Dubai Airshow unlikely to see big deals of 2007

Organizers of the Dubai Airshow are putting on a brave face ahead of this year’s event, the economic meltdown and a bleak commercial aviation backdrop aside.

By (AP)

Published: Fri 13 Nov 2009, 11:49 AM

Last updated: Thu 2 Apr 2015, 8:24 AM

Exhibitor numbers are up, they say, as are advance bookings and the size of the exhibition hall for the biennial event, which starts Sunday. Regional first-time flights by aircraft like the F-22 Raptor and Eurofighter Typhoon fighters are another draw.

What no one is talking about, however, is matching last show’s record-breaking order total of $155 billion — a figure that spotlighted the Middle East as an important growing source of business for aerospace and defense manufacturers.

The theme among plane and weapons makers this time around: lowered expectations.

“We’re not expecting a lot of orders,” Habib Fekih, president of Airbus’ Middle East operations, told The Associated Press on Thursday. “Deals will not be the main driver of the show.”

The last Dubai Airshow saw jaw-dropping orders from the region’s fast-growing carriers, such as hometown favorite Emirates and Qatar Airways.

Gulf carriers signed up for some 140 planes from both Airbus and Boeing Co. worth nearly $40 billion at list prices on the first day of the 2007 event alone. Included in that haul was an order from Emirates that it boasted was the world’s biggest ever.

Two years later, Middle East carriers are still growing fast. But they are also struggling with falling fares from a slump in travel demand — particularly in their plush front-of-plane sections — that is ravaging the industry worldwide.

The head of the International Air Transport Association warned last month that regional airlines have yet to turn growth into profitability. The trade group expects Mideast carriers to lose a combined $500 million this year.

An outlook like that, combined with economic uncertainty and the massive order backlog from past air shows, is unlikely to translate into the eye-popping orders of previous years, analysts say.

That’s not to say there won’t be any deals.

“My gut feeling is there’ll be a few surprises both on the military and civilian side,” said Charles Wald, a retired U.S. Air Force general who is now senior adviser to professional services firm Deloitte LLP’s aerospace and defense industry division. “There’s a sense things are getting better here.”

Airbus predicts air traffic will grow faster in the Middle East than anywhere else in the world in the coming years, forcing the region to nearly triple its passenger fleet over the next two decades. The plane maker estimates the value of that demand is worth $243 billion.

While commercial aviation deals have dominated headlines out of previous shows, fresh defense contacts could feature high on the agenda this time around.

American defense contractor Raytheon Co. said it is planning to finalize a number of missile and air traffic control deals at the show.

Earlier this year, the Waltham, Massachusetts-based company announced a $246 million contract to sell missile system spare parts to the UAE following the country’s $3.3 billion order for an advanced Patriot defense system late last year.

“There’s a lot of interest to make some major acquisitions and upgrades” in the region, said Paul Mikolashek, vice president for Raytheon International.

Other military equipment makers planning a significant presence include Lockheed Martin Corp., Northrop Grumman Corp. and France’s Dassault Aviation, which is hoping to sell 60 of its Rafale fighter jets to the UAE air force.

The demand is clearly there. Between 2004 and last year, the UAE bought more weapons than any other country besides China and India, according to the Stockholm International Peace Research Institute. The majority of those arms came from the U.S.

Across the wider Middle East, defense spending could top $100 billion annually by 2014, according to research and consulting firm Frost & Sullivan.

The drive for new weapons comes amid increasing tensions between Iran — which sits just across the Persian Gulf from Dubai — and the U.S. and its regional allies.

Arab governments see other threats too, as Saudi Arabia’s recent strikes against Yemeni rebels along its southern border show.

Guy Anderson, lead analyst at defense consultancy Jane’s Information Group, said Western defense companies see the oil-rich Gulf countries like Saudi Arabia and the UAE as an important source of revenue to make up for slowing business in their home markets.

“You’ve got shareholders who expect perpetual growth. ... When your big established markets start to look flat, you need to look elsewhere for growth,” he said. “This is a big market that is getting bigger.”

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