Paris Air Show Report

 - June 29, 2009, 11:46 AM

If you can imagine the Paris Air Show as a stock market then what happened at this year’s event (held from June 15 to 21) was nothing less than a rally, spurred by unexpectedly strong sales activity. With the worldwide economy still in the grasp of the largest downturn since the Great Depression in the 1930s, most observers had predicted slim pickings at this year’s show. In fact, the bottom line looked a lot better than expected, with total announced sales fast approaching $30 billion–though this must be compared with order tallies announced on the international airshow circuit counted in the hundreds of billions of dollars over the past five or six years.

It would be irresponsible and groundless to suggest that the aerospace sector turned a corner in Paris. The grave uncertainties over economic fundamentals were certainly not swept aside by a relatively upbeat show. For all the wishful thinking, none of the experts assembled in Paris could offer any definitive conclusions as to whether the industry has yet reached the long anticipated bottom of the down cycle.

Louis Gallois, chief executive of Europe’s EADS group (which includes Airbus), said it is not safe to assume that the worst of the downturn has passed for aerospace. “In 2009 the impact [of the downturn] will be limited, and we’re on track. [But] 2010 and perhaps 2011 will be more critical, and will depend on the traffic evolution, which is still disappointing,” he said at a Paris Air Show press conference. “Just how bad 2010 will be is still unclear. We have no visibility.”

Nonetheless, the money several airlines (largely those from Asia and the Middle East) committed at the show will eventually trickle down the aerospace food chain and bolster confidence that could drive yet more orders. The hope is that the new business heralded in Paris will not prove to be what stock market insiders refer to as
a “dead-cat bounce,” meaning a sudden upturn in equity prices that immediately precedes another dip in fortunes.

Show organizers were expecting final audited figures would show trade visitor numbers close to the record 153,920 who came to Paris in 2007. That may not prove to be the case, but it is no secret that many exhibiting companies opted to bring fewer employees to Le Bourget as part of their cost-cutting measures.

The big hit of the show–in terms of novelty among the aircraft on display–once again came from Russia, but this time it was not one of the country’s impressively agile and powerful fighters. Instead, it was the international debut of Sukhoi’s Superjet 100 airliner, turning more heads than even the Airbus A380, which seemed more like an old friend than a new arrival. Another show star rising in the east was Antonov’s new An-148-100 regional airliner, which came to Paris just days after the type had entered commercial service in Ukraine.

Schiebel’s Camcopter S-100 ushered in a new chapter in the history of the Paris Air Show as the first unmanned air vehicle to take part in the flying display. The Austrian aircraft’s appearance also represents the first flying demonstration by a rotary-wing UAV at any major airshow.

Airlines Loosen Purse Strings
Airbus announced a slew of new orders and commitments made through memorandums of understanding (MOUs) totaling $12.9 billion in new business–with an almost exactly 50:50 split between firm and provisional orders. Almost half of these sales, in terms of value, came from three carriers: Malaysia’s Air Asia signed a $2.4 billion contract for 10 A350-900s; Qatar Airways ordered 20 A320s and four A321s for a combined $1.9 billion (including the conversion of four options placed during the July 2008 Farnborough International airshow); and Vietnam Airlines made a $1.4 billion deal for 16 A321s.

Other announced Airbus sales during the show came from a pair of carriers from the Philippines, with Cebu Pacific ordering five A320s and Zest Air buying its first of this type. France’s Aigle Azur ordered a single A319.

The business with Vietnam Airlines also included an MOU for two A350-900s worth $480 million. Airbus signed other MOUs with Hungary’s Wizz Air for 50 A320s (valued at $3.8 billion), as well as with India-based Paramount Airways for 10 A321s ($900 million) and with Turkish Airlines for a pair of A330-200s and five A330-300s ($1.4 billion).

During the show, a private, undisclosed Asian customer placed a firm order for an Airbus A320 Prestige, becoming the first to order the type in the region.

