Boeing groundings to dominate industry summit in Dubai

Emirates, the region’s biggest airline, is looking at reducing an order for the delayed Boeing 777X in the wake of safety concerns. (Reuters)
Updated 15 November 2019

Boeing groundings to dominate industry summit in Dubai

  • The biennial civil and military expo is a major showcase for wares from jumbo jets to military drones

DUBAI: An eight-month crisis over the grounding of Boeing’s 737 MAX jets and widespread industrial delays are setting an unpredictable backdrop to next week’s Dubai Airshow, with some airlines reviewing fleet plans even as others look for bargains.

The biennial civil and military expo is a major showcase for wares from jumbo jets to military drones but faces growing questions over demand and the capability of overstretched suppliers, delegates arriving for the Nov. 17-21 event said.

Top of their agenda will be the worldwide grounding of the 737 MAX in the wake of two deadly crashes.

Investors who have pushed up Boeing shares believe the planemaker is turning a corner after the eight-month grounding, with the company predicting commercial flights in January. But it also faces a logjam of undelivered jets that could take two years to unwind.

State-owned flydubai expects its fleet will now shrink by a third this year, highlighting the cost of the grounding for the biggest MAX customer outside the US.

“Flydubai has very big ambitions. Given the scale of those ambitions, there is little they can do but wait and watch, like everyone else,” said Teal Group analyst Richard Aboulafia.

Boeing lost one potential MAX customer earlier this year as Saudi budget airline flyadeal ditched a provisional order.

Experts say airline frustrations with plane and engine makers could also disrupt plans by the world’s largest jetmakers pushing for order endorsements.

The Middle East’s largest aerospace event will give Airbus and Boeing a chance to sit with some of their top customers who have threatened to walk from billions in deals.

The planemakers are struggling to deliver aircraft on time, forcing airlines to delay expansion plans, while engines on some jets are causing issues for carriers.

“This seems to be a systemic issue across the board,” said Novus Aviation Capital Managing Director Mounir Kuzbari.

“As a result, we see stress on the relationship between airlines and the plane and engine makers.”

Dubai’s Emirates, by far the region’s biggest airline, has issued a stern warning to plane and engine makers. It will no longer take delivery of aircraft that do not meet performance expectations, raising doubts over $35 billion in pending orders.

Airbus, Boeing and engine makers will be looking to allay concerns as they finalize aircraft sales with Emirates, which is also looking at reducing an order for the delayed Boeing 777X.

Airbus is seen close to a final order for A330neo and A350 jets while Boeing aims to salvage a provisional order for 787s.

Air Arabia could, however, steal the show with a planned order of up to 120 Airbus jets, industry sources say.

Kuwait’s Jazeera Airways is in negotiations with Airbus and Boeing for around two dozen aircraft.

Past editions of Dubai’s premier trade event have featured blockbuster deals, often led by Emirates, as Gulf carriers redrew the aviation map around their “super-connector” hubs.

But the Gulf hub model is increasingly under pressure as the once-rapid growth of the region’s biggest airlines slows.

“The market continues to be weak for all airlines in the region, and  we expect to see a further 2-3 percent reduction in passenger numbers for the full year,” Diogenis Papiomytis, Frost & Sullivan’s global program director for commercial aviation, said.

Middle East military leaders touring the displays will try to gauge whether they are on the cusp of another regional splurge on weapons following an escalation in Gulf tensions.

A series of attacks over the summer has highlighted potential security gaps among some of the world’s leading defense spenders who now increasingly buy from China and Russia. 

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: