DUBAI, Nov 8, (Agencies): After three years of record jetliner orders, planemakers are bracing for a slowdown in new commitments at the Dubai Airshow which opens on Sunday under the shadow of recently falling oil prices and conflicts in the Middle East.
Barring traditional show surprises, delegates attending the biennial Nov 8-12 event predicted a drop in major commercial order announcements as Gulf airlines take stock after expansion.
The aerospace industry is putting a brave face on the slowdown, saying the tally of more than 400 orders at the 2013 edition was never going to be repeatable. But analysts will be scanning the announcements for any evidence that the dip is more than a return to normality.
Aerospace investors are concerned that a glut of wide-body jets rolling off production lines towards the end of this decade could put pressure on aviation, just as doubts gather over the pace of economic activity.
“A lot of airlines have bought aircraft to capture the same growth,” said Ben Moores, senior analyst at IHS Aerospace, Defence & Security.
That does not mean the Nov 8-12 bazaar, where airliners and arms buyers mingle at Dubai’s newest aviation hub, will be lacking in financial or military firepower.
Major General Ibrahim Nasser Al Alawi, commander of the UAE Air Force and Air Defence, said over $206 billion in orders were booked at the 2013 Dubai air show, adding: “This year’s air show is on course to be even bigger and better.”
Boeing said on Saturday it remained confident about long-term jetliner demand, particularly in the Middle East which is expected to need more than 3,000 jets in 20 years.
Etihad Airways may emerge as the buyer of 10 777X jets listed anonymously on Boeing’s website, Gulf sources said, though an announcement may not happen at the show. Both companies declined comment.
The recent commercial order boom is expected to lead to deals putting parts manufacturing back into the UAE and India at the show. And in defence, at least four Gulf nations are negotiating new fighter purchases.
UAE officials told the Dubai International Air Chiefs conference it would extend spending on air power and other items, despite the cost of fighting against insurgents in Yemen.
But executives see some Gulf countries pulling back on military modernisation programmes, even though IHS’s Moores noted the region’s biggest buyers were most able to weather lower oil revenues.
Qatar is seen likely to slow plans to acquire Lockheed Martin’s THAAD missile defences, but others like Saudi Arabia are accelerating their orders.
“We’re anxious to see what happens to the weapons projects,” said one executive.
“Due to large previous orders, the total show order tally this year will be much less than years prior,” said Ben Moores, senior analyst at IHS Aerospace, Defence & Security.
Organisers say the last edition of Dubai Airshow generated business of up to $200 billion (185 billion euros), with orders for planes in the first few hours topping $162.6 billion, beating the show’s previous record of $155 billion set in 2007.
But this year’s show might have a “record set for lack of sales,” Moores said.
There is currently an order backlog of 750 widebody aircrafts for the Gulf region, so it is unlikely that further orders will be made, he said.
Over 1,100 exhibitors from more than 60 countries are taking part in the biennial fair.
They include major aircraft makers Airbus and Boeing, which continue to compete for a larger chunk of orders from the ever-growing air travel sector in the Gulf region.
Dubai’s Emirates along with Abu Dhabi’s Etihad and Qatar Airways — the Gulf Three already have a long list of orders placed with the US and European rivals, Boeing and Airbus.
Some of those carriers have made it clear that they do not intend to make major announcements at Dubai Airshow.
Conflicts and militant attacks in the Middle East and elsewhere will offset falling demand for helicopters driven by softer oil prices, the head of Russsian Helicopters said on Sunday.
Russian Helicopters, part of state corporation Rostec, is unlikely to see any negative effect of lower petroleum prices this year due to committed orders and deliveries.
But the firm could see a decline in sales in 2016 and 2017 by about 10 to 15 percent, chief executive Alexander Mikheev told Reuters at the Dubai Air Show.
The market for helicopters, which are used extensively in the oil and gas industry, is dependent on oil prices that have fallen significantly in the last year, he said.
He suggested however demand spurred by security requirements looked robust.
“It is clear that local conflicts and terrorist attacks require helicopters more and more. So if there’s this demand, there’s no problem for orders,” Mikheev said.
“We will also substitute decline in demand with after sales service.”
The company’s M-17 and M-18 helicopters proved very reliable in Afghanistan and can operate efficiently in very hot climates.
Over 500 Russian helicopters are in operation in the Middle East and North Africa, Mikheev said.
Russian Helicopters plans to expand its production overseas in a joint venture in India.
“We are still in talks,” said Mikheev declining to give a timeline. Talks are going on with India’s Hindustan Aeronautics Ltd, Reliance Defence & Aerospace and Larsen & Toubro for making KA-226 helicopters in India, he said.
Earlier this year Russian Helicopters signed an agreement with Aviation Industry Corporation of China (AVIC) on cooperation for heavy helicopter development.
