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Andy Chambers
15 July 2016

The rain fell mainly on the planes

Farnborough Airshow 2016 rant, sorry round up

When considering my view on the Farnborough International Airshow 2016 it is tempting to focus on the chaos of the first couple of days at the show. Monday’s washout was spectacular, and when we were eventually cleared from the site at around 5.30pm there was hardly anybody left. Even the ice cream van had gone home!

At least the weather was not the fault of the organisers. However, the queues on Tuesday morning, despite years of practice, appeared to suggest that Farnborough might have already unilaterally removed the right of free movement for people within the EU. However, we believe it was a lack of organisation that ended up with the queue snaking back over the entrance bridge before the entrance security process was “accelerated”. In addition it is all very well selling overpriced goods to the captives for lunch, but please could you ensure the detritus created by the feeding frenzy is subjected to a waste management system of some sort. Piles of rubbish are worse than unseemly.   

Rant over, so what of the show itself.

Well the highlight of any show for me is seeing new aircraft fly, so Tuesday afternoon was undoubtedly that point. The F-35B appeared around 4pm in the flying display, and with good grace came into its hover phase right in front of us. Not as noisy as the Harrier, or am I going deaf, but powerful enough to stir the memories. Very stable and a partial view of the future for both BAE Systems and the UK military as volumes continue to build and the new aircraft carriers progress towards launch.

F-35B hovering at Farnborough Airshow 2016

What happened on the business front, allowing for the usual distortions of previous announcements being confirmed etc.? Well Airbus booked $35bn of new aircraft orders (197 firm orders worth $26.3bn) and commitments (82 aircraft worth $8.7bn).  Whilst not as much as at recent shows in Paris and Farnborough it did beat its order intake in 2012 largely due to continued strong demand for the A320 family. So maybe it was not as quiet as we expected. Although John Leahy was quoted as saying he thought a book to bill of 1x was unlikely this year, Fabrice Bregier still expects him to deliver the 250-300 orders in the second half that will be required to achieve that feat. The major news for the markets though was the A380 production rate reduction from 2018 to just 12 a year, with Airbus convinced this is the best option and having to run hard to reduce the break even still further.  Nevertheless earnings growth still looks set to accelerate from next year.

At Boeing the 100th birthday party today is supported by orders and commitments for 182 civil aircraft worth $26.8bn. The icing on the cake from a UK perspective may well be the $2.3bn UK MOD order for 50 Apaches, although this had been foreshadowed, and the commitment to create 2,000 Boeing UK jobs. Boeing also committed to build a new £100m facility at RAF Lossiemouth to support the 9 P-8A Poseidon aircraft that are to be purchased and to open more bidding opportunities to UK suppliers on Boeing programmes, all nice positives.

Boeing and Airbus values of orders and commitments at Farnborough and Paris Air Shows

What we did not get was either manufacturer progressing new aircraft plans. Indeed the A350-“2000” stretch seems unlikely to be this year and the business case for Boeing’s midmarket B757 replacement still looks debatable.
Despite the much anticipated and long awaited slowdown in order intake for both Boeing and Airbus, the main challenge for the two main commercial aircraft manufacturers and their suppliers remains the execution of the ramp up and the progressive reduction in the length of the backlog. This should provide solid volume growth through the end of the decade as the newer programmes increase production to new heights.

Civil aerospace remains a growth industry, as more passengers around the world fly more often and more aircraft come up for retirement every decade. Even after the impetus of fuel efficiency from the new models starts to wane, I expect that global trend to continue.


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