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Posted June 25, 2010 10:54 AM
By Paul Sheridan

A look ahead to Farnborough

Now that Wimbledon has started and the sun is shining, people’s thoughts inevitably turn towards the Farnborough International Airshow. While it offers a good chance to gauge the mood of bankers and lessors, the Airshow is really a manufacturer’s event where Boeing, Airbus et alia get to show off their latest creations and trumpet their latest orders. But what are the big issues for aircraft investors and industry watchers?

Firstly, given how orders have been so much lower than deliveries over the past year, any increase in orders will be a good sign for the industry and the signs leading up to the show have been positive.
 
For new aircraft programmes, given the number of new aircraft being designed and delivered, this year will tell us a lot about the shape of the aircraft market for the next 10 to 20 years. The most important things to look out for are:
 
A380: Emirates managed to spoil Lufthansa’s party at the Berlin Airshow with its 32 A380 order. Even if it was linked to a restructuring at DAE, since it brings their A380 orders to 90 it should strike fear into any smaller airline looking to fly international routes to or near the Middle East. It doesn’t entirely help A380 values however as it increases the Emirates concentration risk significantly. For a positive impact on values we need to see orders from airlines who just want to put 70 business class seats and 430 economy class seats and no bars, showers or fountains. That will at least point towards a secondary market developing in future. We put the A380 on positive watch in our Aircraft Ratings product anticipating these orders. Whether it is from competitive pressures, congestion or high oil prices all the signs point to now being the time for Airbus to get some serious orders for the aircraft.
 
90 seater jets: Mitsubishi and Sukhoi will no doubt be at the Airshow in force and will be telling all how much better their 90 seater is than any other aircraft. Whether or not this is true they both have a long way to go to start challenging Bombardier and Embraer. And who knows, we might even see yet another country announcing a 90 seat jet programme.
 
C series: Bombardier need a good Airshow to reassure investors about the future of the C series. They will have to announce a freezing of the design and make lots of reassuring noises about the manufacturing process. Then there will be the small matter of securing more orders for the aircraft.
 
Re-engining: It will surely be impossible to get through Farnborough without yet more discussion about re-engining. That this has gone on so long highlights what a difficult decision it is for Boeing and Airbus since any path has downsides. Not doing it hands the C series an advantage over the already embattled A319 and 737-700. Doing the re-engining will delay a full replacement aircraft but will still entail high development costs for the manufacturers. This will be hard to recoup on an aircraft with such a limited production life. Who is going to pay a premium for an aircraft that will lose value quicker than a current generation 737-800 or its replacement?

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