At Farnborough Air Show, gloom amid the glamour

At the year's biggest air show, starting Monday at Farnborough near London, the U.S. Air Force's top-of-the-line F-22 Raptor jet fighter will makes its debut aerial display, and an Airbus A380 superjumbo airliner will perform flying stunts it would never attempt with passengers aboard.

Amid the afterburner smoke and carbon-laced vapor trails, the show's organizers also are promoting a big midweek conference headlined by Boeing and Airbus that's focused on "green" aviation.

But the glamour of the big show won't dispel a sense of crisis in the aviation industry worldwide. We won't see the blockbuster tally of orders of previous air shows.

The skyrocketing cost of oil has the entire industry's attention. The price of jet fuel has precisely doubled in a year, obliterating all hope of profits at most air carriers.

Airlines are desperately cutting routes, raising fares, parking older planes in the desert and deferring new airplanes on order. A few smaller airlines have gone out of business, but aviation analysts warn that many more are on the brink.

"Right now, we are ready to crash," said Adam Pilarski, aviation-business guru with consulting firm Avitas.

Yet another challenge to profitability will be in the spotlight: The increasing pressure on airlines, especially from Europe, to drastically cut carbon emissions.

The European Parliament this month backed a proposal to bring aviation into a cap-and-trade system for emissions, requiring each carrier to pay penalties for any emissions beyond its average level in 2004-6.

Aviation consultancy Ascend estimates the plan, starting in 2012 and applicable to all airlines flying in and out of the European Union, "would effectively add around $6 per barrel of crude to EU flights, escalating each year."

That could kill some of the smaller low-cost carriers specializing in short-haul European leisure travel.

Boeing Commercial Airplane chief Scott Carson and his Airbus counterpart, Tom Enders, will speak Wednesday at an unusual 2-½ hour "sustainable" aviation conference at the show. And Boeing will have a special technology exhibit on the theme of a "sustainable future."

Industry analyst Richard Aboulafia of the Teal Group is more than a little skeptical, calling the conference a "greenwash" (akin to covering problems with a coat of whitewash).

"You are talking about propelling people around the globe at high altitude using exploding hydrocarbons. [The eco-conference is] about damage mitigation."

Pilarski takes a less-jaundiced view.

"Put high oil prices together with environmental concerns, and there is an unbelievably strong pressure for change," said Pilarski.

When the world's airline executives held their annual summit in Vancouver, B.C., a year ago, the threat of action by politicians under pressure from the green lobby indeed did produce "meaningless platitudes," said Pilarski.

Bottom-line reality

"Now it's economic reality. And economic reality speaks much louder," he said. "Right now, the realization is that at these prices ... you cannot have aviation the way we know it now."

Pilarski means higher fares, a significant cutback in global flying and a serious search for alternative technologies to reduce oil dependence.

How will that affect Boeing and Airbus? Paradoxically, Pilarski believes they may benefit as airlines clamor for more fuel-efficient planes.

The big manufacturers agree. Boeing's new annual market forecast, released in advance of the show, maintained a predicted 5 percent annual increase in global air travel over the next 20 years.

Both Boeing and Airbus are ramping up deliveries of their jets, which burn less fuel than most airliners now flying. And both are selling next-generation planes that are even more cost-efficient.

New challenger

Challenging the big two, Canada's Bombardier is touting at Farnborough a new narrow-body jet the size of a 737 with an innovative Pratt & Whitney engine and carbon-fiber plastic-composite wings (see related story).

Looking across the globe, it's clear that oil prices are slamming aviation far beyond the U.S.

Airlines in India lost a million dollars a day in the final quarter of 2007. In May, Australian flag carrier Qantas announced staff and route cuts.

Even Cathay Pacific of Hong Kong — in the burgeoning Chinese market — has begun to lose money and this month warned investors to expect a sharp drop in earnings.

Yet Barry Eccleston, chief executive of Airbus Americas, maintains that overall global demand is not so bleak.

The Middle East and Russia, both rolling in oil money, are expected to order more planes. Growth in China continues, though at a slower pace than before, Eccleston said.

At least two Persian Gulf airlines, Etihad of Abu Dhabi and Qatar Airways, are expected to announce big orders at the show. Asiana of South Korea and British Airways are rumored to be ready to buy Boeing wide-bodies.

The world's two largest aircraft-leasing companies, ILFC and GECAS, are expected to place large orders for narrow-body jets.

Boeing's 787 Dreamliner, its narrow-body 737, its big twin-engine 777 and the new 747-8 version of its jumbo jet are all candidates for orders.

Unlike Boeing, Airbus stores up sales for announcement at the shows, so its sales maestro, John Leahy, can expect to come out on top once again.

He will look to add significantly to his tally of 362 firm orders already won for the A350. And it will be a surprise if he cannot announce some new A380 orders, now that five of the superjumbos are in service with Singapore Airlines and impressing passengers.

Other items on the show agenda:

Boeing will seek to allay doubts about its crucial 787 Dreamliner program, with a Tuesday presentation by Dreamliner chief Pat Shanahan (see profile). Serious production snags have pushed out deliveries to some customers as much as 30 months.

Airbus will have to explain away its stalled plant-restructuring plan — sales of its German and French factories fell through, pushing out its attempt to share costs and risks — as well as a slowed ramp-up in production of its A380 superjumbo.

Executives need to convince airlines that, despite those manufacturing concerns, Airbus' proposed A350 is on track to challenge both Boeing's Dreamliner and 777.

Finally, to spice up the show, where would we be without a little U.S.-European tension?

Ensuring that nationalistic passions inflamed by the just-reopened U.S. Air Force tanker contest don't fade, Airbus parent EADS will fly at Farnborough an old A310 with the company's new tanker-refueling boom attached, demonstrating its deployment in flight.

Boeing won't fly a tanker or a boom at Farnborough. It will, however, try to sell C-17 transport jets, helicopters and other hardware to the Europeans.

Dominic Gates: 206-464-2963 or dgates@seattletimes.com