Boeing aircraft sales dip as airlines suffer

Soaring oil prices have affected sales of US aircraft manufacturer Boeing. (GETTY IMAGES)

After three years of record aircraft sales, Boeing Company's orders are showing signs of slipping as the world's airlines scramble to survive soaring oil prices.

The top four United States airlines are planning to cut flights, lay off workers and retire older planes this winter as they look to cut their fuel bills, moves likely to be followed by overseas carriers.

Boeing's chief concern is that airlines in the United States and Europe are aggressively cutting flights and scaling back capacity, which are the main indicators of industry growth and, ultimately, demand for aircraft.

Carriers in Asia and the Middle East, Boeing's strongest-growing markets in the past few years, have not shown signs of weakness so far, but high oil prices could eventually hurt them too. Boeing says demand for its new, more fuel-efficient aircraft will stay strong, but airlines are showing signs of alarm as jet fuel hovers above $150 a barrel, adding billions of dollars to airlines' operating expenses.

Amid discussion of mergers and bankruptcies, new aircraft orders have started to slow and analysts' outlook for the next three to four years has darkened.

"The airlines are having a hell of a rough time, which means they will continue being weak financially," said Paul Nisbet at aerospace specialists JSA Research.

"The US airlines in particular are going to have to delay further buying aircraft."

It is too early to call it a disaster for Boeing, said Nisbet, given that a dip in orders was already expected after the boom, and that Boeing has a record $271 billion (Dh994bn) worth of jetliner orders on its books.

But the situation could become serious if oil stayed high and economic weakness in the United States spread to the rest of the world, according to analysts.

"Although the Boeing backlog is currently huge, we expect declining orders and delivery deferrals to result in a flattening off in production from 2010," said Macquarie Capital's Rob Stallard in a research note.

That would signal "the end of this aerospace up-cycle", he added.

Airlines signed up to buy 67 new aircraft from Boeing in May, compared with 92 in the same month a year ago.

Boeing had 414 commercial aircraft orders at the end of May, in line with the 417 it had at the same time last year, which turned out to be its best year ever, with 1,413 net orders.

Boeing's main rival Airbus has not yet felt a decline. According to the latest figures, it had 397 net new orders for the year at the end of April, higher than the same time last year.