Air Show Begins Amid Dour Market

FARNBOROUGH, England -- The world's top airshow of the year opened Monday with civil aviation still reeling after Sept. 11 but defense expenditure booming as governments seek to counter the threat of further attacks.

With up to 300,000 executives, ministers and manufacturers coming to Farnborough in southeast England, security has been tightened -- a stark reminder to the industry of the turbulent future it still faces.

The last Farnborough airshow two years ago was plunged into mourning after the Paris crash of the Concorde supersonic airliner, and the 2002 gathering could be an equally muted affair.

With the airlines still losing billions, Credit Suisse First Boston analyst Harald Hendrikse summed up the gloomy outlook: "I have zero doubt we will see further order cancellations. The travelers just aren't there."

The industry is in no mood to celebrate -- in sharp contrast to the usual flow of carefully stage-managed plane order announcements made by arch rivals Boeing and Airbus SAS at the show to see who can create the biggest splash at Farnborough.

The industry is facing its worst crisis since the Gulf War a decade ago. With more than 2,000 planes still lying idle, losses are endemic and overcapacity rampant.

Swissair and Belgium's Sabena were the first high profile casualties after Sept. 11 and airlines have globally lost $12 billion over the last year. Climbing back into profit is proving to be slow and painful.

As British Airways marketing director Martin George so starkly put it: "People make parallels between this and the Gulf War, but 9/11 was extremely dramatic because it was the first time commercial aircraft were used as weapons of war. It undermined the absolute heart of the business."

But civil aviation's loss is the defense industry's gain.

"Defense is clearly very, very positive at the moment," said Schroder Salomon Smith Barney aerospace analyst Nick Cunningham.

President George W. Bush has proposed a $379 billion defense budget for the coming U.S. fiscal year, while Britain has agreed to the biggest real increase in defense spending for two decades. President Jacques Chirac meanwhile is determined to raise France's military profile.

The civil aviation rivalry between Europe and the United States has now turned into a dogfight over defense, with the Eurofighter Typhoon battling Lockheed Martin's F-35 Joint Strike Fighter to see who can grab the most orders from airforces around the world.

The Pentagon's chief weapons buyer has no doubts who will win. "No contest," said Edward Aldridge, after Turkey this month became the seventh nation to partner with the United States in developing the Joint Strike Fighter, the biggest warplane project in aviation history.