Boeing Co. Dreamliner 787 planes sit on the production line at the company’s final-assembly plant in North Charleston, South Carolina, in December.
The jetliner shopping spree that's spanned more than a decade is drawing to a close, according to sales data and industry analysts.
That's bad news for Boeing Co. and Airbus Group SE, which face the highest level of airplane-delivery deferrals in at least 15 years. Final 2016 tallies to be unveiled over the next few days probably will show aircraft orders trailing shipments, a sign of a weakening market. Airline profits are poised to fall from last year's peak, with even Persian Gulf giants Emirates and Etihad Airways PJSC tempering growth.
Unlike past sale slowdowns, triggered by terrorism or recession, demand also has been hurt by the relatively low cost of fuel. While oil has risen in the past year, prices are hovering at about $50 a barrel, half of what they were in mid-2014. That gives airlines less incentive to retire older jetliners or order newer, more efficient models.
The glut of jets is sapping interest in wide-body planes and threatening production increases that Boeing and Airbus have plotted over the next two years for the lucrative 737 and A320 families of single-aisle aircraft. With last week's revelation that Emirates is postponing a dozen Airbus A380 superjumbos, the number of delivery delays for the year reached 251, the most since at least 2001, according to Flight Fleets Analyzer data compiled by Bloomberg Intelligence.
"It's not that the sky is falling, but we are definitely late in the cycle," said Ron Epstein, an analyst at Bank of America Corp.
So far, plane-makers have been able to find other takers for production slots that have been vacated as carriers such as United Continental Holdings Inc. and Southwest Airlines Co. postpone deliveries and scan the secondary market for bargains.
"The real question becomes how long are they able to do that for," Epstein said during a presentation last month.
Nobody knows how steep the downturn will be or how long it will last, and the trade war with China threatened by President-elect Donald Trump only adds to the uncertainty. In contrast to previous slowdowns, global air travel is still growing and airlines are mostly making money, providing assurance they'll follow through on the bulk of their orders.
Airbus and Boeing are sitting on a near-record $1.2 trillion order backlog, and to some extent are victims of their own success. Airlines aren't racing to close deals for jetliner models that are sold out for the rest of the decade, such as Airbus' A350 and Boeing's 787 Dreamliner. As the second-largest U.S. defense contractor, Chicago-based Boeing has an added cushion: Weapons sales seem likely to increase because Trump has vowed to increase military budgets, even as he's railed against costs.
There are signs, however, that the aerospace cycle has peaked. Global airline profit this year is forecast to fall 16 percent to $29.8 billion from 2016's apex, according to the International Air Transport Association, an industry trade group. Another indicator of the aircraft manufacturing's health, a measure of sales to shipments known as the book-to-bill ratio, is expected fall to the weakest level since the 2009 recession, according to Bloomberg Intelligence.
Boeing had netted 470 orders through Dec. 20, well short of its targeted deliveries of 740 to 745 planes for the year. Airbus reported 410 net orders through November. The European plane-maker had been aiming to deliver 670 jetliners in 2016, 20 more than it forecast at the start of the year. The annual totals don't include sales to Iran or deals closed late in December, including an order for 75 Boeing 737 Max aircraft placed by General Electric Co.'s aircraft leasing division.
Spokesmen for Boeing and Airbus declined to comment.
Airbus shares gained only 1.4 percent last year after surging 50 percent in 2015. Boeing climbed 7.7 percent, trailing the S&P 500 index.
The market is also absorbing a glut of twin-aisle jets after output increased at a 16 percent annual pace from 2011 through 2015, said Richard Aboulafia, an aerospace analyst at Teal Group. Last month, Boeing announced a second cut in the production rate of its 777 jetliner during a sales drought, while Airbus' A330neo orders have stalled, he said.
About 18,070 passenger planes were in service as of November, a 41 percent jump from 2007, according to a Dec. 19 report by Deutsche Bank AG. Only 6.6 percent of the global fleet was in storage, down from 8.3 percent in November 2007.
"It's different manifestations of the same problem," Aboulafia said. "With twin-aisles, it's demand. With single-aisles, it's fuel."