Airbus launches new A321 jet, Boeing apologises for MAX crisis

Safety concerns, trade wars and growing security tensions in the Gulf are dampening spirits at the world's largest plane makers as they arrive at this week's Paris airshow with little to celebrate despite bulging order books.

The aerospace industry's marquee event gives businesses a chance to take the pulse of the $150-billion-a-year commercial aircraft industry, which many analysts believe is entering a slowdown due to global pressures from trade tensions to flagging economies, highlighted by a profit warning from Lufthansa late on Sunday.

Airbus launched a long-range version of its A321neo jet at the airshow, aiming to carve out new routes for airlines with smaller planes and steal a march on rival Boeing's plans for a possible new mid-market jet.

"We can fly from north-eastern Asia into south Asia, from the Middle East to Bali or from Japan deep into Australia, and so on," said Airbus chief salesman Christian Scherer.

Leasing company Air Lease Corp became the first customer of the new aircraft, taking 27 as part of a deal for 100 Airbus planes. Sources familiar with the matter said JetBlue Airways Corp would also buy some of the new jets.

Airbus and Boeing are also grappling with their own problems. The US planemaker is striving to bring its top-selling 737 MAX jet back into service after its grounding following two fatal crashes. 

Boeing executives took turns to apologise for the loss of life in the crashes and pledged to apply the lessons learned to future planes following criticism of its response to the disasters in Indonesia and Ethiopia that killed 346 people.

"This is the most trying of times," Boeing commercial airplanes boss Kevin McAllister told a press briefing.

"This is a defining moment for Boeing. It's given us pause. We are very reflective and we're going to learn," CEO Dennis Muilenburg said on Sunday.

The grounding of the latest version of the world's most-sold jet over safety concerns has rattled suppliers and fazed rival Airbus, which is avoiding the traditional baiting of Boeing while remaining distracted by its own corruption probe.

'Net orders might be lowest in years'

Aerospace executives on both sides of the Atlantic are concerned about the impact of the crisis on public confidence in air travel and the risk of a backlash that could drive a wedge between regulators and undermine the plane certification system.

Airlines that rushed to buy the fuel-efficient MAX are taking a hit to profits since having to cancel thousands of flights following the worldwide grounding in March.

Even the launch of a new longer-range version of the successful A320neo jet family from Airbus is unlikely to dispel the industry's uncertainty, analysts said.

The plane maker is hoping to launch the plane with up to 200 orders with the support of at least one major US buyer, such as American Airlines, but faces a last-minute scramble to win deals.

"Boeing's MAX crisis isn't the most ominous dark cloud since it can be solved, but traffic numbers are genuinely scary," said Teal Group aerospace analyst Richard Aboulafia.

"If March and April are a sign of things to come, we're looking at broader industry demand and capacity problems."

"Net orders might be the lowest in years," Aboulafia said.

Others dismiss fears of a downturn, citing the growth of the middle class in Asia and the need for airlines to buy new planes to meet environmental targets.

"The only solution that the industry has is the newest most fuel-efficient aircraft," said John Plueger, CEO of Air Lease Corp.
"So that replacement cycle is going to continue."

"We're talking to so many airlines who still want more aircraft, and there's really been no lessening of those discussions," he said.

Boeing is delaying decisions on the launch of a possible new aircraft, the mid-sized NMA, to give full attention to the 737 MAX and last-minute engine trouble on the forthcoming 777X, industry sources said.

But it could unveil a number of deals favouring widebody jets where it has the upper hand against Airbus, including at least a dozen 787 aircraft for Korean Air Lines and some demand for 777 freighters.
Airbus is, meanwhile, set to confirm an order for A330neo jets from Virgin Atlantic.

"We'll have some orders flow. We anticipate some widebody orders that you'll be hearing about through the week. But that's not our focus for the show," Muilenburg said.

Although slowing, a multi-year boom in airline orders is still trickling down to suppliers such as engine makers. French-American CFM International is set to announce a record order by units for over 600 engines from India's IndiGo.

The show, taking place between June 17 and 23, is not only about jetliner deals, but also a magnet for many of the world's arms buyers who come to preview the latest military equipment, from anti-aircraft missiles to hotly sought cyber war-fighting capabilities.

French President Emmanuel Macron will open the show by unveiling a mock-up of a proposed new fighter as France and Germany sign a deal for its development.

Industry insiders will also weigh the merits and potential fallout of United Technologies Corp's planned $121 billion tie-up with defence contractor Raytheon Co.

The deal would potentially upend the aerospace sector, creating a conglomerate spanning commercial aviation and defence and putting pressure on major suppliers such as Honeywell and General Electric.

Gulf tensions

Air show delegates are also watching a face-off between the US and Iran in the Gulf, with the former blaming the latter for attacks on two oil tankers, which has raised fears of broader confrontation in the region.

In another political row with implications for arms firms attending the show, the US has threatened to cancel Turkey's participation in the Lockheed F-35 fighter jet program over Ankara's purchase of a Russian radar system.

Watching the show attentively is China, whose own aerospace ambitions are growing at a time when US-China trade tensions are rising ahead of a possible meeting between US President Donald Trump and Chinese President Xi Jinping this month.