In big week for air
expos, defense jets outlook rosy as civil aviation
fragile
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[October 31, 2016]
By Tim Hepher and Brenda Goh
ZHUHAI,
China (Reuters) - From Zhuhai in southern China to Florida, hawkers of
civil and military aircraft - and the money to finance them - will try
to drum up new business at aerospace expos this week, conscious their
high-risk industry is approaching a turning point.
After U.S. weapons makers beat profit forecasts, analysts say tensions
in eastern Europe and Asia are reversing a post-Cold War slump in
defense spending that until recently weighed on arms firms. At the same
time, commercial aviation is faltering after a decade-long winning
streak.
"Civil is weakening and turning very spotty in places, whereas defense
is growing in U.S. and world markets," said Teal Group consultant
Richard Aboulafia. "It's a combination of a re-armament cycle coupled
with something of a ramp-up based on regional tensions and fears."
China's biggest aviation event - Airshow China, starting in Zhuhai on
Tuesday - underlines the trend in what is a banner week for the
industry. A defense trade show takes place in Jakarta and an air finance
conference in Hong Kong, as well as the annual U.S. business jet
jamboree in Orlando, Florida.
Topping Airshow China's agenda is the last-minute public debut of the
J-20 stealth fighter - a warplane China hopes will narrow a military gap
with the United States. Ability to project air power is key for China as
it flexes muscles on territorial disputes in the East China and South
China seas.
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It's the second successive edition of the biennial Zhuhai show at which
China has pulled the covers off a classified stealth jet, after
displaying the export-oriented Shenyang J-31 in 2014.
Western analysts say the J-20 moves up a gear in terms of China's
ability to punch beyond its territory, though it may lack the clout of
its lookalike, the U.S. F-22 Raptor. The Xian Y-20 strategic cargo
carrier, similar to the U.S. C-17 aircraft, will also be present.
C919 - FYING SOON?
Another hot topic at Zhuhai will be the outlook for the much-delayed
maiden flight of state-owned Comac's 150-seat C919 jetliner - Beijing's
effort to challenge the civil aerospace domination of Airbus Group <AIR.PA>
and Boeing Co <BA.N>. The C919 is currently scheduled to take flight
this year, but industry sources say this will slip to 2017.
"When it was launched the C919 was supposed to fly in 2014. Now it is
2016 and it hasn't flown, because developing a commercial jet has been
much harder than they expected," said China aerospace expert Bradley
Perrett of Aviation Week.
The delays mean the jet is launching into a civil market looking softer
due to slowing growth - a subject set to dominate discussion when 1,000
commercial jet financiers gather at the two-day Airline Economics
conference this week in Hong Kong.
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![](../images/103116pics/busine54.jpg)
People take pictures and videos as the first C919 passenger jet made
by the Commercial Aircraft Corp of China (Comac) is pulled out
during a news conference at the company's factory in Shanghai,
November 2, 2015. REUTERS/Stringer
![](../images/ads/current/demay_inv-lda081412.png)
With more than a million millionaires and over 200 billionaires, China
should also be among the most promising markets for private jets. But
belt-tightening and Beijing's corruption crackdown have hit demand for
large models, which had resisted a post-financial crisis drop in
industry sales.
The plight of the business jet trade will dominate the U.S. National
Business Aviation Association's Florida get-together this week.
"Previous declines always rebounded," said Daniel Hall, senior
valuations analyst at Flight Ascend consultancy, referring to business
jet sales. "This has clearly not."
Those concerns deepened when parts supplier Honeywell predicted fewer
deliveries next year.
INDO DEFENSE
Underlining the current divide between civilian and military aviation
fortunes, foreign sellers are expected to flock to the Nov. 2-5 Indo
Defense arms exhibition in Jakarta, just weeks after Indonesian jets
staged exercises on the edge of a South China Sea area claimed by
Beijing.
With Indonesia's arms imports up threefold since 2010, according to the
Stockholm International Peace Research Institute, competition between
suppliers is brutal.
Delegates at the event will seek updates on a tentative decision by
Indonesia to buy around 8 Sukhoi Su-35 fighters from Russia.
Rivals contractors are fighting to stay in contention for the deal to
supply Jakarta with fighters, in what one Western source described as a
test for efforts by President Joko Widodo to enforce more transparency
in big-ticket deals.
Rivals Lockheed Martin, Sweden's Saab <SAABb.ST> and owners of Europe's
Eurofighter will all attend Indo Defense.
(Additional reporting by Alwyn Scott in ORLANDO, Florida; Editing by
Kenneth Maxwell)
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