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Orders reach for the skies again at Farnborough

21 July 2010

So, the Farnborough air show closed its doors yesterday for another two years. Now more than 60 years old, this major international event continues to provide a shop window for the wares of the big aerospace companies competing for global business, both military and civil. A little more than 60 years ago, the world’s first jet airliner – the De Havilland Comet 1 – made its debut at Farnborough to show the world what post-War austerity Britain was capable of.

In this past week, civil aviation again took centre stage, as the military budgets of the world powers continue to shrink and airlines at last start to see a rise in their lucrative first and business class passenger numbers. Without doubt, this year’s show stopper was the appearance for the first time outside the USA of Boeing’s (Rolls-Royce powered) 787 Dreamliner. And the scene was set for a classic demonstration of the fierce competition between Boeing and its European rival, Airbus.

Inevitably, it was going to be a numbers game and neither company held back on revealing their Farnborough order books. The Dubai based airline, Emirates led the pack with a $9.1bn order for 30 Boeing 777s, only weeks before having placed the world’s largest single civil aviation order ($11bn) with Airbus for the A380 ‘super jumbo’. GE’s aircraft leasing arm announced an order for 60 Airbus A320s worth $4.5bn and 40 Boeing 737-800s worth $3bn, while the US based group, Air Lease Corporation announced an order worth $4.4bn for 51 Airbus A320s.

Despite the damaging delays to the Dreamliner development schedule, Boeing is very confident that its latest offering is the future of aviation, thanks to its lightweight construction and correspondingly higher fuel efficiency and lower emissions. Against the Dreamliner, Airbus is pitching its A350 XWB, which is presently lagging the former in development terms by about three years. Despite this, Airbus says it has 500 orders from 33 customers for the A350 XWB. Similar to its immediate rival, the Dreamliner, the A350 XWB is of lightweight construction, comprising 45% high-strength composite and 55% low-density aluminium lithium alloy, steel, aluminium and titanium.

All pretty healthy competition one might think. Unfortunately, not quite so as the six-year long legal spat between Boeing and Airbus on the question of subsidies took another tumble earlier this month. The World Trade Organisation (WTO) panel investigating alleged subsidies to Boeing, announced a further delay in the issuing of the confidential interim panel report until mid-September at the latest.

The time lag between this case, and a case brought by the United States against alleged subsidies made to Airbus has been widening steadily over the six-year period and now stands at nearly a year. The European Commission says that this creates the wrong impression that Airbus has received some WTO incompatible support, whereas Boeing has not. Only when both panel reports have been received will both sides have a more complete picture of the dispute, the EC asserts. Airbus president and CEO, Tom Enders expressed “surprise and disappointment” at the last minute announcement of yet another delay by the Boeing subsidies panel.

“We are, however, not surprised by the apparent difficulties the WTO is faced with,” says Mr Enders. “We have said time and again that the complexity, interconnectedness and industrial significance of the Boeing and Airbus cases would strain the capabilities of the WTO. Since these cases were filed, the world has changed. In aviation, the previous duopoly marketplace is increasingly being populated by government-sponsored players, leaving Boeing and Airbus as those that, by any objective measure, benefit least from government support.”

Mr Enders believes the ongoing struggle of the WTO to address the world as it was in 2004 (the date the cases were filed) raises the question whether it can succeed in its basic mission to create a climate for a negotiated settlement on the basis of fair market rules in the interest of both the industry and the employees on both sides of the Atlantic.
“Another delay is a disappointment. But we are looking forward to the Boeing subsidies panel report. It will eventually come, and it will show: Boeing has received billions of dollars in WTO illegal subsidies,” he claims, adding:

“The importance of this report is greater, however, than a simple vindication of the obvious fact that Boeing aircraft such as the B787 would not exist without government subsidies. When the two WTO reports are published, those nations whose industries are building the aviation technologies of tomorrow can consider the WTO's views on the past to craft new market rules that efficiently guarantee fair trade, a level playing field and continuous technology investment."

Les Hunt

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