Boeing groundings to dominate industry summit in Dubai

Emirates, the region’s biggest airline, is looking at reducing an order for the delayed Boeing 777X in the wake of safety concerns. (Reuters)
Updated 15 November 2019

Boeing groundings to dominate industry summit in Dubai

  • The biennial civil and military expo is a major showcase for wares from jumbo jets to military drones

DUBAI: An eight-month crisis over the grounding of Boeing’s 737 MAX jets and widespread industrial delays are setting an unpredictable backdrop to next week’s Dubai Airshow, with some airlines reviewing fleet plans even as others look for bargains.

The biennial civil and military expo is a major showcase for wares from jumbo jets to military drones but faces growing questions over demand and the capability of overstretched suppliers, delegates arriving for the Nov. 17-21 event said.

Top of their agenda will be the worldwide grounding of the 737 MAX in the wake of two deadly crashes.

Investors who have pushed up Boeing shares believe the planemaker is turning a corner after the eight-month grounding, with the company predicting commercial flights in January. But it also faces a logjam of undelivered jets that could take two years to unwind.

State-owned flydubai expects its fleet will now shrink by a third this year, highlighting the cost of the grounding for the biggest MAX customer outside the US.

“Flydubai has very big ambitions. Given the scale of those ambitions, there is little they can do but wait and watch, like everyone else,” said Teal Group analyst Richard Aboulafia.

Boeing lost one potential MAX customer earlier this year as Saudi budget airline flyadeal ditched a provisional order.

Experts say airline frustrations with plane and engine makers could also disrupt plans by the world’s largest jetmakers pushing for order endorsements.

The Middle East’s largest aerospace event will give Airbus and Boeing a chance to sit with some of their top customers who have threatened to walk from billions in deals.

The planemakers are struggling to deliver aircraft on time, forcing airlines to delay expansion plans, while engines on some jets are causing issues for carriers.

“This seems to be a systemic issue across the board,” said Novus Aviation Capital Managing Director Mounir Kuzbari.

“As a result, we see stress on the relationship between airlines and the plane and engine makers.”

Dubai’s Emirates, by far the region’s biggest airline, has issued a stern warning to plane and engine makers. It will no longer take delivery of aircraft that do not meet performance expectations, raising doubts over $35 billion in pending orders.

Airbus, Boeing and engine makers will be looking to allay concerns as they finalize aircraft sales with Emirates, which is also looking at reducing an order for the delayed Boeing 777X.

Airbus is seen close to a final order for A330neo and A350 jets while Boeing aims to salvage a provisional order for 787s.

Air Arabia could, however, steal the show with a planned order of up to 120 Airbus jets, industry sources say.

Kuwait’s Jazeera Airways is in negotiations with Airbus and Boeing for around two dozen aircraft.

Past editions of Dubai’s premier trade event have featured blockbuster deals, often led by Emirates, as Gulf carriers redrew the aviation map around their “super-connector” hubs.

But the Gulf hub model is increasingly under pressure as the once-rapid growth of the region’s biggest airlines slows.

“The market continues to be weak for all airlines in the region, and  we expect to see a further 2-3 percent reduction in passenger numbers for the full year,” Diogenis Papiomytis, Frost & Sullivan’s global program director for commercial aviation, said.

Middle East military leaders touring the displays will try to gauge whether they are on the cusp of another regional splurge on weapons following an escalation in Gulf tensions.

A series of attacks over the summer has highlighted potential security gaps among some of the world’s leading defense spenders who now increasingly buy from China and Russia. 


Mexico objects to labor enforcement provision in North American trade deal

Updated 4 min 45 sec ago

Mexico objects to labor enforcement provision in North American trade deal

  • Mexico produced more stringent rules on labor rights aimed at reducing Mexico’s low-wage advantage
  • US House of Representatives proposes the designation of up to five US experts who would monitor compliance with local labor reform in Mexico

MEXICO CITY: Mexico’s deputy foreign minister, Jesus Seade, said on Saturday he sent a letter to the top US trade official expressing surprise and concern over a labor enforcement provision proposed by a US congressional committee in the new North American trade deal.
Top officials from Canada, Mexico and the United States on Tuesday signed a fresh overhaul of a quarter-century-old deal, aiming to improve enforcement of worker rights and hold down prices for biologic drugs by eliminating a patent provision.
How labor disputes are handled in the new United States-Mexico-Canada Agreement (USMCA) trade deal was one of the last sticking points in the negotiations between the three countries to overhaul the agreement.
Intense negotiations over the past week among US Democrats, the administration of Republican US President Donald Trump, and Mexico produced more stringent rules on labor rights aimed at reducing Mexico’s low-wage advantage.
However, an annex for the implementation of the treaty that was presented on Friday in the US House of Representatives proposes the designation of up to five US experts who would monitor compliance with local labor reform in Mexico.
“This provision, the result of political decisions by Congress and the Administration in the United States, was not, for obvious reasons, consulted with Mexico,” Seade wrote in the letter. “And, of course, we disagree.”
USMCA was signed more than a year ago to replace the North American Free Trade Agreement (NAFTA), but Democrats controlling the US House of Representatives insisted on major changes to labor and environmental enforcement before voting.
The letter, released on Saturday, is dated Friday and addressed to US Trade Representative Robert Lighthizer. Seade said he would travel to Washington on Sunday to raise the issues directly with Lighthizer and lawmakers.
“Unlike the rest of the provisions that are clearly within the internal scope of the United States, the provision referred to does have effects with respect to our country and therefore, should have been consulted,” Seade wrote.
Both Canada and the US House Ways and Means Committee said the deal included a mechanism for verification of compliance with union rights at the factory level in Mexico by independent labor experts.
Some Mexican business groups bemoaned a lack of clarity and conflicting information on how the rules would actually be enforced under the deal, the first text of which became public only on Wednesday.