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Airbus Says Mideast Unrest May Wipe Out 40% of Orders There


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By Tamara Walid - Apr 11, 2011 2:08 PM GMT-0300


Airbus SAS, the biggest commercial planemaker, said unrest in the Middle East and North Africa could cost it as many as 60 orders in 2011, or 40 percent of the total expected from the world’s fastest-growing aviation market.


Airlines including EgyptAir, Africa’s second-biggest carrier, had indicated a need for aircraft but are now unlikely to sign contracts, according to Habib Fekih, Toulouse, France- based Airbus’s president for the Middle East region.


“I believe we can get close to 90 or 100 orders,” Fekih said in an interview in Dubai. “Before the unrest I would have said 150, easily. The potential was there at the beginning of this year in some countries where there is unrest today.”


Airbus, which has become increasingly reliant on Arab carriers to swell its backlog, might also need to review a “limited number” of deliveries as protests for a change of government and better living standards spread from Tunisia and Egypt to Yemen, Syria, Bahrain and Libya, Fekih said yesterday.


The Middle East accounts for about one-quarter of Airbus’s order backlog by value, worth $492 billion at list prices. A decade earlier, it barely registered on the company’s books.


Fekih predicts that the political turmoil will lead to sales being delayed rather than lost completely.


‘Huge Potential’

“This unrest will have a limited effect but will not impact growth in the long run,” the executive said. “Of course I’m concerned, and it will have consequences, geopolitical and economic, but whatever happens the traffic will not disappear. The region has such huge potential for development and growth.”


Demand from the Middle East is still higher than in Europe and Asia, even though “nothing so dramatic happened” in those regions, he said.


Once Egypt in particular stabilizes, the flow of travelers to one of the world’s most popular tourist destinations will resume, spurring demand for planes, Fekih said.


Orders from the region this year are likely to be led by the more stable economies of the Gulf, Fekih said, where Emirates, Etihad and Qatar Airways are establishing inter- continental travel hubs to squeeze out European and U.S. rivals.


Middle Eastern demand for the A380 superjumbo will be more subdued than previously, said Fekih, who began his career at Tunisian carrier Tunisair in 1976 and joined the European planemaker in 1986, with fewer than 10 orders likely.


Qatar, Saudi Air

Qatar Air has an expression of interest to add more A380s to the five on order, with the sheikdom’s selection to host the 2022 soccer World Cup expected to spur sales, the executive said. Saudi Arabian Airlines -- the third-biggest Middle Eastern carrier based on 2009 traffic and one of the busiest in the world during the hajj pilgrimage -- could be another superjumbo customer, depending on the outcome of a fleet review, he said.


Emirates, the superjumbo’s biggest customer with 90 planes on order, could add more if it succeeds in sourcing takeoff and landing slots at target airports, Fekih said. For the Dubai- based carrier and other Gulf operators the model is being increasingly viewed as “the backbone of the fleet,” he said.


EgyptAir is also a potential A380 customer in the longer term as the Cairo-based company will need “the same weapon” to compete with regional peers, Fekih said.


Neo Talks

Airbus has also started negotiations with four or five customers for “a few tens” of its A320neo model, the re- engined version of the European planemaker’s single-aisle series, Fekih said, adding that he hopes to make at least one sale this year.


Airbus, a unit of European Aeronautic, Defence & Space Co., said this month that it will bring forward service entry for the neo by almost six months to October 2015, and the model is “attracting a lot of attention,” Fekih said.


“Many countries in the region are using A320s already in their fleets so the next step would be the A320neo,” he said.


Successive delays to Boeing Co. (BA)’s 787 Dreamliner, which is scheduled for delivery from the third quarter, are aiding sales of Airbus’s existing A330 model as airlines seek to fill a gap.


“Many customers are buying A330s despite buying the 787s,” he said. “It means the A330 is still an attractive option.”


Saudi Arabian Air is showing an interest in buying A330s or A350s, Fekih said, “because the 787 is late and because they don’t have enough aircraft.” Qatar Airways and Etihad might also look at this option, or keep existing aircraft longer, if there are further delays to the Dreamliner, he said.


Airbus is also targeting Egypt, Lebanon, Morocco, Algeria and Jordan for further A350 sales, he said.


EADS shares closed 0.2 percent lower at 20.88 euros in Paris. The stock has gained 20 percent this year, valuing the company at 17.1 billion euros ($25 billion).


To contact the reporter on this story: Tamara Walid in Dubai at twalid@bloomberg.net


To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net



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