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Punishing punches.

AIRCRAFT MANUFACTURERS, battered and bruised by the global economic downturn since the late 1980s, appear to have found a measure of solace in two unlikely markets -- China and the Middle East. The long-awaited economic boom in China appears not only to have arrived, but to be winging purposefully forward -- if air travel can be taken as an indicator of commercial expansion. The air transport sector grew by an astonishing 32% over 1992, making China the most exciting growth market in recent history. Conservative forecasts point to a demand of some 50 new aircraft a year until at least the year 2000.

While the demand for new aircraft in the Middle East is nowhere as spectacular as in China, manufacturers are quietly confident of a steady stream of orders as Gulf airlines continue to expand and replace fleets.

The expansion of these two markets has cushioned some severe body blows to the aircraft industry. The most punishing punch was inflicted on Europe's Airbus Industrie when Northwest Airlines cancelled an order for 74 aircraft, including 24 of Airbus' latest and biggest craft, the A340.

Fortunately for Airbus, some serious legwork over the past three years in the Middle East has paid handsome dividends. Gulf Air is buying six A340s for delivery next year with an option for a further six and Kuwait Airways Corporation is expanding its fleet with 15 Airbuses, including four A340s.

The A340, like Boeing's latest twinjet 777, aims to slot into the much touted "new" market segment between the old 747-400 jumbos and 767-300. The 777, which boasts the widest fuselage cross-section in its class, will provide two-class seating for 350 to 375 passengers, will feature a new wing design and be powered by high-efficiency turbofan Rolls-Royce Trent engines. Both the A340 and the Boeing 777 are long-range, large capacity planes. The 777 has a range of 7,500km while the four-engine A340-200 has the longest range of any commercial plane, able to fly 14,500km non-stop.

Although Boeing announced that it will lay off 28,000 staff over the next two years because of declining or deferred orders, it still managed to slice up the largest global market share last year, a healthy 57% to the Airbus consortium's 29%. However, Airbus has been virtually unchallenged in the Middle East for the past three years, enjoying an 80% share of new aircraft sales. But Boeing has been making steady inroads in the Middle East market. One of its most important contracts has been with the Dubai-based Emirates Airlines which has seen a spectacular growth in its passenger traffic since the Gulf war. Emirates has placed a $200m order for 14 777s for delivery in 1996. Saudia's fleet of 70, based heavily on 15 to 20-year-old 737s and Lockheed TriStars, is due for replacement, but so far no firm orders have been placed with any of the major makers.

The Bahrain-based Gulf Air, like most of the other Middle East airlines, has taken advantage of the prevailing buyer's market in aircraft and have been shopping around assiduously. While Gulf Air is replacing its Boeing 737s with Airbus A320s for its short and medium haul routes, it has opted for 18 767-300ERs for its long distance routes.

Although economic sanctions and the uncertain political climate have virtually killed off the Iraqi aircraft market, Iran is becoming an increasingly attractive one.

Iran wants to upgrade, modernise and expand its ageing Boeing fleet. Discussions with Boeing for the purchase of 20 737-400s have been deadlocked because the US Administration will not lift its proscription on sales of "dual use" equipment. The European Airbus consortium however, has successfully concluded a deal with Iran for the purchase of two A300-600Rs. Boeing is not the only American company pressing the US Administration to normalise commercial relations with Iran and, in the present depressed economic climate, the Clinton Administration may well find that it has little option but to warm up to Tehran.

Of the three major aircraft makers, McDonnell Douglas has the slimmest profile in the Middle East. Only the Egyptian ZAS Airline, a private charter and cargo carrier, flies their MD-80s. Egyptair's expansion plans have been in the works for a considerable time but the drop in tourism over the past two years could force the carrier to defer its proposed purchase of five 777 and three A340s.
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Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Special Report; aircraft sales to the Middle East
Publication:The Middle East
Date:Nov 1, 1993
Previous Article:Survivors of the battlefield.
Next Article:Staying aloft.

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