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Boeing crisis, trade tensions cast pall over Paris Airshow

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PARIS (Reuters) — Safety concerns, trade wars and growing security tensions in the Gulf are dampening spirits at the world’s largest planemakers as they arrive at this week’s Paris Airshow with little to celebrate despite bulging order books.

The aerospace industry’s marquee event is a chance to take the pulse of the $150-billion-a-year commercial aircraft industry, which many analysts believe is entering a slowdown due to global pressures from trade tensions to flagging economies, highlighted by a profit warning from Lufthansa late on Sunday.

Humbled by the grounding of its 737 MAX in the wake of two fatal crashes, US planemaker Boeing will be looking to reassure customers and suppliers about the plane’s future and allay criticism of its handling of the months-long crisis.

“This is a defining moment for Boeing. It’s given us pause. We are very reflective and we’re going to learn,” Chief Executive Dennis Muilenburg pledged on Sunday.

The grounding of the latest version of the world’s most-sold jet over safety concerns has rattled suppliers and fazed rival Airbus, which is avoiding the traditional baiting of Boeing while remaining distracted by its own corruption probe.

Aerospace executives on both sides of the Atlantic are concerned about the impact of the crisis on public confidence in air travel and the risk of a backlash that could drive a wedge between regulators and undermine the plane certification system.

Airlines that rushed to buy the fuel-efficient MAX are taking a hit to profits since having to cancel thousands of flights following the worldwide grounding in March.

Even the planned launch of a new longer-range version of the successful A320neo jet family from Airbus, the A321XLR, is unlikely to dispel the industry’s uncertainty, analysts said.

The planemaker is hoping to launch the plane with up to 200 orders with the support of at least one major U.S. buyer such as American Airlines but faces a last-minute scramble to win deals.

“Boeing’s MAX crisis isn’t the most ominous dark cloud, since it can be solved, but traffic numbers are genuinely scary,” said Teal Group aerospace analyst Richard Aboulafia.

“If March and April are a sign of things to come, we’re looking at broader industry demand and capacity problems.”

“Net orders might be the lowest in years,” Aboulafia added.

Others dismiss fears of a downturn, citing the growth of the middle class in Asia and the need for airlines to buy new planes to meet environmental targets.

“The only solution that the industry has is the newest most fuel-efficient aircraft,” John Plueger, Chief Executive of Air Lease Corp, told Reuters. “So that replacement cycle is going to continue.”
“We’re talking to so many airlines who still want more aircraft, and there’s really been no lessening of those discussions,” he said.

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