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 The world's biggest aerospace gathering will still have its fair
share of announcements, including a potential 100-plane leasing
order for Boeing, as well as the showmanship that goes with any
public contest with European arch-rival Airbus.
But with almost a decade's worth of production on their books, any
new business is likely to be couched in tougher than ever warnings
that factories must 'execute' to win long term. And many analysts
believe the order party is winding down.
"Given the fact that order books have swelled so large, it is
unlikely that the headlines will be about large blocks of orders at
this show and much more about the production process and viability
of the supply chain," said aerospace consultant Jerrold Lundquist,
managing director of The Lundquist Group.
"Although the battle for market share in orders will always be
there, the contest for delivery share is growing, as each player
strives to ... ramp up their production output."
Low interest rates and high oil prices created a stampede of orders
for new planes and fuel-saving spin-offs of existing ones in recent
years, leaving some 12,000 jetliners left to produce and lifting
shares across the aerospace sector.
"We are getting to volumes where ... you need to build a single
aisle aircraft every 6.5 hours. It is a drumbeat and intensity that
is very demanding," Airbus Chief Operating Officer Tom Williams told
reporters ahead of the air show.
But French engine maker Safran <SAF.PA> injected a note of caution
this week by saying its priority would be to meet its already record
commitments, before thinking about further production increases
being explored by some planemakers.
A profit warning ahead of the show from French seats maker Zodiac
Aerospace highlighted concerns about tensions in the supply chain,
though some suppliers fear jetmakers are raising production too
quickly to fuel their own market battles.
"You have to balance market share with execution. A lot of suppliers
are worried about making that big investment and watching it all
fall down," said aerospace analyst Richard Aboulafia, vice president
at Virginia-based Teal Group.
Asked on the eve of the show whether solid production lines were
more important than chasing new orders, Airbus <AIR.PA> CEO Fabrice
Bregier told Reuters, "I hope we can do both".
FEWER ORDERS
Boeing <BA.N> raised its forecast for jet demand on Thursday and
Airbus is expected to follow suit when it outlines its latest market
forecasts on Monday.
It goes into the show with a lead over Boeing in plane orders, with
247 so far this year versus Boeing's 175. (Graphic:
http://link.reuters.com/kaz43w)
But barring last-minute deals, several industry sources said the two
plane giants may struggle to announce 500 orders between them,
compared with 697 at the Farnborough event last year. Some analysts
have predicted higher orders, especially from Airbus.
Dutch lessor AerCap <AER.N> is close to a deal to buy 100 of
Boeing's 737 MAX jets, two people familiar with the matter said.
Both firms declined to comment.
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But unlike previous years, industry sources said there was less rush
to complete orders in time for this year's show, a sign that the
recent order wave appears to be maturing.
A keenly-awaited final order for 250 Airbus planes from India's
IndiGo is not expected to be finalised at the event.
The show is also seen unlikely to bring Airbus immediate respite
from slow sales of the A380 superjumbo, with all eyes instead on a
possible relaunch at the Dubai Airshow in November.
Airbus Group Chief Executive Tom Enders was quoted on Friday as
saying a decision on whether to upgrade the double-decker with new
engines, using a formula that has worked for the company's smallest
planes, would be taken by year-end.
VICTORY LAP
In the skies, the show will mark the first head to head flying
demonstration between Boeing's 787-9 and the A350-900, two new
carbon-fibre jets winning sales in the wide-body market.
It will also be a victory lap for France's Rafale fighter which
stunned the defence industry by winning a trio of export orders in
recent months after years of frustrating losses.
It is an opportunity too for some recently developed aircraft to
restore their image after a spate of problems.
French President Francois Hollande will open the show on Monday with
a symbolic flypast of the Airbus A400M, weeks after a fatal crash
during a pre-delivery test flight.
Canada's Bombardier <BBDb.TO> will be bringing both its new CSeries
plane and a new management team as it attempts to kickstart a
project designed to challenge the duopoly of Airbus and Boeing,
after missing its Farnborough debut last year.
Defence companies attending the show have been buoyed by heightened
security concerns triggered by the rise of Islamic State, Russia’s
support for separatists in eastern Ukraine and China’s assertive
stance in the South China Sea.
U.S. officials and industry executives also see demand from new
customers such as India, Vietnam and others.
Some U.S. companies like Northrop Grumman <NOC.N> have switched to
other air shows in the Middle East and Asia, but many others will be
joining the 130,000 trade visitors to pow-wow with suppliers,
potential buyers and the big weapons makers.
(Aditional reporting by Andrea Shalal and Victoria Bryan; Editing by
Mark Potter)
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