The aircraft market will continue to be strong in 2012 as it is driven by demand from countries in the Middle East and Asia, particularly China, says the top executive of Boeing Co.

Ongoing discussions with airlines suggest the U.S. aircraft manufacturer will receive "the same or more orders" this year, said James McNerney, chairman, president and CEO of the company.

Boeing received 805 orders last year, while its European archrival, Airbus, had a record 1,419 orders. The U.S. company fell behind its competition after it hesitated over whether it should vie with Airbus' A320neo aircraft or build a new single-aisle aircraft. In the end, it decided to introduce the 737 MAX, a modified version of the Boeing 737.

"The real strength (of the market) is the Middle East and Asia, particularly China," McNerney said.

He said the company's sales will be driven not only by countries' economic growth but also a strong demand to replace old and inefficient airplanes as oil prices remain high.

Although the Chinese government has lowered the country's GDP growth target for 2012 to 7.5 percent, the lowest in eight years and down from 8 percent last year, "it is still good growth", McNerney said.

Meanwhile, the demand for replacing older aircraft is also growing in China and is expected to become increasingly strong during the next decade. The country made some of its biggest airplane purchases starting in the 1990s and some of those aircraft are becoming obsolete, McNerney said.

China will need 5,000 new aircraft from 2011 to 2031 and 820 of them will be used as replacements, according to Boeing's aviation industry outlook for the next two decades, which was released in September 2011.

Europe's ETS

China this month suspended approval of US$12 billion worth of Airbus orders, Airbus confirmed earlier. Among the suspended orders were 35 for A330 wide-body planes and 10 for A380s. The company said the cancellation was a consequence of a dispute between China and Europe over the European Union's Emission Trading Scheme, which will impose a carbon tax on airlines.

Boeing, meanwhile, has received orders for 30 B777 wide-body jets from various Chinese airlines, The Seattle Times reported earlier this month. The orders are worth nearly US$9 billion at list prices. In one deal, which was announced on Feb 28, China Southern Airlines ordered 10 B777s.

"We have had some very serious discussions with a number of Chinese airlines," McNerney said. "Those discussions have centered around roughly that many B777s, but the orders are not all finalized yet."

"I do not know whether we will benefit or Airbus will suffer from the issue," he said. "It could possibly hurt Airbus for a short term, but it hurts the industry for a long term. None of us want that. Instead of paying taxes, we should invest in technology."

McNerney said the aviation industry should respond to the carbon tax in a unified way. He also said the concerns about the Emissions Trading Scheme should be dealt with globally instead of regionally, since the aviation industry has become a global industry.

Boeing plans to increase its production rate by 30 percent in the next three years to reduce its current backlog of orders of 3,771 aircraft.

Scott C. Thompson, managing partner of PwC International Ltd's U.S. aerospace and defense department, said Boeing and Airbus had backlog orders for about 7,000 aircraft in 2011 and fulfilling those will take them seven years at their current capacity for production.

The large number of undelivered planes shows there isn't a bubble in the aviation industry, but does give manufacturers a warning that they need to do more to strike a balance between their production and the orders they receive, Thompson said.

Increasing production, though, is not easy. The industry, McNerney explained, has a long, global supply chain, making it difficult for the manufacturer to produce things faster.