Flying in Farnborough

by Martin Denholm

Flying in Farnborough

by Martin Denholm, Senior Editor

Thursday, July 22, 2010

Back in my home county of Hampshire in England, the Farnborough International Airshow is in full swing this week.

The bi-annual event is the biggest of its kind in the world and offers an insight into the latest developments within the aviation sector...

And coming just a few weeks after the International Air Transport Association (IATA) forecast a $2.5 billion profit this year for the aviation sector, it's also seen as a key barometer of a suddenly budding recovery. The IATA's projection came after a $9.4 billion loss for the world's airlines in 2009 and just four months after it forecast a $2.8 billion annual loss.

But the flurry of new, big-money orders shows that airlines are again focused on expansion rather than hunkering down and cutting costs. On the first day alone, $18 billion worth of new deals were confirmed. Among them...

  • Emirates will splash out $9.1 billion for 30 new Boeing (NYSE: BA) 777 aircraft.
  • Hong Kong Airlines will pay Airbus $5.7 billion for 25 new planes.
  • General Electric Capital Aviation Services, the branch of General Electric (NYSE: GE) that leases aircraft, said it will spend $3 billion on 60 new Boeing 737-800 planes and $4.5 billion on Airbus A320 planes.
  • Air Lease Corporation (ALC) agreed a $4.4.deal with Airbus for 31 A320s and 20 A321s. ALC has also ordered 54 Boeing 737-800s, due for delivery in 2012.
  • Boeing and Airbus aren't the only manufacturers that have grabbed new orders this week. Brazilian firm Embraer (NYSE: ERJ) received an $1.3 billion order from British budget airline Flybe for 35 of its 175-style aircraft. The airline is expanding in Western European and has an option for a further 105-aircraft order when the contract expires in March 2017. If it does, the deal would be worth $5 billion.

The "Dream" in the Sky

One of the main attractions at the airshow was the presence of Boeing's much-hyped (and much-delayed) 787 Dreamliner on British soil.

Two years later than scheduled, the Dreamliner is a step forward for greener aviation, as it uses less fuel than regular aircraft and is made of lightweight composite material.

But the delays have cost Boeing its exclusive time in the spotlight. Airbus is working on a new A350 series of planes, including the mammoth A380, which can seat 1,000 passengers.

However, while piling that many passengers onto one aircraft might be efficient, the company is just plain wasteful with its lavish A400 military transporter plane.

Already four years late and massively over budget to the tune of several billion euros, it's truly bizarre that seven European governments have pumped an additional 1.5 billion euros ($1.9 billion) into the project to keep it alive, given the budget crisis in Europe. Not only that, the A400 isn't even expected to turn a profit once it's up and running!

Nevertheless, the Farnborough International Airshow has showcased the best and brightest within the aviation sector. More importantly, the rash of new aircraft orders for Boeing, Airbus and Embraer planes have highlighted an emerging trend: The sector appears to be expanding again.

Best regards,

Martin Denholm

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