Outlook Gloomy At Farnborough Air Show

Slow global economic recovery and sharp cuts to national defense budgets are expected to blow a chill wind through the Farnborough International Airshow next week.

LONDON (AP) -- The slow global economic recovery and sharp cuts to national defense budgets are expected to blow a chill wind through the Farnborough International Airshow next week.

But there are some glimmers of light amid the austerity gloom as plane makers, government ministers and military top brass gather for one of the aviation and defense industry's premier events.

There's buzz about the debut of two of the world's most long-anticipated aircraft -- the Boeing 787 and the Airbus A400M -- and likely commercial plane orders from buyers in the Middle East and Asia.

More than 1,000 exhibitors from 38 countries have signed up to take part in the weeklong event showcasing both commercial and defense aircraft. Delegations from Egpyt, Taiwan and Morocco will be attending for the first time, while organizers also cited stronger interest from major players China and Russia.

Analysts expect the event to be more upbeat than last year's sister show in Le Bourget outside Paris as the global economy staggers back to its feet, but they aren't holding their breath for orders anywhere near the record-breaking $88.7 billion worth announced in Farnborough in 2008.

"The show is a little too soon to see a huge rise of orders, but there'll probably be more than Paris," said Forecast International analyst Raymond Jaworowski. "We should start to see orders accelerate late this year."

Boeing, which suffered a setback on the eve of the show by revealing that delivery of the already long-delayed 787 may be set back yet again, this week predicted that the global airline industry will need $3.6 trillion in new aircraft over the next 20 years.

The Geneva-based International Air Transport Association has forecast that global industry profits will reach $2.5 billion this year, an upturn from the huge $9.4 billion loss in 2009.

Analysts expect Asia and North America to lead the recovery, with Europe lagging behind. Strikes at some airlines, the debt crisis and the volcanic ash cloud that caused major disruptions this spring are all hurting Europe's recovery.

Analysts are instead expecting Middle Eastern and Asian buyers to put up some money. Emirates airline, the largest in the Gulf states, has indicated it would announce new orders at Farnborough after surprising many with a repeat order last month for 32 Airbus A380 superjumbos. There is also an expectation that Qatar Airways will sign a deal to equip a new low-cost carrier in the region.

But Boeing this week downplayed the likelihood of big deals at Farnborough, stressing it didn't save up orders for international shows -- a dig at major rival Airbus' tendency in recent years to announce a block of attention-grabbing announcements at Farnborough and Le Bourget.

"At the end of the day, what matters is where we are at the end of the year, or over the longer term," said Randy Tinseth, Commercial Airplanes vice president for marketing.

Potentially of more interest to industry watchers who use the biennial event to gauge the industry mood are the emerging signs that the old duopoly of Chicago-based Boeing and EADS-owned Airbus in the commercial plane making market is on the wane, particularly in the lucrative single-aisle, narrow-body sector.

Boeing and Airbus currently account for more than two thirds of output and 40 percent of sales in the sector, but smaller rivals are stepping up -- Canada's Bombardier Inc. picked up a strong 80-plane order earlier this year from Republic Airways Holding Inc. for its C-Series.

"The win at Republic is a wake up call for Airbus and Boeing," said Adam Pilarski, an aviation economist with Washington, D.C.-based consulting firm Avitas. "They thought the C-Series would sell to regional airlines but they sold to full service (airlines)."

Damien Lasou, managing director at Accenture's Aerospace and Defense Industry Group in Paris, said analysts would be watching to see whether Bombardier develops the C-Series, which is on track for its first delivery in 2013, into a fully fledged family of planes.

"The aircraft is improving a lot of parameters like direct maintenance and fuel efficiency, but it's not with just one product you can satisfy the big airlines," he said.

Bombardier is not the only new challenger. China's state-owned Comac and Russia's Irkut will also be briefing potential investors at Farnborough on aircraft they plan to bring to market by 2016.

Boeing is hoping to retain some of the limelight with the international debut of the fuel-efficient 787. The plane, made of lightweight composite material that makes it both cheaper to produce and more eco-friendly, is already two years behind schedule. Boeing said this week that the first delivery of the jetliner -- scheduled for late this year to Japan's ANA -- may slip into early 2011 because of inspections and instrument changes.

On the defense side of the show, some of the industry's most lucrative programs are being threatened by national budget cuts just as economies start to improve.

In the U.S., the world's biggest single defense market, the Pentagon is looking to trim some $100 billion of savings from personnel and procurement over the next five years. In Britain, Europe's largest market, the government is considering cuts of up to 20 percent.

Lasou said he expects a shift into services by many defense and aerospace companies as they look to new avenues to turn a profit. Leasing the use of weapons systems, rather than buying them outright, could reduce costs for governments while providing companies a steady stream of revenue, he said.

Britain has already scaled down its order for Airbus' A400M four-propeller military transport plane, which is expected to be a big draw in the daily flying display at Farnborough.

Airbus expects to start delivering A400Ms sometime after December 2012 -- around four years behind schedule and 50 percent over budget because of technical glitches. The original seven customer nations for the aircraft -- Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey -- agreed with Airbus' parent European Aeronautic Defence & Space Co. in March to spend an additional euro3.5 billion to save the project after months of bickering about who should pay for cost overruns.

Analysts will also be watching for developments in the bitter Boeing-Airbus battle to win a $35 billion contest to provide aerial tankers to the U.S. Air Force -- the World Trade Organization ruled earlier this month that European governments gave Airbus illegal subsidies for the project.

Associated Press Writers Andrew Khouri in London and George Tibbits in Seattle contributed to this report.