ERJ Embraer SA

By Gaurav Raghuvanshi 

SINGAPORE--Aircraft makers such as Boeing Co., Airbus Group SE and Embraer SA say they aren't worried that the economic slowdown in Asia, especially China, will hurt sales in the world's fastest-growing aviation market.

Rather, some are still trying to keep up with demand.

"My biggest worry is not being able to build all the aircraft that we've already sold," John Leahy, chief operating officer of Airbus, said at a news conference at the Singapore Airshow on Tuesday.

Financial markets have been spooked by China's slowing growth. Last year, Beijing reported, the world's second-largest economy grew at its slowest pace in 25 years, 6.9%--and many economists say they believe the true figure is closer to 6%. But China is still expanding faster than any other major economy. And China, India and Southeast Asia remain the fastest-growing aviation markets in the world.

Airbus predicts that over the next 20 years, the Asia Pacific region will take delivery of 12,800 new aircraft, valued at US$2 trillion. That would constitute about 40% of its projected total global demand of 32,600.

The Toulouse, France-based company expects the number of passengers in Asia to keep growing 5.6% a year over the next 20 years. It remains bullish about China, where it expects to deliver 800 planes between now and 2020, and where Mr. Leahy said he expects passenger growth to stay at 10% over the next few years.

Arch rival Boeing predicts Asia will take delivery of 14,330 planes over the next 20 years, 38% of its projected global total. "The Asia story will only get better," said Dinesh Keskar, senior vice president of sales in Southeast Asia and India at Boeing.

Embraer, which builds smaller planes, predicts that over the 20 years the Asia-Pacific region will take delivery of 1,570 new jets with seating for between 70 and 130 passengers.

"We are enjoying momentum in China," said John Slattery, chief commercial officer at Embraer Commercial Aviation. Despite the slight slowdown in China's gross domestic product, "the aviation market continues to grow at double digits."

Asia Pacific commercial-aviation sales will grow 9.2% a year in nominal U.S. dollar terms between now and 2020, outpacing the global 7.5% rate, Rajiv Biswas, chief economist in Asia Pacific at IHS Global, forecast in a recent report.

Sliding crude-oil prices have helped airlines cut costs. Fuel accounts for nearly a third of the total expenses of airlines in Asia, Mr. Biswas said.

No deliveries have been canceled or deferred by Asian customers, Boeing and Embraer executives said in responses to queries from reporters. Mr. Leahy said no customers are negotiating to reduce orders "outside the normal course of business." Airbus reported later Tuesday that Garuda Indonesia canceled an order for seven A330 jets.

Airbus officials couldn't immediately be reached for comment. Arif Wibowo, Garuda's chief executive, said the carrier is evaluating offers from both Boeing and Airbus for the newest variants of their planes and may order up to 30 widebody jets this year. The company may swap some orders for older variants for the latest ones, he said, before Airbus announced the cancellation of the order for seven older models.

No big orders were announced on the first day of the Singapore Airshow, which runs through the end of this week.

Airbus announced in October that it will increase production of its best-selling A320 model by 2019 to 60 planes a month from the current 42 A320s; it had previously disclosed plans to raise monthly output to 50 planes next years. Boeing plans to lift production of its rival 737 jetliner to 52 a month in 2018.

Asia is home to some of Airbus's biggest customers: India's InterGlobe Aviation Ltd., which operates IndiGo, Malaysia's AirAsia Bhd. and Indonesia's Lion Air Group have placed orders for hundreds of planes in recent years.

Several analysts have said that Asian carriers may have been getting ahead of themselves: Passenger growth for carriers in Southeast Asia, for instance, lags behind fleet growth. AirAsia was forced to defer some of its aircraft deliveries in 2014.

Write to Gaurav Raghuvanshi at gaurav.raghuvanshi@wsj.com

(END) Dow Jones Newswires

February 16, 2016 09:07 ET (14:07 GMT)

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