Paris Preview: From Green to Red

The last Paris Air Show was all about being green and, while that will remain a major theme of the biennial aviation show which kicks off next week, this year’s show will be all about seeing red with losses dripping from almost every balance sheet, now compounded by rising oil prices. Still, the event will be tinged with a modicum of hope. Despite calls for re-equipping depleted arsenals, commercial aerospace is expected to be more active, according to Goldman Sachs.

Even so, what was an uncertain atmosphere at last October’s National Business Aviation Association’s convention will be full fledged pessimism at Paris, especially as business jet manufacturers Gulfstream and Cessna will remain conspicuous by their absence, victims of the vitriol visited upon the industry since November. With thousands of employees having been laid off, manufacturers are loathe to spend on Paris, which occurs so shortly after EBACE.

The business jet market seems to have stabilized, according to UBS analyst David Straus, who said available business jets – some 3,057 – in May were roughly the same as April although they included about 2900 new jets. Availabilities, however, were 55% higher than the year-ago period which means a price depression between 30% and 40%, Strauss told Reuters. Bombardier tops of the list of aircraft available for sale at 19%, followed by Cessna at 18%, and Dassault, Gulfstream and Hawker Beechcraft all at 16%.

“Overall, we think the current business jet market is characterized by significant oversupply, weak pricing and tight financing,” Strauss told Reuters. “While our key indicators and contacts indicate a bottom is near, we think the potential for further production cuts along with the risk of an extended downturn limits upside for most of the stocks.

While exhibitors are cutting attendance and the lavishness of exhibits, they are also rolling out a plethora of announcements designed for either program updates, launches, debuts or sales, although airframers are not expecting to break any records this year.

Those that can’t attend this year will get blow-by-blow coverage with Aviation Today as editors from Avionics, Aircraft Maintenance, Rotor and Wing, Aviation Today’s Daily Brief fan out across the event. The Aviation Today web site will be continually updated with breaking news from the show including video and blog reports from the show stands posted on a special Aviation Today Paris Air Show 2009 Microsite.

Indeed, GIFAS reported exhibitors will remain flat from the last show at 2,000, although small and medium sized companies have upped their participation to 1,500. The 100th anniversary Paris Air Show will host 150,000 professional visitors with a like number of public visitors. The show will highlight its august history with a display of 30 antique aircraft, including the Bleriot XI, the aircraft that launched the biennial event in 1909 when it was held in the Champs-Elysee. A counterpoint will be the latest in military and civil aircraft technology although the 787 will be absent as testing continues.

Of special interest will be Sukhoi’s Superjet, making its debut in this year’s flying demonstration. During the recent Regional Airline Association meeting in Salt Lake, the new regional jet offering which, like Bombardier is targeting the mainline market, drew plaudits from attendees impressed with the level of organization compared to the progress at the same point in development in the last generation of regional jets. Attendees said the same of the Mitsubishi MRJ, which will be displaying the interior mock up with its newly developed seats during the show. The Superjet will be joined by about 25 other military and civilian aircraft, including Bombardier’s Q400.

Despite the economic calamity surrounding the event, participants are cautiously optimistic that a turnaround is at hand as evidenced by United’s recent 150-aircraft request for proposals from the big two, coupled with similar RFPs from other airlines. While Airbus has enjoyed a net gain of 11 aircraft this year, Boeing’s empty ’09 order book looms large as the show gets underway, especially since one of the favorite games at international air shows is to exploit the rivalry between the two in score-card-like fashion. More prominent are the cancellations – 58 at Boeing with 32 in the first quarter alone (mostly 787s) and 14 for Airbus. The recent announcement by Airbus that intends to open up manufacturing plants in the U.S., China, where the first China-produced Airbus aircraft recently flew, and India among other regions shows the strategy of how it intends to compete.

Even so, recent news this year and that emanating from the International Air Transport Association’s general meeting about a doubling of industry losses and order deferrals and cancellations has its benefits in making it a buyer’s market with the consequent drop in prices. Airbus CEO Tom Enders, joined by Boeing and Rolls Royce, said at the Kuala Lumpur meeting that activity is rising, with Enders saying he is holding to the company’s 300-aircraft order prediction for the year. Delivers are expected match last year at 480.

