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Gulf airlines may spend $20bn at Dubai show

Dubai, November 12, 2011

Gulf airlines and lessors could splash out more than $20 billion on Airbus and Boeing jets at next week's Dubai air show, underscoring the region's role as the industry's chief paymaster amid Europe's worsening sovereign debt crisis.

Emirates is in talks for a hefty order of at least 30 and possibly as many as 50 Boeing 777 long-range aircraft worth $8.5bn to $14.5bn and Qatar Airways is expected to place a $6.5bn order for 50 fuel-saving A320neo jets and five A380s from Airbus, industry sources said.

The last air show two years ago was muted by Dubai's own crisis, but the city state is recovering after a bailout from neighbouring Abu Dhabi. Burned by its reliance on property and the financial sector, Dubai is now focusing on becoming a transport and logistics hub.

'We absolutely expect the Gulf airlines to continue on the expansion trail - they are very into having a young fleet and are determined to be superconnectors who try and hoover up traffic flows on a global basis,' said Stephen Furlong, transport analyst at Davy Research in Dublin.

'While in other parts of the world you have things like the EU emission scheme and night-time flying bans, in the Gulf, the governments and the airlines are joined at the hip - the governments are totally in line with the growth plans.'

Orders are likely to include dozens of new sales for Airbus's revamped A320neo short-haul jet, which has enabled the European planemaker to pass Boeing in the order race this year.

But the EADS subsidiary will also be under pressure to explain delays in the A350 passenger jet directly to Gulf customers whose support is crucial for Europe's answer to Boeing's carbon-composite 787 Dreamliner to succeed.

Chief among those is Qatar Airways chief executive Akbar Al Baker who regularly blasts Airbus and Boeing over design decisions and delays and has abruptly cancelled air show deals.

Emirates and Qatar Airways have some 370 planes on order to be delivered over the next few years but the euro zone debt crisis could mean some orders being cancelled or put on hold.

Financing is increasingly an issue as the industry's traditional backers - European lenders and particularly French banks - have become more risk averse and are shying away from new deals. Emirates chief executive Tim Clark said recently the airline was looking at the Islamic finance market to fund aircraft deliveries.

That said, the shake-out in Europe may bring advantages of cost for Gulf carriers.

Daniel Broby, chief investment officer at Silk Invest, said Gulf airlines could snap up bargain deals as the world waits for Europe to resolve its debt crisis and ease doubts over growth.

'The advantage of buying at the air show at this stage in the cycle is that they are bound to secure good prices, because there will be little demand from Europe or the US.'

Airlines placed around $14bn in orders at the last biennial show in 2009, sharply down from $155bn in 2007.
 




Tags: Dubai Air Show | Debt crisis | Gulf airlines |

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