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Eyes on China at Singapore Airshow amid industry consolidation
[SINGAPORE] Strong airline profits and higher defence spending have boosted the outlook for aerospace firms gathering for next week's Singapore Airshow, but after a surge of activity in 2017 the event is expected to produce few big-ticket deals.
The biennial show, the largest in Asia, will bring together buyers and sellers against the backdrop of China's attempt to play a bigger role in a realigning global aerospace industry.
The Chinese push into the commercial jet and military drone markets comes amid regional insecurity in South-east Asia over its rising power while the United States is retreating toward "America First" oriented policies.
China was looking to get a leg up in commercial jet technology through a deal with Bombardier Inc over the advanced C Series last year, but the Canadian company instead chose to partner with Airbus SE.
The Airbus-Boeing duopoly could be further solidified if Boeing and Brazil's Embraer SA agree to a tie-up that could involve their commercial and defence divisions.
China, with its narrow-body C919, is not the only country trying to carve out space in the tightly controlled commercial market. Russia's Irkut MC-21 and Japan's Mitsubishi Regional Jet are also seeking to become serious competitors, and will be represented at the airshow like their Chinese rival.
But all three projects have faced delays, and significant question marks remain over whether any will gain a solid order base outside their home markets.
The C919, which has received 785 orders to date, looks the strongest because of its backing by Chinese airlines and lessors, said DVB Bank head of aviation research Bert van Leeuwen.
"They have the market, the money and the ambitions," he said of China.
Manufacturers are targeting the Asia-Pacific region for product sales and services because it is the world's fastest growing aviation market.
Airbus and Boeing are sending the heads of their services divisions to Singapore as they look to increase their presence in the maintenance, repair and operations industry.
But on the sales side, a final push late last year by legendary Airbus commercial sales head John Leahy before he retired has pulled orders forward and is expected to result in a weak start to the year.
"I'm not expecting much," DVB Bank's van Leeuwen said of Singapore Airshow orders. "I wouldn't be disappointed if there are few orders or if the whole year in 2018 doesn't bring many orders because this is an industry where there is an eight-year backlog of production."
The buzz around product launches - a big sales driver at airshows - is expected to be missing at the Singapore event as Boeing's keenly watched decision on introducing a potential new mid-market airplane is not expected until later in 2018.
On the military side, South-east Asian countries are bolstering their air forces amid insecurity over China's rise and its increasingly assertive stance in the South China Sea.
The Republic of Singapore Air Force, South-east Asia's biggest spender and a potential future Lockheed Martin Corp F-35 customer, celebrates its 50th anniversary this year and will launch the festivities at the airshow.
North Korea's ballistic missile programme and potential internal instability in some South-east Asian countries are also lifting budgets, although in other cases political events, such as an upcoming election in Malaysia, could push back buying decisions.
China's Chengdu Aircraft Industry Group will be displaying two versions of its Wing Loong reconnaissance and strike drones at the show in hopes of penetrating the Asian market. However, it may be too early for Chinese products to gain much traction at a time when the Trump administration is calling on military attaches and diplomats to boost US arms sales.
"I think few countries are going to buy much from China," said Richard Bitzinger, a senior fellow at Singapore's S Rajaratnam School of International Studies.
"Partly it is a reliability thing and partly it is 'if you really want to keep the United States engaged, you buy their weapons systems'. In a sense it is still the US's market to lose."