Dubai Airshow: Gulf carriers take a breather

In contrast to the previous Dubai Airshow in 2013, huge aircraft orders were not making the headlines at this year’s event. With the commercial industry set to absorb hundreds of new planes, the military sector led the way.

An Airbus A350 XWB flies past the tail fin of an Airbus A380-800 operated by Emirates during an aerial display at the Dubai Airshow. Jasper Juinen / Bloomberg

Arabian Gulf airlines took a pause at Dubai’s Airshow last week after an order extravaganza two years ago when their aircraft orders surpassed US$200 billion.

Yet military activity took centre stage at the latest biennial Dubai Airshow, as the UAE and Saudi Arabia are leading a fight in Yemen against the Houthi rebels.

The two countries are also participating in the US coalition against ISIL in Syria and Iraq.

“The 2013 show was a true one-off,” says Saj Ahmad, the chief analyst at the UK’s StrategicAero Research.

“The Boeing777X launch happened. We cannot expect every air show to launch new products.”

Two years ago Emirates made the largest order in Boeing’s commercial history when it bought 150 Boeing 777X planes worth $76bn, additionally it purchased 50 Airbus A380s, worth $23bn at list prices.

Its Abu Dhabi neighbour, Etihad, made equal headlines at the time, when it made a $25.2bn deal with Boeing for about 98 wide-body aircraft.

It trumped the Boeing order with another $26.9bn deal with Airbus — which included 50 Airbus A350s, the twin-aisle jet that competes with the Boeing 777X currently under development.

“The 2013 splurge has yet to be delivered,” says Addison Schonland, a founder and partner of the US commercial aviation consultancy AirInsight.

“There is a cycle and [that] everyone is looking out and holding back a bit seems like a good idea. The growth is tempered by low fuel costs keeping older planes economic. The additional cost of new planes is not justified right now,” he adds.

Two Asian airlines created some buzz at this year’s show. India’s Jet Airways made an order of 75 Boeing 737 single-aisle jets worth $8bn at book prices.

The Indian airline, which is 24 per cent owned by Etihad Airways, made the order amid high growth in the Indian air travel market — with heated competition between Spicejet and Indigo, the domestic market leader.

Meanwhile, Vietnam's budget airline VietJet bought 30 Airbus A321 planes worth $3.6bn.

There was some excitement initially about the possibility of Emirates choosing between Boeing 787-10 aircraft or the Airbus A350-900 model to grow its fleet. The carrier said previously that it is looking to place an order of about 100 long-range planes — however, it is still deciding between the Boeing and the Airbus.

“The reason why Emirates didn’t pick a winner between the 787-10 or A350-900 stems largely down to the congestion at Dubai International Airport,” says Mr Ahmad.

He adds that as the development of Dubai’s new airport Al Maktoum International will not be complete until the start of the next decade or so, Emirates has to make the most of whatever capacity is available today.

Mr Ahmad says that Emirates is yet to absorb its many Boeing 777s and Airbus380s, and therefore it was never going to rush to do a deal to add more jets.

And with the military airspace in the UAE and GCC now being used to combat ISIL, the growth of commercial aviation and the airspace it uses is under pressure.

If the 2013 Dubai airshow was all about the Gulf carriers’ deals, this year it was about keeping the engines of those planes in good shape for the decade or so to come.

Emirates last Monday signed a $16bn deal with GE Aviation for the maintenance, repair and overhaul — better known as MRO — of the GE9X engines on its Boeing 777X fleet over a period of 12 years.

While that may seem like a lot of money, it is only reasonable given the $76bn that was spent on 150 777X aircraft in 2013.

The Dubai airline also signed a second 12-year MRO deal with GE Aviation, worth $36 million, covering the maintenance and inventory support for various avionics, electrical power and mechanical systems on all Emirates Boeing 777 aircraft currently in service and the 44 more 777-300ERs on order.

“MRO and engine work is huge in the region,” says Mr Schonland.

“Engines are replaced faster than just about anywhere else because of the sand and dust. So the business is totally appropriate.” Etihad, in parallel, said it was exploring the idea of setting up its own MRO facility in Eastern Europe as part of a memorandum of understanding (MOU) with Mubadala, the Abu Dhabi investment fund, potentially worth up to $1bn.

Separately, military and defence planes were in the spotlight at last week’s show.

Among the deals that were struck was one between the UAE Armed Forces and the Swedish aerospace company Saab to buy two new Global 6000 surveillance jets and upgrade two Saab 340 aircraft currently owned by the UAE.

The deal is worth $1.27bn.

Meanwhile, Lockheed Martin said it won a deal worth $262.8 million to provide Saudi Arabia’s F-15 sniper targeting system, which allows day and night low-level navigation.

“The on-going malaise in Iraq and Syria with Islamic State and the seeming war without end in Yemen were two big drivers for military and defence deals at the show,” says Mr Ahmad.

“Given that the GCC governments have close economic and political links to the US, it is in their interest to shore up and bolster their military hardware and capability to tackle the growing threat from the likes of Islamic State and other rebel groups in Syria and beyond.

“There’s a good chance we’ll continue to see this activity going into next July’s Farnborough Airshow too,” he adds.

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