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Boeing crisis, trade tensions cast pall over Paris Airshow
SAFETY concerns, trade wars and growing security tensions in the Gulf are dampening spirits as the world's largest plane-makers arrive at this week's Paris Airshow, with little to celebrate despite bulging order books.
The aerospace industry's marquee event is a chance to take the pulse of the US$150-billion-a-year commercial aircraft industry, which many analysts believe is entering a slowdown due to global pressures from trade tensions to flagging economies, highlighted by a profit warning from Lufthansa late on Sunday.
Humbled by the grounding of its 737 Max in the wake of two fatal crashes, US plane-maker Boeing will be looking to reassure customers and suppliers about the plane's future and allay criticism of its handling of the months-long crisis.
Its chief executive Dennis Muilenburg said: "This is a defining moment for Boeing. It's given us pause. We are reflective and we're going to learn."
The grounding of the latest version of the world's most-sold jet over safety concerns has rattled suppliers and fazed rival Airbus, which is avoiding the traditional baiting of Boeing while remaining distracted by its own corruption probe.
Aerospace executives on both sides of the Atlantic are concerned about the impact of the crisis on public confidence in air travel and the risk of a backlash that could drive a wedge between regulators and undermine the plane certification system.
Airlines that rushed to buy the fuel-efficient Max are taking a hit to profits since having to cancel thousands of flights following the worldwide grounding in March.
Even the planned launch of a new longer-range version of the successful A320neo jet family from Airbus, the A321XLR, is unlikely to dispel the industry's uncertainty, analysts said.
The plane-maker is hoping to launch the plane with up to 200 orders with the support of at least one major US buyer such as American Airlines.
Boeing's Max crisis isn't the most ominous dark cloud, since it can be solved, but traffic numbers are genuinely scary," said Teal Group aerospace analyst Richard Aboulafia.
"If March and April are a sign of things to come, we're looking at broader industry demand and capacity problems. Net orders might be the lowest in years."
Others dismiss fears of a downturn, citing the growth of Asia's middle class and the need for airlines to buy planes to meet environmental targets.
John Plueger, chief executive of Air Lease Corp, said: "The only solution that the industry has is the newest most fuel-efficient aircraft. So that replacement cycle is going to continue."
Boeing is delaying decisions on the launch of a possible new aircraft, the mid-sized NMA, to give full attention to the 737 Max and last-minute engine trouble on the forthcoming 777X, industry sources said.
But it could unveil a number of deals favouring wide-body jets where it has the upper hand against Airbus, including at least a dozen 787 aircraft for Korean Air Lines and some demand for 777 freighters. Airbus is meanwhile set to confirm an order for A330neo jets from Virgin Atlantic.
"We'll have some orders flow. We anticipate some wide-body orders that you'll be hearing about through the week. But that's not our focus for the show," Mr Muilenburg said.
Robert Stallard of Vertical Research Partners expects roughly 800 aircraft orders at the show. This compares with 959 orders and commitments at last year's Farnborough Airshow. Some analysts pegged the likely total closer to 400.
Though slowing, a years-long boom in airline orders is still trickling down to suppliers like engine makers.
The June 17-23 Airshow is not only about jetliner deals, but also a magnet for many of the world's arms buyers who come to preview the latest military equipment, from anti-aircraft missiles to hotly sought cyber war-fighting capabilities.
French President Emmanuel Macron will open the show by unveiling a mock-up of a proposed new fighter as France and Germany sign a deal for its development.
Industry insiders will also weigh the merits and potential fallout of United Technologies Corp's planned US$121 billion tie-up with defence contractor Raytheon Co.
The deal would potentially upend the aerospace sector, creating a conglomerate spanning commercial aviation and defence and putting pressure on major suppliers such as Honeywell and General Electric.
Airshow delegates are also watching a face-off between the United States and Iran in the Gulf. The US blames Iran for attacks on two oil tankers in a vital shipping route that have raised fears of broader confrontation in the region.
In another political row with implications for arms firms attending the show, the US has threatened to cancel Turkey's participation in the Lockheed F-35 fighter jet programme over Ankara's purchase of a Russian radar system.
Watching the show attentively is China, whose own aerospace ambitions are growing at a time when US-China trade tensions are rising ahead of a possible meeting between US President Donald Trump and Chinese President Xi Jinping at the upcoming G-20 summit in Japan. REUTERS