When Boeing interrupted its kickoff briefing at the Farnborough Airshow to announce a $4 billion order from start-up airline FlyDubai, I couldn’t help thinking, "is this really going to happen?" To me, it was analogous to a major-league sports contract, i.e., does a guy really get paid $275 million over 10 years to play baseball, or is this a contract based on a mountain of conditions? Showy signing ceremonies at major air shows are the preferred method of airframers and their customers, but I can recall nothing similar for cancellation announcements.
FlyDubai’s order for 54 737-800s was small change, however, compared to the transactions that ensued from Etihad Airways. The five-year-old national carrier based in Abu Dhabi, capital of the United Arab Emirates, placed orders for 205 aircraft valued at $43 billion. Mind you, the mega-package consists of 100 firm orders, 55 options and 50 purchase rights. But firm orders include 35 still-to-fly Boeing 787 Dreamliners and 25 Airbus A350 XWBs as well as 10 A380 superjumbos. DAE Capital, the leasing division of Dubai Aerospace Enterprise, closed an earlier $12.6 billion order for 100 Airbus models, including 30 A350s. With nothing but bad economic news in the lead-up to Farnborough, Flight Daily News asked "Crisis, What Crisis?"
Yes, these are government-owned airlines and yes, the emirates are rolling in oil wealth, trade and tourism. But even they must be feeling ripples from the economic slowdown in the United States, where airlines are grounding planes and deferring orders. Etihad in Arabic means "united" — here, United Airlines in June announced that it will reduce its fleet by 100 aircraft to cope with "unprecedented" fuel costs. While orders were being placed at an aerodrome southwest of London, The Times of London was reporting that bmi, Britain’s third-largest airline, would fly "near-empty aircraft" rather than lose its coveted takeoff slots at Heathrow.
Airframers and analysts contend that robust order backlogs — Boeing with $285 billion worth; Airbus with $279 billion — should sustain the industry through hard times. Boeing CEO James McNerney, in an interview with Aviation Week, said only 10 to 11 percent of his company’s commercial backlog is tied to troubled U.S. airlines, attesting to the industry’s growth in other regions. There also is a silver lining in that airlines struggling with record fuel costs are retiring older, less efficient aircraft to eventually embrace new, more efficient models.
Still, I had that "while Rome burned" kind of feeling the other day as I stood in the plush Emirates Airline lounge at John F. Kennedy International Airport, happily removed from the clamorous, sweaty domestic terminal to which I had arrived. It was my honor to be among journalists invited to welcome the first revenue flight to America of the ever-impressive Airbus A380, an historic event that took place Aug. 1. We stood, sipping Moet and peach-flavored iced tea, as the object of our affection landed on schedule from Dubai and taxied past a Singapore Airlines 747 and Air India 777 to park directly below us.
Emirates President Tim Clark alighted from the A380 still chipper after the 13-hour flight — helped, no doubt, by the stand-up shower he took in first class. Until rival Etihad stole the show at Farnborough, Emirates reigned supreme in buying aircraft, with $35 billion in orders placed at the 2007 Dubai Airshow. Emirates is the largest A380 customer, with 58 ordered.
Clark was refreshingly candid, and addressed many of the questions I have about airline economics, at least as it concerns those airlines still buying planes.
"A lot of people ask us, where are you going to fly these airplanes, why did you buy so many of them, how are you going to fill them? We have to say that it is demand for our services that drives our growth," he said. "We are in Dubai. Its geocentricity drives our growth as we connect city pairs across the continents, creating new travel patterns, allowing [for] the demand that clearly is manifesting itself from Asia into Africa, from South America into Africa and into the Middle East itself.... These 380s, of which we have 58 on order, will soon be flying over the next three to five years, and they will all be full."
Though promising not to be "Churchillian" in his remarks, Clark called for a stiff upper lip. "We are being hit very hard by fuel, but then so is everybody else," he said. "We just have to tough it out and move on."