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Business

Aviation Industry Cautious of Recovery Amid Economic Fears

Aircraft manufacturers at the Berlin Air Show forecast Wednesday, May 28, rising demand over the next 20 years for cargo planes as world trade grows, but signs mounted that the stumbling US economy might spoil the boom.

The new Airbus A380 super jumbo jet

Airbus has high hopes for future sales despite delays and postponements

Aircraft manufacturers at the Berlin Air Show forecast at a conference Wednesday, May 28, that rising demand over the next 20 years for cargo planes as world trade grows, but signs mounted that the stumbling US economy might spoil the boom.

Airbus chief executive Thomas Enders said 1,700 air-freight aircraft were currently flying the world's skies, but in two decades the number would more than double to 4,200.

He was speaking at the European Congress on Air Transport, an event during this week's air show, known by its German initials as the ILA, at Schoenefeld international airport south-east of Berlin.

The show is a combination of hard sell in the exhibition booths and the romance of flying outside in the skies. Military pilots competed with one another Wednesday to put on the best flying display at the air show.

Among them were HAL Dhruv helicopters sent by the Indian air force, partner nation at this year's show. Each painted with a stylized peacock, the four helicopters wheeled in formation over the airfield while releasing marker smoke.

DHL looking to outsource

Among signs of trouble for the aerospace industry was an announcement the same day by parcels company DHL that it would cease its own air-transport operations within the United States and contract out the airlift job for 10 years to its rival, UPS.

DHL, a unit of German company Deutsche Post World Net, has struggled against the soaring cost of moving mail and parcels as the price of aviation fuel jumps and sales are squeezed by the slowdown.

DHL Express chief executive John Mullen justified DHL dispensing with its own yellow cargo planes in North America by arguing that the company did not need to maintain "infrastructure that customers don't ask for."

Sales of Airbus planes to be postponed

In another sign of trouble in the US market, Jet Blue Airways said in San Francisco it was postponing purchase of 21 Airbus jets because of soaring fuel prices. Jet Blue chief executive Dave Barger said the airline had to be financially cautious.

The original order foresaw delivery of the A320 jets between 2009 and 2011. Jet Blue, in which Lufthansa of Germany has a 20-percent stake, expects to accept the aircraft between 2014 and 2015 instead.

But Gulf Air of Bahrain ordered 35 jets Wednesday from Airbus at the Air Show in a purchase package with a list price of $4.86 billion (3.12 billion euros). The discount terms for the bulk order were not disclosed.

The state-owned airline will obtain 15 Airbus A320 jets and 20 Airbus A330-300 planes, the two companies said.

Enders said the Jet Blue statement and plans by Qantas to idle some planes and cancel an order for one Airbus should not be overrated. He insisted, "We are expecting another very good year for Airbus in 2008 and aim to build 24,000 planes in the next 20 years."

The figure includes passenger, cargo and military planes.

He said that after subtracting cancellations, Airbus had taken 397 orders so far this year and had delivered 162 jets by the end of April from its main factories in Toulouse, France and Hamburg, Germany.

Industry analysts have suggested that between 15 and 20 percent of Airbus orders are "soft," having been placed by financially shaky customers. Airbus said that at the end of last year it had 3,421 plane orders in hand, with 1,341 orders received in 2007.

Calls for more envionmental responsibility

During discussion of the cargo business, Peter Hintze, the German government's coordinator of aviation policy, appealed to the aerospace industry to pay more attention to criticisms of the planes' pollution and climate-change impact.

He said the extensive use of older jets for air cargo meant greater public sensitivity about the freight business. Older planes are generally noisier and use more fuel per ton carried than new ones.

Many air freighters are created by removing seats from second-hand passenger jets and fitting them with rear doors.

Enders' sales forecast included about 900 brand-new air-freighters to be sold in the next two decades.

Statistics at the air show indicated international air cargo tonnages growing 5 percent annually in recent years and analysts maintained that despite the financial crisis the world rate would accelerate to 6 percent annually in the next few years.

Airbus hit by European skills crunch

In other developments, Airbus announced a global recruiting drive to find 500 engineers after Thomas Enders admitted that the company was having difficulties finding qualified specialists in Europe.

"We will recruit 500 engineers all over the world this year. We need the best and the brightest worldwide for our industry," Enders told a news briefing. "Our sector is very challenging and in big demand of highly skilled engineers. Unfortunately, we don't find them in Europe."

The Airbus boss said that in particular he needed staff familiar with lightweight composite materials used to make the next generation of passenger jets and also electrical designers.

After bemoaning a sufficient supply of such candidates in Europe, Enders added: "We are looking for global partnerships."

He noted that Airbus had opened training centers for engineers in countries where the air transport market was expected to grow, citing China, India and Russia.

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