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Last Updated: Sunday, 12 June, 2005, 13:38 GMT 14:38 UK
Giant planes and contracts at Paris show
By Jorn Madslien
BBC News business reporter at the Paris Air Show

Airbus A380 and A318 during testing ahead of the Paris Air Show
The A380 is seen as a flagship both for Airbus and for Europe
The undisputed main attraction at this year's Paris Air Show will be the first flying display to include the largest civilian aircraft ever built.

The Airbus A380 flyover, around lunchtime on Monday, should do much to divert attention from the squabbles surrounding the aircraft's maker:

  • Deliveries of the A380 super-jumbo have been delayed by at least half a year and many of Airbus' customers are upset as a consequence.
  • A lengthy political tug-of-war between France and Germany, the main stakeholders in Airbus' parent EADS, has caused severe delays in announcing who will become the company's new chief executive.
  • A long-running trade row over state support for both Airbus and its US competitor Boeing has raised uncertainty about its future projects.

Despite all this, and although the order book for the A380 has yet to bring the project to a break-even point, Airbus is already considering it a success.

The aircraft maker, which is jointly owned by European aerospace giants EADS (80%) and BAE Systems (20%), is instead firmly focusing on its much smaller A350, a plane that is being designed to compete head-on with Boeing's new flagship - the 787 Dreamliner.

However, due to the transatlantic trade spat, the much anticipated go-ahead to start work on the aircraft is now no longer expected to be announced at Paris.

Airbus has conceded that it may not be announcing a hundred orders for the plane as had been previously hoped.

On a wider level, Airbus' problems are significant.

Some observers point out that whereas Airbus is struggling, Boeing is enjoying considerable success at the moment.

Unless Airbus gets its act together, they say, Boeing could well reclaim the top spot as the world's leading civil aircraft maker within months.

Americans return

Beyond the two giants' battle for market share in the civilian aircraft market, the defence industry is gearing up for combat as well.

This year the Americans are back in force, having stayed away from "Old Europe" when the last Paris show was held in 2003, soon after the war in Iraq.

"People above the rank of colonel are going to be there, unlike two years ago. It's going to be a lot more busy," says Bank of America Securities aerospace analyst Nick Fothergill.

Flanking the generals will be a slew of senior officials representing US defence behemoths like Lockheed Martin and Northrop Grumman.

In 2003, US defence firms deemed it important to show loyalty to their government at a time of serious political tension over the war in Iraq - with the US clashing hard with France and Germany over its legitimacy.

Shrewd move

Eyeing a sharp rise in demand for their wares, the US arms manufacturers were in no doubt that their loyalty would pay off.

Lockheed Martin helicopter
Aircraft and helicopter makers are getting ready to do deals

They were right. In 2003, military spending rose 6% worldwide - double the growth rate seen in 2002 - with the Pentagon accounting for three quarters of the rise, according to the Stockholm International Peace Research Institute (Sipri).

Last year, the growth rate remained strong at 6%, with global military expenditure rising to more than $1 trillion, a level not seen since the Cold War.

The US, with its "war on terror" in Afghanistan and Iraq, accounts for almost half the total, observes Sipri.

"The main explanation for the current level of and trend in world military spending is the spending on military operations abroad by the US, and to a lesser extent, by its coalition partners," the think-tank says.

Joint ventures

After more than two years on the outside, European arms manufacturers are now getting ready to do deals with their American competitors, with a view to recovering lost ground.

"There's a theme of US companies teaming with European companies on aircraft or helicopters and bringing them into the US market," observes Merrill Lynch aerospace analyst Byron Callan.

A recent corruption scandal in the US - which culminated in the cancellation of a $23.5bn US Air Force leasing deal for a Boeing 767-300 refuelling tanker - has left the door ajar for Europe's EADS to get in on the act.

EADS is hoping to link up with Northrop Grumman, with the two jointly providing a replacement for the cancelled order, thus breaking into a market formerly tightly controlled by Boeing.

Such a deal would be good news for the outgoing Airbus chief executive Noel Forgeard and his co-chief at EADS, Tom Enders.

The two men, Mr Enders in particular, hope to oversee a revival of EADS's defence operations.

The Paris Air Show is held at the Le Bourget airport on the outskirts of the French capital. Monday 13 June to Thursday 16 June are reserved for industry officials and journalists.

The show is open for the general public from Friday 17 to Sunday 19 June.


BBC NEWS: VIDEO AND AUDIO
See Airbus' super jumbo arrive at the Paris Air Show



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