Gulf carriers ordered 140 planes for nearly $40 billion from both Airbus and Boeing Co. on Sunday, the opening day of the Dubai Airshow, in a boost for the global airline industry and a sign of the Middle Eastern airlines' rapid expansion.
With their economies booming in the wake of soaring energy prices, the oil rich states, in particular the United Arab Emirates, have been plowing money into ambitious airline expansion programs that are a boon for the aircraft manufacturers.
"These purchases are fundamentally important for Airbus and Boeing," John Strickland, director of JLS Consulting, a London-based aviation consultancy firm, told The Associated Press.
He said the Mideast "aviation giants" — Dubai-based Emirates, Qatar Airways and Abu Dhabi-based Etihad — are key customers of both planemakers. "These big orders are very important because they will not come in this size from Europe or the U.S. any time soon," he said.
In fact, the contracts and order options for a total of nearly $35 billion inked by Emirates Airline on Sunday set a historic record, according to Sheik Ahmed bin Saeed Al-Maktoum, the company's head. "This is the largest-ever aircraft commitment in civil aviation made by any airline in a single order," he said in a company statement.
With at least 98 firm orders signed Sunday, Airbus was by far the biggest beneficiary of the buying bonanza. But on the same day, the European company said that a weakening U.S. dollar was cutting into profits, pushing it to both look into sales in euros and possibly shift more salaries outside the euro zone.
"The weak dollar is a huge challenge for us as the aviation industry trades in dollars and a lot of the world's manufacturers are based in the U.S.," spokesman David Velupillai told Dow Jones Newswires.
A weak U.S. dollar does not make the planes more expensive, but it does lower the company's profits since half of Airbus' costs are in euros, he said. "We're also trying to cut down costs by placing our work force in dollar zones and are importing a lot of materials from the U.S."
On the opening day of the show, Emirates Airline announced it had signed a massive order for 93 commercial aircraft, including 78 from Airbus and 12 Boeing 777 jets, for a total of $23.4 billion, with an option to buy 50 more Airbus planes for nearly $12 billion.
The company's firm order included eight of Airbus' new superjumbo A380, the world's largest commercial jet. Emirates said it has made a total of 58 superjumbo orders to date, making it the biggest customer for the A380. It is expected to start taking delivery of the plane in August 2008.
Sheik Ahmed signed the contracts with Airbus Chief Executive Thomas Enders, and Lee Monson, vice president of Boeing Commercial Airplanes for the Middle East and Africa. Emirates said it also bought aircraft engines from Rolls Royce, Engine Alliance and GE Aviation.
Qatar Airways, meanwhile, ordered 27 Boeing 777 planes in part of its plan to double its 58-strong fleet to 110 aircraft by 2010. Saudi low-cast carrier National Air Service said it would buy 20 Airbus A320 aircraft.
Dow Jones reported that the Qatar Airways deal was worth $13.5 billion and the Saudi airline contract $2.2 billion.
The Dubai Airshow, the third-largest event of its kind, is closely watched as a measure of the state of Gulf air carriers, who are taking advantage of shifting travel routes to substantially expand their fleets, and ambition to turn the region into a major international hub.
"European carriers are also successful in exploiting new traffic flows and we cannot expect them to fall over and let the Middle East carry on without competition challenge," Strickland said.
This competition comes at a fortuitous time for the two global aircraft giants, which have been experiencing delays and setbacks in developing the latest generation of massive airliners.
Airbus had several high profile delays with its fuel efficient A350 and superjumbo A380, while Boeing has acknowledged delays with its Dreamliner 787.
"There's so much new, demanding technology that there are simply delays in putting it all together," Strickland said, noting Emirates Airlines' purchase of 70 Airbus A350 planes was a strong endorsement of the final product.
Airbus is owned by European Aeronautic Defense & Space Company. It has worked to put many of the problems with the A380 behind it, but another problematic plane, this time a military aircraft, continues to hurt financial results for parent company EADS.
EADS said last week it will take a bigger-than-expected third-quarter charge of 1.2 billion euros ($1.75 billion) to 1.4 billion euros ($2 billion) because of delays related to its Airbus A400M military aircraft. The company has scrapped its profit forecast for 2007.