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Reflections on the Dubai Airshow 2015


30-11-2015

Simon Kay

Senior Non- Resident Fellow - Global Affairs


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This, said a Qatar Airways executive in Dubai at the end of the Airshow, is the slowest show I have seen in ten years. If this executive had read the pre-show forecasts for the Dubai Airshow of 2015, he would not have been surprised when the airline orders slowed to a $12 billion trickle, following the $206 billion flood of 2013.

Most of the Gulfs airlines gave the fact that they now have enough orders for the next few years as the obvious reason for this years slowdown in orders  Etihad claiming that it has enough orders to last until 2025. Added to this, the Airbus and Boeing production lines are now full for the next few years, with reports suggesting that the Gulf airlines alone have a backlog of 750 aircraft orders.

News from Iran, however, emerging at the end of the week of the Airshow, may cause smiles at Airbus, as President Rouhani said during an interview on French radio that Iran will probably order aircraft from Airbus during a state visit to France in mid-November.

Another factor behind the reduction in civilian aircraft orders is that a number of Gulf airlines are now having to deal with the problem of congested airspace and airports. The capacity constraint curve has hit us a little bit sooner (than expected), Emirates President Tim Clark said at the Airshow. He added that his airline would have ordered another 100 Airbus 380s if there was room at Dubai International Airport.

The airspace difficulties facing the Gulf airlines are exacerbated by the current use of this airspace by military aircraft striking Iraq, Syria and Yemen. The corridors available to civilian aircraft are therefore narrower than before, leading to congestion and delays. The expected doubling of civilian air traffic in the Gulf over the next twenty years suggests that the regions air traffic control structure will need to be re-examined soon.

Many commentators at the Dubai Airshow added a note of optimism for the show exhibitors by suggesting that military equipment orders announced at the show have increased. Certainly the SIPRI figures on defence expenditure as a percentage of GDP for 2011 to 2014 support the view that more equipment is being ordered 
   

                          2011            2012          2013          2014

UAE                     5.5%           5.1%          5.9%          5.1%
Bahrain                3.6%           3.8%          4.1%          4.2%
Saudi Arabia         7.2%           7.7%          9.0%         11.8%
United States        4.6%           4.2%          3.8%          3.5%
U.K.                      3%             2.2%          2.1%          2.1%

 

The Wall Street Journal has reported that the UAE, Saudi Arabia, Oman and Qatar spent a total of US$109.9 billion on defence in 2014, an increase of almost 44% over the 2012 figures.

One potential defence contract that has been reported on by many commentators recently is the potential UAE purchase of the Rafale fighter jet. The Dubai Airshow ended on a note of suspense, however, when the show organisers cancelled plans to announce a $40 billion deal, rumoured to be for the Rafale. If the rumour is true, the cause may have been the Russian announcement, made in the same week, that Russia and Iran have signed a contract for the S300 missile system (Reports say that the systems will be delivered to Iran during 2016.)

When Russia first announced in April 2015 its willingness to resume the sale, the news was followed the next day by a declaration made in Israel by a Lockheed Martin spokesman that the F35 is designed to deal with the S300. So, if Iran deploys the S300 during 2016, the Gulf States wish may be to arm themselves with an aircraft capable of defeating the missile system.

In supplying Iran with the S300 system, which even the Israelis say is a defensive weapon, Russia is not supplying its client with the latest version. Almaz-Antey stopped producing the S300 in 2012 and switched full production to the S400, an upgraded version that has been in service in Russia since 2007 and which Russia has agreed to sell to China. In the meantime, the S500 system is thought to be in production at Almaz-Antey.

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