Boeing, which always professes not to store up order announcements for show time in the way that its European rival appears to do, nonetheless joined in the Paris sales action when MC Aviation Partners, a wholly owned subsidiary of Mitsubishi Corp., finalized an order for two Next Generation 737-800s valued at $153 million at list prices.

The U.S. airframer also found itself on the receiving end of one of the most astonishing, and seemingly unscripted, outbursts when Qatar Airways CEO Akbar Al Baker effectively threatened to pull the plug on a contract for up to sixty 787s, due to what appear to be Qatar’s objections to the way Boeing is handling the long-delayed program.

“Unfortunately Boeing is not run by commercial people,” Al Baker told reporters. “Boeing is run by bean counters and lawyers. We have some serious issues with them, and if they do not play ball with us they will be in for a serious surprise.”

Al Baker acknowledged that the issues he spoke of were related to Qatar’s order for the 787. “They’re not dealing with this in a professional manner,” he said. He declined to go into specifics, after Qatar at the last moment canceled a press conference which many thought would have been a new order announcement. Asked about Al Baker’s comments, a Boeing spokesman said the company does not publicly discuss customer-related issues.

The Boeing 787 has been dogged by setbacks related to difficulties in managing the supply chain, changes to the design, weight increases and supplier-related issues. As a result, the airplane is almost two years late. After last month’s most recent delay to first flight, Boeing said it could take “several weeks before the new schedule is available.”

However, Boeing did report that it is evaluating the case for redesigning the wing for the 777 twinjet to offer a direct alternative to Airbus’s A350-1000. Such a development might serve as an alternative offering to the 787-10 model that the manufacturer has been considering.

The airliner sales announced at the Paris show brought in their wake substantial orders for the engines that power them, as well as a $14 billion order from Abu Dhabi-based Etihad Airways for aircraft it had ordered last year at the Farnborough show. General Electric claimed no less than $8 billion dollars worth of new orders, including some for Engine Alliance’s GP7000 turbofans (in which GE is a partner with Pratt & Whitney). The Rolls- Royce tally was $4.1 billion, including orders for the International Aero Engines consortium in which it is the senior partner. CFM International and Pratt & Whitney also won new business at the show.

While the Superjet 100 itself impressed the show crowds, Russian aircraft lessor Avialeasing converted a letter of intent for 24 of the regional airliners signed at the Farnborough show last July into a firm order valued at approximately $715 million. Scheduled for delivery between 2011 and 2013, the airplanes are destined for Avialeasing customer airlines. Avialeasing still holds a letter of intent for options covering an additional 16 Superjet 100s.

The deal brings Sukhoi Civil Aircraft’s firm order book for the Superjet to 122 airplanes, initial deliveries for which are set to begin in December when launch customer Aeroflot takes its first aircraft. Aeroflot holds firm orders for 30 Superjet 100s, plus options for 15 more Superjet International, the joint venture between Sukhoi and Italy’s Alenia, also announced that Hungarian flag carrier Malev has signed a letter of intent for 30 Superjets, 15 of which would involve firm orders and the remainder options. The deal could potentially be worth $1 billion, if all orders and options are exercised. Sukhoi followed up that news with the signing of another letter of intent, this one with Spanish airline Gadair, involving two firm orders and two options and potentially worth around $60 million.

Another leasing company, Ilyushin Finance, did a deal to supply up to 45 airliners to Russian airline Atlant-Soyuz. The memorandum of understanding, worth up to $1.2 billion, is with United Aircraft Company for 30 Antonov An-148 regional airliners and 15 Tupolev Tu-204 medium-haul jets.

Bombardier Aerospace announced a new firm order for 15 CRJ1000s from Spanish regional carrier Air Nostrum. The Valencia-based Iberia Regional partner also opted to convert delivery positions on its final five CRJ900s to firm slots for CRJ1000 NextGen jets. Based on the list price for the CRJ1000 NextGen, the value of the new firm order for 15 airplanes totals $793 million. Meanwhile, Bombardier has moved into the next stage in the development of its new C Series aircraft by announcing 17 new partners for the program, thus completing the selection of all major suppliers.

