Airports in a storm

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Last week, Etihad announced a record $14bn engine deal with partners including Rolls Royce and GE Aviation; Etihad CEO James Hogan.

Misery reigned at this year's Paris Airshow, with industry figures sporting faces longer than an A380's wingspan. But Middle East carriers are leading the charge towards a brighter future, unveiling a string of multibillion-dollar deals.

orrential rain hammers down relentlessly from the gloomy, unforgiving skies over Paris, sending people scurrying for cover at Le Bourget. And the atmosphere is as miserable as the weather at this year's Paris Air Show, with aviation's biggest figures, clad in immaculate designer suits and stylish shoes, sloping sullenly through the puddles between the glitzy chalets and huge exhibition halls.

The sombre mood is hardly surprising given the chronic state that most airlines are in. With the financial crisis hitting passenger demand, carriers across the globe are desperately trying to fill seats on their respective routes; an aim made all the more difficult for A330 operators in the wake of the Air France disaster on May 31.

The aircraft, carrying some 228 passengers from Brazil to France, crashed into the Atlantic Ocean for reasons unknown, with no survivors from its 228 passengers. Among the potential causes, experts and analysts initially suggested thunderstorms as a possible catalyst. In the weeks since, a technical fault with the plane's air speed sensors has been proposed.

Throw last year's crippling oil price into the mix, which peaked at $147 a barrel but is now hovering around $70, and you have a sector that is struggling to stay airborne, a trend borne out by Boeing and Airbus' poor order books.

The US and European manufacturers openly admitted that their objective at this year's air show in Paris was damage limitation. The companies have suffered setbacks in 2009 after receiving cancellations from newly cash conscious carriers.

Other airlines, meanwhile, have or are considering delaying aircraft deliveries in a bid to better weather the economic storm.

By May 31, Boeing had secured orders for 73 planes and faced 66 cancellations, giving it seven net orders. Airbus just pipped its US rival during the same period, with 32 orders and 21 cancellations, giving it a net inflow of bookings for 11 planes.

In 2008, Airbus had 777 net orders to Boeing's 662, a far cry from this year's expected final tallies based on the dismal first half figures. In response to the declining demand, both firms have cut production and may trim further if market conditions continue to decline.

With airlines reneging on aircraft orders or delaying deliveries, it is no surprise to see the International Air Transport Association (IATA) predicting greater financial deficits for the industry.

Indeed, IATA's figures suggest global airlines will register a $4.7bn loss in 2009 as passenger demand continues to wane. The Middle East is no exception, with a $1.5bn shortfall expected this year, a drastic increase from the $900m projection that IATA originally issued in early 2009.

But despite IATA's downbeat outlook, spirits remain high among the Middle East airlines represented in Paris. While carriers from other regions were content to simply turn up and parade themselves at the world's biggest air show, their Gulf counterparts fired on all cylinders with a series of multibillion-dollar deals.

Etihad Airways stole the headlines after announcing a $14bn engine agreement with partners including Rolls Royce and GE Aviation.

The carrier has 100 firm orders, and options and purchase rights for a further 105 engines, with deliveries expected between 2011 and 2020. This deal follows last year's aircraft announcement, which saw Etihad agreeing to buy 100 aircraft and take options and purchase rights for a further 105.

When announcing the deal on June 17, Etihad Airways chief executive officer James Hogan talked about the airline's bold ambitions during testing times. "Despite the tough economic challenges currently facing the aviation industry, Etihad Airways continues to roll out its long-term expansion plans in a measured, considered and controlled manner," he said.

"The new aircraft, and engines that will power them, are scheduled for delivery between 2011 and 2020 which demonstrates the confidence we have in our plans for sustainable future growth. These plans will establish Etihad Airways as the world's leading airline and our hub of Abu Dhabi as a leading global centre of commerce and tourism."

Hogan continued: "We are operating in a very challenging environment at the moment but we have absolute confidence in our future, intrinsically linked to the exciting and ongoing development of Abu Dhabi, as well our engine and aircraft manufacturing partners."

While the Abu Dhabi carrier takes credit for sealing the event's biggest deal, other Middle East carriers and aviation companies were equally keen to publicise their own transactions. Perhaps to steal a march on its UAE rival, Qatar Airways revealed the previous day it had signed a "major" aircraft order with Airbus.

Qatar Airways chief executive officer Akbar Al Baker told journalists that the Doha carrier had ordered 24 Airbus A320s and $700m worth of engines to power them.

He also hinted the new planes could be used to launch a new low-cost carrier designed to compete with budget airlines that are stealing market share from Qatar's flagship operator.

Whether Al Baker follows through and establishes a low-cost airline remains to be seen, but he insists the order is further evidence of Qatar Airways' firm footing in the Middle East aviation industry.

In typically bullish fashion, he added: "Qatar Airways is determined to grow with the world's best aircraft at the heart of a modern and fuel-efficient fleet, and this A320 family order will ensure that our narrow-body fleet is the youngest and best equipped in the region.

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