Defence steals Farnborough show

The focus at Farnborough in on military hardware like the Eurofighter Typhoon

FARNBOROUGH, England -- Europe's biggest airshow has opened in England with traditional big-spending airlines being overshadowed by governments buying military hardware.

Rivalry between aviation giants like America's Boeing and Europe's Airbus Industries to notch up orders is being eclipsed by the battle between the Eurofighter Typhoon and Lockheed Martin's F-35 Joint Strike Fighter to win the hearts, minds and wallets of the world's governments.

"In the past it's always been about who is ordering which civil plane," said CNN's Richard Quest reporting from the Farnborough Air Show, southern England, "But this year it is much more about defence spending."

The turnaround comes as the world's airlines continue to reel from the aftermath of the September 11 terrorist attacks on the U.S. and defence expenditure is boosted as governments seek to counter the threat of further attacks.

Security has been tightened at the massive event which is scheduled to draw up to 300,000 executives, ministers and manufacturers -- a reminder to the industry of an uncertain future.

CNN NewsPass VIDEO CNN's Richard Quest visits the Farnborough airshow in England where the focus was more on defense spending and less on civil acquisitions (July 22) Play video   MORE STORIES • KLM in talks to buy Airbus jets  • Airbus, Boeing on defensive     QUICKVOTE Will defence spending help the aerospace industry bounce back? Yes No View Results

The last Farnborough airshow two years ago -- the show alternates with Paris -- was plunged into mourning over the Paris crash of the Concorde supersonic airliner and the 2002 gathering has begun amid gloom on the world's stock markets and hard times for most carriers.

Despite that, many airline chiefs at Farnborough are being upbeat.

KLM Royal Dutch Airlines, Europe's fourth-biggest airline, said they were negotiating with Airbus for the possible purchase of 12 A330-200 jets, with an announcement due later on Monday.

EasyJet, Europe's second-biggest low-cost airline, could announce an order for 100 planes from Airbus or Boeing, Keith McMullan, at London-based consultancy Aviation economics, told CNN.

Virgin Atlantic's chairman Sir Richard Branson confirmed on Monday the $2 billion purchase of ten Airbus A340-600s to replace its current A340-300 fleet, upping the passenger carrying capacity by 25 percent.

Branson told CNN at Farnborough: "After September 11 we weren't sure if anybody would fly again. It was a horrible time, but people are flying again.

"Economy class passengers have come back. That's why we are trying to get bigger planes. But it's a struggle to get the business passengers back.

Despite a downturn for the world's airlines, Airbus is celebrating orders

"Our feeling is you look after economy class passengers, not just go for the business class. The back end of the plane can pay the bills, the front end is the icing on the cake.

"The fact that we have ordered these new planes expresses confidence in the industry."

But for the less successful airlines a more cautionary note was struck by Credit Suisse First Boston analyst Harald Hendrikse, who told Reuters: "I have zero doubt we will see further order cancellations. The travellers just aren't there."

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

British Airways marketing director Martin George told Reuters: "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 it has been the opposite story for the defence industry.

"Defence is clearly very, very positive at the moment," Schroder Salomon Smith Barney aerospace analyst Nick Cunningham told Reuters.

President George W. Bush has proposed a $379 billion defence budget for the coming U.S. fiscal year while Britain has agreed to the biggest real increase in defence spending for two decades - $3.5 billion over three years.

Meanwhile, President Jacques Chirac has said he is determined to raise France's military profile to keep pace with Britain.

Virgin's Branson: Economy pasengers pay the bills

The Eurofighter project is being taken forward by four countries -- the UK, Germany, Italy and Spain. Initial deliveries to the four partner nations are expected towards the end of this year.

Visitors to Farnborough are getting the chance to see a full-scale Eurofighter replica. Also making its debut at Farnborough will be the large cargo door ATP Freighter, which is being made by BAE in partnership with the Scandinavian company West Air Sweden.

Monday was also seeing a special ceremony to mark the first powered flight in Britain. British and American dignitaries were attending the re-dedication of a memorial to the first British plane journey which was made by a U.S.-born pilot from Farnborough in 1908.

That UK first flight saw Colonel Samuel F Cody cover all of 1,390 feet at the controls of "British Army Aeroplane No 1".

The ceremony is part of a year-long series of activities leading to the centennial celebrations of the world's first flight by the Wright Brothers in America in 1903.

The Farnborough show lasts until Sunday July 28.