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Last Updated: Monday, 19 July, 2004, 16:32 GMT 17:32 UK
Military machines swoop on Farnborough
By Jorn Madslien
BBC News Online business reporter at the Farnborough Air Show

AgustaWestland's Richard Case shows off helicopters to Admiral Sir Alan West, First Sea Lord.
Big business mingles with top brass at the airshow
Military hardware makers are taking centre stage as the aerospace industry gathers at the world's largest air show in Farnborough this week.

After a low profile at last year's Paris show - thanks in part to the absence of Americans following the stand-off between France and the US over Iraq - makers of fighter jets, attack helicopters and missiles are back with a vengeance.

This year, the Pentagon returns with several high-level delegations that include a dozen generals and admirals, reinforcing the view that the US plans to continue spending big on arms.

John Douglass, chief executive of the Aerospace Industries Association, told trade magazine Aviation Week that there is pent-up demand from the reduced US participation at Paris 2003.

As a customer, the Pentagon is in a much better state than a civil aviation industry which is still burdened both by high crude oil prices and by the effects of the Iraqi war and the Sars virus on air travel.

Here to woo the US top brass are F-16 fighter jet maker Lockheed Martin, which has seen sales of its range of military aircraft soar in recent months, AgustaWestland, which is showing off its latest range of fighting helicopters, and Aermacchi, whose M-346 futuristic jet prototype will take part in an air display.

Military procurement officials also get to see what to expect from future warfare. Both Boeing and Northrop Grumman are showing off prototype models of unmanned fighter planes.

Their hope is to secure orders for their wares from equipment hungry armies, navies and air forces.

Reduced spending

But as the top military brass rubs shoulders with manufacturers, it becomes apparent that the desire by senior officers to better kit out their forces may not always be matched by their spending power.

In the UK, visitors to Farnborough are about to witness cuts in the defence budget on Wednesdsay after the UK Chancellor of the Exchequer Gordon Brown recently set out plans to rein in government spending.

Group of Eurofighter planes
The Eurofighter's troubles are persisting

Central to the Ministry of Defence's (MoD) ambitions is the Eurofighter project which has suffered from both severe cost overruns and delays.

The second tranche of Eurofighter - a joint fighter jet project between the UK, Germany, Italy and Spain - is being held up as the UK is dragging its feet over a contract for more than 230 Eurofighters.

The British had been expected to sign the so-called Tranche Two contract at the Farnborough show, thus enabling the project to move forward, but this now seems unlikely.

Industry observers say a spat between the MoD and Europe's biggest defence contractor, BAE Systems, is at the heart of the delay which is expected to push the project's costs sharply higher.

But Lord Bach, Minister for Defence Procurement, rejected that relations between the Mod and BAE Systems are strained.

"Of course, there are bound to be tensions between an important contractor and their most important customer," he acknowledged in an interview with BBC World Business Report.

But in fact, "relations are good and we work very good together on very important projects for the armed forces", he added.

Scaled down

Along with the fresh doubts about the Eurofighter project, concerns are also emerging about the Farnborough show's future.

According to Aviation Week Farnborough's director, Trevor Sidebottom, believes the next show - due to be held in 2006 - could well be slimmed down.

There is talk, even among manufacturers, of cancelling the public days, having fewer trading days, moving the show away from Farnborough, and even changing the timing of the show to September.

Red arrows air display team
Exciting or past its sell-by date?

"The market is saturated," said John Douglass of the Aerospace Industries Association. "We're cutting back on these shows, reducing our presence across the board."

The air show format, it seems, is quickly becoming obsolete as a forum for deal making, in part thanks to rapid consolidation and the urgency of cost cutting by companies in the aerospace industry.

As such the rise in exhibitor numbers - to 1,360 this year from 1,240 in 2002 - belies the state of affairs at Farnborough.

Even the 150,000 trade visitors who are expected to visit the show this week do little to alleviate fears that the Farnborough show is increasingly seen as irrelevant by some of its traditional backers.

"The manufacturers would like to see a less frequent schedule," said Mr Douglass.

"The expense has got to be more affordable or the show phenomenon is going to erode more quickly."

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