Paris jinx grounds planes but deals soar

By Tim Hepher

LE BOURGET, France (Reuters) - Airbus faced the unexpected and daunting task on Monday of delivering a marketing blow to rival Boeing and maintaining momentum for a revamped jet with its two flagship planes grounded at the Paris Air Show.

Airbus order flow on day one was expected to be relatively light as sales chief John Leahy was locked in last-minute negotiations on major deals he hopes to announce later in the week.

But industry sources said Airbus was expected to kick off the show with an order for some 30 A320neo planes worth $2.4 billion at list prices to Scandinavian airline SAS.

The European planemaker has targeted an order surge worth tens of billions of dollars, but was left reeling as the world's largest aviation event was jinxed by a series of mishaps including a taxiway collision involving the A380 superjumbo.

The right-hand wing-tip of a test plane for the world's largest jetliner, with a wingspan of almost 80 meters (yards), scraped a building at Le Bourget airport on Sunday and was withdrawn from the air show's traditional flying displays.

A second aircraft, the delayed European A400M airlifter, was also withdrawn from air display after a gearbox problem but will be allowed to perform in a lypast when French President Nicolas Sarkozy inaugurates the biennial event on Monday.

The A380 collision caused dismay hours after the arrival of its new rival -- Boeing's elongated 747-8 superjumbo which is showing its distinctive silhouette abroad for the first time.

The latest version of the legendary 747 jumbo touched down in orange and red "sunrise" livery symbolizing the importance of Asia, whose economic growth is set to dominate aviation in coming years starting with this week's air show.

The air show could bring two record deals on successive days as Airbus tries to woo buyers for a revamped A320neo with more efficient engines, saving airlines 15 percent in fuel costs.

"We clearly believe in the business case and the orders you are going to see at the show are going to be astounding," said David Hess, chief executive of engine maker Pratt & Whitney.

Buyers are already camped out in Paris hotels to negotiate the final details of major deals but are aware that Airbus has staked a lot on winning a slew of orders for the A320neo at the Paris show, and some are said to be digging in their heels.

A $16 billion provisional deal from IndiGo to buy 180 A320neo passenger jets, first announced in January, was mired in further negotiations that could spill beyond the air show.

The deal if finalized would set a record for the number of planes in one transaction. But sources say if all goes to plan it is set to be eclipsed by a 200-plane order being fine-tuned between Airbus and Malaysia's AirAsia.


Demand for aircraft is on a sharp rebound driven by demand from Asia's rapidly growing airports and the Middle East.

"Those two markets will enjoy at least one third if not more of the demand increase for global air traffic in the next decade," said Philip Toy, a managing director at Alix Partners.

The Airbus A320neo has also benefited from airline concerns about fuel costs. Boeing said on Sunday it would decide by end-year whether to upgrade its 737 with new engines from about 2016, as Airbus has done, or build an all-new jet in 2019.

"They will sell hundreds but it is hard to tell what is gross and what is net, what is a conversion from an earlier order. There are myriad complications," said Teal Group analyst Richard Aboulafia said of the A320neo.

Orders are likely to include a confirmation of an $8 billion 100-plane order from leasing giant ILFC and another plane order for both Airbus and Boeing planes another big lessor, GECAS.

Russia and China will flex their muscles as potential rivals to Airbus and Boeing, especially during a Tuesday visit by Russian Prime Minister Vladimir Putin and some analysts expect surprise sales. But Western planemakers say it will be some time before newcomers mount a serious challenge in civil aerospace.

(Additional reporting by Joanna Partridge, Karen Jacobs, Kyle Peterson, Rhys Jones, Victoria Bryan, Lionel Laurent)