Paris Air Show opens under a cloud

Paris – The biennial Paris Air Show opens Monday at a tense time for global aviation, with airlines staring at dwindling passenger numbers and huge financial losses in the somber aftermath of the unexplained crash of an Air France Airbus jet.

By all accounts the 100th anniversary of the air show, to run for a week at Le Bourget near Paris, will be a subdued affair compared with the 2007 exposition.

Two years ago manufacturers Airbus and US rival Boeing — well before the world fell into recession — won 800 orders worth more than USD 100 billion (EUR 71 billion).

"I don’t expect any major announcements next week in terms of sales," said IHS Jane’s aviation analyst Chris Yates, who described the state of the industry as "precarious".

"And that’s going to be the case until we come out of this recession."

Organisers are nonetheless predicting the presence of 2,000 exhibitors, a record, and around 300,000 visitors, roughly the same as in 2007.

But dampening the atmosphere is the June 1 loss of an Air France Airbus A330 that went down over the Atlantic on a flight from Rio de Janeiro to Paris, killing all 228 people aboard.

With the odds against discovery of the "black box" flight data recorders, which could shed light on the catastrophe, investigators at this point can only speculate on what caused an aircraft delivered just four years ago and operated by a major world carrier to fall out of the sky and plunge into the ocean.

Airbus, already bedevilled by production and delivery delays afflicting two of its planes, had little to say about the crash until Friday.

Airbus head Thomas Enders in an interview appearing in the German daily Bild Zeitung defended the A330, calling it "one of the best and safest planes ever built" and urging "patience" during the investigation.

Even before the accident, there was gloom and doom aplenty in the airline sector, with Boeing and Airbus foreseeing a 60 percent decline in demand for aircraft this year in the face of a global economic slide and tighter credit.

Airbus has said that from 1 January  to 31 May it had received just 11 orders, along with 21 cancellations.

Boeing from January 1 to June 2 recorded 65 orders and 65 cancellations.

The International Air Transport Association (IATA) has meanwhile predicted an 8.0 percent decline in passenger numbers this year to 2.06 billion compared with 2008 and a 17 percent fall in goods transported by air to 33.3 million tonnes.

IATA director Giovanni Bisignani told delegates to the association’s annual meeting in Kuala Lumpur last week that the airline industry could lose USD 9.0 billion this year, almost double the estimate three months ago, making the crisis worse than the aftermath of the 11 September 2001 attacks in the United States.

Combined with a revised estimate of losses in 2008 of USD 10.4 billion, the sector now looks set to lose nearly USD 20 billion over two years.

Airline executives see chances of a turnaround in late 2010 as the world economy slowly emerges from recession.

But Bisignani warned that rising oil prices in a recovering global economy could put an aviation industry rebound at risk.

IATA has said the industry’s fuel bill is likely to fall by USD 59 billion to 106 billion this year based on an average of USD 56 per barrel of North Sea crude. North Sea crude on Friday was trading above USD 70 in London.

The International Energy Agency this week forecast a slight rise in its estimate of oil demand this year, a signal that the pace of the recession could be easing.

The signal is good and bad news for the airline industry. While healthier economic momentum should boost passenger travel it could also mean higher oil prices and heavier fuel bills.

Yates said the stronger trend on the oil market would likely lead to the scrapping of "marginally viable routes," such as some of those between Britain and the United States for example.

The head of German flag carrier Lufthansa this week took aim at financial market speculators he blamed for helping to drive up the price of crude.

"Financial speculators now have an enormous influence on our business," Wolfgang Mayrhuber told the Financial Times Deutschland.

"The old rule whereby supply and demand dictated the price of a certain raw material no longer applies."

In addition to commercial deals won or lost, the Paris Air Show will feature flying displays, although two of what would have been the biggest attractions, the Boeing 787 Dreamliner and the Airbus A400M military transporter, will be no-shows, both products having been plagued by development delays.

The F-22 Raptor fighter jet, made by the US firm Lockheed, will in addition be absent, according to French aviation authorities, who gave no official reason.

The market for business jets is also under severe strain and two US manufacturers, Cessna and Gulfstream, have pulled out of the Paris show.

AFP / Nathaniel Harrison / Expatica