Airbus Tops Boeing at Air Show Rescued by Mideast (Update1)

July 18 (Bloomberg) -- Airbus SAS topped rival Boeing Co.'s sales tally at the Farnborough International Air Show, where plane orders from Middle Eastern and Asian airlines shored up an industry besieged by high oil prices.

The world's two largest airliner manufacturers announced $64 billion in orders, with more than 60 percent of the total going to Toulouse, France-based Airbus. That fell short of the $69.7 billion in purchases at the most recent comparable event, November's Dubai Air Show.

As in Dubai, the biggest buyers were carriers and leasing companies from the Persian Gulf region, where governments are investing revenue from the same surge in oil prices that is eroding earnings at airlines across the globe. Boeing said it no longer hoards orders for air shows but that the event was useful for the level of contact with other manufacturers and airline customers.

``There may have been a little less traffic through the show this year, but that helped those discussions go a little deeper, so all in all it's been a week well-spent,'' said Tom Downey, the Chicago-based company's senior vice president for communications. ``Our customers are clearly facing some difficult circumstances with high oil prices, but there's still demand.''

Airbus parent European Aerospace, Defence & Space Co. advanced 4.9 percent to 12.80 euros in Paris trading, boosting the stock's surge this week to 19 percent. Boeing had advanced 7 percent this week as of 11:58 a.m. in New York.

Biggest Buyer

The biggest buyer at Farnborough was Etihad Airways, the Abu Dhabi-based national carrier of the United Arab Emirates, which purchased Airbus planes valued at $10.7 billion at list price and Boeings worth $9 billion.

Dubai Aerospace Enterprise, the state-owned lessor, followed Etihad, with confirmation of an order for 100 Airbus jetliners worth $13 billion. Asian carriers were next, with South Korea's Asiana Airlines Inc. claiming 30 Airbus planes for an estimated $7.2 billion and Air China confirming an order for 45 Boeing jets for $6.3 billion.

Orders from other regions were sparse as carriers struggle with spiraling costs. More than two dozen airlines have stopped flying or filed for bankruptcy in the past year and the industry may lose at least $6.1 billion all-told, the International Air Transport Association said at the weeklong show.

Credit Conundrum

Carriers need to replace older planes with more fuel- efficient models but are constrained by tightening credit markets. Some, including Ryanair Holdings Plc, Europe's largest discount carrier, are grounding planes.

``The fact that, at current oil prices, an increasing number of aircraft are uneconomic should encourage airlines operating older aircraft to park capacity,'' Dresdner Kleinwort analyst Andrew Evans said in an investor note on July 17. ``Failing that, bankruptcy looms for some of the industry's weaker players.''

In the Arab world, though, carriers may almost double their combined fleet to 900 planes by 2015, according to a regional trade group. Etihad, Qatar Airways Ltd. and Dubai-based Emirates were among the biggest buyers last year for Boeing and Airbus and the region dominated again this week.

Etihad ordered 55 Airbus planes, including the double- decker A380, plus 45 777s and 787 Dreamliners from Boeing. Startup carrier FlyDubai, owned by the Gulf emirate's government, added 737s worth 3.78 billion.

Colombia, California

Purchases from outside the Arab world and Asia were limited. Synergy Aerospace, which controls Latin American airlines including Avianca in Colombia and Oceanair in Brazil, bought 10 Airbus A350s valued at $2.1 billion, while Aviation Capital Group of Newport Beach, California, was the only U.S. buyer. The leasing company agreed to take A320s from Airbus valued at $1.77 billion and 737s from Boeing worth 934 million.

Arik Air of Nigeria added a mix of 737s and 747 jumbos for $1.6 billion and Alis Aerolinee of Italy committed to buying five freighters from Airbus, without placing a firm order.

Clay Jones, chief executive officer of Rockwell Collins Inc., the U.S. maker of cockpit instruments, predicted that airlines will reduce capacity by 5 percent worldwide through 2009, and by 10 percent in North America. Carriers will still take delivery of planes while retiring some old aircraft, yielding no net growth in the global fleet, Jones said in an interview.

Jones said the Farnborough show was ``not like in years past'' in that it lacked product introductions.

`Fewer People'

``There are relatively fewer people here, and I say `relative' because there are still a lot,'' he said. ``But there's not a lot of deal-cutting here at the show now. It's mostly meet-and-greet.''

While Jones said he doesn't expect many order cancellations, BGC Partners LP senior strategist Howard Wheeldon reckons the declining availability of credit may threaten backlogs.

``The biggest question overhanging the industry is the depth of the crisis in the credit markets and to what extent that will extend into airlines' ability to find funding for purchases,'' said London-based Wheeldon.

The price of fuel should at least spur sales of replacement planes, said David Joyce, CEO of the GE Aviation unit of General Electric Co., the world's largest maker of jet engines.

``Contraction will favor the most fuel-efficient airplanes,'' Joyce said. ``I'm feeling really good about where were positioned.''

Turboprop Boost

Fuel costs have also helped led to a resurgence of interest in less thirsty turboprop jets, according to Rockwell's Jones and other aviation executives at the Farnborough show, held every other year outside London.

``We see more and more demand from customers for larger- capacity regional aircraft,'' said Chief Executive Officer Stephane Mayer of Avions de Transport Regional. ATR is evaluating a larger turboprop to break into the market for 100-seat planes, Mayer announced at the show.

Bombardier Inc., the world's third-largest planemaker, unveiled the first order for its planned CSeries jetliner, moving the Canadian company closer to taking on Boeing and Airbus with an airliner-sized model.

CSeries Interest

The 60-plane agreement with Deutsche Lufthansa AG was described as a letter of interest worth $2.8 billion at list prices. The aircraft will have 110-130 seats, challenging Boeing's 737 and Airbus A320-series planes.

Bombardier's aircraft would also overlap with the smaller 190 model from Empresa Brasileira de Aeronautica SA, or Embraer. The Brazilian planemaker announced orders for 22 190s at the show, including 12 from Consorcio Aeromexico SAB, Mexico's largest airline.

Moscow-based Sukhoi Civil Aircraft Co. also continued its attempted revival of the Russian civil aviation industry, winning 25 orders worth $750 million for its SuperJet airliner from AMA Asset Management of Switzerland and another, undisclosed European buyer. The SuperJet is being marketed in a joint venture with Finmeccanica SpA.

To contact the reporter on this story: Susanna Ray in Farnborough, England, via sray7@bloomberg.net; Andrea Rothman in Farnborough, England, via aerothman@bloomberg.net.

To contact the editor responsible for this story: Chris Jasper in Farnborough at cjasper@bloomberg.net.