WHAT'S HOT? –– ANALYSIS OF RECENT HAPPENINGS

44th PARIS AIR SHOW HAS USA WORRIED ––
A REPORT 

New Delhi, 23 June 2001 

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Mergers and acquisitions within Europe's aviation and defence companies have followed USA's pattern of consolidation. There is a sea change to be perceptively seen in the business arena. This phenomenon of "bigger is better, leaner, meaner and cheaper" is yet to affect India as India's economy is complex and large, but it is still isolated and protected by the Government especially in the aviation and defence sectors.

The merging of companies in Europe has contributed to a significant increase in the competitiveness of plane makers. Airbus and other major companies like engine makers Rolls Royce and Snecma in the Aviation sector, are now posing a serious threat to the American giants like Boeing, Lockheed, Northrop Grumman, GE and their traditional ancillary suppliers, who had already merged and remained market leaders. There is also a slowing down of the world economy. It is under these conditions and backdrop that the 44th Paris Air Show, the largest display of 1700 Aviation Exhibitors and the 242 civil and military aircraft parked on the tarmac, got underway at Le Bourget near Paris on 16th of June.

Farnborough in UK and Asian Aerospace in Singapore, which are considered Air Shows numbers two and three, in comparison seemed small. Germany has pitched for the Berlin Air Show next year and it is a money making business, if the nation can do it well and attract adequate exhibitors. France has perfected the art and GIFAS, the Group of Aerospace Industries put up a cohesive show. The Paris air show, the world's largest by far, will continue till 24th June and to ensure that the VIP visitors stay and Paris gains from the tourists also, President Jacques Chirac is scheduled to visit the show on 19th and Prime Minister Lionel Jospin will host a lunch on 23^rd. Naturally hotel space is at a premium.

The President is slated to make some important announcements, which would have the concurrence of his European partners. This ensures CEOs are present throughout the show and some keep flitting around Europe in their executive jets –– whose sale has risen phenomenally. Airbus has sold nineteen 25-seaters and both TWA and United have announced interest to build up a large fleet of Corporate jets –– they see companies sharing leased jets for the future, with costs coming down and the ability of large corporations to afford these costs. In a small way Indian corporate houses have also joined this trend along with Chief Ministers.

Already some 6 billion dollars worth of prospective and firm orders have been announced within the first three days and many more are expected, as Germany's Defence Minister Schparing was expected to arrive and offer support to some military programmes. As is customary at the Paris Air show, the first day was reserved for the world media and Press assembled at the show, but this time top professionals were invited also. CEO's and top executives freely mingled with media and offered interviews and set the scene for the days to follow with a leak here and there.

This time there was a sharp tone in the interview of Boeing's CEO Henry Stonecipher, who hinted that Airbus had contributed to the decision of the European Commision not to allow GE and Honeywell, the largest aircraft engine makers to merge. The 26 billion dollar deal has been called off and will have some effect on the structures and costs, which were being put in place in anticipation. This has upset even President Bush who just visited Europe to convince his allies on the NMD. The very articulate CEO of Airbus Noel Forgeard hit back in impeccable English with a strong French accent supported by his BAE systems and German Daimler Aerospace and Spanish DASA partners, saying that Airbus had supported the merger within the conditions stipulated and wondered why politics were being brought into business. Boeing and Airbus had agreed to compete fairly. However it is evident the cohesion in Europe is growing stronger. The joining up is definitely aimed at seeing that business remains on this side of the Atlantic if they can help it.

Forgeard revealed that as of today though Airbus had only 46% of the world's civil aircraft market, it was near 56% in economic content and waved the red rag to Boeing. Airbus is flush with 1660 aircraft on order and has pinned its hopes on their new four engined and economical A 380, which may put Boeing’s market leader 747 Series in serious re-thinking by airlines buying newer long haul jets. 

Airbus is delivering 330 aircraft per year and their crowing glory has come when France, Spain, Germany and UK have agreed to take 225 pieces of this Military turbo prop A 400M plane as their future military transporter. This will make Lockheed lose its prime place with its C130 series.

