By Joanna Plucinska and Allison Lampert
FARNBOROUGH, England (Reuters) – A keen fall in Ryanair’s quarterly profits cast a shadow over the opening of the Farnborough Airshow on Monday, where industry leaders were already worried about supply chain problems, plane delays and a failed emissions-cutting plan.
Boeing (NYSE:) said it has received a vast order from Korean Air for 20 777X and 20 787 aircraft, worth $7 billion based on Cirium Ascend’s estimated delivery prices, to accelerate the U.S. planemaker’s long-delayed 777X program.
But many delegates at the July 22-26 gathering of aviation leaders were not expecting the conventional flood of deals, with Airbus struggling to meet production targets and Boeing taking a reserved stance amid the safety crisis that was sparked by a panel discussion of the 737 MAX flight in January.
Aviation was hit demanding by the pandemic, which caused air travel to collapse but then rebounded sharply, leaving many companies scrambling to solve labor and parts shortages.
The situation was made worse by the deepening crisis at Boeing, which was forced to ponderous production of its best-selling 737 MAX aircraft due to panel failures.
Delays in aircraft deliveries have made it harder for airlines to capitalize on a surge in travel and rising costs following the pandemic, and there is growing evidence that airlines are struggling to pass on those costs to consumers as demand begins to normalize.
Ryanair, Europe’s largest budget airline, reported on Monday that its quarterly profit fell by almost half, with ticket prices falling by 15% and management warning of increased downward pressure on prices.
CEO Michael O’Leary added that there had been some improvement in deliveries from Boeing, but delays remained and he was starting to get a little worried about deliveries scheduled for next year.
In a separate statement, flydubai said fleet expansion plans had been hit by delays in deliveries of Boeing planes, while Air India’s boss said the company had been forced to steal parts from other planes to keep its planes flying because of disruptions to the industry’s supply chain.
“The big question for airlines here at Farnborough is what has happened to the halo effect of demand since the pandemic – has that recovery stalled?” said veteran aviation journalist Mark Pilling, who was due to host the CEOs’ panel.
Pegasus Airlines CEO Guliz Ozturk told reporters that customers are “going back to basics” and looking for lower prices.
“We’re starting to see demand normalize. What does that mean? I mean, the demand is there, but now travelers are looking, just like they were before the pandemic, for the most affordable, lowest, best price for travel,” she said.
Ryanair’s pricing warning deepened concerns about pressure on profitability, which is a measure of the average price per mile paid by each passenger and a key barometer of an airline’s profitability.
Airline shares were among the biggest fallers in Europe, with Ryanair down more than 14% to post its worst day since June 2016 at 1140 GMT, while rival easyJet (LON:) fell 8%, TUI fell 4.9% and BA owner IAG shed 4%.
SUPPLY CHAINS REPAIR
With deal-making likely to be confined, attention at the airshow is likely to focus on how manufacturers cope with supply chain blockages.
Stephanie Pope, Boeing’s fresh commercial airplane chief, said at a news conference Sunday that production of the 737 MAX planes is improving and the company is undergoing a “transformational change” in safety and corporate culture.
Airbus CEO Guillaume Faury said on Sunday the company was making progress in increasing production of its top-of-the-range passenger planes.
Some deals are being finalized, delegates said. Virgin Atlantic is close to placing a back-up order for Airbus A330neos, while Flynas, the Saudi low-cost carrier, is ready to order up to 30 of the same wide-body planes, industry sources said.
Japan Airlines is expected to confirm recent initial orders for the jetliners, and Boeing is seeing interest in leasing its 737 MAX planes, while Turkish Airlines is in negotiations to buy Boeing planes, industry sources said.
The companies declined to comment.
This week’s airshow will be packed with panels and workshops on sustainability, as aerospace giants and airlines seek to highlight their commitment to reducing carbon emissions while planning a massive expansion of global air travel.
On the defence front, attention will be focused on Ukraine, possible delays in plans to replace the US F-22 fighter jet, codenamed NGAD, and a defence review by the fresh British Labour government.
In a speech at the airshow, British Prime Minister Keir Starmer said he wanted to “go on record” how vital the Global Combat Air Programme (GCAP) was, ending speculation that the fighter jet project with Japan and Italy could be abandoned following a defence review.
