Air show business slow for Boeing, Airbus

Orders for 8 planes won at British event, down from 114 two years ago

July 23, 2002|By BLOOMBERG NEWS

FARNBOROUGH, England - Boeing Co. and Airbus SAS won orders for eight planes, down from 114 two years ago, as the year's major air show opened in Farnborough, and Boeing Chairman Phil Condit said the industry faces its worst-ever slump.

It was a stark contrast from the show in 2000, when the world's two largest aircraft builders announced orders worth $15 billion on the show's first day. Airline traffic is expected to drop as much as 14 percent this year, "the worst decline the commercial aviation market has ever seen," Condit said at a news conference. Boeing's deliveries won't rebound until at least 2004, he said.

Some analysts consider even that forecast optimistic. Airlines might lose as much as $6 billion this year, the International Air Transport Association estimates, choking demand for new planes.

"It ain't a glorious dawn anymore; we're in tough soup," said Daniel Solon, an aircraft consultant with Avmark International in London. "Business traffic, especially, has basically dropped off a cliff."

KLM Royal Dutch Airlines NV agreed to buy from Airbus six midsize A330-200 jets valued at $780 million and take options for 18 more. The Dutch carrier also agreed to buy from Boeing two 777-200ER jets worth $344 million.

Industry executives say few other orders are expected at the show, where Boeing and Airbus traded barbs over who is to blame for heavy price discounts. Condit said in an interview that the discounts are the steepest he has seen in his four decades at Boeing.

Boeing contended that Airbus is keeping production artificially high in an effort to unseat Boeing as the world's largest plane manufacturer. Airbus has said it plans to make at least 300 planes next year, the same number as this year. Boeing plans to cut production to as few as 275 from 380.

"We stepped up and made the hard decisions to reduce our production, and it's just amazing to us that our competitor would not," said Alan Mulally, head of Boeing's airliner unit.

Airbus responded that it has gained market share by taking away longtime Boeing customers. "They're trying desperately to fill up their volumes," said Airbus Chief Operating Officer Gustav Humbert.

Toby Bright, Boeing's chief airliner salesman, called that claim "absolutely absurd."

Though the mood was pessimistic in the commercial aircraft market, defense contractors such as Raytheon Co. and Lockheed Martin Corp. were buoyant at the show. U.S. defense procurement is in the midst of its biggest buildup since the mid-1980s in the wake of the terrorist attacks of Sept. 11.

"How about the need for defense in the post-Cold War world? Do you remember that debate? It's ancient history now," Dan Burnham, Raytheon's chief executive, said at a press reception.

"We used to make 50 Paveways a month; now we're making 650 Paveways a month, faster than anyone dreamed possible," he said, referring to a laser-guided bomb Raytheon manufacturers.

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