Special Report On Global Market Outlook For Wide-Body Aircraft

World Airline News, Oct 12, 2001

We expect that, as over the North Atlantic, traffic across and around the Pacific will continue splintering into multiple city pairs rather than being further concentrated into the major hubs. This trend, we believe, is increasing demand for the new smaller wide-body aircraft while depressing demand for the largest. The Sonic Cruiser would benefit greatly from this continuing trend.

Potential Orders For Wide-Body Airliners

Numerous competitions are in the works, but the urgency of making decisions and placing orders has undoubtedly been dampened - if not totally taken off the table for the short term - by the current world economic downturn following the events of Sept. 11.

These competitions include:

* KLM indicated in August that it had solicited bids for purchasing rights for up to 34 wide-body aircraft to replace older aircraft, including 747-300s, possibly its MD-11s, and/or 767-300s. It is currently considering the 777 and the A330. KLM has also solicited several lease companies to submit bids. A final decision had been expected during the first half of 2002. The airline has indicated that it may choose not to exercise the purchase rights.

* Air China is contemplating a major aircraft order for a broad array of aircraft models including 767s and 777s.

* China Eastern is considering acquiring 25 aircraft including five A340s and 747s.

* Hainan Airlines is considering the purchase of 767s or A330s.

* Atlas Air is weighing its choice for a jumbo airliner. The cargo carrier has an eventual need for about a dozen additional large freighter aircraft and is believed to be favoring to the A380.

* Cathay Pacific is expected to choose soon between the extended range 777, the A340-500/-600, and 747-400ERs for up to 20 aircraft for its fleet.

* Lufthansa had been planning to decide on its future large aircraft requirements by the first quarter of 2001. The airline recently delayed that decision again. It has been reported that Lufthansa is contemplating the purchase of up to 15 A380s and four 747s.

* Thai Airways was contemplating the purchase of three more wide-body aircraft, following the purchase of two 747s earlier this year.

* EVA Airways was expected to order the extended-range 777, but has been taking a good look at the A340-500/-600.

* Air India and Indian Airlines are considering spending up to $4 billion between them to purchase replacement wide-body aircraft. These airlines, however are experiencing financial difficulties that are probably delaying any purchase actions.

* Malaysia Airlines has been considering a purchase of 777ERs or A340- 500s.

* Royal Air Maroc has included four 767s or A330s in its modernization plans.

The Jumbos - A Slumping Market

The order rate for the 747 has been at a fairly steady rate of 2.5 per month since the beginning of 1999, 69 percent of the orders having been for freighter aircraft. No orders, however, have been received since April. While we believe that the 747 will continue to do reasonably well, it is obvious that the all-new A380 is taking market share from Boeing. It is interesting to note that since the launch of the extended-range 747-400ER in December, orders for 13 of the aircraft have been placed - seven of which were for the freighter version. We expect that orders for passenger versions of airliners of the size of the 747-400 and larger will likely moderate significantly following the surge this year resulting from the launch announcements. We expect that the majority of future orders of 747-sized or larger aircraft will be for cargo versions.