Global slowdown fears overshadow Singapore aviation show

Sun Feb 14, 2016 12:51am EST
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By Tim Hepher and Siva Govindasamy

SINGAPORE (Reuters) - Aerospace leaders gathering for this week's Singapore Airshow face conflicting pressures as they juggle growing concerns over jetliner demand while keeping record production plans on track.

Worries about the effects of a faltering global economy and tensions in the South China Sea overshadow the two-yearly event in Singapore, which is both a major commercial travel hub and home to Southeast Asia’s most potent and best-trained air force.

For now, airline traffic continues to grow rapidly, spurred by continued growth in Asian household incomes, while airline profits also benefit from low oil prices.

But as aerospace industry shares fall in step with tumbling global markets, analysts increasingly question the durability of an aerospace expansion cycle now in an unprecedented eighth year.

After a lackluster show in Dubai in November, the industry's expo bandwagon rolls into the crucial Southeast Asian region without the carnival atmosphere of previous years.

"All the thoughts that this is no longer a cyclical industry have disappeared. We are due for a down-cycle," said aerospace consultant Jerrold Lundquist, managing director of The Lundquist Group."(But) I don't think there will be any impact in the next 18-24 months. It is when you get beyond 24 months that you might see some softening."

Southeast Asia is one of the industry's major drivers and has placed record orders in recent years, leading to speculation of overcapacity. Some carriers, including Philippine Airlines, are expected to acquire new aircraft this week.

But rather than counting up new orders, analysts say investors' main concern this week will be to check for signs of waning travel or jetliner demand and whether an overloaded supply chain is in danger of breaking as manufacturers work to turn a record backlog of orders into a smooth flow of deliveries.   Continued...

South Korea's Black Eagles aerobatics team perform a maneuver during a preview of the Singapore Airshow at Changi exhibition center in Singapore February 14, 2016.  REUTERS/Edgar Su