Russian Helicopters also has a joint venture with Augusta Westland for the development and manufacturing of single engine helicopters.
The firm also plans to open a service centre for helicopters in Egypt in 2017, he said, adding that Egypt has 77 Russian helicopters.
Canadian planemaker Bombardier said on Sunday it is nearly 100 percent done with flight testing of its FTK-5 test aircraft for its new CSeries regional jet.
Fred Cromer, president of Bombardier Commercial Aircraft told reporters the programme was doing well, and was seeing demand from customers in the Gulf region. Bombardier’s CS100 is making its debut at the Dubai Airshow this week.
The company added that Latvia-based Air Baltic would be the launch operator of its CS300 aircraft when it takes delivery in the second half of 2016. The Latvian flag carrier has 13 CS300 aircraft on firm order and options for seven more.
Airbus expects to sell more A380 superjumbos this year, but a potential deal may not be finalized until early 2016, the planemaker’s chief executive said on Sunday.
Asked in an interview whether Airbus still aimed to win a keenly awaited new order in 2015 for the double-decker airplane, Fabrice Bregier told Reuters, “I think so, yes, … and if it slips into next year this is not a drama. I think we will have some new customers.”
The A380 is looking particularly competitive because of weaker oil prices, he added.
Airbus is also looking at whether to upgrade the world’s largest passenger jet, as requested by its largest customer Emirates, but will only do when the time is right and once a solid business case has been established, he said.
Asked whether Airbus planned to lengthen the jet in order to increase its 544-seat capacity, Bregier said, “It is too early to say. We can stretch this aircraft; the problem is to see whether we would have a sensible market for that.”
Bregier, president and chief executive of the planemaking unit of Airbus Group, added, “I am pretty sure we will stretch the aircraft. I have said ‘one day’ and this ‘one day’ is perhaps after the launch of the so-called A380neo.”
Emirates airline president Tim Clark earlier urged Airbus to push ahead with the A380neo and downplayed reports that the upgrade could include a decision to stretch the plane.
Russia’s Sukhoi Civil Aircraft Company, a maker of regional jets, plans to lift production more than three-fold by 2020, banking on demand from at least five Middle East customers, a senior executive said on Sunday.
Sukhoi is in talks with Egypt, Iran, Saudi Arabia, Qatar and Oman for sales of its Sukhoi Superjet 100 (SSJ 100), Evgeny Andrachnikov, senior vice president, told Reuters at the Dubai Airshow.
“By 2020, we will have critical mass of 200 aircraft (produced annually). We are in serious talks with many clients including in the Middle East with Egypt a big ticket game,” he said. Currently, Sukhoi’s production capacity is 60 jets annually.
He said Egypt Air is a potential client after Egyptian president Sisi visited Moscow and held discussions, among other things, about Sukhoi with his counterpart, Putin.
“There is clear indication of interest,” he said. If the order is firmed up, it would be Sukhoi’s first in the Middle East, he said, adding that Iran, a big market is also a potential customer for a big order.
Sukhoi is aggressively pushing exports, in part, due to a mandate from the government to sell 30 planes annually. Domestic demand is incapable of consuming that, compelling Sukhoi to look beyond Russia.
Sukhoi is targeting the Pacific Rim, Africa, Latin America and Australia for sales of its jets, Andrachnikov said.
Sukhoi is also working on a 120-seater model as well as business jets to cater for Middle East markets. Its business jets operate currently only in Russia bit with three sold to Thailand and one to Kazakhstan.
Production is in Russia, although plans are afoot to start some parts production in India, a long time ally of Russia, under India’s offset programme.
“We are in advanced talks with Indian manufacturers for industrial cooperation in India. It could happen in 2016,” he said, declining to name the companies.
SSJ 100 is a 100-seat new-generation plane designed and manufactured by the company jointly with Alenia Aermacchi, a Finmeccanica company.
Irish European regional airline CityJet last month signed a deal with Sukhoi to purchase 15 SSJ-100 jets worth over $1 billion
Qatar Airways chief executive said on Sunday the airline would consider replacing some of its Airbus A380s with the upgraded A380neo if the newer plane performed better.
“If Airbus produces a (plane) which is head and shoulders above what they produce today — we would look at them for replacements,” Akbar Al Baker said when asked about interest for the A380neo. The new aircraft would have to perform better, on range, capacity and fuel burn for it to be interesting, he said.
Rival Emirates, the largest A380 customer, has been pushing Airbus to upgrade their superjumbo jet for increased efficiency.
Al Baker also said Qatar Airways was not allowed to take part in Indian carrier IndiGo’s initial public offering but it would still purchase shares “if the price is correct —I will not overpay.” IndiGo raised $464 million from a public offering in late October.