Airbus and Rolls-Royce fly high at Dubai Air Show, analysts cautious

The Airbus hitches held up the entry into service of the A380 superjumbo by about two years and left the A350 trailing in the battle for the mid-sized jet market against arch-rival Boeing Co and its 787 Dreamliner.

"This air show has confirmed Airbus is very much back on the market with the right products," said Airbus chief operating officer for customers, John Leahy.

Analyst Howard Wheeldon of BGC Partners said Airbus management "have the right to be fairly chipper" after the group's upbeat performance at the show.

He noted that Airbus may have secured the orders by offering discounts of between one third and one half of list prices, although he said it was an industry practice and nothing particularly new.

"That's fair enough, provided shareholders can see a decent profit being achieved," Wheeldon said.

"But in the case of Airbus through its EADS parent and given the many problems it still has left to resolve, the probability is they won't be seeing a decent real profit for many years."

The financially troubled A380 programme should be seen as a "bridge" to the potentially more profitable A350 programme," Richard Aboulafia, vice president analysis at Teal Group said. "They need to keep their heads above water, and keep getting product out of the door until the A350 comes to market."

The trend among Middle Eastern carriers for larger aircraft is good news for Airbus's A380 and A350 product offerings, Aboulafia said.

"Boeing won the battle of the 250 seater market, but Airbus seems to be counterattacking in the 300-350 seater market," Aboulafia said.

While Airbus is on track to beat its record of 1,111 orders achieved in 2005, analysts are concerned about the momentum of its Power 8 restructuring plan.

"Power8 is very concerning," said Aboulafia. "To give Airbus the benefit of the doubt, orders like these should inspire confidence with investors and industrial partners. But the problems may be with politicians and unions."

Aboulafia added the lack of guidance on the Power8 timetable in particular is worrying.

"The problem for Airbus isn't only a lack of progress on Power 8 restructuring plans or how Airbus should fund future development programmes," Wheeldon said.

"It is also about how to combat the nasty problem that commercial aircraft sales are traditionally priced in dollars."

Boeing secured orders and options for 177 of its civil jets during the show, including 53 firm orders and options for the 787, giving the Chicago-based group a total to date of around 760 firm Dreamliner orders.

A Boeing spokesman said: "The 787 is the fastest-selling jetliner of all time and these latest orders are all further good news."

Airbus, part of European aerospace giant EADS, benefited from some much-needed positive headlines when it finally delivered its first A380 to Singapore Airlines last month.

But the record orders the manufacturer announced in Dubai were more significant, with commitments from across the Middle East swelling its order book.

The Toulouse-based company enjoyed an order bonanza at the show, booking 163 firm aircraft orders, worth a total of more than USD28 billion at catalogue prices, including its largest-ever firm order in dollar terms - for 70 A350s and 11 A380s from Emirates. It also notched up 132 commitments from three customers.

Airbus's newest programme -- the A350 extra-wide body jet -- fared particularly well, racking up 70 firm orders from Emirates and 10 from Yemenia.

The 270-350 seater, long-range mid-sized A350 is not due to enter service until 2013 after a poor market reaction to the initial design prompted a revamp to incorporate more composite technology.

The latest round of orders prompted Airbus sales chief John Leahy to increase his sales forecast for the programme to "more than 300" by the end of the year. The A350 order book currently stands at 276.

A 30-aircraft commitment from newcomer Dubai Aerospace Enterprise (DAE) for its leasing arm, DAE Capital and a memorandum of understanding (MoU) for the A350's VIP version from Hong Kong's C Jet, completed the picture.

DAE, formed in 2006, signed a memorandum of understanding for a total of 100 Airbus aircraft, including the A320 family aircraft at the show. And Airbus enjoyed interest from other customers in its more established products.

Prince Al Waleed Bin Talal of Saudi Arabia made headlines when he placed the first order for the double-decker A380 as a private jet, dubbed the "flying palace". The only A380 operating so far, with Singapore Airlines, seats 471 passengers.

"The orders represent a lot of capacity for this region - they are way out of line with Airbus and Boeing's 20-year outlooks for the region," said Aboulafia, adding "the irony is that after years of mismanagement an aircraft manufacturer is being saved by high oil prices."

Meanwhile, Rolls agreed multi-million pound deals to supply its Trent XWB engines to Middle Eastern carriers who signed up for the A350 XWB.

The Trent XWB is currently the only engine available for the 270-350 seater A350 family.

Rolls benefited from the Emirates A350 order, being asked to supply Trent XWBs to power up to 120 A350s -- 70 firm and 50 options -- in a deal potentially worth some USD8.4 billion if all options are exercised.

DAE made a 1.2 billion order for Trent XWBs to power its new fleet of 30 A350 XWBs, while Yemenia Yemen Airways confirmed an order, thought to be worth around 400 mln, for engines to power 10 A350 XWBs at the show.

Rolls also got a boost from the single A380 jet order from Prince Al Waleed, with an order for its Trent 900.

The UK firm, whose main civil engine plants are in Derby in the Midlands, also sealed deals for its Totalcare engine support service, which provides lifetime support for its engines.

Rolls said its success at Dubai underlined the importance of the Middle East to its business.

"The Middle East is an important region for all R-R business sectors, but the Dubai show has really focused attention on the contribution that the Trent engine family is making to Middle East growth," a Rolls spokesman said.

The five-day Dubai show, which officially ends today, hosted 850 exhibitors from 50 countries, with more than 140 aircraft on display.

It celebrated its best ever year, with orders for new aircraft topping 67 billion USD and the growth in the region showing no sign of abating.

GE Aviation and two affiliated ventures received aircraft engine orders totaling some 3.3 billion USD at list prices during the show.

At the show, Saudi Arabia's National Air Services (NAS) said it intends to add 120 new aircraft to its fleet over the next five years, while Bahrain's Gulf Air is set to totally replace its existing fleet with the purchase of 35 new aircraft within weeks.