By Bill Ostrove, Space Systems and Military Markets Analyst, and Raymond Jaworowski, Senior Aerospace Analyst, Forecast International.
As the Farnborough International Air Show 2016 kicks off, an exciting week is expected. Boeing will celebrate its 100th anniversary, even as the aerospace giant battles its rival for dominance in the commercial airline market. As is typical at Farnborough, a number of much anticipated aircraft debuts will occur, including that of the F-35B, KC-390, and Boeing 737 MAX. Hanging over this year’s show will be questions about Brexit, which has left businesses to deal with increased uncertainty.
Boeing’s 100th Anniversary
William Boeing founded the multinational aerospace and defense firm on July 15, 1916, which means that Boeing’s 100th anniversary will fall during the air show. Boeing has acquired a number of competing aerospace firms over the years, including Rockwell’s aerospace business (originally North American Aviation) and McDonnell Douglas. Boeing will display aircraft important to its history, including a B-17 bomber and a P-51 Mustang (which is now connected to Boeing through Rockwell), along with newer aircraft like the 737 MAX.[i]
As Boeing celebrates its 100th anniversary, the aerospace giant is battling its major rival, Airbus, for dominance in the commercial airline market. Compared to the Farnborough and Paris air shows of recent years, commercial aircraft orders may be down somewhat at this year’s Farnborough show. The persistence of relatively low oil prices hurts the business case for an airline to buy new, fuel-efficient aircraft, and incentivizes carriers to keep older and thirstier aircraft in service longer than they otherwise might.
Still, there are reasons to be optimistic about the commercial airline industry. Production backlogs remain high. Airbus’ A320neo family has been particularly successful in recent years, with over 4,500 of the type in the company’s backlog.[ii]
In addition, deals in the areas of component supply, aftermarket services, etc., could result from the show. Even if business is down for the big OEMs, suppliers could have a successful show. And, even if sales are not firmed up or announced at the show, companies can still make initial contacts that may lead to firm orders down the road, or make progress furthering deals that are already in the works.
Another major factor casting a shadow on the show is the recent U.K. vote to leave the European Union. At this point it’s difficult to determine exactly how Brexit will affect the aerospace and defense sector. One tangible outcome, at least over the short term, will be the reduced value of the pound sterling. Since many U.K. defense programs, such as the F-35 and P-8, are paid for in dollars, reducing the value of the pound will lower London’s spending power.[iii]
The more prominent role that Brexit will play at Farnborough will be casting uncertainty on the future of aerospace and defense programs in Europe generally and the U.K. specifically. The U.K. will need to form a new government and then negotiate its relationship with the remaining EU countries. The wide range of outcomes for these events creates uncertainty that businesses will need to deal with while negotiating deals.
Even with uncertainties over Brexit surrounding the show, Farnborough continues to be one of the premier air shows in the world. This year’s show will feature many aircraft debuts:
Lockheed Martin F-35. The Lockheed Martin F-35 Lightning II will make its inaugural appearance, marking the first time the U.S. Marine Corps’ short takeoff and vertical landing (STOVL) F-35B variant will be seen at a major international air show. The U.K. has also ordered the F-35B variant. The F-35 was supposed to debut at the 2014 show, but an engine fire grounded the aircraft on the eve of the event.[iv]
Embraer KC-390. One of two test models of the Brazilian Embraer KC-390 transport aircraft will make it to Farnborough. While the program has suffered from delays, strong progress has recently been made. The latest achievement is a successful paratrooper jump test. The trip to Europe will allow Embraer to demonstrate the aircraft to European countries that have signed letters of intent (but no official contracts) to purchase the aircraft, particularly Portugal and the Czech Republic.[v]
Embraer Legacy 500. Along with the military KC-390, Embraer will debut its Legacy 500 business jet at the show. Embraer wants to improve sales of the jet in Europe a year after the aircraft received European validation.[vi]
Boeing 737 MAX. Boeing’s new 737 MAX jet, powered by two CFM International LEAP-1B engines, will make its first air show appearance. The first flight of the first 737 MAX 8 aircraft took place in January, and the fourth flying test aircraft will be present at the show. Certification of the aircraft type is expected for the second quarter of 2017, with delivery starting in July of that year.[vii]
Embraer E190-E2. Having completed its maiden flight in May, Embraer will likely send its new E190-E2 to the show. Embraer will also set up an E2 cabin mock-up in its pavilion.[viii] The E190-E2 will enter commercial service in 2018, offering more range than the current-generation E190.
Airbus A320neo. Although the A320neo made its debut last month at the ILA show in Berlin, it is worth mentioning. The A320neo is Airbus’ new-generation single-aisle aircraft. Offered in a number of variants to meet airlines’ needs, the new aircraft will feature improved fuel efficiency. Having received certification from the European Aviation Safety Agency (EASA) and Federal Aviation Administration (FAA) with the CFM International LEAP-1A engine, initial deliveries are expected later this year.
Armed Sikorsky S-70i Black Hawk. Although Sikorsky’s S-70i debuted at Poland’s Anakonda military exercise in June, Farnborough will be the first air show appearance for the new armed Black Hawk. When United Technologies owned Sikorsky, the company was prevented from arming Black Hawks itself. Now, as part of Lockheed Martin, Sikorsky will integrate production and arms outfitting internally, with Sikorsky’s PZL Mielec subsidiary in Poland producing the S-70i.[ix]
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