Fo­cus

De­fense jets out­look rosy, civil frag­ile

Kuwait Times - - ANALYSIS - C919 - Fly­ing Soon? Indo De­fense

From Zhuhai in south­ern China to Florida, hawk­ers of civil and mil­i­tary air­craft - and the money to fi­nance them - will try to drum up new busi­ness at aerospace ex­pos this week, con­scious their high-risk in­dus­try is ap­proach­ing a turn­ing point. Af­ter US weapons mak­ers beat profit fore­casts, an­a­lysts say ten­sions in east­ern Europe and Asia are re­vers­ing a post-Cold War slump in de­fense spend­ing that un­til re­cently weighed on arms firms. At the same time, com­mer­cial avi­a­tion is fal­ter­ing af­ter a decade-long win­ning streak.

“Civil is weak­en­ing and turn­ing very spotty in places, whereas de­fense is grow­ing in US and world mar­kets,” said Teal Group con­sul­tant Richard Aboulafia. “It’s a com­bi­na­tion of a re-ar­ma­ment cy­cle cou­pled with some­thing of a ramp-up based on re­gional ten­sions and fears.” China’s big­gest avi­a­tion event - Air­show China, start­ing in Zhuhai on Tues­day un­der­lines the trend in what is a ban­ner week for the in­dus­try. A de­fense trade show takes place in Jakarta and an air fi­nance con­fer­ence in Hong Kong, as well as the an­nual US busi­ness jet jam­boree in Or­lando, Florida.

Top­ping Air­show China’s agenda is the last-minute pub­lic de­but of the J-20 stealth fighter - a war­plane China hopes will nar­row a mil­i­tary gap with the United States. Abil­ity to pro­ject air power is key for China as it flexes mus­cles on ter­ri­to­rial dis­putes in the East China and South China seas. It’s the sec­ond suc­ces­sive edi­tion of the bi­en­nial Zhuhai show at which China has pulled the cov­ers off a clas­si­fied stealth jet, af­ter dis­play­ing the ex­port-ori­ented Shenyang J-31 in 2014. Western an­a­lysts say the J-20 moves up a gear in terms of China’s abil­ity to punch be­yond its ter­ri­tory, though it may lack the clout of its looka­like, the US F22 Rap­tor. The Xian Y-20 strate­gic cargo car­rier, sim­i­lar to the US C-17 air­craft, will also be present.

An­other hot topic at Zhuhai will be the out­look for the much-de­layed maiden flight of state-owned Co­mac’s 150-seat C919 jet­liner - Beijing’s ef­fort to chal­lenge the civil aerospace dom­i­na­tion of Air­bus Group and Boe­ing Co. The C919 is cur­rently sched­uled to take flight this year, but in­dus­try sources say this will slip to 2017. “When it was launched the C919 was sup­posed to fly in 2014. Now it is 2016 and it hasn’t flown, be­cause de­vel­op­ing a com­mer­cial jet has been much harder than they ex­pected,” said China aerospace ex­pert Bradley Per­rett of Avi­a­tion Week.

The de­lays mean the jet is launch­ing into a civil mar­ket look­ing softer due to slow­ing growth - a sub­ject set to dom­i­nate dis­cus­sion when 1,000 com­mer­cial jet fi­nanciers gather at the two-day Air­line Eco­nom­ics con­fer­ence this week in Hong Kong. With more than a mil­lion mil­lion­aires and over 200 bil­lion­aires, China should also be among the most promis­ing mar­kets for pri­vate jets. But belt-tight­en­ing and Beijing’s cor­rup­tion crack­down have hit de­mand for large mod­els, which had re­sisted a post-fi­nan­cial cri­sis drop in in­dus­try sales.

The plight of the busi­ness jet trade will dom­i­nate the US Na­tional Busi­ness Avi­a­tion As­so­ci­a­tion’s Florida get-to­gether this week. “Pre­vi­ous de­clines al­ways re­bounded,” said Daniel Hall, se­nior val­u­a­tions an­a­lyst at Flight As­cend con­sul­tancy, re­fer­ring to busi­ness jet sales. “This has clearly not.” Those con­cerns deep­ened when parts sup­plier Honey­well pre­dicted fewer de­liv­er­ies next year.

Un­der­lin­ing the cur­rent di­vide be­tween civil­ian and mil­i­tary avi­a­tion for­tunes, for­eign sell­ers are ex­pected to flock to the Nov 2-5 Indo De­fense arms ex­hi­bi­tion in Jakarta, just weeks af­ter In­done­sian jets staged ex­er­cises on the edge of a South China Sea area claimed by Beijing. With In­done­sia’s arms im­ports up three­fold since 2010, ac­cord­ing to the Stockholm In­ter­na­tional Peace Re­search In­sti­tute, com­pe­ti­tion be­tween sup­pli­ers is bru­tal.

Del­e­gates at the event will seek up­dates on a ten­ta­tive de­ci­sion by In­done­sia to buy around 8 Sukhoi Su-35 fight­ers from Rus­sia. Ri­vals con­trac­tors are fight­ing to stay in contention for the deal to sup­ply Jakarta with fight­ers, in what one Western source de­scribed as a test for ef­forts by Pres­i­dent Joko Wi­dodo to en­force more trans­parency in big-ticket deals. Ri­vals Lock­heed Martin, Swe­den’s Saab and own­ers of Europe’s Eurofighter will all at­tend Indo De­fense. —Reuters

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