leasing companies to take delivery of 39,210 new passenger jets

LONDON: Airbus raised its 20-year forecast for jetliner demand on Wednesday despite expected slower growth in traffic, as it predicts airlines will replace ageing fleets with smaller, more fuel-efficient new planes.
The industry faces a squall of new pressures from trade tensions, the partial unwinding of globalisation and an anti-flying campaign from climate activists, notably in Europe.
Airbus Chief Commercial Officer Christian Scherer voiced alarm about the prospect of a tit-for-tat tariff war between the United States and Europe after the World Trade Organization signalled that Washington can impose sanctions in a long-running dispute over aircraft subsidies.
The European planemaker expects demand for new planes to be led by Asia, where the industry has been enjoying a boom in demand due to the growth of cities and a burgeoning Asian middle class.
Demand from China is expected to leapfrog the United States and Western Europe, while India and new manufacturers like Vietnam are growing the fastest.
In its annual long-term forecast that sheds light on world trends, Airbus predicted the world's fleet would more than double to 47,680 jets by 2038.
Airbus expects airlines and leasing companies to take delivery of 39,210 new passenger jets and freighters over the next two decades compared to 37,389 previously forecast, as airlines seek to tap into the fuel savings offered by newer jets.
It shaved its 20-year forecast for average traffic growth to 4.3% a year from 4.4%.
'LOSE-LOSE' TRADE BATTLE
Airline traffic growth has slowed this year amid trade tensions between the United States and China.
"Increased protectionism and other geopolitical risks remain a concern," Airbus said in its Global Market Forecast.
Scherer said possible sanctions related to the dispute with Washington over aircraft subsidies had so far had no impact on U.S. demand for Airbus jets.
"Ultimately they will have an impact on airplanes and therefore the price of tickets and that is not good. If there is an impact, the same impact will happen here in Europe," he said, referring to the likelihood of European countermeasures.
"It is a lose-lose impact," Scherer told reporters.
Touting the industry's record in cutting emissions, in a week that Swedish teenage climate change activist Greta Thunberg pressed the U.S. Congress for action on climate change, Airbus said the industry could still achieve carbon-neutral growth because new planes are so efficient.
Environmental groups backing a global "climate strike" say more radical steps are needed to avert a disaster.
"We are on a path to de-carbonise but we can't do it alone," Scherer said, calling for investment in sustainable biofuels.
Airbus revised up its demand forecast for the industry's most-sold single-aisle jets by 4% to 29,720 planes but cut the medium segment including its A330neo by 2% to 5,370.
It followed U.S. rival Boeing in scrapping separate forecasts for the world's largest aircraft after deciding to halt production of the Airbus A380 due to weak demand.
It now includes these aircraft with the largest twin-engined jets, with the resulting combined category up 22% to 4,120 jets.
Airbus raised its 20-year forecast for services like repairs, training and cabin upgrades to $4.9 trillion from $4.6 trillion.
Once focused mainly on building their jets, Airbus, Boeing and other manufacturers are stepping up competition for a slice of this market to gain access to lucrative recurring revenues.


ADNOC wants its flagship crude as global benchmark

Updated 1 min 27 sec ago

ADNOC wants its flagship crude as global benchmark

  • Abu Dhabi oil giant’s ambitious call comes amid falling Brent volumes and new UAE exchange plan

ABU DHABI: Abu Dhabi National Oil Co. (ADNOC) is aiming to have its Murban futures contract eventually replace North Sea benchmark Brent whose volumes are declining, an ADNOC executive said on Tuesday.

Intercontinental Exchange Inc. plans to launch a new exchange in the UAE, ICE Futures Abu Dhabi (IFAD), in the first half of 2020 to host ADNOC’s flagship Murban crude grade.

“We want to give the industry Murban as a replacement for Brent crude futures,” Philippe Khoury, head of trading at ADNOC group, told an energy conference in the UAE capital Abu Dhabi.

“We still have to demonstrate that over time the community can trust the crude as a benchmark,” he added.

Oil majors BP, Total, Inpex, Vitol , Shell, Petrochina, Korea’s GS Caltex, Japan’s JXTG and Thailand’s PTT have agreed to become partners in the new exchange.

Vitol CEO Russel Hardy said that it will take time to build liquidity on the new exchange, and that Brent, a basket of different crude qualities, and US West Texas Intermediate (WTI) were very established.

“There is a great deal of different constituents playing in those markets. These things will take time to build up on the exchange here,” he said at the same panel discussion.

“It is right to have that level of ambition but it will take some time to build that level of liquidity,” he said of ADNOC’s plans for Murban.

The new contract will create an alternative benchmark to the most commonly used Middle East standard, the Dubai/Oman benchmark operated by the Dubai Mercantile Exchange (DME) and traded on CME’s electronic platform.

Abu Dhabi’s Supreme Petroleum Council last week approved the launch of a new pricing mechanism for Murban crude as part of ADNOC’s broader transformation strategy. It authorized the state energy firm to remove destination restrictions on Murban sales.

ADNOC plans to implement new Murban forward pricing between the second quarter and third quarter of 2020.

UAE Energy Minister Suhail Al-Mazrouei said earlier on Tuesday that he saw no conflict between his country’s compliance with OPEC output cuts and plans to list Murban.

He said the UAE remained committed to cuts agreed by the Organization of the Petroleum Exporting Countries, plus allies led by Russia. These countries have since January implemented a deal to cut output by 1.2 million barrels per day (bpd) which lasts until March 2020, in an attempt to boost prices.

“I don’t think there is a conflict in floating Murban with the fact that UAE is going to comply with whatever we agree to with OPEC. I am not worried about that,” Mazrouei said.

Murban light crude output is around 1.6-1.7 million barrels per day. The UAE has traditionally sold oil directly to end-users, mainly in Asia, based on retroactive pricing rather than forward pricing used by Saudi Arabia, Kuwait and Iraq.

The UAE, the third-largest OPEC producer behind Saudi Arabia and Iraq, pumps around 3 million bpd, produced mostly by ADNOC.