Industry turbulence could result in mixed Dubai Airshow 2019

Airbus A350 aircraft
Dmitry Birin

On November 17, 2019, the Dubai World Centre’s doors will open to greet thousands upon thousands of aviation professionals to one of the biggest gatherings of the aviation industry, Dubai Airshow 2019. The last show, held in 2017, resulted in Airbus “making it fly” with 510 orders and commitments, while Boeing announced 296 commercial jet orders and commitments, valued at about $50 billion. Orders for the 737 MAX poured in, with SCAT Airlines from Kazakhstan signing a last-minute deal for eight MAXs.

While the Paris Air Show is usually reserved for various airlines to flex their muscles, Dubai airshow is reserved for the big boys from the Middle East to announce blockbuster deals, like in 2013, when over $200 billion was spent on aircraft orders from various airlines around the world, including huge sums from the Middle East big three airlines.

But in two years’ time, the industry has changed significantly. Blockbuster deals would be very surprising at the 16th iteration of the Airshow in Dubai. Yet at the same time, circumstances could prompt some airlines to commit to new airplanes.

Financial shakiness of aviation industry

Firstly, the financial situation at the big airlines in the Middle East, namely Emirates, Etihad and Qatar Airways, is shaky. The three carriers were always the main drivers behind the massive cash splashes in Dubai.

In 2013, for example, Emirates announced intention to purchase 150 Boeing 777X aircraft, with 50 more options. If the options are to be exercised, the deal is worth more than $75 billion at catalog prices. The same year, Etihad opened up its wallets and inked a contract with Boeing for 56 wide-bodies: 25 777X, one 777 freighter and 30 Boeing 787 Dreamliners. Finally, Qatar Airways also emptied its cash vaults and added 50 Boeing 777X jets to its pending orders.

2015 was a fairly quiet and uneventful Airshow for all parties involved, including the manufacturers. The only significant order through the five-day event was a deal for 75 Boeing 737 MAX aircraft by the now-bankrupt Jet Airways. After a record-breaking event in 2013, airlines needed a break to get back up on their feet.

Seemingly, the 2017 event was proof that only Emirates were back on their feet, as it ordered 40 Boeing 787 jets – an order that has seemingly disappeared from the airline’s reports. Etihad tried to significantly reduce its losses in 2017, which reached $1.95 billion in 2016, meaning the airline had no cash to spare on aircraft. Meanwhile, Qatar Airways had nowhere to place their feet – the diplomatic rift between Qatar and the rest of the Persian Gulf countries put the two sides in a conflict, resulting in Qatar Airways not attending the airshow. And unless something changes, Qatar flag carrier’s presence at the airshow is not a very likely possibility.

Nevertheless, Emirates had a friend on its shopping spree in 2017 – flydubai. The low-cost carrier signed a $27 billion deal at list prices with Boeing for 225 737 MAXs, making a historic narrow-body order from a Middle East carrier. Airbus, on the other hand, also broke a record, but not with a local airline. Instead, the manufacturer signed a Memorandum of Understanding (MoU) with Indigo Partners’ four portfolio airlines (Frontier Airlines, JetSMART, Volaris and Wizz Air) for 430 Airbus A320neo jets.

Etihad‘s financial situation has not yet improved – in 2018, the airline still ran at a loss of $1.28 billion. Describing Qatar Airways‘ financial situation could become a never-ending journey to a rabbit hole of what if‘s, as it is hard to say how healthy the carrier’s finances would be if not for the blockade. Nevertheless, the blockade, which has resulted in a frugal $639 million loss in FY2019, also makes it fairly difficult to free up cash to order new aircraft. At last, Emirates, while it reduced its costs significantly, including scaling down its capacity, the airline is still in recovery mode – in H1 FY2019, it posted a net profit of $235 million (AED862 million).

In addition, Emirates President Tim Clark has expressed his frustrations with aircraft manufacturers and the reliability of new aircraft. On September 4, 2019, he stated that the poor reliability of new aircraft does irritate him.

“We are not in a business to deal with aircraft that don’t function properly.”

The aforementioned flydubai is, unfortunately, struggling due to the same record-breaking order. On September 30, 2019, the low-cost carrier issued its H1 2019 results, reporting a $53.6 million (AED196.7 million) loss. Chief Executive Officer of flydubai, Ghaith Al Ghaith stated that while the airline was cautiously optimistic about its 2019 results at the end of 2018, its performance “was significantly impacted by the grounding of the Boeing 737 MAX.”

Another low-cost carrier, flyadeal, based in Saudi Arabia, dropped its 737 MAX order in favor of sticking with the A320 family in July 2019. Just recently, it leased three A320s from Vueling. The carrier is looking to expand and with the 30 ordered jets coming only in 2021, this provided an option to do it quickly. 

Yet there are some airlines that might splash some cash during a time when wide-body demand is dwindling and narrow-body aircraft are not delivered  based on schedules in their contracts – while the Renton factory has to find a place to store the MAX, the plant in Hamburg is missing deadlines to deliver A320 family aircraft on time.

Potential buyers list

On October 16, 2019, Air Arabia announced that it is partnering with Etihad to create Abu Dhabi’s first low-cost carrier, Air Arabia Abu Dhabi. Previously, reports indicated that Air Arabia is eyeing an order with either Airbus or Boeing for more than 100 aircraft, due to be revealed before January 2020. A large portion of the new aircraft would go to the aforementioned Abu Dhabi venture, with the latest report by Reuters indicating that Airbus is the frontrunner to win the deal from Air Arabia that would possibly be announced during the Dubai Airshow.

Another carrier from the Middle East, Saudi Arabian Airlines, is also possibly looking to refresh its fleet, especially in the wide-body department. On March 15, 2019, the Chief Executive Officer of the airline told Air Transport World that he is mulling with the idea of ordering new wide-body aircraft: Boeing 787 or Airbus A350. Later reports indicated that Saudi Arabian Airlines were close to materializing the order, including wide-bodies from Airbus, yet nothing came to fruition.

Ben Smith, the CEO at Air France-KLM also seemingly shares this opinion. During Investor Day 2019 on November 5, 2019, Smith noted that “this is a good time to buy long-haul airplanes” as prices are down. The French airline is hoping to get “opportunistic prices” for the aircraft they would select to replace the A380, he said, adding that a decision was due in the coming weeks, possibly coinciding with Dubai Airshow.

On November 12, 2019, Finnair held Capital Markets Day, where the Finnish airline announced its strategy over the next few years, with the goal to showcase sustainable and profitable growth. Over the next six years, it also plans to invest heavily in its fleet with an aim to operate 100 aircraft by 2025, including the replacement of older jets. However, no definitive announcement on the potential planes was expressed during the event, ruling Finnair as a potential buyer during the next week. At the same time, Finnair never secured a deal in Dubai show or had a huge presence, for that matter, thus a contract for new aircraft would be surprising.

For aircraft manufacturers, the experience at the Dubai Airshow will definitely be very different. Airbus proudly announced that the European company will showcase “Future of Flight” at the event, bringing its “wide range of innovative technologies, products and services from market-leading commercial and military aircraft to helicopters and space systems.” Meanwhile, amidst the 737 MAX crisis, Boeing will focus on “Safety, Innovation and Partnerships” at the Airshow, the company announced on November 11, 2019.

However, Airbus has its fair share of its own issues with the Airbus A400M. On November 19, 2019, the company will hold a briefing regarding the aircraft.


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