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As Airlines Suffer, Boeing May, Too

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As travel demand declines, the world’s airlines could lose $2.5 billion next year, creating a rough climate for jetmakers the Boeing Co. and Airbus.

“The outlook is bleak and the chronic industry crisis continues as we face the toughest revenue environment in 50 years,” Giovanni Bisignani, chief executive of the International Air Transport Association, said on Tuesday.

The association predicts passenger traffic will drop 3 percent while cargo traffic will decline 5 percent in 2009. As a result, carriers in Europe and the Asia-Pacific region will rack up $1 billion and $1.1 billion in losses respectively next year.

Only North American airlines are expected to post a profit in 2009 after losing an estimated $3.9 billion this year. Across the globe, the association predicts carriers will lose $5 billion this year, largely due to high fuel costs.

Bisignani’s group represents 230 international airlines.

The Chinese government seemed to validate the aviation group’s concerns on Tuesday when it urged Chinese carriers to defer or cancel jet deliveries in 2009. The country’s Civil Aviation Administration posted a statement on its Web site suggesting that airlines should ground or sell aircraft and reduce the number of planes ordered from foreign companies, the Wall Street Journal reported.

China Southern Airlines, which is China’s largest carrier by fleet size, has 81 Boeing Co. jets on order, according to Boeing’s Web site. The airline has more than 70 aircraft on order with Airbus, according to the European company’s site.

Hong Kong-based Cathay Pacific announced in late November that it planned to ask to delay deliveries of Boeing jets, including 21 777s. Boeing also has seen jet deferral requests from U.S.-based Air Tran Airways.

The Chicago-based aerospace company has only six jet order cancellations listed on its orders Web site for this year. Its rival Airbus lists 122 order cancellations in 2008 but still leads in net orders this year.

At an industry conference last month, Boeing’s Scott Carson, president of commercial airplanes, indicated that jet deliveries scheduled for 2009 were in the clear in terms of financing.

As jet deferrals and cancellations pile up, commercial aircraft orders are expected to slow after several record-setting years for both Boeing and Airbus. Boeing took in 1,413 net orders last year and 1,044 orders in 2006. Its backlog of unfilled requests exceeds 3,700 jets.

Earlier this year, Boeing had predicted in its 20-year forecast that China will need 3,710 new airplanes by 2027 with rapid and sustained growth in cargo traffic.

But cargo traffic has been hit hard in recent months, including a 7.9 percent drop in October. The Asia-Pacific region has captured about 45 percent of the global cargo market and therefore will be “disproportionately impacted by the expected 5 percent drop” in cargo next year, the International Air Transport Association predicts.

“The 7.9 percent decline in October is a clear indication that the worst is yet to come — for airlines and the slowing global economy,” Bisignani said.

Boeing already warned its more than 163,000 workers worldwide that the company may scale back employment levels next year. And the company announced at least 800 defense jobs in Wichita, Kan., will end in 2009.

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