Oil prices threaten jet market

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Oil prices threaten jet market By Mark Odell Published: October 9 2000 13:11GMT | Last Updated: October 9 2000 15:16GMT

The head of Boeing's commercial aircraft division warned on Monday that despite recovery in Asia, continued high oil prices could undermine the market for new jets.

Alan Mulally, president of Boeing's Commercial Airplanes Group, said the economic resurgence in Asia had helped produce "a good, healthy business environment" which should lead to two of the best years in the history of commercial jet sales.

The head of the world's largest civil jet maker cautioned, however, that oil prices could yet undermine this optimism.

"Asia is coming back and the economies around the world are pretty stable. But I say that with a little cautiousness because of the [high] oil prices. The thing we are always concerned about is that it could act like an exogenous shock to economies. Oil could slow up GDP growth and we could end up right back where we were. Travel could slow down in Asia and everybody then worries about that leaking back into Europe and the United States," Mr Mulally said.

Beyond the macro-economic effects of the high oil price, it has forced most major airlines to increase published fares at least twice this year. An airline's fuel bill is the second biggest cost item after wages and the high oil price is expected to wipe out most airlines' profits from the underlying strong market for air travel.

Assuming there is no oil "shock", Mr Mulally predicts demand for air travel will grow at more than 6 per cent this year and next, compared to an average of around 4.7 per cent.

He expects total orders for 2000, including those for arch-rival Airbus, to top 900 aircraft, making it one of the best years on record.

Those expectations are below the record order levels of 1996 to 1998. But the crucial difference is that demand is now much more in line with the growth in air travel and the rate of replacement of old aircraft.

Mr Mulally would not be drawn on whether Boeing would regain the top spot in the annual orders race this year, after Airbus deposed it in 1999. At current levels, however, the Seattle-based jet maker looks certain to outpace its European rival.

Boeing has already won 467 orders in the first nine months of the year, comfortably by-passing last year's total of 391 aircraft, giving it a market share of around 60 per cent of new business.

http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT30LP164EC&live=true&tagid=ZZZCWHK1B0C&subheading=energy%20%26%20utilities

-- Martin Thompson (mthom1927@aol.com), October 09, 2000


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