Jeremy Hobson: The biggest event of the year for airline makers like Airbus and Boeing is wrapping up outside of London. And at this year’s Farnborough Air Show, the companies have announced orders worth more than $50 billion. Sounds like a good thing for the industry — and the economy.
But as Marketplace’s David Gura reports, it’ll be a while before orders on paper turn into airplanes in the sky.
David Gura: Airlines put a lot of thought into their orders.
Howard Rubel is an analyst with Jefferies, and he says buying aircraft…
Howard Rubel: …is not like buying tomatoes, cucumbers or lettuce, where it is all spur of the moment.
One thing airlines have to pay attention to is how long it’ll take a company like Airbus or Boeing to deliver what they’ve ordered. Right now, there is an eight-year backlog.
Rubel: Sometimes planes could be delivered in three-to-six months, and it would have an immediate impact on the economy. Sometimes they are three-to-five years out.
Not only that, airlines are not going to pay millions for a plane until they can put a pilot in it.
Cai von Rumohr is with Cowen and Company.
Cai von Rumohr: They give some money up front. All deals are different, but they usually are not going to give huge, huge amounts.
These deals are an economic indicator, von Rumohr says. They give investors a sense of how well the airlines are doing, and where the commercial aircraft sector is heading.
I’m David Gura, for Marketplace.
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