The big question is financing, the demand for which is expected to far exceed the supply in a tight credit market. The industry will require $68 billion in financing for this year’s deliveries alone, although U.S. airlines and analysts suggest deliveries for this years are already finannced. Pressure will be on export credit and vendor financing and higher capital costs will be the norm, especially for airlines that do not enjoy the AAA credit rating.

Only yesterday Fitch Ratings downgraded the debt ratings for UAL Corp. (UAL) and its principal operating subsidiary United Airlines, Inc. (United). The downgrade reflects Fitch's view that the “airline's credit profile is likely to weaken further, as extreme pressure in the revenue environment continues to undermine the positive cash flow impact of lower jet fuel prices in 2009.” Fitch expects United's operating results and free cash flow generation to remain weak through the remainder of the year, largely as a result of its heavy exposure to premium business markets.

A hint of where U.S., and, indeed, many carriers around the world, hope to get money is evidenced by United Chair Glenn Tilton’s outspoken lobbying to eliminate or lower barriers to foreign investment, allowing investment beyond the 24.9% limit. Unfortunately, this has met with protectionist stances on the part of governments, with alliance investigations in both the U.S. and Europe. The U.S. Congress, prompted by increasing labor pressure, wants even approved alliances rolled back.

Yesterday, United pilots joined senators in asking the Administration to delay expected government approval of an application by United and Continental Airlines for immunity from some antitrust law provisions. Today, UAL workers will protest executive bonus programs at UAL’s annual meeting which is adding fuel to the already hostile labor environment. United countered by saying the inclusion of Continental in the Star Alliance that includes US Airways, Lufthansa, Air Canada, Air China, Singapore Airlines among others “is about adding an American company into an immunized alliance that will continue to protect American jobs - to suggest otherwise is a mis-characterization of the facts.”

Manufacturers are expecting to announce orders during the show and analysts suggest looking for activity among Middle Easterners Etihad and Qatar, who have been expanding wildly amidst a sea of capacity cuts in other regions. On the critical list for deferral consideration are Jet Airways and Qantas for the much-delayed 787 and ILFC and Thai for the A380. ILFC has suggested a major shift in the industry’s reception of the giant wide-body aircraft. Certainly, United’s RFP suggests that airlines will go toward smaller, extended-range aircraft for international routes that are now becoming overcrowded. News coming from airlines this year also suggest the shift.

Capacity cuts are still the order of the day in executive suites and US Airways Chair Doug Parker yesterday again called for industry consolidation as the only answer to the industry’s inability to make money. The United order may be a sign that the airline has given up hope for a merger, having tried with both Delta and US Airways in the past, especially in the face of Congressional opposition to increasing alliances and/or foreign investment. Even so, ILFC also pointed to the fact all forecasts show huge needs for both replacement and expansion aircraft, especially with the growing push on the environmental front.

Airbus
Airbus is celebrating its 40th anniversary at the show as is Embraer. The celebration tips off on Wednesday with the first full family flying display includingan A300B (MSN003), the world’s first ever wide-body twin-engine jet, an A320 (MSN001), representing the first all fly-by-wire passenger aircraft, an A340 (MSN001), representing the first truly very-long-haul aircraft, and an A380 (MSN001). In its Tuesday media briefing it will discuss current market trends at 10:30. Its static display includes an A321 and an A380 (MSN001), and an Airbus Military maritime patrol aircraft CN-235. Fresh from its UN citation for it’s Big Picture Environmental program, the company will round out its Paris offerings on Friday at 10:30 with the winners of its worldwide university contest “Fly Your Ideas” at an awards ceremony in the EADS press chalet. The contest has encouraged students to develop creative ideas to further enhance the environmental performance of aviation. Overall, more than 2,350 students from over 80 countries have taken part.

Boeing
The company's commercial airplanes presence will be highlighted by the new Air France fuel-efficient Boeing 777 Freighter, which will be on display from June 15 through June 17. Its commercial briefing schedule begins Monday at 9:30 with a presentation from Boeing Commercial Airplanes President and CEO Scott Carson. On Tuesday, Pat Shanahan, Boeing Commercial Airplanes vice president and general manager of Airplane Programs, will speak at 13.00, while on Wednesday, June 17, Bill Glover, Boeing Commercial Airplanes managing director of environmental strategy, will provide a Boeing environmental update at 10.00.
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Bombardier
Business jets will be the focus of Bombardier’s participation although its Q400 turboprop regional airliner will also be present. It will also me touting is new program to improve the efficiency of its CRJ and Q Series aircraft. The iflybombardier.com portal was unveiled last week at its CRJ Operators’ Conference and Trade Show, in Orlando, Fla. It includes a set of diagnostic services and work processes that draw on the extensive fleet performance history of CRJ and Q-Series aircraft. Both maintenance personnel and decision makers can now query data more rapidly and to a detailed level, allowing them to isolate issues and initiate corrective actions quickly and easily.

