An analysis of the record backlogs at Airbus and Boeing suggests that U.S. carriers are the most likely to live up to their commitments, while the Middle East’s major airlines could disrupt order books if U.S.-led efforts to derail Gulf carrier expansion are successful, CRT Capital says.

CRT expects that the next five years of deliveries will be placed largely as expected because they represent a healthy mix of both growth and replacement aircraft.

“We have conviction that Boeing and Airbus can successfully manage delivery positions of troubled carriers by swapping slots with their more prosperous peers,” the CRT analysis says, adding that—as others have noted—Airbus and Boeing have likely booked 10%-15% more orders than they will ultimately build. Combined, the two manufacturers’ reported backlogs totaled about 12,000 aircraft at the end of February, representing more than 85% of total air transport outstanding order book.   

After 2020, when deliveries start to skew heavily toward fulfilling growth plans, the outlook is less certain.

“We do not believe that every order will survive the Darwinian struggle of survival-of-the-fittest between the network airlines, Gulf carriers, Chinese airlines and ultra-low-cost carriers,” CRT says. “We see the global competitive battle between airlines escalating over time ...There will be winners and losers and aircraft orders will be casualties.”

The North American carrier revival, strengthened by cost-streamlining consolidation and continued capacity discipline, makes the region’s carriers the safest bets in the industry, CRT believes.

“With North American airline credits improving, and financing plentiful and cheap, these customers are solid and predictable,” CRT says.

Their biggest threat—besides chasing market share by boosting capacity absent demand—is arguably the expansion of long-haul services by full-service carriers like Emirates Airline, Etihad Airways, and Qatar Airways, and LCCs with transatlantic aspirations, like Norwegian Air International and Ryanair.

American Airlines, Delta Air Lines, United Airlines and several unions have formed an unusual and vocal alliance to challenge Gulf carrier growth—particularly long-haul services focused on routing passengers through hubs in Qatar and the United Arab Emirates, as opposed to serving the countries’ origin-and-destination demand (Aviation Daily, March 6). European carriers have raised similar issues at home. The battle has captured much of the industry’s attention—perhaps nowhere more than within senior executive offices at Airbus and Boeing, CRT suggests.

CRT calculates that the Middle East’s four major carriers—Emirates, Etihad, Qatar, and FlyDubai—hold nearly 7% of the total Airbus and Boeing backlog. The 800-odd orders are heavily tilted toward higher-priced widebodies, including 50% of the 777s on order and 60% of the A380s, making the commitments even more valuable than the straight order percentage suggests.

While the Gulf airlines have dedicated backers in their governments, they still face headwinds that, if strong enough, could have a significant effect on aircraft delivery schedules.

"[T]he Gulf carriers face a rising protectionist effort in the United States and Europe, in particular,” CRT notes. “The collapse in oil prices has removed billions from the Gulf economies. The airlines face revenue pressures from excess capacity, weak foreign currencies, slower economic growth and competition between themselves and network airlines throughout the world.”

The issues facing the Gulf carriers are less acute than those challenging some big players in regions outside North America, CRT notes. European legacy carriers are caught between Gulf and Asian long-haul carriers on intercontinental routes and low-cost, traffic-generating machines like Ryanair and EasyJet in their backyards.

Asian carriers face the challenge of matching demand with expanding capacity as upstarts like AirAsia and Lion Air take on established incumbents.

But considering the stake that the big aircraft manufacturers have in the Gulf carriers’ continued expansion, CRT suggests that the Middle East’s risks are just as significant as those of any region.

If a Gulf carrier “sneezes” and does not follow through on its widebody commitments, CRT warns, “Boeing and Airbus would catch a cold.”