Although Boeing will likely make slight downward revision of world air cargo demand when it releases its next World Air Cargo Forecast in November, the airframe manufacturer remains upbeat about long term growth prospects of the air cargo business.

Boeing is projecting 5 per cent growth in worldwide air cargo traffic for 2008, slightly up from last year’s cargo traffic growth of 4.3 per cent but still the fourth straight year that growth fell short of the manufacturer’s long-term forecast of 6.1 per cent annual cargo traffic growth. In a media briefing at the Singapore Airshow, Boeing regional director for cargo marketing, Jim Edgar, said the revised annual cargo growth rate would likely be in the 5-6 per cent range.

A number of key factors are behind this he said, including the ongoing record high oil price, the steady slide of the US economy into recession and the resultant global ripple effects, as well as the potential impact of air cargo being diverted to the maritime trade.

“World maritime dry cargo traffic has grown as fast as air cargo traffic,” Edgar said. But long term he said Boeing forecasts point to a maritime growth rate 1-2 per cent lower than air cargo growth.

In part this is due to a number of constraining factors like capacity limits at key ports in the US and Europe. He also noted that with the trend towards larger and larger container ships, there are only a handful of ports worldwide that can handle super post-Panamax container vessels.

“But there are more than 600 airports worldwide that can handle wide-body freighters,” he added, on an upbeat note. But Edgar did acknowledge that Boeing customers have been expressing serious concern that a growing volume of air cargo is making its way onto ocean carriers.

“We haven’t been able to quantify, but it posses a significant competitive threat, especially as fuel costs continue to go up,” he said.

While fuel costs also impact the maritime world, the price differential between air and sea is obviously huge he said, noting that air cargo is as much as 3-6 times more expensive than moving cargo by sea.

In a bid to shave costs, particularly in light of the slowing global economy, shippers might be “driven to maritime,” he acknowledged.

But for the Asian region Edgar said the outlook was still quite rosy with the intra- Asia trade still experiencing the world’s highest growth rate, currently ringing in at nearly 11 per cent annual growth.

“As Asian countries become net consumers and not net exporters, this traffic will continue as well as drive demand for high end European consumer goods which will help drive a healthy Asia-Europe trade,“ he said.

But concern over the US economic slowdown, high fuel prices and a modal shift to sea freight clearly haven’t stopped carriers from continuing their fleet expansions. Boeing booked orders for some 258 freighters over the past three years – a number that Edgar said was “unprecedented” for a three-year period.

The orders represented 14 per cent of the total value of the manufacturer’s total commercial aircraft orders over the period. Currently Boeing has 158 production freighters on its order books.

Responding to Payload Asia queries regarding comments made by Airbus’ chief commercial officer for customers, John Leahy that Boeing’s 747-8 Freighter was merely “40-year-old technology gussied up to meet present day standards,” Edgar was unequivocal.

“We’ve never in our history, launched a plane based on a freighter only. The 747-8 has all new engines, an all new wing structure and new cockpit – this is clearly more than simply gusseying up!”

Rolls Royce broke ground for its new US$225 million Trent engine assembly and testing facility at Singapore’s new Seletar Aerospace Park, during the recent Singapore Air Show.

The first Trent technical facility outside of Europe will be “the most modern Rolls-Royce production engine assembly and test facility for large commercial aero engines” anywhere in the world, according to Rolls-Royce.

“The facility will be a breakthrough for the aerospace industry in Asia. Engines for large commercial aircraft will be assembled and tested in Singapore before being sent to Boeing and Airbus for installation on aircraft,” said Rolls Royce.

Scheduled for completion in 2009, the Facility of the Future will produce engines in the Trent series, the Trent 1000 for the Boeing 787 and the Trent XWB for the Airbus A350 XWB. The facility, the development of which was announced in November 2007, also enables Rolls-Royce to be closer to its long-term partner Singapore Airlines, whose fleet will now include engines assembled in Singapore.

Sir John Rose, Rolls-Royce chief executive, said: “Our world-class Facility of the Future at Seletar Aerospace Park will break boundaries in terms of operational and environmental efficiency and be our distinctive showcase in Asia.”

Rolls-Royce currently employs over 1200 people in Singapore on maintenance projects and expects to hire another 330 for the facility.

Rolls-Royce says the investment will also help it meet growing global demand. Its order book currently stands at a record US$90 billion with Asia and the Middle East comprising US$40 billion of that total - an amount equal to the total group order book just four years ago.

Rolls-Royce has a 50 per cent share of the modern wide-body commercial aircraft market, with its Trent engine having been selected to power a broad range of new airline programmes, including the Trent 900 on the Airbus A380, the Trent 1000 on the Boeing 787 and the Trent XWB on the Airbus A350 XWB.

Singapore Aero Engine Services Private Limited (SAESL) - a S$185 million (US$109 million) joint venture between SIA Engineering Company, Rolls-Royce and Hong Kong Aero Engine Services Limited (HAESL) - specialising in the maintenance, repair and overhaul (MRO) of Rolls-Royce Trent aero engines, broke ground during the recent Singapore Airshow for a new two-storey, 12,000 sqm expansion in Singapore.

The new development, to be built at a cost of S$60 million (US$43 million) will integrate with the existing building and enhance SAESL’s service offerings enabling it to service 250 engines per year.

Currently, SAESL focuses on Trent aero engines, including the Trent 500, 700 and 800 which power the A340, A330 and Boeing 777 respectively. SAESL is also the lead facility for the Trent 900, the engine chosen by Singapore Airlines for its A380 aircraft.

When completed by 2009, the new development will enable growth in SAESL’s engine type capability, including capability the Trend XWB.

European airframe manufacturer Airbus said a freighter version of the A380 is still in the cards. Speaking to press at the recent Singapore Air Show, Airbus’ chief commercial officer for customers, John Leahy said: “We will see an A380 freighter at some point in time,” without specifying a timeframe.

“Because of the production problems we had to make sacrifices,” Leahy said adding that the freighter variant “will be in our future, but for now we need to ramp up to four 380 aircraft a month by 2010.” He also highlighted the need to begin preparing for a ramp up for the A350 production. Airbus said their order book this year is expected to include at least 30 A380 passenger aircraft and more than 100 A350s, but conceded that orders are likely to shrink by nearly 50 per cent this year as the US recession slows global economic growth.

“We expect fewer orders this year,” confirmed Leahy.

“The size of the order intake this year will be more in the category of 700 aircraft rather than 1,400 (in 2007),” he said adding that this was a conservative estimate. He said however the market is more stable now and the cycles are comparable to “hills and valleys” rather than the “peaks and canyons” in the past.

Airbus said it has a backlog of 3,600 firm orders - a full one third of which are from Asian customers - which means they are sold out for the next five years.

“But I would expect to see fewer and fewer orders as the market cools off a bit,” Leahy said.

The Airbus executive however said the Asia Pacific region remains on track to becoming the top global market in the next 20 years.

Leahy said Asian customers have generated most of the demand to date for the A380, the world’s largest passenger jet, but he expects US carriers to begin using it in the future. He also said Airbus, a unit of European Aeronautic Defence & Space Co., is in talks with long-haul budget carrier AirAsia X, based in Malaysia, about 20 to 25 midrange A350s and it could place its order for A350s “by this summer.”

Airbus chief executive Tom Enders said he expects Asia to become the leading market for large aircraft over the next 20 years. Enders said he expects 40 per cent of the world’s “twin-aisle” planes and 56 per cent of large aircraft like the A380 to be operating in Asia over the next 20 years.