US Business

Britain’s Farnborough airshow flew into view Monday under a sweltering heatwave, as US planemaker Boeing basked in the glow of the first gigantic order in global aviation’s first get-together since Covid.

Visitors flocked to air-conditioned chalets and exhibition halls to escape the intense heat on the first day of one of the world’s biggest civil and defence shows, while queues snaked for ice cream vans under dizzying air displays.

Tens of thousands of visitors are expected at this year’s event, which coincides with Britain’s first-ever “extreme heat” red alert that has been declared for both Monday and Tuesday, when temperatures set to soar further.

“People who come to visit are really happy to visit. Some of the stays are a little longer than they would normally be because it’s pretty relaxing inside,” said John Paul Frasier, adviser for Canadian manufacturer De Havilland Aircraft, speaking to AFP inside its business chalet.

“It’s pretty challenging and we know that tomorrow is going to be a little bit warmer.”

The business terraces were meanwhile deserted as some plucky visitors — clad in hats, shorts and sunglasses — headed to the tarmac to watch the commercial and military jets soar across the skies.

– Beads of sweat –

“It the hottest I’ve seen, we just have to power through,” said Aaron Rutter, vice president of sales at Lisi Aerospace, with beads of sweat dropping from his forehead as he watched Boeing’s new 777X jumbo jet make a series of twists and turns across the sky.

“There a few crazy (ones) of us out there. It’s all relative,” added Rutter, who hails from Arizona and kept his black jacket on.

This is the first Farnborough since 2018 because the 2020 edition was cancelled as the Covid health emergency ravaged the aviation sector.

Boeing fired the first shot on Monday in its traditional orders battle with European rival Airbus, clinching a $13.5-billion deal for 100 MAX planes from Delta Airlines in a huge vote of confidence for the crisis-hit jet — and for the industry’s broader recovery from Covid.

Delta lodged its first-ever order for medium-haul MAX 10 aircraft, with options for 30 more of the fuel-efficient planes as it seeks to replace its ageing fleet and cut emissions.

The blockbuster deal marks a huge turnaround for the MAX jet which had suffered two deadly crashes in 2018 and 2019.

– Decarbonisation –

Delta, which has 222 Airbus aircraft due for delivery, was until now the only large US airline that had not yet ordered MAX jets.

The MAX 10 is the largest version of Boeing’s new generation of single-aisle aircraft, and competes with the commercially-successful Airbus A321.

Delta boss Ed Bastian added that the aircraft would help it improve fuel efficiency and secure a “more sustainable future for air travel”.

The news comes as airlines worldwide seek to replace ageing fleets with fuel-efficient planes that emit less carbon dioxide.

Airbus and a number of major airlines signed letters of intent to explore the possibility of capturing CO2 emissions from the air and storing them underground.

Boeing revealed also that Japanese airline ANA had agreed to purchase 20 of its smaller MAX 8 jets — worth $2.4 billion — plus two 777-8 freight planes.

– ‘Handing over controls’ –

Outgoing British Prime Minister Boris Johnson opened the prestigious five-day event as the aviation sector plots its post-Covid recovery.

The event coincides with fast-moving political turmoil in Britain after Johnson’s recent announcement that he is stepping down as Conservative party leader, sparking a divisive contest to replace him also as prime minister.

“This government believes in aviation and its power to bring jobs and growth to the entire country,” Johnson said Monday in opening remarks, before alluding to his exit from Downing Street.

“After three years in the cockpit… I am now handing over the controls seamlessly to someone else. I don’t know who,” he added, sparking laughter from delegates.

Stock markets pushed higher while the dollar slid against the euro and pound on Monday on returning risk appetite as recession fears eased slightly.

Oil prices jumped over four percent, even though investors continued to fret over Russia’s war in Ukraine, a Covid spike in China and central banks quickly raising interest rates.

“After a volatile week which ended on a high note, the positive momentum has spilled over across the major global markets,” noted Richard Hunter, head of markets at Interactive Investor.

“Investors will nonetheless remain on high alert this week, as further economic data provides further colour, while the need for caution against a further possible supply shock for oil and the likelihood of an interest rate hike from the ECB (European Central Bank) increases.”

Both Asian and European stock markets enjoyed strong gains following a positive session Friday on Wall Street after June retail sales came in above forecasts and banking giant Citigroup’s April-June results beat expectations.

