Dubai confirms 100-jet order
Farnborough, UK, July 16, 2008
Dubai snapped up 100 jets worth $13 billion as oil money poured into Farnborough for the second day of an air show.
Although Tuesday's order by Dubai Aerospace Enterprise (DAE) was a firmed-up version of a draft deal, it demonstrated the industry's growing reliance on Gulf oil power as frugal spending elsewhere signalled the end of a three-year plane-buying boom.
State-owned DAE signed a firm order to buy 30 mid-sized Airbus A350-900s and 70 single-aisle A320s, saying it planned to become a leading regional lessor.
But, overall, the mood on the commercial side of the Farnborough Airshow was fairly grim as executives assessed how to tackle oil at records highs around $145 a barrel.
About 350 firm orders for planes had been announced by mid-afternoon on Tuesday. The first two days of the week-long aviation jamboree, held on alternate years in Farnborough and Paris, traditionally account for the bulk of any business. Some 600 planes in total were ordered in Paris in 2007.
The big DAE deal came on top of $25 billion of aircraft purchased by Gulf carriers led by Abu-Dhabi-based Etihad Airways on Monday.
In other business, Qatar Airways pledged to buy up to six A321 single-aisle planes and warned it could set up a budget airline within 90 days to repel any attack by a rival airline.
Tunisair ordered 16 Airbus planes order from Tunisair worth $1.9 billion at list prices and outside the show Air China said it would buy 15 Boeing 777 wide-bodies and 30 Boeing 737 narrow-bodies for $6 billion.
"It is not over yet," said veteran air show observer Howard Wheeldon of BGC Partners, referring to Middle East demand.
"My main concerns are that this (year) is as good as it gets. The Middle East is resilient, but from now on aircraft makers and airliners will have to batten down the hatches and manufacturers will have to set the ground for some likely cuts in production," he said.
An even bigger concern for capital markets relates to the airline industry's ability to finance itself, he said.
US planemaker Boeing and European rival Airbus conceded this week they would be forced to offer some financing for airlines, though the European company is particularly reluctant to do so.
The large aircraft industry's traditional cycle of growth and deceleration usually lasts about a decade but in recent years it has managed a record peak, both in duration and the sheer number of planes on order.
The good news from that for planemakers are the fat backlogs both Airbus and Boeing hold, worth years of deliveries.
The bad news is tens of thousands of jobs may be on the line as the two firms revamp for a slow period that may be compounded if, as is quite possible, defence spending also slows.
A problem with the braking systems meanwhile became the latest glitch to haunt Boeing's 787 Dreamliner as it prepares for a first flight scheduled for the fourth quarter.
The first of the fuel-saving mid-sized jets, originally meant to fly last summer, has been held back by three major production delays due to parts shortages and incomplete work from suppliers arriving at its assembly plant near Seattle.
There is no change in the recently announced fourth-quarter schedule but the brake systems delay is the newest "air bubble" in the timetable, Pat Shanahan, the 787's general manager, said.
The work on the brake control and monitoring system is being done by US company Crane Co, which was subcontracted by General Electric Co's Smiths aerospace unit. - Reuters