Thursday, May 19, 2016

Ruili Orders Six 787-9's

Boeing, who is stuck in a ordering down cycle, does a pick six 787-9's from Ruili, a Chinese airlines expanding its footprint going forward. This year, in particularly is noted as a "order pause year" for Boeing citing low fuel costs and customer's solid fleet inventory as a reason for the 2016 pause. Airbus also has had a slow order start, thus making any order binges "so last year". This period sets up as an airshow dependent year for order announcements. 

Ruili 737 in action



The airshow grows in importance when Boeing or Airbus tents have something to say at the shows. Even though Boeing holds this year’s order lead during the first half of 2016, an airshow may change whose doing what to whom. My own order predictions are out the window as the makers are shaking the order tree for any ripe commitments.  Any prediction will be coming from the airplane makers themselves born out of hopefulness from a friendly customer. The other side of the order business is hanging onto any orders placed prior to 2016, and preventing cancellations. This year remains prone to order cancellations in the wide body arena.
The economy is not the culprit for airline ordering malaise, but underlying factors contribute to the order pause such as competitive risks. Opening a new route with its current aircraft inventory is a risk when the competitive margins are slim going into a new market served by another airline. Buying new aircraft for such a market is a greater risk. An expanding airline such as Ruili may hesitate investing with new equipment when they have older. However, in Ruili's case they have a small inventory to begin with including any wide bodied aircraft. Summarily, all Chinese based airlines are strictly given oversight by its government and its respective fleet expansion mode. Making Ruili's order transaction an accomplishment for Boeing completing the deal.

This does indicate the condition of the world airline market where special situations makes the order during 2016. The remainder of the year should see sales with customers who have rendered down to a decision point, where risk taking becomes the higher priority for its business model, rather than waiting for all the tea leaves to line up before ordering. The six Ruili 787-9's is a big deal in today's market.