Planemakers plotting course through trade, Brexit worries
AEROSPACE firms are setting out products from luxury jets to lethal drones at back-to-back British air shows this week, hoping trade tensions will not deter airlines from buying jetliners even as geopolitical uncertainty allows them to sell more weapons.
The quintessentially English atmosphere of the Royal International Air Tattoo, where straw-hatted VIPs watch fighters thunder over picturesque Cotswolds villages, gives way on Monday to the Farnborough Airshow, where the hard-nose business deals in the US$800 billion aerospace and defence sector will be done.
Trade tensions between the United States and both China and Europe, disputes over the consequences of Britain’s exit from the European Union and an increase in global protectionist rhetoric have barely dented a prolonged industry boom.
“The overall environment will reflect industry health, despite the dark clouds of Brexit and other global trade setbacks in the background,” said analyst Richard Aboulafia of Teal Group.
“In short, we’ll see more of what we’ve seen for years: aviation remaining a strangely protected and happy corner of a turbulent world.”
Boeing is expected to confirm demand for air transport is rising after Airbus lifted forecasts last week, citing strong economic growth in emerging markets and the need to replace older planes in Western markets.
The bullish outlook was underscored ahead of the show by forecasters Flightglobal Ascend.
The two giants will add to record orders for benchmark narrowbody jets, whose waiting lists underpin their near-record share prices, while seeking a recovery in sales of bigger jets.
After a lull, Boeing will be looking for a boost to its largest twinjet, the future 777X. Sources said recently it is in talks for an eye-catching deal with Saudi Arabia.
Airbus will hope to end uncertainty over AirAsia’s support for its A330neo jet after a showdown on prices. That could also involve a deal for smaller planes, though doubts have been expressed over financial commitments to Airbus.
Farnborough is the first such event since Airbus and Boeing shook up the industry by agreeing to absorb key commercial programs of smaller rivals Canada’s Bombardier and Brazil’s Embraer as they prepare for competition from China.
The result should be a fierce contest for sales in the 100-150-seat sector even before Boeing closes its Embraer deal.
A new airline, Moxy, is expected to confirm a large order for the rebranded Airbus A220, the former Bombardier CSeries.
The event is also expected to provide new evidence of strong demand for freight planes as e-commerce drives up shippers’ profits.
Analyst predictions for total commercial orders and commitments vary from last year’s 900 to about half that. While high fuel prices make efficient new planes attractive, they hurt the bottom line of buyers, delaying some decisions.
“We are not blind: there are things that need to remain on watch,” the head of major engine-maker CFM said.