Aerospace Update

Boeing Forecasts a $2.8 trillion Market for New Commercial Airplanes over Next 20 Years Boeing’s Current Market Outlook shows persistent growth rates across all markets over the next 20 years.

The center of gravity of the world airline fleet will move substantially toward the Asia-Pacific region. More than one third of the value of new airplanes delivered will be accounted for by Asia-Pacific, compared with about a quarter for North America and a quarter for Europe and the CIS.

Worldwide, Boeing forecasts a $2.8 trillion market for new commercial airplanes over the next 20 years and projects a need for approximately 28,600 new commercial airplanes (passenger and freighter), doubling the world fleet by 2026. These new airplanes will make up 80 percent of the 36,400 airplanes in service in 2026. The vast majority of these new airplanes will be in the single-aisle (90 seats and above) and twin-aisle (200-400 seats) categories.

The air cargo market is set for average growth of 6.1 percent per year, comprising 6.2 percent per year for air freight and 2.5 percent per year for airmail. This will triple the volume of world air cargo traffic over the 20-year period.

Many more markets will receive a strong boost as governments ease regulations that have previously restricted market access. New Open Skies agreements between the European Union and the United States and Canada will shortly be in effect. Further liberalization is imminent in Asian and North African markets, with a continuing long term trend toward opening up markets worldwide.

Developing regions are becoming more influential on the world stage. Hence, the Current Market Outlook includes analysis of Commonwealth of Independent States (CIS) markets (including Russia) for the first time.

Five years after 9/11, the industry is a picture of health and stability, according to Flight International’s annual Aerospace Top 100 survey – compiled in association with PricewaterhouseCoopers. The industry should stay on this upward trend - until at least 2008-9, if this is one of the industry's normal cycles. Revenues are continuing to grow and overall industry profit margins are heading back towards their peak of 2000. But while the prime contractors and their Tier 1 partners are solidly profitable, there are signs that not all of the Tier 2 and 3 suppliers are so successfully turning increased sales into higher earnings.

International Lease Finance Revises its Original 16 Airbus A350 order to 20 A350 XWBs

International Lease Finance Corporation (ILFC) and Airbus have concluded a revision of ILFC's original 16 A350 order to 20 A350 XWBs. The revised agreement by the world's largest commercial leasing company by fleet value, and a subsidiary of American International Group, Inc, is for both the -800 and the -900 version. ILFC has the flexibility to also select the -1000 version upon request. This transaction brings total orders for the A350 XWB to 196 from nine customers.

"Airbus is now offering an outstanding product which satisfies the market and our requirements," says ILFC Chairman and CEO Steven Udvar-Hazy.

"ILFC's order confirms that the A350 XWB is a very attractive asset for a leading lessor. It is yet another strong endorsement by the financial community for our all new product," Airbus President and Chief Executive Officer Tom Enders said. "The all-new A350 XWB will bring unrivalled operating performance and economics, whilst passengers will enjoy more comfort in a highly advanced and more spacious cabin. Being extremely fuel efficient and quiet, it will also set new standards in terms of environmental friendliness."

With now over 600 Airbus aircraft ordered, ILFC is Airbus' largest single customer worldwide. The leasing company was a launch customer for Airbus' A319, A321, A330-200, A330-300, A340-600 and A380, all market leaders in their categories, and has ordered virtually every type of Airbus aircraft.

The A350 XWB (Xtra-Wide-Body) will be the world's most technically advanced aircraft when it enters service in 2013. Building on A380 technologies and going beyond, it is designed to increase productivity and offer unparalleled levels of passenger comfort in its class while further reducing fuel burn and emissions, and being even quieter. The A350 XWB will offer the lowest operating costs and lowest seat mile costs of any aircraft in that category. Addressing environmental concerns and cost-effectiveness, the A350 XWB will be one of the most fuel-efficient and "green" aircraft ever.

Powered by Rolls Royce Trent XWB engines, the A350 XWB will be available in three basic passenger versions with up to 8,300 nm/ 15,400 km in range, the A350-800 which can fly 270 passengers in a spacious three-class configuration, the A350-900 seating 314, and the A350-1000 which is designed for 350 passengers.

Vietnam Airlines has signed a memorandum of understanding with Airbus Industries (Toulouse, France) for 10 A350-900 XWBs, as well as 20 additional A321s.

With its commitment for 30 additional Airbus aircraft, Vietnam Airlines will become one of the largest Airbus operators in Asia. Vietnam Airlines currently operates a fleet of 23 Airbus aircraft, including 10 A320s, 10 A321s and three A330s (two -200s and one -300). Five previously ordered A321s are still to be delivered. With Vietnam Airlines’ endorsement, total firm orders and commitments for the composites-intensive A350 XWB program stand at 264 aircraft (154 firm orders and 110 commitments).

