Middle East aviation to steal the show

As European economies struggle, Gulf firms will be among major deal-makers at air show.

Middle East aviation companies and Asian airlines are expected to dominate the deal-making this week at the UK's Farnborough International Airshow as austerity measures to battle turbulence in European economies keep many global players grounded. Abu Dhabi Aircraft Technologies (ADAT), a maintenance company, yesterday announced a major 10-year servicing contract with flydubai, the budget airline start-up.

Multibillion-dollar orders are expected from Emirates Airline, while Qatar Airways has also hinted at air show announcements. This year is not likely to match the record-breaking US$88.7 billion (Dh325.52bn) of deals announced in Farnborough in 2008, but it should reflect the improved global outlook in the 12 months since the Paris Air Show, when orders were scarce. While the global economy has improved in the past year, European countries have recently committed themselves to tough spending cuts to pull back huge national debts.

"Austerity measures at the moment are the biggest enemies of the sector," said Richard Aboulafia, of the aerospace and defence consultancy Teal Group. The new conservatism threatens to curb the recovery of Europe's commercial airlines as well as national defence budgets, two important drivers for the aerospace industry. Aircraft financing credit has also been stretched thin by the global crisis, limiting the ability of airlines to take on new orders.

Such complications could see the Middle East and Asian carriers, which are recording the fastest traffic growth worldwide, play leading roles at Farnborough, the largest air show in the world. Emirates, the world's largest airline by international seating capacity, is also the largest customer for Boeing and Airbus aircraft, with $59bn of planes on order. But with $964 million in profits last year, the carrier said it needed more planes to fuel its expansion.

"[Emirates] will have to order some more in the air show in Farnborough ? because of the growth," said Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, last month. One of the airline's announcements will be with GE, indicating a possible engine order. Qatar Airways, with $35bn worth of planes on order, has been considering buying more narrow-body aircraft, possibly to create a budget airline arm.

Etihad Airways, meanwhile, is unveiling its latest cargo aircraft from Airbus at the show. It is not expected to announce any new deals after it sewed up its growth needs for the next decade at the Farnborough show in 2008, with a deal worth up to $43bn. ADAT's servicing deal highlights the growing ambitions of Abu Dhabi to take on a larger role in the aerospace supply chain. It is owned by Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, which aims to pair ADAT with its sister company SR Technics in Zurich to become one of the world's top three aviation maintenance businesses.

Mubadala has several announcements this week to "solidify our ambitions and capabilities", said Homaid al Shemmari, the executive director of Mubadala Aerospace. [e-mail]