REFILE-AIRSHOW-PREVIEW-Fuel sipped in moderation at Farnborough

(Refiles to add missing word “one” and remove extraneous “said”
in paragraph 7 and adds missing word “be” in final paragraph)

* U.S. defence cos brace for cuts

* Air traffic demand seen picking up

* Farnborough Airshow opens to public July 19-25

By Andrea Shalal-Esa and Tim Hepher

FARNBOROUGH, July 16 (BestGrowthStock) – Cocktails and kerosene will
take a back seat at next week’s Farnborough Airshow as arms
firms strive to fit in with the growing mood of austerity and
Boeing (BA.N: ) shows off its new fuel-saving 787 Dreamliner.

Many defence companies have cut back on their visible
presence at the aerospace gathering and organizers have been
told to cut back on anything that might look like frills and
perks to Pentagon planners and others weighing big defence cuts.

That means fewer orders of champagne but plenty to talk
about inside the invitation-only chalets before the biennial
July 19-25 business jamboree near London opens to the public
next Friday.

“Everyone is cutting back on hospitality this year,
especially in the government areas,” a catering supervisor said
as workers put the finishing touches to a temporary air base
crammed with smart weaponry and sleek, new passenger jets.

European aerospace companies face a raft of uncertainties
over spending reviews affecting projects ranging from aircraft
carriers and the combat jets they carry to unmanned spy drones.

Defence giants in the United States have seen relatively
stable spending, but are bracing for steeper cuts as they battle
to maintain existing projects like the Lockheed Martin (LMT.N: )
F-35 Joint Strike Fighter, history’s costliest arms deal, on
budget and schedule. [ID:nN15230198]

“There is only one thing on everyone’s lips and it’s cuts,”
said Howard Wheeldon, senior strategist at London brokerage BGC
Partners, who has attended every Farnborough since 1968.

Overshadowing the airshow will be high-profile battles
between Boeing and EADS (EAD.PA: ) subsidiary Airbus over a $50
billion contest to provide aerial tankers to the U.S. Air Force
and the world’s largest trade dispute over aircraft subsidies.

The two companies and their engine makers are also involved
in a cat-and-mouse game over multi-billion-dollar decisions on
possible upgrades for their popular single-aisle jetliners, but
expectations of a big European announcement have faded.

As arms firms scrape the bottom of government coffers for
funding, analysts say acquisitions could heat up in coming
months, especially for second-tier defence and civil companies.

Damien Lasou, managing director leading Accenture’s
Aerospace and Defense Industry Group, said he expected a strong
shift into services by many defence and aerospace companies,
especially given pressures on defence budgets.

Leasing the use of weapons systems, rather than buying them
outright, could reduce costs for governments, while providing
companies a steady stream of revenue.


On the commercial side of the show, all eyes will be on
Boeing’s carbon-composite Dreamliner, taking a break from flight
testing to make its first public appearance outside the U.S.
following production delays of over two years.

Boeing suffered a setback on the eve of the show when it
announced first delivery of the mid-sized lightweight airliner,
designed to consume less fuel than traditional metal aircraft,
could be pushed back again into 2011 from the fourth quarter.

The switch to composite materials on planes like the 787 and
rival Airbus A350, due in mid-decade, could be another cue for
consolidation along an increasingly specialised supply chain.

“(Valuation) multiples are low and there are candidates that
are technologically very interesting, especially those that have
very large investments coming up, for instance for a switch to
composite materials,” said Stefan Ohl, managing director at
AlixPartners in Munich.

“You used to say that the strong will eat the weak. Now you
could say that the liquid will eat the illiquid. That means
those that have a full war chest.”

Analysts expect a more positive tone on plane orders as air
traffic demand picks up, especially after a shock repeat order
for 32 Airbus A380 superjumbos from Dubai’s Emirates last month.

Emirates could place an order for Boeing 777s at the show
but demand remains modest compared to earlier this decade.

Aviation analysts will be watching for further orders for
the Bombardier (BBDb.TO: ) C-Series 110-130 passenger jet,
designed to eat into the bottom end of the Airbus-Boeing product
range, as well as fresh moves from the new players China and
(Additional reporting by Maria Sheahan; Editing by Sharon

REFILE-AIRSHOW-PREVIEW-Fuel sipped in moderation at Farnborough