Wall Street continued to move higher on Monday, with investors cheered by investment bank Goldman Sachs posting a big jump in revenue even if profits slid like they did at competitors.

Earnings season continues and investors “will want to be comforted with reassuring earnings guidance” given the concerns about the risk of recession due to rising interest rates to tame inflation. 

“That is the key more so than the actual results,” he added.

While a strong set of economic data has of late boosted bets on the US Federal Reserve lifting borrowing costs more, the latest figures were not seen as being large enough to warrant a sharper rate hike next week — easing recession fears.

Market analysts widely expect the US central bank to announce a 75 basis-point lift after its meeting next week, though some have suggested a one percentage-point increase could still be on the cards to try and cool decades-high inflation.

– ECB to act –

The ECB is set on Thursday to raise its interest rates for the first time in more than a decade.

To try and counteract a steep rise in prices, the central bank has said it intends to raise borrowing costs by a quarter point, the first such move since 2011. 

The ECB’s delay in acting compared with other central banks that have announced a series of increases — coupled with fears of a eurozone recession — saw the euro fall to parity with the dollar last week.

But on Monday, the European single currency was up around 0.8 percent against the dollar, while the British pound climbed 1.1 percent versus the greenback.

After falling under $100 per barrel last week on recession fears, they jumped back over that level on Monday.

“Oil prices are soaring again today, buoyed by an apparent easing in economic fears, stronger risk appetite and a failure by the White House to get any concrete commitment to increase oil output during the Middle East visit,” said market analyst Craig Erlam at trading platform OANDA.

“When the biggest talking point from President (Joe) Biden’s meeting with Saudi Crown Prince Mohammed bin Salman is a fist bump photo, you know it probably hasn’t gone to plan,” he added.

– Key figures at around 1530 GMT –

New York – Dow: UP 0.4 percent at 31,422.66 points

EURO STOXX 50: UP 1.0 percent at 3,511.86

London – FTSE 100: UP 0.8 percent at 7,218.69 (close)

Frankfurt – DAX: UP 0.7 percent at 12,959.81 (close)

Paris – CAC 40: UP 0.9 percent at 6,091.91 (close)

Hong Kong – Hang Seng Index: UP 2.7 percent at 20,846.18 (close)

Shanghai – Composite: UP 1.6 percent at 3,278.10 (close)

Tokyo – Nikkei 225: Closed for a holiday

Euro/dollar: UP at $1.0166 from $1.0088 on Friday

Pound/dollar: UP at $1.1991 from $1.1865 

Euro/pound: DOWN at 84.77 pence from 85.00 pence

Dollar/yen: DOWN at 138.18 yen from 138.54 yen

Brent North Sea crude: UP 4.8 percent at $106.06 per barrel

West Texas Intermediate: UP 4.6 percent at $102.04 per barrel

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US aerospace giant Boeing on Monday fired the first shot in an orders battle with European rival Airbus at Farnborough airshow, clinching a $13.5-billion deal for 100 MAX planes from Delta Airlines in a huge vote of confidence for the crisis-hit jet — and for the broader sector recovery from Covid.

The deal, announced on the first day of Farnborough amid a sweltering heatwave, marks a huge turnaround for the MAX jet which had suffered two deadly crashes in 2018 and 2019.

Outgoing British Prime Minister Boris Johnson meanwhile opened the prestigious five-day event as the aviation sector plots post-Covid recovery.

US carrier Delta lodged its first-ever order for medium-haul MAX 10 aircraft, with options for 30 more of the fuel-efficient planes as it seeks to replace its ageing fleet and cut emissions.

Boeing revealed also that Japanese airline ANA had agreed to purchase 20 of its smaller MAX 8 jets — worth $2.4 billion — plus two 777-8 freight planes.

– ‘Persuasive case’ –

“We always take pride in the quality of our customers and how good they are at their trade,” said Boeing chief executive Dave Calhoun, speaking to CNBC after the news.

“What that says about the evaluation of our airplane, vis-a-vis whatever we compete against, their selection of the (MAX 10) plane reflects that,” he said, adding that Boeing had made a “persuasive case” for the jet whose production still faces supply-chain issues.

Delta boss Ed Bastian added that the aircraft would help it improve fuel efficiency and secure a “more sustainable future for air travel”.

