On the tarmac of Le Bourget two years ago, Airbus pipped Boeing to the post in the race for orders, and at last year’s Farnborough Air Show we saw $123.9 billion of deals recorded. As we see OEMs (Original Equipment Manufacturers) gradually take more control of the aftermarket, and major shifts in the global geopolitical order begin to transform the balance of the industry, this year’s show could set the tone of the market for the next five years.
Here are the key topics that I predict will take center stage at the 52nd installment of the International Paris Air Show:
OEM migration from manufacturer to service provider
Boeing and Airbus have been moving away from the pure OEM play to become systems integrators and service providers. This is no more apparent than in the aftermarket.
Paris will see a rise in deals conducted on service models like Power-by-Hour contracts – likely to make up 60-70% of the deals. While such engine leasing models are not a new concept, they have proliferated widely throughout the industry in recent years. OEMs can realize profit much earlier in the lifecycle, while airlines receive a cheaper deal over the lifecycle of the engine. Keep an eye out for Rolls Royce who up to this point has been leading the charge here.
The opening of the global defense industry
Continued political instability in the Middle East and Asia and the announcement by President Trump of a further $54 billion to the U.S. defense budget has been a huge boost for the defense industry, while shifting alliances have led to a more open global market. Previously seen as too closely affiliated with Russia, Indian manufacturers are now benefiting from renewed traction with U.S.-aligned markets. Israel now sends more than 50% of its defense export to India highlighted by the recent record $2bn deal between the two governments. Elsewhere, Rolls Royce recently completed a deal for the MTU Series 4000 engines to be assembled by a part of the Indian Ministry of Defence.
With India’s power as buyer and manufacturer now highly regarded by western and developing markets alike, we could well see new and substantial contracts on the table.
Credit By: Cnbc.com