Airlines from oil-rich Middle Eastern countries saved the world's largest air show from an otherwise lackluster start Monday, booking orders for about 150 planes worth more than $25 billion.
Many European and U.S. airlines are expected to refrain from big deals at the Farnborough International Airshow as they cope with rocketing fuel prices and flagging passenger demand because of the global credit crunch.
In contrast, several Middle Eastern carriers with the benefit of oil-backed sovereign wealth funds are banking on huge investments and greater tourism in the Gulf region to justify spending for aircraft amid talk in the industry of potential cancelations and delays on existing orders.
Escalating energy costs have eaten into airlines' profits, and 25 carriers have ceased operations in the past six months. The International Air Transport Association forecasts industrywide losses of $2.3 billion this year.
Digital Access for only $0.99
For the most comprehensive local coverage, subscribe today.
Kerosene, the fuel distilled from crude oil used to power planes, now accounts for around 40 percent of airline costs, up from 13 percent five years ago, the IATA said.
The biggest deal Monday came from Etihad Airways, which split an order for 100 aircraft between Airbus and Boeing worth $20 billion at list prices.
“The size of our order … mirrors the rising prominence of the Middle East and its increasing emergence as a new focal point of global aviation,” CEO James Hogan told reporters.
Hogan declined to comment on whether the lack of orders from other parts of the world meant he could get a bigger discount on the catalog price than usual, saying only that the size of the deal involved “extensive negotiations.”
More deals are expected throughout the five days of the trade show, starting Tuesday with Middle Eastern carrier Qatar Airways which has a news conference scheduled.
Airbus Chief Salesman John Leahy said he would be disappointed if the European planemaker does not book firm orders for 200 planes this week.
But he said he does not expect any announcements from Los Angeles-based International Lease Finance Corp., the world's largest aircraft lessor, which has suggested it might order jetliners to meet demand from airlines that can no longer afford to buy their own planes and those postponing deliveries to cut costs.
Despite the gloom surrounding the sector, aerospace executives have been quick to strike a reassuring stance at Farnborough, suggesting the difficult economic outlook could in fact prompt more efficiency in the industry with the introduction of cleaner planes.
At the Paris show last year, Airbus and Boeing received 506 orders between them. Credit Suisse said it expects around 200 to 300 orders to be announced at Farnborough.