The news comes as airlines worldwide seek to replace ageing fleets with fuel-efficient planes that emit less carbon dioxide.

Defence aerospace companies are also expected to emerge as big winners at Farnborough, with Russia’s invasion of Ukraine boosting spending on armed forces worldwide.

Russian companies have been banned from the show due to the war.

The event also coincides with fast-moving political turmoil in Britain after Johnson’s recent announcement that he is stepping down as Conservative party leader, sparking a divisive contest to replace him also as prime minister.

– ‘Handing over controls’ –

“This government believes in aviation and its power to bring jobs and growth to the entire country,” Johnson said Monday in opening remarks, before alluding to his exit from Downing Street.

“After three years in the cockpit… I am now handing over the controls seamlessly to someone else. I don’t know who,” he added, sparking laughter from delegates.

Johnson also noted that his Conservative government was “investing massively in defence”.

This year’s event — one of the world’s largest civilian and defence shows — is the first global aviation get-together since the Paris airshow in 2019, before Covid hit.

Farnborough was cancelled in 2020 as the Covid health crisis grounded aircraft and ravaged the sector.

Global air traffic is gradually recovering and in May reached more than two-thirds of its pre-pandemic level, according to the International Air Transport Association.

That recovery has however faced headwinds from rocketing inflation fuelled by historically high energy prices and higher wages, while staff shortages constrain airports and have sparked summer flight cancellations.

– Air displays –

Visitors to Farnborough witnessed air displays by Britain’s Red Arrows and South Korea’s Black Eagles, as well as from the US-made F-35 stealth fighter.

Airbus and Boeing are showcasing their latest twin-aisle passenger aircraft, the A350-900 and the 777X.

Ahead of the event, Britain issued a historic red warning for extreme heat, with southern England temperatures potentially exceeding 40C for the first time on Tuesday.

“It’s pretty challenging and we know that tomorrow is going to be a little bit warmer,” said John Paul Frasier, special advisor for Canadian aircraft manufacturer De Havilland.

“People who come to visit are really happy to visit.”

Iraq’s oil wealth is rekindling tensions between federal authorities and the autonomous Kurdish region, in a row that could compromise the lifeline industry and keep investors away, analysts say.

The long-simmering dispute came to a head in February — at a time of political deadlock in Baghdad — when the federal supreme court ordered Kurdistan to hand over oil extracted from its territories to the federal authorities.

Then earlier this month, a commercial court in the Iraqi capital annulled contracts between the Kurds and foreign firms, after the oil ministry in Baghdad filed a judicial complaint.

Authorities in the Kurdistan capital Arbil have cried foul, accusing Baghdad of heaping “unjust pressure” on them and announcing their own legal action.

Iraq, the second largest producer in the Organization of the Petroleum Exporting Countries, sits on enormous oil reserves, and revenues from the sector feed 90 percent of the federal government budget.

It exports an average of 3.3 million barrels of crude oil per day (bpd), while production in Kurdistan amounts to just over 450,000 bpd.

The February ruling stated that a 2007 law adopted by Arbil to regulate oil and gas was unconstitutional.

But analysts say politics play a major role in the dispute in Iraq, whose political barons have failed to reach agreement on choosing a president and a prime minister since October legislative elections.

“When it comes to oil, each side uses their respective powers as carrots and sticks depending on the political atmosphere of the day,” said Bilal Wahab of The Washington Institute for Near East Policy.

“At times when there was political accord, the courts were rather quiet. When there was political discord, however, the reverse was true,” he told AFP.

– ‘Reputation being damaged’ – 

The nullification of oil contracts between the Kurds and four international oil companies (IOCs) from Canada, Britain, Norway and the United States at the start of July has inflamed the row.

“For Baghdad to be chasing IOCs out of Iraqi Kurdistan does not serve to show Iraq as a major producer welcoming of foreign investment,” cautioned Yesar al-Maleki, an analyst at the Middle East Economic Survey.

In a fightback, the Kurdish regional authorities in June initiated judicial proceedings against the federal government.

One lawsuit targets Oil Minister Ihsan Ismail, accused by the Kurds of trying to “intimidate” foreign firms operating in the Kurdistan region of northern Iraq.

The Kurdish autonomous government has accused Baghdad of taking “illegal” and “politically motivated” actions.

