AIR SHOW: Oil Wealth Continues To Drive Aircraft Orders

AIR SHOW: Oil Wealth Continues To Drive Aircraft Orders July 15, 2008: FARNBOROUGH, England - Airlines based in oil-producing nations continued to drive aircraft orders on the second day on the biannual Farnborough International Airshow. While aviation-leasing companies unveiled a few deals, too, the biggest orders came from carriers based in the Middle East and Nigeria, where coffers have swelled in recent years as demand for oil has boosted revenues. As on Monday, there were no orders from North America or Europe, where these days airlines are thinking more about retrenching than about expanding their aircraft fleets. Gripped by rising fuel prices, their biggest expense, more and more airlines are reducing costs by downsizing, laying off workers and grounding planes as financially strapped consumers cut down on nonessential travel. Commercial aircraft manufacturer Airbus, a unit of European Aeronautic Defence & Space Co. NV (EADSY), snared orders for 148 planes worth $17.1 billion, bringing its tally for the first two days of the show to 211 aircraft valued at $29.7 billion. The European aircraft manufacturer is expected to post more orders Wednesday. EADS's earnings guidance for 2008 is for Airbus to book "over 700" orders this year. The plane maker took 525 orders over the first half of this year, and with those of the past two days its total since Jan. 1 is only a few dozen shy of 700. U.S. rival Boeing Co. (BA) Tuesday unveiled a solitary order for seven planes, bring its two-day total to 106 planes for $13.5 billion. Airbus and Boeing tend to hold back announcements so that they have orders to disclose for the bigger air shows. Airbus's single-largest order on Tuesday, for example, was the confirmation of a memorandum of understanding that had been announced last year. Airbus and Boeing executives may be putting on a brave face about the market's near-term outlook, thanks to robust demand from the Middle East, but the news from Europe is somewhat grimmer. Irish budget carrier Ryanair Holdings PLC ( RYAAY) announced Tuesday that it would trim its winter schedule from its Dublin base to 1,200 flights a week from 1,350 flights last winter, and the number of planes there from 22 to 18. "I think high oil prices will make low-cost carriers rethink their business models," said Qatar Airways' Chief Executive Akbar al-Baker. Qatar Airways Tuesday placed a firm order for four Airbus A321 narrow-bodied aircraft, with options for another two, for delivery starting in 2009. The firm order is worth about $360 million on the basis of catalog prices. "Qatar Airways is clearly bucking the industry trend by placing aircraft orders and being confident of a bright future for the Middle East and global aviation industry," said al-Baker. DAE Capital, the aircraft leasing and financing division of Dubai Aerospace Enterprise, placed an order worth $12.6 billion with Airbus for 100 aircraft, including 30 of its A350-900 wide-bodied jets and 70 narrow-bodied A320s. The two companies had completed the outline of a deal at the Dubai air show last November. Sheikh Ahmed Bin Saeed Al Maktoum, chairman of DAE, said: "This order confirmation underlines our vision and strategy to make DAE a leader in the aircraft leasing market, that is able to seize upon the significant aviation growth in the Middle East region and in other developing markets." North African airline Tunisair (TUN) confirmed that it had placed an order for 16 Airbus jets including the planned A350 XWB wide-bodied aircraft. The order includes three A350-800s, three A330-200s and 10 narrow-bodied A320s. On the basis of Airbus' catalog prices, the Tunisair order is worth about $1.94 billion. Tunisair also took out an option for one A350 and two A320s. Tunisair signed an initial agreement for its planned order in April when French President Nicolas Sarkozy visited Tunisia. U.S. leasing company Aviation Capital Group agreed to buy 23 single-aisle A320 aircraft worth about $1.8 billion. ACG Managing Director Stephen Hannahs said that increasing numbers of airlines would be likely to turn to leasing in the next two years because of "capital restraints" and the high cost of buying new fuel-efficient aircraft. Airbus wound up the day with an order from Russian flag carrier Aeroflot ( AFLT.RS) for five Airbus A321 aircraft worth $400 million at list prices. Russian flag carrier Aeroflot (AFLT.RS) agreed to purchase five Airbus A321 aircraft worth $400 million at list prices. On a quiet day for Boeing, privately owned Nigerian airline Arik Air announced an order for seven next-generation 737s. It had ordered 10 last September. The more recent order had been attributed to an unidentified customer on Boeing's orders and deliveries Web site. The next-generation 737s list at approximately $ 60 million each. Separately, Sukhoi Civil Aircraft Co. (OKBS.RS) Tuesday said it has signed an initial agreement worth more than $630 million to supply Russian leasing company Avialeasing with 24 of its Superjet 100 regional aircraft. Avialeasing has taken options for another 16 planes, Sukhoi said. Company Web sites: http://www.airbus.com; http://www.boeing.com