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.


S&P downgrades trio of Dubai developers as pandemic hits property and retail

Updated 6 min 39 sec ago

S&P downgrades trio of Dubai developers as pandemic hits property and retail

  • Gulf states are being hit hard by the coronavirus pandemic that has come at a time of weak oil prices

RIYADH: The credit ratings of three Dubai property companies were downgraded by S&P as the coronavirus pandemic hits confidence in the retail and real estate sectors.
S&P Global Ratings reduced the credit ratings for the real estate developer Emaar Properties as well as Emaar Malls to +BB from -BBB with a negative forward outlook, adding that it sees a “weakening across all its business segments” in 2020. S&P also cut its rating for DIFC Investments to +BB from -BBB, while keeping a stable outlook.
Gulf states are being hit hard by the coronavirus pandemic that has come at a time of weak oil prices, heaping pressure on governments, companies and employees.
The ratings agency expects the emirate’s economy to shrink by 11 percent this year
“The supply-demand imbalance in the realty sector appears to have been exacerbated by the pandemic. We now expect to see international demand for Dubai’s property to be subdued, and the fall in residential prices to be steeper than we had expected, lingering well into 2021” S&P reported.
Despite easing restrictions and the opening of the economy, S&P said that overall macroeconomic conditions remained challenging.
Global travel restrictions and social distancing constraints “significantly weigh on Dubai’s tourism and hospitality sectors” the rating agency reported.
Still, Dubai’s tourism chief was upbeat on the emirate’s prospects when international tourism resumes.
“Once we do get to the other side, as we start to talk about next year and later on, we see very much a quick uptick. Because once things normalize, people will go back to travel again,” Helal Al-Marri, director general of Dubai’s Department of Tourism and Commerce Marketing told AFP in an interview.