Boeing crisis, trade tensions cast pall over Paris Air Show

The Paris Air Show, the aerospace industry’s marquee event, is a chance to take the pulse of the $150-billion-a-year commercial aircraft industry. (AP file)
Updated 17 June 2019
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Boeing crisis, trade tensions cast pall over Paris Air Show

  • Marquee event is a chance to take the pulse of the $150-billion-a-year commercial aircraft industry
  • Aerospace executives are concerned about the impact of the Boeing 737 MAX crisis on public confidence in air travel

PARIS: Safety concerns, trade wars and growing security tensions in the Gulf are dampening spirits at the world’s largest planemakers as they arrive at this week’s Paris Air Show with little to celebrate despite bulging order books.
The aerospace industry’s marquee event is a chance to take the pulse of the $150-billion-a-year commercial aircraft industry, which many analysts believe is entering a slowdown due to global pressures from trade tensions to flagging economies, highlighted by a profit warning from Lufthansa late on Sunday.
Humbled by the grounding of its 737 MAX in the wake of two fatal crashes, US planemaker Boeing will be looking to reassure customers and suppliers about the plane’s future and allay criticism of its handling of the months-long crisis.
“This is a defining moment for Boeing. It’s given us pause. We are very reflective and we’re going to learn,” Chief Executive Dennis Muilenburg pledged on Sunday.
The grounding of the latest version of the world’s most-sold jet over safety concerns has rattled suppliers and fazed rival Airbus, which is avoiding the traditional baiting of Boeing while remaining distracted by its own corruption probe.
Aerospace executives on both sides of the Atlantic are concerned about the impact of the crisis on public confidence in air travel and the risk of a backlash that could drive a wedge between regulators and undermine the plane certification system.
Airlines that rushed to buy the fuel-efficient MAX are taking a hit to profits since having to cancel thousands of flights following the worldwide grounding in March.
Even the planned launch of a new longer-range version of the successful A320neo jet family from Airbus, the A321XLR, is unlikely to dispel the industry’s uncertainty, analysts said.
The planemaker is hoping to launch the plane with up to 200 orders with the support of at least one major US buyer such as American Airlines but faces a last-minute scramble to win deals.
“Boeing’s MAX crisis isn’t the most ominous dark cloud, since it can be solved, but traffic numbers are genuinely scary,” said Teal Group aerospace analyst Richard Aboulafia.
“If March and April are a sign of things to come, we’re looking at broader industry demand and capacity problems.”
“Net orders might be the lowest in years,” Aboulafia added.
Others dismiss fears of a downturn, citing the growth of the middle class in Asia and the need for airlines to buy new planes to meet environmental targets.
“The only solution that the industry has is the newest most fuel-efficient aircraft,” John Plueger, Chief Executive of Air Lease Corp, told Reuters. “So that replacement cycle is going to continue.”
“We’re talking to so many airlines who still want more aircraft, and there’s really been no lessening of those discussions,” he said.
Boeing is delaying decisions on the launch of a possible new aircraft, the mid-sized NMA, to give full attention to the 737 MAX and last-minute engine trouble on the forthcoming 777X, industry sources said.
But it could unveil a number of deals favoring widebody jets where it has the upper hand against Airbus, including at least a dozen 787 aircraft for Korean Air Lines and some demand for 777 freighters. Airbus is meanwhile set to confirm an order for A330neo jets from Virgin Atlantic.
“We’ll have some orders flow. We anticipate some widebody orders that you’ll be hearing about through the week. But that’s not our focus for the show,” Muilenburg told reporters.
Robert Stallard of Vertical Research Partners expects roughly 800 aircraft orders at the show, but noted it can be hard to tell which are truly new, firm business or old orders, or switched models. That compares with some 959 orders and commitments at the Farnborough Airshow last year.
Some analysts pegged the likely total closer to 400.


Singapore woes ring trade alarm bells

Singapore has long been viewed as a barometer of the global demand for goods and services. (AFP)
Updated 22 July 2019
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Singapore woes ring trade alarm bells

  • Governments have slashed economic growth forecasts, and gauges in several countries measuring activity in the manufacturing and services sectors paint a bleak picture

SINGAPORE: A plunge in exports and the worst growth rates for a decade have fueled concerns about the outlook for Singapore’s economy, with analysts saying the figures offer a warning that Asia is heading for a slowdown as China-US tensions bite.
While it may be one of the smallest countries in the world, the export hub is highly sensitive to external shocks and has long been viewed as a barometer of the global demand for goods and services.
The affluent city-state is highly dependent on trade and has traditionally been one of the first places in Asia to be hit during global downturns — with ripples typically spreading out across the region. The latest signs are not good. In June, exports collapsed 17.3 percent from a year earlier, the fastest decline in more than six years, led by a fall in shipments of computer chips.
That followed a shock 3.4 percent quarter-on-quarter contraction in GDP in the second quarter. Year-on-year growth came in at just 0.1 percent, the slowest pace since 2009 during the global financial crisis.
“Singapore is the canary in the coal mine,” Song Seng Wun, a regional economist with CIMB Private Banking, told AFP. “And what it tells us is that it is a tough environment.”
To warn of danger, miners used to bring caged canaries underground with them as the birds would die in the presence of even a small amount of poisonous gas — signaling to workers that they should make a swift exit.

BACKGROUND

In June, exports in Singapore collapsed 17.3 percent from a year earlier, the fastest decline in more than six years, led by a fall in shipments of computer chips.

While steadily weakening growth in China is partly to blame for a slowdown in exports, analysts say the trade war between the US and China has dramatically worsened the situation.
While Singapore — a transit point for products heading to and from Western markets as well as the Asian base for manufacturers of some hi-tech goods — may be showing the strain most, negative data has emerged throughout the region.
Exports have been slipping across Asia. In India they plummeted 9.7 percent in June, in Indonesia, Southeast Asia’s biggest economy, they dropped 8.9 percent in the same month while in South Korea they slipped 10.7 percent in May.
Governments have slashed economic growth forecasts, and gauges in several countries measuring activity in the manufacturing and services sectors paint a bleak picture.
Central banks are moving to spur domestic consumption, with Indonesia and South Korea cutting interest rates Thursday, the latest in Asia to lower borrowing costs.
Singapore’s central bank is seen as likely to ease monetary policy at an October meeting, and some economists are predicting the country could fall into recession next year.
“There are no winners in this trade war. While most of the attention has focused on the trade conflict between China and the US, the damage has not been confined to these two economies,” business consultancy IHS Markit said in a commentary.