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planes will fly east

Asia seen topping North America airline market by 2027

Jul 09, 2008

U.S. aerospace giant Boeing Co. (BA) expects the market for commercial airplanes to be $3.2 trillion over the next 20 years, with the Far East aircraft market overtaking North America in that time.

The Asia-Pacific region is seen getting 9,160 planes worth $1.19 trillion, while North America is seen receiving 8,550 planes worth $740 billion. The expected deliveries for Asia-Pacific rose from last year's forecast, while North American deliveries are down.

In addition, Boeing lowered its projections for a fleet size at the end of the next 20 years of 35,800 from 36,400 forecast last year.

With high fuel prices making older, less-fuel efficient planes too expensive, Boeing said replacement airplanes took a great share of demand - 42% - than previous forecasts of 36%.

Boeing still expects global air traffic to increase 5% a year.

"We're facing a very dynamic situation today in the commercial aviation industry," said Randy Tinseth, Boeing Commercial Airlines vice president of marketing. "This year's forecast is rooted in today's realities, but also recognizes the nature of a long-term outlook."

With soaring fuel costs and a weak U.S. economy hampering airlines, many are scaling back plans for growth. U.S. airlines have implemented several fare hikes and have increased charges for a range of services previously considered part of the ticket price. Airlines also have reduced staff numbers and cut fleets. Despite many merger discussions between potential partners, only Delta Air Lines Inc. (DAL) and Northwest Airlines Corp. (NWA) were able to agree to combine.

International airlines have not suffered as much since their fleets tend to be newer and more fuel-efficient. Deutsche Lufthansa AG (LHA.XE) posted record profits in 2007 and thinks it can match that performance this year, perhaps through some shrewd acquisitions. British Airways (BAIRY) doubled its profits from last year, while Dubai-based Emirates Airline is thriving and expects " robust" demand growth for 2008. Also, airlines in China are largely spared the pain of high fuel costs because their government maintains an artificially low price through subsidies.

In April, Boeing said the weak U.S. economy hadn't affected its business so far since only 11% of new aircraft orders were from U.S. customers.

Asia seen topping North America airline market by 2027

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