Farnborough struck by industry gloom
Abu Dhabi’s Etihad Airways was the talk of the Farnborough Airshow yesterday after it unveiled a $20bn (£10bn) order for 100 planes – but it was a quiet debut for Europe’s biggest industry show.
Etihad CEO James Hogan said the airline had placed orders for 35 787 Dreamliners and 10 777s from America’s Boeing for $9bn, and from Europe’s Airbus it had lodged orders for 25 A350s, 20 A320s and 10 superjumbo A380s for $11bn.
The Middle East flag carrier said the order came as part of the kingdom’s plan to boost its population to 5 million by 2030, raise its annual tourist numbers to 3 million by 2012 as the state spends $200bn over the next 10 years to diversify its economy from oil.
Hogan said: “We are confident in the mid and long-term future of the aviation industry and our hub status between the East and the West, despite the rising price of oil in the short-term.”
Etihad, which currently has a fleet of 37 aircraft and flies to 45 destinations, said oil was currently 54 per cent of its costs.
Airbus, Boeing and Brazil’s Embraer all announced orders yesterday, but observers said the deal flow was up to 25 per cent down on the last time Farnborough was held in 2006.
Two years ago, when the show was last held here at Farnborough – it alternates with Paris – orders totalling some $42bn were announced, but experts said the Airshow will struggle to match that figure, because the industry is suffering its worst downturn since the 9/11 attacks in New York in 2001.
Evolution Securities aviation analyst Nick Cunningham said carriers were “too nervous to order airplanes, and also rather concerned that they ordered too many last year and the year before”.
Farnborough runs until Sunday.
City Views: What’s in store for the global Aviation industry in the future?
Anthony Bidulph (Blackrock): “I think the industry will shrink massively in the next decade, purely because of the cost of fuel. We’ll see major consolidation in the sector, and most of the smaller state carriers will go bankrupt. I also think that two major airlines in the US will probably go under in the next 12 to 18 months.”
Leila Salek (Financial Recruitment Consultant): “People will want to go away more in the future but it will be a real struggle to pay the higher prices, put up because of increasing fuel costs. I think a fair number of carriers will go bust, both because of fuel prices and the cost of reducing the environmental impact of flying – airlines will have to take action there, too.”
Simon Cardy (RBS Sempra Energy): “There will be fewer major airlines, and we’ll see some takeovers. I can’t see budget airlines like Ryanair continuing with their low fares because of rising fuel costs, although I think they’ll stay afloat. The cost of implementing environmental measures will affect the industry eventually too, but will take longer to make an impact.”