Air show fuels hope of better days for airlines

A flurry of orders for arch rival plane makers Boeing Co. and Airbus signaled an optimistic start to the Farnborough International Airshow - and more began to roll in on Tuesday at the industry's premier event.

Adding to deals worth more than $18 billion signed on Monday, European regional airline Flybe announced an order for up to 140 Embraer planes, worth as much as $5 billion at list prices, to be delivered between 2011 and 2017 to support its expansion plans.

The deals at Farnborough, considered a barometer of the aviation and defence industry along with its sister show at Le Bourget in Paris in alternate years, are giving rise to hopes that the worst may be over for the airline industry after a deep two-year downturn.

"This is a good time to buy aircraft," said Flybe Chief Executive Jim French after unveiling the carrier's deal, which includes 35 Embraer 175 jets, and options for 105 more Embraer aircraft.

Airbus is expected to make at least one further order announcement on Tuesday, as is ATR, an EADS-Finmeccanica joint venture.

More than 1,000 exhibitors from 38 countries have signed up for Farnborough, with delegations from Egypt, Taiwan and Morocco attending for the first time. Organizers also cited stronger interest from major players China and Russia.

Analysts don't expect anything close to the record-breaking $88.7 billion worth of deals announced at Farnborough in 2008, but the gathering has already exceeded the slow orders for commercial planes at Le Bourget last year, where deals came in at around $7 billion.

The International Air Transport Association has forecast that global industry profits will reach $2.5 billion this year, an upturn from the huge $9.4 billion loss in 2009. Asia and North America are expected to lead the recovery, with Europe lagging behind. Strikes at some airlines, the debt crisis and the volcanic ash cloud that caused major disruptions this spring are all hurting Europe's recovery.

Airbus chief salesman John Leahy said his company and U.S. rival Boeing survived the recent downturn better than in the past because they anticipated a slump in orders and let their backlogs build up without increasing production.

Bombardier Commercial Aircraft President Gary Scott was more cautious about the near-term outlook, saying that airlines needed to be sure they could sustain recent post-crisis gains before they had the "balance sheet and the courage to order airplanes in significant quantities again."

Among the early buyers were Middle Eastern airlines Emirates and Qatar, European carrier Aeroflot and plane leasing firms GE Capital Aviation, GECAS and Air Lease Corp.

Boeing notched up a number of sales for its fuel-efficient 787 jetliner, which is making its international debut at Farnborough after a problem-plagued production line delayed the Chicago-based company's delivery schedule to customers. The first 787 is due to be delivered to Japan's ANA later this year, more than two years overdue, and Boeing has said that could slip into the first few weeks of 2011.

But the optimism in the aviation sector wasn't extending to the defense side of the sector where massive cuts to Western military budgets were the talk of Farnborough.

In the U.S., the world's biggest single defense market, the Pentagon is looking to trim some $100 billion of savings from personnel and procurement over the next five years. In Britain, Europe's largest market, the government is considering cuts of up to 20 percent.

Airbus' long-delayed A400M military transport plane is providing a high profile symbol of the problems facing the defense sector.

Britain has already scaled down its order for the four-engine military transport, which will take part in the daily flying display at Farnborough.

Airbus expects to start delivering A400Ms sometime after December 2012, around four years behind schedule and 50 percent over budget because of technical glitches. The original seven customer nations for the aircraft - Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey - agreed with Airbus' parent European Aeronautic Defense & Space Co. in March to spend an additional euro3.5 billion to save the project after months of bickering about who should pay for cost overruns.

Analysts will also be watching for developments in the bitter Boeing-Airbus battle to win a $35 billion contest to provide aerial tankers to the U.S. Air Force - the World Trade Organization ruled earlier this month that European governments gave Airbus illegal subsidies for the project.

The show runs July 19-25 at an airfield about 30 miles (50 kilometers) west of central London.

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AP reporter Andrew Khouri contributed to this report.