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Farnborough International Airshow opens on London outskirts

The world's largest air show opened Monday with aerospace executives upbeat about the future of the industry despite the likelihood of far fewer orders for new planes thanks to high fuel prices and the credit crisis.

The Farnborough International Airshow on the outskirts of London is traditionally - along with its sister show in Le Bourget in France on alternate years - the scene of a flurry of high profile orders for U.S-based Boeing Co. and its European rival Airbus.

In an early, anticipated announcement, the recently launched low-cost airline FlyDubai announced an order for 50 Next-Generation 737-800s. Worth around US$3.74 billion at current list prices, FlyDubai has substitution rights to convert its 737-800 orders to 737-900ERs in the future.

Oher possible buyers include fellow Middle Eastern carriers Etihad Airways and Qatar Airways, All Nippon Airways Co., British Airways and Los Angeles-based International Lease Finance Corp., the world's biggest aircraft lessor.

But deals at this year's event, to be attended by more than 300,000 people, are expected to be thin compared with the Paris show last year, where 506 orders were taken between Airbus and Boeing. Credit Suisse said it expects around 200-300 orders to be announced at Farnborough.

Potential cancellations and delays have so far generated as much talk around the air show as possible orders to purchase.

Plane makers have been quick to strike a reassuring stance, suggesting the difficult economic outlook could in fact prompt more efficiency in the industry and with the introduction of cleaner planes.

"Is it over? No, I don't think so," said Scott Carson, president and CEO of Boeing's Seattle-based commercial airplanes unit.

"I think the opportunities that are presented by the crisis we find ourselves in will drive manufacturers to produce products that allow our customers to be more efficient and be profitable," he added in a briefing at the opening of the weeklong show.

Carson said that Boeing had not received any cancellations.

"We have experienced a handful of delays from customers, but each of the delays has been more than offset by increased demand from customers for one product earlier to help them deal with the high fuel price," he said.

Escalating energy costs have eaten into airline profits, and 25 carriers have ceased operations in the past six months. The International Air Transport Association is forecasting industrywide losses of US$2.3 billion (EUR 1.45 billion) this year.

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 air transport association said.

Airbus CEO Thomas Enders said Saturday that the European planemaker had no plans to revise its production schedule, although it is monitoring the situation daily.

Louis Gallois, CEO of Airbus parent EADS, said Saturday there was no reason to panic because passenger air traffic is holding up despite the economic slowdown.

"We are not in the situation of 2001," he said. "We have issues concerning the airlines, but not the traffic."

Airbus and Boeing face another challenge from Canadian planemaker Bombardier Inc., which is seeking to compete with the narrow-body Airbus A320 and Boeing 737 with its C-series aircraft family, launched Sunday. The new plane is designed to carry 110-145 passengers. Bombardier's largest plane now flying, the CRJ-900, has a maximum of 88 seats.

Carson said the high fuel price "will mean a small upgauging in the size of our smallest airplanes as customers look for the economics associated with some additional seats."

"We certainly haven't ruled out participating in the smaller airplane market but we have not seen over the past decade that market being one that is terribly attractive to us," he added.

Almost 1,500 exhibitors from 35 countries are expected to show off the latest in aviation technology at Farnborough - including a flypast of the Lockheed Martin F-22 fighter jet Monday.

The air show runs July 14-18 for aerospace professionals only; public days are July 19-20.