The Airbus A380 made its first visit to Istanbul last week, where incumbent carrier Turkish Airlines revealed long-term ambitions to operate the ultra-large aircraft, but says the replacement of its A310s and A340s is a more pressing requirement.

The airline is evaluating the A350 XWB and Boeing 787, and general manager Temel Kotil says the airline is planning "to announce new orders at the beginning of 2008".

The carrier is planning to place orders for at least 20 aircraft and possibly add 10 options. Turkish Airlines is also looking for medium-range types to expand the A320 and 737 fleet. A technical report on the fleet expansion has been completed and sent to the carrier's board.

THY operates seven A340-300s and five A330-200s and the carrier next year will lease a pair of A330s to replace two of its five A310s. These A310s will be converted into freighters.

AgustaWestland, Eurocopter and Russia's Rosoboronexport arms agency have submitted a combined seven proposals in response to a Brazilian air force requirement for 24 new medium-lift and attack helicopters.

Nominally budgeted at $395 million, the combined programme was placed on the fast track in late June, when the Brazilian defence ministry issued a request for information, with a request for proposals having followed early in the third quarter.

The air force says its initial programme calls for the purchase of 12 medium-lift transports also configured for search-and-rescue and combat SAR tasks, plus 12 attack helicopters. Service sources are concerned that numbers could differ when the programme's final budget is approved early next year, but Brasília-based sources say the procurement's importance could spur the government to inject additional funds to cover the required number of aircraft.

AgustaWestland's proposal includes its EH101, A109 light utility and AW129 attack helicopter designs, while Eurocopter is offering the EC725 and Tiger. Moscow's submission is based on the Mil Mi-171V and Rostvertol Mi-35M.

Sources close to the programme suggest that the EC725 is the leading candidate for the medium-lift requirement, due to the air force's experience in operating Eurocopter's AS332/532 Super Puma/Cougar family of helicopters, but say the Tiger's high unit cost could deter the defence ministry from following its preferred single-source supplier model.

The defence ministry hopes to sign contracts for the selected aircraft in the fourth quarter of 2008. The Brazilian air force also intends to early next year address a separate requirement for heavylift helicopters.

Boeing Projects $120 Billion Latin America Market for New Commercial Airplanes

Boeing [NYSE:BA] forecasts that Latin American airlines will need 1,730 airplanes worth $120 billion over the next 20 years, according to an analysis presented recently at the Latin America Airfinance Conference in Rio de Janeiro.

Air travel within Latin America will grow 6.6 percent during this period, well above the world average growth of 5 percent -- second only to China's 8.8 percent forecasted growth rate.

"Boeing understands aviation better than anyone else," said Michael Barnett, Boeing's director of Marketing for Latin America, who presented the analysis at the conference. "What our analysis shows is Latin America's rich aviation history will continue with robust, above-average growth.

"In fact, we forecast air travel within the region will increase at a rate second only to China, demonstrating continued regional vitality. Boeing has and will continue to provide the right products and solutions for the region to sustain that growth."

Deliveries to airlines in Latin America will represent approximately 4 percent of the deliveries measured by dollar value worldwide between 2006 and 2025.

Over the next 20 years, deliveries of new airplanes in Latin American will consist of:

Combined with the retained fleet and used airplane acquisitions, these new deliveries will result in a Latin America commercial airplane fleet of over 2, 420 airplanes by 2026.

The Boeing Company [NYSE: BA] board of directors has approved a new repurchase plan for up to $7 billion of common stock and declared a regular quarterly dividend of 35 cents a share.

Boeing has bought approximately $8 billion of its stock since resuming repurchases during 2004. This new plan follows the $3 billion buy back that the board approved in August 2006. The company is nearing completion of the repurchases authorized under that plan.

"Our strong financial performance allows us to return value to our shareholders while continuing to invest in our growth and becoming more productive," said Boeing Chairman, President, and Chief Executive Jim McNerney. "We are executing a balanced cash deployment strategy that's serving Boeing and its shareholders well."

The share repurchases will be made on the open market or in privately negotiated transactions. The number of shares to be purchased, and the timing of the purchases, will be based on the level of cash balances, general business conditions and other factors including alternative investment opportunities.

