Civil wars abating
Farnborough Airshow Preview 2016
Next Monday sees the start of the week long Farnborough Airshow which typically heralds a flurry of news in the sector. We expect the main talking points to be:
- A lack of headline grabbing aircraft orders
- Will Airbus and / or Boeing commit to a new aircraft?
- Airbus’ production issues to come under scrutiny
- F-35B to be the highlight of the flying display
- A focus on innovation
- Will Farnborough survive in a post Brexit UK
1. A lack of headline grabbing aircraft orders – We are not expecting the OEMs to make a large number of significant order announcement as the backlog is already bulging and delivery slots are booked up. However Airbus and Boeing will no doubt have saved up a couple of deals to grab the headlines, and may take the opportunity to name some of the as yet ‘undisclosed’ customers. Next Friday is Boeing’s centenary so it will inevitably be seeking to steal the limelight from Airbus.
2. Will Airbus and / or Boeing commit to a new aircraft? Airbus has to decide whether it is going to respond to Boeing’s 777-9X with is own super stretched A350-1000, dubbed the A350-2000. Fabrice Bregier’s (Airbus CEO) recent comments suggest no decision is likely to be announced at Farnborough. However, he has challenged John Leahy (COO – customers) to prove the business case by coming back with signed commitments, and there is no better opportunity than at the year’s biggest airshow. Boeing has to decide whether to enter the ‘middle of the market’ slot that the 757 used to occupy, now dominated by the A321. Whilst the OEMs enjoy the publicity of a new aircraft launch, there is a sense that customers & shareholders would like them to focus on successfully delivering the backlog of more than 12,000 firm orders.
3. Airbus’ production issues to come under scrutiny – Airbus has only delivered 12 of the 50 A350-900s due to be delivered this year, leaving them a lot of work to do in the second half of 2016. The delay has been caused by problems in the supply chain, principally at Zodiac who supply the cabin interiors. Qatar airlines, the launch customer of the A350 will be present at the show. The airline has been very vocal about problems with the aircraft this year and delayed deliveries. The A400M is also suffering from serious problems with its power gearbox, although it is scheduled to participate in the flying display. Airbus has so far refused to be drawn on whether it will still reach its target of c.20 deliveries this year.
F-35B for the RAF
4. F-35B to be the highlight of the flying display – An RAF F-35B aircraft is due to make its long awaited appearance at the airshow, after its participation in 2014 due to an engine fire which led to the whole fleet being grounded just before the show. It is programmed to take part in a fly past with the Red Arrows. However, new regulations as a result of the Shoreham air crash means the flying display is likely to be a little less acrobatic this year. The presence of the F-35, a truly international defence collaboration, is likely to generate lots of talking points in defence. For example:
• UK purchases of US equipment now look a lot more expensive given the post Brexit collapse of Sterling. Are the planned UK purchases of the F-35 secure?
• Is the Eurofighter consortium (BAE , Airbus & Finmeccanica) going to be affected by Brexit?
• What does the future hold for the Anglo-French FCAS project?
5. A focus on innovation – for example unmanned technology and hybrid air vehicles. Whilst the developments in these areas are of less immediate interest to the financial markets, they are crucial to understanding how the industry may evolve in the future.
6. Will Farnborough survive in a post Brexit UK? There may well be some discussion over whether Farnborough will continue to host the airshow in alternate years to Paris once the UK leaves the EU. Given the international nature of the events it seems unlikely the set up will change, but there could be some scare mongering, particularly as David Cameron is scheduled to attend on Monday.
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