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Richard Aboulafia is VicePresident, Analysis of the Teal Group

euronews:
The crisis in the eurozone is in full development. IATA has announced that the profits of the aviation sector will be halved this year comparing to forecasts. Yet the big manufacturers are challenging each other in the race for orders. Farnborough 2012 will be the air show of crisis or recovery?

Richard Aboulafia:
Most of the orders we saw last year, and most of the orders we’ll see this year, are for deliveries beyond 2017. They are basically positions taken for the next generation of narrowbody jets, Airbus’s A320NEO and Boeing’s 737MAX. These orders, therefore, should not be regarded as statements of market optimism in the current timeframe.

euronews:
In Europe, Air France is implementing a huge restructuring. Other major airlines are not doing well. After the merger between British Airways and Iberia, is to be expected more consolidation, if not worse?

Richard Aboulafia:
The European legacies face weak home markets and growing competition from the Arab Gulf carriers. But the big three will remain the big three. What we’ll see more of is the gradual process of absorbing marginal players, as we’ve seen over the past few years. Yet if anything the crisis has stalled this process. TAP, for example, is unlikely to be purchased in the middle of a crisis like this one. Worst case scenario, of course, is more complete failures, as we’ve seen recently with Malev and Spanair.

euronews:
The Asia Pacific is now driving the market for the aviation industry. Some states, like China, challenge the European Union Emission Trading Scheme and therefore suspend the purchase of European aircraft. Protecting the environment may become a concern for the industry?

Richard Aboulafia:
It’s clear that the EU massively overstepped in its ETS initiative. Either it backs down now, with relatively little pain except some embarrassment, or they back down later, after the rest of the world ignores them and imposes painful retaliation.

euronews:
Usually the military sector has been an important driving force for technology research. Is this still true even in times of cuts to defense spending?

Richard Aboulafia:
There has been less and less of a connection between military research and commercial aerospace. Since the 1970s, the trend has actually reversed, with considerable transfer ot technology from the commercial world to the military one. Also, Europe has not spent more than a token amount on military R&D in over a decade, yet the continent continues to do very well with civil technology research and market share.

Copyright © 2014 euronews

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