Commentary: Clearer Skies for Paris Airshow?
Day two of the Paris air show and Monday's terrible weather seems to have lifted. The question is has it lifted the mood of those here at Le Bourget?
To find out I spoke to Pierre Beaudoin, the CEO of Bombardier, and to be honest I was surprised about how upbeat he was. Apparently, the firm's chalet here at the show has been teeming with potential customers despite the economic gloom. That said, the company did yesterday downgrade its 20-year growth forecast (though how useful a 20- year forecast is remains open to question).
Like Boeing's Scott Carson yesterday, Mr Beaudoin said that he expects a recovery sometime in 2010 but admits that if things don't improve by then, the industry is in real trouble. (Watch the full interview with Pierre Beaudoin below).
For now everybody is confident that this is just a cyclical downturn and not a major crisis. Nevertheless, if you have cash or credit to spend you can get a very good deal from either Boeing or Airbus. The CEO of Qatar Airways was telling me last night that it's very much a buyers' market and that he got quite a deal from Airbus' sales supremo John Leahy when negotiating the purchase of 24 narrow body jets.
So if it's a good time to buy jets is it a good time to buy aerospace stocks. Nomura's Nick Fothergill says that investors in the sector should expect quite a bit of volatility over the next 6 months but for those with a 3 year + time frame there are opportunities. He favors EADS saying that while other US prime contractors and supply chain firms have had a run-up, the European firm has lagged. The big caveat, however, remains the fate of the military transport aircraft the A400M. If European governments were to decide not to take the plane then the implications for EADS could be significant. On the other hand, there is very little priced into the stock for a potential win when it comes to the soon to be re-opened competition for the Pentagon's purchase of a fleet of mid-air refueling tankers.
If you remember, last time round EADS along with its partner Northrop Grumman won the competition but the Pentagon had to re-open the tender because Boeing rounded up enough people in Washington to force a rematch. This time round, however, Boeing looks stronger because it's going to be tough for the Obama administration to send jobs overseas and the US firm has put together a more compelling package for the US Air force.
This competition will certainly be one of the big stories for the aerospace sector this year and is the main subject of my conversation with Ron Sugar, the CEO or Northrop Grumman, on CNBC's World Wide Exchange.