On display will be a Learjet 60 XR , Learjet 85 mock-up, Challenger 850 , Global Express XRS and Q400 NextGen

Briefings begin Monday at 10:30 a.m. with the Bombardier Market Forecast Press Conference in the media center with Mairead Lavery, Vice President, Strategy and Business Development, Steve Ridolfi, President, Bombardier Business Aircraft, Gary R. Scott, President, Bombardier Commercial Aircraft. On Tuesday at 10:30 it will provide an update of the CSeries Program with Gary R. Scott, President, Bombardier Commercial Aircraft, Ben Boehm, Vice President, Commercial Aircraft Programs, Robert Dewar, Vice President, Integrated Product Development Team Colin Elliott, Vice President, Engineering and Business Development, Belfast

General Electric
GM will provide briefings on CFM on Saturday at 12:30 with a media lunch and will unveil its GEnx on Monday at 12:30 at its exhibit at C137, Hall 2A. It will wrap up its briefings with one on Engine Alliance on Wednesday at 9 am at the UTC Chalet #A406, Paris Air Show

Mitsubishi Aircraft Corporation
The newest entrant into the regional jet field will hold media briefings on Tuesday and Wednesday at 1:30 and 4:30, respectively. It will update its MRJ program on Tuesday and unveil its cabin mock-up as well as a 3D demonstration video of the MRJ and speak with executives from MJET on Wednesday.

Pratt & Whitney
Pratt & Whitney will host a media breakfast on Tuesday at 9 at Chalet: Row A, #409 with Dave Hess, President. Later, at 1, it signs a joint venture agreement with a Turkish firm for engine development and manufacturing at the Pratt & Whitney Exhibit Stand: Hall 5, Stand B20/30.
At 4 it will provide complete test results for its PurePower PW1000G Geared Turbofan Demonstration Program, the engine which will power both the Bombardier CSeries and the Mitsubishi MRJ, both set for EIS in 2013. On hand at the announcement at its exhibit stand will be Bob Saia, Vice President, Next Generation Product Family
As the other half of the engine alliance it will also be at the GE/Pratt briefing on Wednesday at the 9 a.m. media breakfast with Jim Moravecek, President, Engine Alliance, United Technologies Chalet: Row A, #409, Engine Alliance Announces New Engine Deal. Later than morning it announces new commercial engine business with a major Asian airline at its stand.

Raytheon Company
Raytheon will be plugging several key areas of its business including global intelligence, surveillance and reconnaissance; unmanned systems, both aerial and ground control; air traffic management; the Patriot Air and Missile Defense System; Active Electronically Scanned Array (AESA) radar; cybersecurity; and its ThalesRaytheonSystems international partnership. It kicks off its events with an 8:30 a.m. discussion on Tuesday of its ThaleRaytheonSystem breakfast on the only trans-Atlantic joint venture of its kind. The event will be co-hosted by a new management team.

Rolls Royce
While we didn’t receive its briefing schedule Rolls Royce will no doubt be plugging its recent $1 million investment in the expansion of its On-Wing Care program in North America. It opened its new North American headquarters for On-Wing Care™ recently at Indianapolis International Airport. It is the sixth Rolls-Royce facility to be opened in Indianapolis, Indiana, U.S.A. The 14,000 sq. ft. hangar and 11,000 sq. ft. shop provides line maintenance and hospital level support for all Rolls-Royce corporate & regional aircraft engines including: AE 3007; AE 2100; Tay; BR700 series; commercial RB211 and Trent series engines, including the Trent 1000 which will enter service on the Boeing 787. The new state-of-the-art center is capable of servicing more than 100 engines a year. In region aircraft operators, benefit from rapid response, minimized impact to fleet schedules, reduced costs and critical 24/7 specialist line support.