Rival aircraft makers signal dive in orders

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TWO of the world's largest aircraft manufacturers yesterday signalled that the industry was about to enter a sharp and prolonged downturn.

Airbus, the European consortium that includes British Aerospace, warned of substantial over- capacity in the industry over coming years.

At the same time its US rival, Boeing, announced it was to cut production of 757 airliners from September 1993. Boeing had already said it would sharply cut production of its smaller 737 aircraft.

Adam Brown, Airbus director of planning, said the 'order frenzy' of the past few years was about to end, forcing companies to rethink the way they did business. He predicted that annual deliveries by the three biggest makers of aircraft with more than 100 seats would drop to 400 by 2004, compared with 800 this year and a 20-year average of 600.

Mr Brown predicted outright war between Airbus, Boeing and McDonnell Douglas in his anticipated buyers' market. He warned that as competition increased, more sophisticated aircraft could end up in the hands of operators with little experience of the equipment, with serious implications for passenger safety.

He said: 'It remains for me at least deeply disturbing that about 70 per cent of accidents and incidents continue to be attributed to pilot error. All of us make huge efforts in training and in-service assistance. But we need to ask ourselves whether we cannot do more on a concerted basis.'

Speaking at a London conference, Mr Brown also said that one of the greatest challenges facing the industry was finance for airlines. He said the current liquidity crisis in the banking market meant many airlines were looking to the manufacturers they deal with for support.

Boeing's cuts will reduce 757 production from 8.5 to seven a month, because deliveries from next September would not be sufficient to maintain current output. The Seattle-based group has already announced plans to cut its workforce by at least 8,000 this year.

The warnings for the industry's future were echoed by Maurice Foley, chairman of the aircraft leasing group GPA. He told the London conference that the huge losses by world airlines in the past two years were catastrophic for an industry that needed to finance at least dollars 30bn per year in new aircraft.

He said: 'Since mid-1990 the world airline industry has lost at least dollars 10bn, an amount roughly equivalent to its entire earnings in the previous six years. There is a huge gap emerging between the industry's financial resources and its needs.'

Mr Foley said he expected airlines outside the ranks of the global 'mega-carriers' to increasingly sub-contract many of their activities such as maintenance to specialist companies to reduce costs.