Embraer announced the conversion of options and purchase rights for several
E-Jets into firm orders. The approximate value of the new business is $360 million.
Japan’s Fuji Dream Airlines, part of the Suzuyo Group, amended a November 2007 contract to add an E175 to the original order for two E170s, the first of which was delivered last February. The E175 will be fitted with a single-class cabin for 84 passengers and is due for delivery next year.

KLM Cityhopper, a wholly owned subsidiary of the Air France KLM Group, increased its orders for the 100-seat E190 by converting seven options of the August 2007 contract. The Dutch regional carrier, which holds options for 11 more of the jets, will take delivery of six more from the original order by year-end.

Avions de Transport Regional landed a firm order for a pair of new ATR 72-500s from Vietnam Airlines. During the show, the airline also accepted delivery of its fourth ATR 72-500, and the first in its new livery.

The French-Italian manufacturer inked a purchase contract for 10 of its new ATR 72-600s with Spain’s Air Nostrum and another firm order with Royal Air Maroc for four ATR 72-600s and a pair of smaller 42-600s. The order from Air Nostrum accompanied options for another 10 airplanes, and the contract with Royal Air Maroc added options for two ATR 72-600s. In the meantime, Royal Air Maroc Express plans to lease four ATR 72-200s from ATR. Nigeria’s Afrijet placed a separate order for four ATR 72-500s valued at $80 million.

Dassault Aviation CEO Charles Edelstenne revealed that all design choices for its next Falcon business jet, a super-midsize aircraft codenamed SMS, have been reopened–including the engine. He also acknowledged that further layoffs might become necessary by year-end.

At the 2007 Paris Air Show, the airframer announced it had selected Rolls- Royce to supply 10,000-pound-thrust-class RB282s. It now appears that even such a key decision is being questioned. “In our design process, Phase A is that of outlines and architecture. It was to end early this year. However, at this time, we saw we had not met our [economic and technical] goals. Therefore, I elected to prolong Phase A to the end of the year. Everything is open,” Edelstenne said.

A Rolls-Royce spokesman insisted his company has a strong business partnership with Dassault. “We continue to work with them on future program requirements,” he said.

Qatar Airways announced the creation of a new VIP charter division called Qatar Executive. The Doha-based operation was due to take delivery of a pair of Bombardier Challenger 605s before the end of last month, joining an existing Challenger 300.

Piaggio received firm orders for three Avanti II twin turboprops–two for the United Arab Emirates military and another for Susi Air in Indonesia. Susi Air, based in Pangandaran, West Java, was scheduled to take delivery of its first Avanti II last month. The charter and scheduled operator has another two of the aircraft on option.

Helicopter Happenings
French aerostructures supplier Daher won a pair of significant deals at the show. First, it cemented its position as one of Eurocopter’s leading partners with a contract to develop and produce a new generation of airframes for a planned new range of light helicopters. A separate contract with ATR calls for Daher to build composite wing panels and longitudinal members for the ATR 72.

AgustaWestland, which brought the latest version of its AW101 helicopter to Paris, announced that Fittipaldi Aircraft has signed a dealership agreement for nine Grand light twins and one AW139 medium twin. Under the new agreement, Fittipaldi Aircraft will act as a non-exclusive dealer to the U.S. VIP market. AgustaWestland also announced orders from the government of Egypt (three AW109 Powers), Indonesia-based Susi Air (one AW119 Ke and one Grand) and Transcanada’s ANR Pipeline (three AW119s).

Eurocopter exhibited its “Bluecopter” engine concept. The diesel engine, dubbed “high-compression engine” for marketing purposes, is supposed to bring greener performance to light singles. The manufacturer is targeting a 40-percent cut in CO2 emissions and a 53-percent reduction in nitrous oxide emissions.