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

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.


Saudi Aramco shares soar at maximum 10% on market debut

Updated 11 December 2019

Saudi Aramco shares soar at maximum 10% on market debut

  • Company is now world’s largest publicly traded company, bigger than Apple

RIYADH: Saudi Aramco shares opened at 35.2 riyals ($9.39) on Wednesday at the Kingdom’s stock exchange, 10 percent above their IPO price of 32 riyals, in their first day of trading following a record $26.5 billion initial public offering.
Aramco has earlier priced its IPO at 32 riyals ($8.53) per share, the high end of the target range, surpassing the $25 billion raised by Chinese retail giant Alibaba in its 2014 Wall Street debut.
Aramco’s earlier indicative debut price was seen at 35.2 riyals, 10 per cent above IPO price, raising the company’s valuation to $1.88 trillion, Refintiv data showed.
At that price, Aramco is world’s most valuable listed company. That’s more than the top five oil companies – Exxon Mobil, Total, Royal Dutch Shell, Chevron and BP – combined.
“Today Aramco will become the largest listed company in the world and (Tadawul) among the top ten global financial markets,” Sarah Al-Suhaimi, chairwoman of the Saudi Arabian stock exchange, said during a ceremony marking the oil giant’s first day of trading.
“Aramco today is the largest integrated oil and gas company in the world. Before Saudi Arabia was the only shareholder of the company, now there are 5 million shareholders including citizens, residents and investors,” said Yasir Al-Rumayyan, the managing director and chief executive of the Saudi Public Investment Fund.
“Aramco’s IPO will enhance the company’s governance and strengthen its standards.”
Amin Nasser, the president and CEO of Saudi Aramco, meanwhile thanked the new shareholders for their confidence and trust of the oil company.
The sale of 1.5 percent of the firm, or three billion shares, is the bedrock of Crown Prince Mohammed bin Salman’s ambitious strategy to overhaul the oil-reliant economy.
Riyadh’s Tadawul stock exchange earlier said it will hold an opening auction for Aramco shares for an hour from 9:30 a.m. followed by continuous trading, with price changes limited to plus or minus 10 percent.

The company said Friday it could exercise a “greenshoe” option, selling additional shares to bring the total raised up to $29.4 billion.
The market launch puts the oil behemoth’s value at $1.7 trillion, far ahead of other firms in the trillion-dollar club, including Apple and Microsoft.
Two-thirds of the shares were offered to institutional investors. Saudi government bodies accounted for 13.2 percent of the institutional tranche, investing around $2.3 billion, according to lead IPO manager Samba Capital.
The IPO is a crucial part of Prince Mohammed’s plan to wean the economy away from oil by pumping funds into megaprojects and non-energy industries such as tourism and entertainment.
Watch the video marking Aramco’s opening trading: