Airbus Group NV (AIR) and Boeing Co. (BA) will push upgraded versions of established jetliners as they compete for orders at the Farnborough Air Show, with demand for all-new models dulled by waiting times that already stretch for years.
Airbus is poised to pitch a re-engined version of the 20-year-old A330 wide-body at next week’s expo, bolstered by record orders for the revamped A320 short-haul jet announced in 2011. Boeing is beefing up the backlog for refreshed long-haul 777, with souped up power plants and an all-composite wing.
Orders for Airbus’s newest A350, due for first delivery this year, and the Boeing 787 Dreamliner, in service for less than three years, may still flow, though neither plane will be available to air-show buyers before 2020. With the A320neo and Boeing’s rival 737 Max also requiring five-year waits, both manufacturers are paying as much attention to the challenges of ramping up production as they are to garnering new customers.
“This might be a show about conservatism, execution on existing programs and not a lot else,” said Richard Aboulafia, an aerospace analyst with Teal Group in Fairfax, Virginia. “This is not a bad environment, but it’s hardly the kind where you want to push further out into record territory.”
Manufacturer backlogs are already swollen to a record 11,500 planes worth $1 trillion, equal to seven years of work.
With most major airlines replete with orders for the newest planes that promise reduced fuel consumption and a path to more sustainable profitability, aircraft lessors may instead take center stage at the Farnborough event southwest of London, announcing new deals to fill gaps in their fleets or help launch the A330neo, as the revamped Airbus will be known.
A sense that the industry may be grazing a purchasing peak has been heightened by an easing back in order activity at the Middle Eastern and Asian carriers that led the purchasing spree.
Gulf operators have already signed up for wide-body fleets, with Dubai-based Emirates, the world’s biggest long-haul carrier, this week confirming a $56 billion, 150-plane order for the revamped 777X originally announced last year. In the short-haul domain, Qantas Airways Ltd. (QAN)’s Jetstar, AirAsia Bhd. (AIRA) and Tiger Airways Holdings Ltd. (TGR) are among low-cost carriers trimming fleets and pushing back deliveries amid concern expansion plans may outstrip passenger demand.
Farnborough in 2014 will struggle to match the fireworks of last year’s Paris expo, when Airbus and Boeing pulled in deals for 848 aircraft worth a combined $129 billion. The previous U.K. show in 2012 netted $53 billion of orders.
“Compared to the last few air shows, we expect this year’s to be a bit flat,” RBC Capital Market’s Rob Stallard said in an investor note on July 8.
Airbus’s A380 superjumbo also risks a poor showing, with 20 orders presented at the Paris show by leasing executive Mark Lapidus yet to be linked to airline operators, even after a firm contract was signed at the Singapore fair in February.
The share performance of Boeing and Airbus and some of their key customers reflects the growing mood of caution, with the U.S. company slipping 8 percent in a month and its European rival sliding 13 percent. Concerns about overcapacity and its impact on prices has pushed Air France-KLM (AF) Group and Deutsche Lufthansa AG, Europe’s two biggest carriers, to pare earnings forecasts, with both down about 25 percent in the last month.
To be sure, no manufacturer wants to go through an air show without at least a few announcements, and sales executives from Boeing, Airbus and regional jet producers Bombardier Inc. (BBD/B) and Embraer SA (EMBR3) will be bracing for the all-night horse-trading often required to seal purchases. If all else fails the companies can usually find a few not-quite-new orders to unveil.
“The usual air-show games could see previously announced orders being firmed up and unidentified orders identified,” Stallard said, highlighting 901 unattributed contracts at Boeing.
Among genuine order prospects, Airbus is currently in the throes of negotiating a $20 billion deal for 200 narrow-bodies with India’s IndiGo, people familiar with the talks have said, though a purchase isn’t certain to be done by show-time.
After Emirates inked its 777X acquisition this week, Boeing will want to bring forward new customers, with Air Lease Corp. (AL) founder Steven Udvar-Hazy one candidate, though he said in Doha last month that he’d prefer to buy after the big twin-jet has proven itself with airline operators.
Hazy is also a potential purchaser of the A330neo, whether it’s launched in Farnborough or not, after endorsing Airbus’s view that the plane could attract more than 1,000 orders over 20 years. The leasing arm of CIT Group Inc. (CIT), which has A330s in its portfolio, has also expressed interest in a re-engining.
AirAsia would also seem sure to buy, with Chief Executive Officer Tony Fernandes this month describing the A330neo as a “killer” model that would finally make long-haul discount flights truly viable.
Airbus’s deliberations are understandable, according to Michel Merluzeau, an aerospace consultant who heads G2 Solutions, based in Kirkland, Washington state.
“It’s very new to them,” he said. “It’s the first time they’re going to revamp a wide-body bird.”
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