The move is part of Boeing’s broader strategy to target Southeast Asia, which is seeing soaring air travel demand
But the US plane maker has still to navigate events such as the fatal 737 MAX crashes and the travel impact of the recent coronavirus outbreak
Boeing is eyeing Vietnam’s fast-growing middle class and rising travel demand to boost its aircraft sales, the American aerospace firm’s top representative said this week at the Singapore Airshow, as it battles on ongoing slump in business.
“It’s been a robust market which is growing at very, very fast rates. There are great opportunities, and clearly, a lot of activity around low-cost carriers there,” said Randy Tinseth, vice-president of marketing at Boeing Commercial Airplanes, at a market outlook briefing on Monday. “As you can also see, we are starting to see more and more interest in long-haul flying [too].”
The Chicago-based company has been seeking to make strides in the Southeast Asian country – just last week, it pitched its newest largest plane in development, the Boeing 777X, to Vietnamese start-up Bamboo Airline.
The move comes amid Boeing’s broader strategy to target Southeast Asian economies. According to the company, Vietnam’s growth in seat capacity was about 15 per cent in the past decade, while Indonesia recorded a capacity hike of slightly less than 10 per cent. Southeast Asia’s air travel growth was tipped to be at 7.1 per cent in the next two decades, compared with Europe’s at 2.8 per cent, it said.
Tinseth noted how Vietnam, Indonesia, and Thailand were three of the world’s top 10 fastest growing markets.
“With an expanding middle class, in a market that continues to liberalise, coupled with a strong domestic, regional and international tourism sector, Southeast Asia has become one of the world’s largest aviation markets,” Tinseth said.
One reason why the Southeast Asian market had changed significantly was because of the rise of low-cost carriers – a market that Tinseth said was “in every way dominated” by wide-body aircraft a decade ago.
Low-cost carriers were able to provide a service to people who have not been able to fly in the past, he said. To meet the soaring travel demand, Tinseth said airlines around the region would need 4,500 new aircraft over the next two decades, and that the expected new orders would add up to US$710 billion.
Despite the optimistic outlook, Tinseth noted there were several considerations that could move the needle. The evolving global economy was a factor, he said, adding that there had also been a shift in the geopolitical environment in recent years.
“For years we have been focused on deregulation [and] globalisation, and that trend in some markets today has reversed. And the question is if we will continue to see the type of deregulation liberalisation we’ve seen in the past,” he said. “Today, we’re facing one of those exogenous shocks, the things you can’t plan for but you have to somehow be ready for.”
The outlook comes as Boeing grapples with a relatively dry spell on plane orders in the past year, after its once bestselling jet the 737 MAX was grounded following two fatal crashes. The separate accidents, which involved Lion Air and Ethiopian Air flights, killed more than 300 people.
Boeing failed to book any new orders for planes in January – the first such instance since 1962, according to a Reuters report.
Vietnam’s budget carrier VietJet Air also has a US$25 billion order for 200 Boeing 737 MAXes, which remains up in the air.
Describing 2019 as a “very, very difficult year”, Tinseth said that Boeing was working with more than 40 regulators around the world.
“Our expectations is that it would return to service in the middle of this year. But between now and then, we have a lot of work to do with the authorities,” he said, adding that the company hoped to get 400 planes back in service.
“This is a process that will take time to play out. It won’t be weeks or months, but clearly, to deliver all these airplanes and to get all the planes back into service will take several quarters.”
This year had also got off to a “rough start”, Tinseth said, citing how the coronavirus outbreak originating from China’s Wuhan city had dampened global travel, especially to and from the mainland.
At a separate media briefing, Ihssane Mounir, Boeing’s senior vice-president of commercial global sales and marketing, said the impact of the outbreak would be felt across the region.
“If you look at China alone and the reduced traffic or capacity by 70 per cent, that’s money. Several global airlines have limited their traffic in and out of China, you have business trips not happening,” he said. “It will have an impact on the economy, on revenues, on these carriers, and on the countries.”
Its European competitor, Airbus, also announced the halting of its operations in China last week.
Mounir said the impact of the coronavirus on Boeing’s supply chain had not yet been seen, but added the immediate impact would be felt on the logistics front.
“We do have a number of deliveries to Chinese customers ready to be delivered that they cannot come to Seattle to deliver for the obvious reasons,” he said.
The executive, however, was optimistic that China would recover from the coronavirus epidemic soon, stressing that Asia remained Boeing’s biggest market.
“If you look at history … it seems like with the coronavirus, things are being managed a lot better than [how things] were managed during Sars in 2003,” he said.
“I would think that the recovery should be more orderly. It should be more efficient than what we’ve seen back in 2003. I remain optimistic.”
Reporting by Dewey Sim in Singapore | Additional reporting by Danny Lee.
This article originally appeared on the South China Morning Post (SCMP)