Airbus, Boeing set for commercial duel in Britain

PARIS, July 10 (Chinese media) -- At a time when the world's aviation sector is still reeling from the effects of runaway oil prices, the American-based Boeing and its main European rival Airbus are looking forward to another titanic duel from July 14 to 20 in Britain.

"Even as clouds are gathering over the international aviation industry, which is currently characterized by high fuel costs, the forthcoming duel at Farnborough will provide a sneak preview of things to come," said one analyst.

Nevertheless, the general opinion is that, on the occasion of the sixtieth anniversary of this biennial exhibition, "there will be no avalanche of contracts, as was the case at Le Bourget, near Paris last year," said the analyst, noting that the Paris air show alternated with the British one.

"There are no expectations for huge contracts at Farnborough. We are confident that there will be quite very few reports of aircraft orders in the second half of the year," said Yan Derocles,an analyst with the Paris-based Oddo Securities.

In 2006, the Farnborough Air Show, which is one of the world's largest, had hosted over 263,000 visitors and had resulted in a total of 42 billion dollars worth of orders, with Airbus and Boeing being the main beneficiaries, according to official figures.

Among the contracts expected at this edition will come from the national airline of United Arab Emirates, Etihad Airways, which in June announced plans to order between 50 and 100 new aircraft, both medium and long-haul, without specifying the chosen supplier.

Airlines from the Gulf are among the largest customers in the aviation sector, especially in the domain of civilian air transport, which is continuing its growth in this oil-rich region where governments are investing heavily in airports and fleets.

"It is clear that in the Gulf, many people are finding new riches mainly due to the rising oil prices," according to Nick Cunningham, an analyst with the London-based Evolution Securities.

"The cost of fuel is having the lion's share in the expenses of carriers," said the analyst, who noted that oil prices had evolved at record levels to more than 140 U.S. dollars a barrel.

The most affected are the Americans, whose often obsolete fleets, consume more energy, and unlike their European counterparts, are not able to take exchange rate advantage buying oil in dollars.

The so-called low cost airlines are the other segment of the industry that is suffering the effects of the current context. "This is mainly because, to them, fuel costs are proportionally even more significant compared to their lower expenditure on staff," said Cunningham.

"This year at Farnborough, the main theme will specifically deal with the impact of airline problems on aircraft orders," said Rupinder Vig, a leading analyst at Morgan Stanley.

Among other large orders expected at Farnborough will be from the U.S.-based ILFC, one of the largest aircraft leasing companiesin the world. "This is an opportunity to buy, because you can get a better price," said Vig, adding that the American company was expected to place several large orders.

"And for carriers which cannot afford to buy at the moment? Leasing airplanes may just provide the solution, especially for some American companies," said Pierre Sparaco, a French aeronautics expert.

Boeing also believes that the rise in the prices of the black gold could eventually have an incentive effect for the industry. "We expect increased demand for the replacement of old and less efficient aircrafts," said Randy Tinseth, Boeing vice-president for marketing of commercial crafts.

The Boeing executive, who was speaking Wednesday while presenting his company's projections for the next 20 years, said the higher oil prices will not force airlines to seek ways to replace fuel guzzling planes but also manufactures to produce cost effective crafts.

Regarding the defense side, the general opinion among analysts is that there will be small contracts, if any, "as trade shows are generally not the place for dramatic announcements in this domain," said a Paris-based analyst.