How do a few small aircraft orders tell a story?
Back in June Sriwijaya Air ordered two 737-900ERs with options on 20 more 737 MAX aircraft. It is a small order and yet a significant one for what it says about the way aviation is changing in Indonesia and how quickly those changes are coming. There are safety implications associated with the order, of course, but also growth prospects for the company and an indication that the carrier has become stable enough to be thinking about the future, not just trying to scrape by today.
Moreover, these are the first two aircraft Sriwijaya has purchased new from the factory; the existing 737 fleet is nearly all Classics (-300/400/500s) that the carrier acquired second (or, in some cases, ninth) hand. Going for new aircraft rather than continuing to buy on the secondary market represents a significant change in the way the carrier is maturing its business.
Ruili Airlines, a small Chinese start-up carrier based in Kunming also placed an order at the Paris Air Show, looking to grow its fleet of five 737NG planes with a commitment for 30 of the 737 MAX type. The company operates 34 daily flights today on 11 routes and will expand to 26 aircraft by 2020, according to the expansion plans outlined as part of the purchase announcement.
“Today’s agreement demonstrates our ambition to grow from a startup airline to a driving force in China’s growing aviation industry,” Ruili Airlines president Ma Zhanwei said during the signing ceremony. Similar to Sriwijaya, the fact that the company is buying new planes rather than seeking out the secondary market speaks to the need to compete on both price and product, along with the value that operating new aircraft brings in markets where the aviation industry is developing so rapidly. Passengers in these new markets are quickly discovering that the reliability and comfort factors in new planes are a differentiator and the ability of an airline to offer such – in addition to cheap fares – is important to sustaining the growth trajectory.
On the other side of the story are the larger legacy carriers. They have increased acquisition of second-hand aircraft, especially in the U.S. market, such as United Airlines’ recent move to pick up 737s from Copa Airlines and A319s from China Southern.
Delta Air Lines has similarly been aggressive in picking up older aircraft and American Airlines deferred some new Airbus A321 deliveries as part of this year’s show. This change in the flow of aircraft through the lifecycle is notable and worth watching, especially as both Airbus and Boeing continue to trumpet the news that industry growth is coming from East Asia, even as Airbus opens a final assembly line in the USA. The unspoken part – that the more developed countries are seeing shrinkage – is very interesting, too.
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