The Boeing Company’s [NYSE: BA] third-quarter net earnings increased to $1.1 billion, or $1.44 per share, from $694 million, or $0.89 per share, in the same period last year (Table 1). Third-quarter revenues increased 12 percent to $16.5 billion while earnings from operations rose to $1.5 billion, yielding a 9.1 percent operating margin. Excluding last year’s charge of $0.22 per share in the period to exit the Connexion business, adjusted earnings per share* rose 30 percent.

Boeing increased its 2007 guidance for revenue, earnings per share and cash flow due to core business performance and lower corporate costs, and now expects earnings per share this year to be between $5.05 and $5.15. The company’s guidance now reflects the previously disclosed revision to the 787 delivery schedule, and the 2008 EPS outlook is reaffirmed.

The Boeing Company [NYSE: BA] and Mumbai-based Jet Airways, India's largest private airline, announced they have finalized an order for twenty Next-Generation 737-800s. The order is valued at nearly $1.5 billion at current list prices.

All 20 737-800s will be equipped with performance-enhancing Blended Winglets, which improve fuel efficiency and reduce CO2 emissions by up to 4 percent. Jet Airways currently operates a fleet of 50 Classic and Next-Generation Boeing 737-400/-700/-800/-900 airplanes.

Jet Airways has one of the youngest aircraft fleets in the world, with an average fleet age of just under five years. The airline operates more than 340 daily flights to 53 destinations throughout India and internationally, including the United States, Canada, Belgium, United Kingdom, Singapore, Malaysia, Sri Lanka, Thailand and Katmandu.

The 737-800 is the most popular member of the Next-Generation 737 family, with more than 2,400 airplanes ordered. The 737-800's market success is confirmed by air finance investors, who consistently rank it as the most preferred airplane due to its wide market base, superior performance efficiency and lowest operating costs in its class. As of Sept. 30, Boeing had received orders for more than 4,100 Next-Generation 737s, and has unfilled orders for nearly 1,800 airplanes worth more than $125 billion at current list prices.

The Boeing Company [NYSE: BA] announced deliveries across its commercial and defense operations for the third quarter of 2007. Major program deliveries during the third quarter were as follows:

Major Programs	3rd Quarter 2007	Year-to-Date 2007
Commercial Airplanes Programs
737	81	250
747	5	12
767	3	9
777	20	58
Total	109	329

Integrated Defense Systems Programs
Apache (New Builds)	9	17
Chinook (New Builds)	1	7
C-17	4	12
C-32/C-40	0	2
F/A-18E/F and EA-18G	11	33
Satellites (Government & Commercial)	1	4
T-45TS	2	7
F-15	3	6
Delta II - Commercial	1	2

	A300/A310	A320	A330/A340/A350	A380	Total
Total Orders	821	5460	1442	165	7888
Total Deliveries	816	3236	842		4894
Aircraft in Operation	636	3203	835		4674

Lockheed Martin is proposing to build 120 more C-130J airlifters for the US Air Force to preserve its 50-year-old production line at least through 2015, even as the Airbus Military A400M emerges as a potential competitor for US sales, Flight International reports.

Lockheed's unsolicited offer seeks USAF support to deliver 24 C-130Js a year between 2011 and 2015. If accepted, the new multi-year proposal would reduce overall costs by 10 percent compared with annual orders, according to the manufacturer. "We look forward to working with our customer to finalise all details necessary for a contract award," it says.

Aggressively expanding XOJet announced an order with Bombardier recently for 80 of the Canadian company’s super mid-size Challenger 300 business jets. The deal is for 20 firm orders, worth $450 million, and 60 options that could raise the order value to $1.9 billion, Flight reports.

This is the largest Challenger 300 order in history and the first deliveries are set to begin in the fourth quarter of fiscal year 2008.

“If XOJet converts all its options, the total order value will be $1.9 billion,” says Jahid Fazal-Karim, senior vice-president sales.

Paul Touw, XOJet, chief executive, joked: “We want to convert them, but you [Bombardier] have to make those planes faster!”

He added: “We’re excited because this is an incredibly fast and large growing market. The total amount spent on travel a year is about $114 billion. Of that, business and corporate aviation is taking a 30% share. And that figure is growing because of the continued stresses of commercial air travel. Business aviation is not a luxury any more, it’s becoming a necessity.”

Fazal-Karim adds: “We know the Challenger 300 is at the top of its class. Following an extensive evaluation of aircraft XOJet chose the Challenger 300 for its superior cabin comfort, reliability and performance. It is truly gratifying to have XOJet share our excitement and invest such confidence in the Challenger 300.”

XOJet is currently flying around 1,200h a year and Touw claims that XOJet is 40% cheaper than card programs, 30% cheaper than fractional ownership and a whole lot more economical than total ownership.