Most CEOs agreed there could be a soft landing in the world's economy which could slow down the rate of air travel which is growing at round 5% and at 8% in the East led by China, but felt it will affect the exercising of options as financing has improved. In fact China is the country being wooed most seriously as their need is for 1650 planes in the next ten years and Foregard had recently visited China personally and had told his staff nothing is to be taken for granted.

This was a direct hint at Boeing which when it was flush with orders took on more than it could deliver, leading to penalties in 1999. Boeing has recently restructured and moved its headquarters to Chicago to separate it from the manufacturing units mainly at Seattle, colloquially known as 'the Boeing town'.  Incidentally one learnt that the A 300 and 310 Airbus flown by IA and AI are obsolete and no longer being manufactured and hence the need for new fuel-efficient planes should be the call in India. Otherwise the experts at the show opine that fares will continue to rise. A conference on large Jets, Environment and Noise Abatement, which are also concerns for the developing world, was also being held.

From India Air Marshal Asthana, the Deputy Chief of Air Staff, headed the IAF contingent. Maj Gen Charanjit Singh, DG Army Aviation Corps and Shri Subir Datta were also there as were reps of HAL, IA and AI. They were consolidating the few on going orders and continuing the relationship between traditional major suppliers from France (Thales, Sagem, Snecma, Dassault, Sextant, Airbus, Dowty Messier and some others), UK (Rolls Royce, Martin Baker, BAE, Westlands etc.), Israel (Rafael and IAI) and the large contingent of Russia which includes the MIG, Sukhoi and missile makers Zvezda and the IL team from Ukraine.

The Air India and Indian Airlines disinvestments were being mentioned in disparaging terms at the Paris Air show with the words that the Government was either not interested in the disinvestments or was helpless, and in both cases there could be no firm new orders and the Airlines were resorting to leasing. That too has proved dubious in the past. HAL put up a small stall in hall No 4 with the LCA, ALH, Dornier, Lancer and HJT 36 proposed jet trainer models and a list of their achievements, which makes mundane viewing as it was a replica of what was on show at the Aero India 2001 at Bangalore. As HAL has nothing new to offer despite being a 1.5 billion dollar business as India's only major aircraft maker owned by the Government, it decided to skip the routine Press briefing. A change of Chairman is expcted in August with Mr. Mohanty taking over from Dr Chandradas Nair and that in India has repercussions on attitudes.

The Russians were at the Paris Air Show in large numbers and were drumming up support by displaying the SU 30 MK, the MIG AT with a combined push by the French, who have supplied the avionics and the engine and the range of their aircraft and wares including the KLUB missiles and the transport planes including the huge TU 225 the largest aircraft in the world, which is sight to see when it takes off or lands.  This aircraft's smaller brother the TU 124 has been chartered by the US to retrieve the EP3 Orion Intelligence plane that crash-landed in Hainan. Lockheed Martin is cutting it up for transportation.

The other major novelties in the corporate jets area were Gulf Stream buying over the Galaxy range of aircraft and so enhancing their range from 6 seaters to 100 seaters, while Dassault showed their latest Falcon and Embraer displayed their ERJ series the 135,140 and 145. The décor of some aircraft interiors could put many drawing rooms to shame and Warren Buffet too has predicted a rise in corporate travel.

It is understood that India is in the market for the last two years to buy seven 50-seater jets for the IAF VIP squadron based at Palam. But then the gestation period by India is well known to companies abroad, and they cite the 15 year period which has elapsed for the 66 AJT. It now seems the deal is on the back burner and Tehelka is being quoted here in Paris too! Lockheed Martin showed the new T50 jet trainer.

The scene on Unmanned Airborne Vehicles was most engrossing with IAI showing off the Searcher and Heron series ordered by the Indian Army, the Global Hawk built by Northrop Grumman and the offering from THALES.

The Paris Air Show is an absolute learning experience for professionals where buyers meet sellers under most congenial surroundings with 150 odd chalets serving gourmet dishes and vintage wines. Witnessing the flying displays by F16s, Rafael and SU 30 and the twenty other aircraft every day added to the treat and the Paris Air Show should be on the calendar of every aircraft buff even if it be once, to get the flavour and bouquet of the world's largest air show.

Earlier Report: Paris Air Show

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