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Boeing kicks off air show order battle with US$4.7b DHL deal

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At the Farnborough Airshow, Boeing said DHL had placed an order for 14 777 freighters, and purchase rights for seven additional freighters. The planemaker is looking to reinvigorate 777X sales.

Farnborough, England

BOEING kick-started a contest for tens of billions of dollars of orders at the Farnborough Airshow on Monday, with a US$4.7 billion deal for freight planes with delivery firm DHL.

Even before the first displays took to the skies over a sun-baked southern England, the US planemaker said DHL had placed an order for 14 777 freighters, and purchase rights for seven additional freighters.

Boeing and European rival Airbus were expected to make several announcements on day one of the July 16-22 event, industry sources said.

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There may be an intense battle for sales in the 100-150-seat market where Airbus and Boeing have forged new alliances.

Despite warnings from some analysts that the pace of orders could slow after an eight-year boom, there were signs of brisk activity as negotiators thronged London hotels on Sunday and some haggled over last-minute air show deals, observers said.

However, bankers said they would be watching closely to see how many of the hundreds of orders anticipated this week were new and how many involved adjusting earlier business or switching models, something not always easy to spot at first.

Higher oil prices and interest rates are seen as a warning sign that the long-running aviation boom may be peaking.

The week is expected to confirm demand for narrowbody jets from airlines such as Mexico's VivaAerobus, which is shopping for some 40 Airbuses, or lessors like Goshawk and Jackson Square, both seen interested in jets in the Boeing 737 MAX category. Major lessors Air Lease and Avolon are also in town.

But both Airbus and Boeing are under pressure to increase orders for some of their wide-body jets due to a recent slowdown in that part of the market. One exception is the Boeing 787, after a multi-year effort to end delays and cost overruns.

Airbus could secure an order for a new A350 customer in Taiwan and Boeing will be looking to reinvigorate 777X sales.

The Farnborough Airshow is the industry's biggest event this year. It alternates with the Paris Airshow and collectively they account for over a quarter of industry order intake each year.

British Prime Minister Theresa May was expected to reassure aviation bosses that her under-fire Brexit plan won't disrupt their supply chains.

Boeing chief executive Dennis Muilenburg said on Sunday the performance of global supply chains was always under watch.

Mrs May's words, which were scheduled to be delivered at the air show southwest of London on Monday, come at a crunch time as pro-Brexit lawmakers in her party oppose her European Union (EU) exit strategy.

Britain is also expected to make a major announcement on future combat air strategy, though Europe's fragmented fighter industry is seen as far from ready to unify around one project.

A source familiar with the matter told Reuters on Monday that defence minister Gavin Williamson would unveil a model of the country's proposed new fighter jet at the show, and earmark £2 billion (S$3.6 billion) in funding for the project.

The aircraft, to eventually replace the Typhoon fighter jet, would be developed and built by Britain's BAE Systems, Rolls-Royce and Italy's Leonardo, the source said. REUTERS

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