Kelly Ortberg’s debut at the Paris Air Show as the new CEO of Boeing was poised to be optimistic.
Since taking the helm in August, Ortberg has overseen improvements in the production of Boeing’s popular 737 Max aircraft, with rising deliveries contributing to the company’s recovery from a challenging period marked by manufacturing and safety issues. Shares of Boeing have surged by more than 13% this year, surpassing the overall performance of the S&P 500.
However, following a tragic incident involving an Air India flight on Thursday, which resulted in the first fatal accident of a Boeing Dreamliner, Ortberg decided to withdraw from attending the upcoming air show scheduled to start on Sunday.
This prominent trade event attracts industry leaders every two years, alternating with the Farnborough Air Show in the U.K. Companies like Boeing and Airbus typically host lavish gatherings, conducting high-profile deal signings and showcasing their latest aircraft with dramatic aerial displays for attendees.
“As our industry prepares for the Paris Air Show, Stephanie and I have both opted to cancel our plans to attend, so we can support our team and focus on our clients and the investigation,” Ortberg stated in a message to employees, referring to Stephanie Pope, CEO of Boeing Commercial Airplanes.
All but one of the 242 individuals onboard Air India Flight 171 perished when the over-decade-old Boeing 787-8 Dreamliner crashed into a building in Ahmedabad, India, shortly after taking off for London. The sole survivor, seated in 11A, is a British national originally from India.
Authorities are still investigating the cause of the crash, which may take weeks or even months to determine. Initial questions revolve around how the aircraft experienced such a rapid descent, leading to its explosive impact. Data from the cockpit voice and flight data recorders, commonly referred to as “black boxes,” will be critical for the investigation.
Ortberg emphasized the importance of refraining from speculation regarding the accident, urging respect for the ongoing investigation.
The company responsible for the aircraft’s engines, GE Aerospace, announced the postponement of an investor day that had been scheduled for Tuesday.
Escalating military conflict
The crash is not the only factor influencing the mood surrounding the air show.
Just prior to the event, tensions escalated when Israel conducted missile strikes on Iran. Shortly thereafter, Iranian forces launched drones towards Israeli territory, leading to widespread flight cancellations and route alterations for many airlines.
This increase in geopolitical tension is likely to shift the focus of the air show to military budgets and expenditures while raising concerns over how such conflicts might affect the demand for commercial aviation.
The show goes on
Despite the recent tragedy and external pressures, major players like Boeing, Airbus, and Embraer are anticipated to secure hundreds of aircraft orders. Demand remains robust, with waiting times for in-demand models extending into the next decade.
Boeing projected that the global market will require 43,600 new commercial aircraft over the next 20 years, citing emerging markets as the key drivers of growth. It predicts these markets will constitute over half of the global fleet by 2044, an increase from a 40% share recorded last year.
Some order announcements may come from previously unreported customers, as industry analysts expect a number of new deals to surface at the show.
Challenges such as workforce shortages have slowed the delivery of new aircraft, while fluctuating tariffs have raised concerns about potentially higher costs for planes and components.
Aircraft pricing has also seen an uptick, with the cost of an Airbus A321neo rising to $65 million by the end of April, up from $58 million at the beginning of 2023, and a Boeing 737 Max 8 priced at approximately $55.5 million, increased from $50.25 million earlier this year, as reported by Ishka, a leading aviation data consultancy.
Amid a shortage of aircraft, rental rates for older planes are climbing, catering to airlines that prefer short-term leases over large upfront purchases. A 12-year-old Boeing 737 is now renting for $241,000 per month, marking a nearly 42% rise from two years ago, while an Airbus A320 of the same age costs about $239,000 per month, a 50% increase, according to IBA Insight.
Orders: How many and who’s buying?
Analysts from U.K.-based IBA anticipate that manufacturers could receive between 700 and 800 commercial aircraft orders during the Paris Air Show, which will encompass firm orders, options, and less binding commitments such as letters of intent and memoranda of understanding.
Potential customers might include Ethiopian Airlines and the Polish carrier Lot, along with Vietnam Airlines, AirAsia, Royal Air Maroc, Etihad, and Saudi Arabia’s Riyadh Air, according to Ishka.
“A significant deal from China is imminent, driven by replacement needs, if not expansion,” Ishka noted in a recent analysis.
Air India, which had previously been identified as a possible client, is no longer expected to pursue new aircraft purchases following the recent disaster.
Return of the big jets
As the appetite for international travel grows, airline customers are increasingly opting for larger aircraft.
“We’ve transitioned from solely focusing on single-aisle aircraft to a surge in orders for larger twin-aisle models designed for international routes,” stated Richard Aboulafia, managing director at aerospace consultancy AeroDynamic Advisory. He noted that major international airlines, including Turkish Airlines and Gulf carriers, are vying for a greater share of the global market, “slicing the pizza into smaller pieces.”
Considering that aircraft orders are typically made years in advance, Aboulafia believes the recent crash will have a limited impact on demand, although there may be a few delays during the air show.
“This is a tragic event that complicates matters greatly,” he remarked. “However, it does not appear that the incident relates to the design or manufacturing of the airplane.”
