Air deals thin on the ground

Chris Stanton

• Last Updated: November 15. 2009 8:28PM UAE / November 15. 2009 4:28PM GMT

Executives said the show might mark the start of turnaround in the airline industry, which has been among the worst hit by the economic crisis, and predicted a number of additional deals this week. Farhad Berahman / AFP

Dubai brought the world’s most advanced jet fighters to its airshow to amaze onlookers, but organisers had no surprises with contracts for new aircraft and weapons systems.

The biggest deal of the day, an order for 12 aircraft from Airbus for Ethiopian Airlines valued at less than US$3 billion (Dh11.01bn), had already been announced in the summer. And Rolls-Royce signed deals for engines, as expected, including a $340 million agreement with Dubai Aerospace.

The value of deals paled in comparison with two years ago, when Gulf airlines were behind a $155bn spending spree.

Emirates Airline officials said for the first time in two years that it might consider an initial public offering (IPO), possibly in the next two to three years.

“Because the market is going towards growth, within two or three years would be excellent,” said Sheikh Ahmed bin Saeed Al Maktoum, the chairman and chief executive of Emirates.

Executives said the show might mark the start of turnaround in the airline industry, which has been among the worst hit by the economic crisis, and predicted a number of additional deals this week.

“Six months, nine months ago, people were talking about delaying aircraft,” said John Leahy, the chief operating officer at Airbus. “I’m not hearing anything like that today.”

Airbus’s headline announcement for the day was a sign of the prevailing mood. The firm disclosed a new wing-tip technology, called “sharklets”, that will boost the A320’s fuel economy by 3.5 per cent.

Airbus noted that the new investment could save airlines $200,000 in fuel costs for each aircraft.

Tom Enders, the chief executive at Airbus, indicated that the next several years would remain difficult.

“We all believe that 2010, 2011 will still be quite challenging,” Mr Enders said. “I am optimistic that we will get through this. We are in a growth industry, we are used to cycles.”

Ethiopian Airlines reconfirmed its order for 12 A350 aircraft to support the airline’s plan to add six international destinations every year. Gima Wake, the chief executive, said his market had been protected to some extent from the effects of the recession.

“Although we operate in the global market, we also have a niche market that will continue,” Mr Wake said.

Mubadala Development’s aerospace unit, Strata Manufacturing, announced it had signed two contracts to provide composite parts to Airbus, marking the European plane maker’s first direct contract with Strata, rather than via a sub-contracting job.

Dubai Aerospace Enterprise said it had reached an agreement with International Aero Engines, a consortium led by Rolls-Royce and Pratt and Whitney, for A320 engines to be delivered in 2011.

Rolls-Royce also signed a $480m contract with Ethiopian Airlines to supply engines for the 12 new jets, and announced a $1.5bn contract with Air China to supply engines for 20 A330s.

Falcon Aviation, an Abu Dhabi helicopter operator, announced it would buy a pair of Sikorsky S-76D helicopters for an undisclosed sum.

Falcon operates helicopters and private jets for VIPs and oil and gas firms, and is increasingly catering to tourists. The firm operates 21 helicopters and five jets.

Sheikh Ahmed, who is also the chairman of Dubai Airports, said the country’s aerospace industry was “open to ideas” as it reached a turning point in an expected revival.

“The airshow comes at an important time for the aerospace industry as the world begins to see a revival in fortunes,” he told delegates. “During the past two years, the business has experienced unprecedented turbulence.”

Sheikh Ahmed added: “It is the Middle East, and the GCC in particular, that has seen a growth in air transport, while elsewhere there have been falling passenger numbers.”

Analysts say large military deals, including a possible sale of Rafale fighters from Dassault to the UAE, could be an alternative to the commercial airline contracts that dominated the 2007 airshow.

Sheikh Ahmed said the region’s investment in defence systems would provide a “secure landscape” for investors.

* with agencies

cstanton@thenational.ae

Dubai airshow coverage, b4