For Wahab, Kurdish and federal government officials fail to appreciate “how much they are damaging the overall reputation of Iraq’s energy industry”.

“Questioning the sanctity of contracts … adds legal risk to a slew of other regulatory and governance risks that ail the Iraqi energy industry,” he added.

The dispute, he said, “repels much-needed foreign investment”.

Oil revenues are critical for Iraq, a country faced with widespread corruption but also mired in a financial crisis and in need of funds to rebuild infrastructure after decades of conflict.

– ‘Compromise’? –

Despite the legal actions, Kurdistan says it is open to a negotiated solution.

It is working on setting up two companies specialised in oil exploration and marketing that would coordinate with Baghdad, a spokesperson for the Arbil government said.

Baghdad’s oil ministry, meanwhile, marked a small victory after oil giants Baker Hughes, Halliburton and Schlumberger committed not to initiate new projects in Kurdistan.

The ministry says the companies are also working to “liquidate and close” existing contracts.

Baghdad has fought to regain control of output from lucrative oil fields in Kurdistan since the autonomous region began marketing oil independently more than a decade ago.

The two had struck a deal under which the Kurdish region would deliver 250,000 barrels per day to Baghdad, in return for a share of federal funds to pay the salaries of Kurdish civil servants. But Arbil never delivered the oil and has complained the funds were late.

In recent weeks, tensions have risen further after a series of unclaimed rocket attacks targeting oil and gas installations in Kurdistan.

Experts say the assaults aim to put pressure on the Kurdistan Democratic Party (KDP), the largest in Kurdistan. 

The KDP is allied to Shiite leader Moqtada Sadr, whose bloc won 73 seats in the October polls, making it the largest faction in the 329-seat parliament.

The party is eyeing the Iraqi presidency for one of its members, although traditionally the job has been held by a member of the rival Patriotic Union of Kurdistan.

“The timeline of events evidently shows that this whole crisis started because the KDP took the side of the Sadrist movement… opposing the Iran-backed Shiite Coordination Framework,” Maleki said.

He expects a “compromise” will be reached to resolve the oil dispute because “Iraq is a country of compromise”.

“Until then, the supreme court ruling will hang like the sword of Damocles over the Kurdish regional government,” he said.

US-European carmaker Stellantis said on Monday it was ending production in China of its Jeep SUV after failing to acquire a majority stake in its joint venture with local firm GAC.

GAC-Stellantis is one of two joint ventures in China embarked on by Stellantis, which was formed in January 2021 last year by the merger of Fiat-Chrysler and PSA.

“Stellantis intends to cooperate with GAC Group in an orderly termination of the joint venture formed in March 2010, which has been loss-making in recent years,” the group said.

It said the move was “due to a lack of progress in the previously announced plan for Stellantis to take a majority share” in the business.

The decision to wave goodbye to GAC would show up as “a non-cash impairment charge of approximately 297 million euros ($302 million) in its first-half 2022 results”, due out on July 28.

Stellantis said it would henceforth “focus on distributing imported vehicles for the Jeep brand in China”.

The group — which also includes the Peugeot, Alfa Romeo and Citroen brands — had hoped to increase its stake in China Guangzhou Automobile Group (GAC) to 50-75 percent.

The move was made possible by a change in Chinese regulations allowing deeper involvement by foreign investors, on condition they obtain Beijing’s approval.

Stellantis told AFP its decision to pull out was “not linked” to a decision by the Chinese government.

The group had announced in January that the acquisition of the hoped-for majority stake in the joint venture with GAC was the first step towards streamlining its activities in the world’s biggest vehicle market.

GAC protested at the time because the deal had not been signed.

Jeep, which is rolling out electric vehicles, was to be one of Stellantis’s main conduits for expanding in China. 

The group reported sales of 152 billion euros ($154 billion) in 2021 and aims to reach 200 billion in 2030. 

Stellantis’s main activity in China is the manufacture and sale of Peugeots and Citroens, via a joint venture with local automaker Dongfeng. 

China is also a key market for its luxury Maserati brand and a target for its premium brand DS.

Jeep sold just 20,000 vehicles in China in 2021 and at the end of last year, GAC-Stellantis terminated production at one of its two assembly lines. 

Jeep is now concentrating on offering a wider array of imported electric vehicles.