Are record orders at Boeing and Airbus sustainable?
It has all the appearance of a golden age for commercial plane-making.
Where strong air traffic, helped by stunning economic expansion in China and India, supports demand for new jets and third parties queue up to finance purchases.
Or it may be evidence of a bubble.
Boeing and Airbus, which dominate the market for large jets, are both predicting a staggering $4 trillion market for new aircraft over the next 20 years with a sharp increase in deliveries. Boeing forecasts a market for 33,500 new planes between 2011 and 2030 thanks to robust growth in China, India and other emerging markets.
As Boeing and Airbus race to bag as many orders as possible, they are ramping up production 57 per cent by value between 2011 and 2014, according to some estimates, with hot-selling narrowbodies - single-aisle planes with about 150 seats - leading the way.
But the pace comes with risk, according to experts who say manufacturers are taking more orders than they can expect to deliver.
An order bubble is swelling, they say, and warn it is possible that if some shock to the chronically unstable airline industry - volatile fuel prices, terror attacks, economic recession - makes airlines rethink their expansion plans, demand could sink, aircraft values could fall and planes could roll off assembly lines without buyers.
“The problem with a bubble is you don’t know it is a bubble until it bursts and then everyone wants to get out,” said Adam Pilarski, senior vice president at consultant AVITAS.
Aircraft manufacturers are aware of the risk, but they stand by their forecasts.
“The last thing we want to do is build more airplanes than the market needs,” said Boeing marketing exec Randy Tinseth. Airplane production is at record levels.
Both plane-makers are revamping jets with new engines to deliver fuel savings of 15 per cent.
“You simply can’t compete if you are operating an older aircraft that is maybe burning 15-20 per cent more fuel than your competitor,” said Tony Tyler, director general of the International Air Transport Association (IATA).
Airbus sales chief John Leahy dismissed talk of a production bubble. “It hasn’t happened yet, and it won’t,” he said.