Paris Air Show

Thin prospects for airliner sales but military deals show potential

 - June 14, 2009, 9:04 AM

This week’s historic Paris Air Show may yet deliver its usual share of surprises, but one apparent certainty is that very few of the exhibitors are likely to go home richer off the back of new orders announced here at Le Bourget. That certainly seems to be true of the commercial air transport sector, but there is some prospect of two important deals being sealed on the military side.

Eurofighter partners could receive a significant boost this week if, as is widely expected, the governments of Germany, the UK, Spain and Italy finally sign the contract for the Tranche 3A block of Typhoon production. And according to somewhat less firm reports, the United Arab Emirates may commit to an order for Dassault’s rival Rafale combat jet.

The only obvious clue to a significant airliner order in the coming days is a pair of press conferences that Etihad Airways has scheduled for tomorrow afternoon. The Abu Dhabi carrier is one of the fastest growing operators in the Middle East region and, in recent years, has made a number of high-profile fleet growth announcements on the international airshow circuit.

One positive sign in the weeks leading up to show came in the form of news of a request for proposal from United Airlines to Boeing and Airbus for a possible $10 billion order for up to 150 aircraft. Unfortunately for those hoping to see a respectable level of sales activity here at Le Bourget that too will have to wait until later in the year, as United looks to take full advantage of the most favorable pricing environment the airlines have seen in many years.

One ray of light that appeared likely to shine on this year’s salon appears to have faded with the growing unlikelihood that one of the industry’s most prominent new airplanes under development–the Boeing 787 Dreamliner–would take to the air either right before or during this year’s show, although Boeing still insists that the new widebody will make its long-awaited maiden flight this month.

Of course, as airlines ground airplanes faster than the rate of deliveries, any inkling of an order of the magnitude United has begun considering will draw considerable attention, even if the final decision appears unlikely to happen until much later in the year. After all, Boeing has registered a net order total of only seven airplanes so far this year, while Airbus has fared only slightly better with net orders for 11 airplanes.

Nevertheless, both manufacturers haven’t given up on plans to maintain delivery rates at or near 480 airplanes for the year, as they scramble to fill delivery slots left vacant by order deferrals and cancellations.

The reasons for that bit of optimism might well center on the fact that financing conditions appear to have improved modestly, according to the most recent UBS airline survey, released just days before the start of the show. Still, order intentions have dropped to their lowest level since the company began conducting the survey, and the percentage of airlines looking to defer has moved even higher.

Delivery Deferrals

According to UBS, 44 percent of its respondents now say they will try to defer delivery of airplanes. Meanwhile, 39 percent said they would try for earlier positions if they become available. Seventy-two percent indicate that they have now secured financing, compared with just 47 percent in the company’s last survey.

In the face of the “unprecedented financial and economic crisis, Le Bourget has lost none of its attractiveness,” show commissioner Louis Le Portz told journalists at a pre-show press conference last week. “Despite the particularly difficult environment there have been very few exhibitor withdrawals.”

Nonetheless, it is clear that bigger companies are economizing as reflected in the somewhat reduced exhibit space they have rented here this week. But all the 353 chalets available have been sold.

The total 566,000 sq ft of stands in six separate halls and 430,000 sq ft of outside exhibition space accommodate 2,000 exhibitors–a new record–up from 1,996 attending the 2007 show. Another record has been notched up in the shape of the 1,500 or so small- and medium-sized companies present and many of the Europeans in this category can be found in Hall 4. 

Since the 2007 show, around ?10 million has been invested to improve access to the site as well as to modernize the reception area, car parks and conference facilities.