What Boeing's Big Haul Says About the Growing Middle East Market
Boeing is poised to bring in about $100 billion in orders at this month's Dubai Airshow, the bulk coming from orders of its developing 777X, which will be the largest passenger jet yet built. These orders would mark the best-selling product launch in the company's history, but it also marks a turning point in the global aviation market. Not only will these deals be inked in the United Arab Emirates, but the largest customers will be Middle Eastern airlines, demonstrating the region's increasing prominence and influence. The airlines and militaries of several Persian Gulf states, flush with oil money, are growing into one of the most important global markets in aviation and defense.
Historically, the aviation industry's biggest events have been the Paris Air Show in France and the Farnborough International Airshow in the U.K., prestige events where aeronautic and defense companies showcase their best offerings and rack up big orders. Over the past 20 years, however, the Dubai Airshow has risen from an obscure newcomer to challenge the biggest events in the business. In 2007, Dubai set the record for the largest order ever taken at an air show, and 2013 could cement its status as the most commercially important event of its kind in the world. Boeing's anticipated $100 billion in orders alone is equal to the 2013 Paris Air Show's entire sales total and nearly $30 billion more than Farnborough brought in.
The biggest driver of Boeing's sales in Dubai, the 777X, could take in as many as 250 orders, mainly from Gulf carriers Emirates, Qatar Airways, and Etihad. The 777X will be the largest passenger jet ever with an unprecedented range up to 9,500 nautical miles. That's important for Middle Eastern airlines, which have smaller local markets for short-range flights than North America, China, Europe, or South America, but are well-positioned geographically to facilitate long-haul travel between continents. With a central position at the crossroads of Asia, Europe, and Africa, and astride routes connecting Asia to the Americas, Gulf airliners are positioning themselves as major intercontinental transportation providers. In fact, with the 777X Gulf airliners will be able to connect any two spots on the globe with just a single stopover in the Middle East.
Gulf airlines don't just have geographic advantages, they also have the pockets to expand. Most Gulf airlines, including the three making the largest 777X purchases, are owned by governments with an awful lot of money from oil production. These governments see aviation as a major economic and strategic priority, and are not afraid to invest heavily in airlines: the Dubai Airshow itself will be held at the new Al-Maktoum International Airport, built for $32 million by the government of Dubai.
Those overflowing public purses are also behind the Middle East's growing importance to the defense market. Oil-rich Gulf states like the United Arab Emirates, Qatar, and Saudi Arabia don't just have the budgets to splurge on high-tech military equipment, they also have the relationships with the U.S. to get Washington's approval to buy from American arms manufacturers. As the U.S. and Europe cut back on military expenditures in the face of troubled budgets, American defense contractors will continue to seek growth from moneyed U.S. allies like the Gulf states. While the order book at the upcoming Dubai Airshow is set to break commercial records, defense watchers should also be looking out for military sales sealed at the trade show for signs that the Middle East is taking a more prominent role in the space.
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The article What Boeing's Big Haul Says About the Growing Middle East Market originally appeared on Fool.com.Fool contributor Daniel Ferry has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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