Defense at Dubai: Overshadowed, But Not Forgotten

Commercial aircraft orders stole the spotlight on the opening day of the Dubai Airshow. Boeing launched its 777X and racked up $100 billion in orders and commitments for 777s, 787s and 737s, while Airbus secured a crucial order for 50 A380s, not to mention 50 A350s and 30 A320neos. 

But the Middle East is also crucial for U.S. and European defense contractors as they look for new markets to help offset declining military budgets at home. Five years ago, Boeing's defense and space unit derived just 7% of its sales from outside the U.S. This year that figure is around 28-29%, and CEO Dennis Muilenburg forecasts international sales will account for one-third of his company's business during the next 5-10 years. 

And most of that growth is coming from the Middle East and Asia-Pacific, he said during a Nov. 17 roundtable with reporters at the Dubai show. "I would say about 80% of our [international] business is in those two regions, and roughly balanced between [them]," he says. Saudi Arabia has ordered 84 F-15s and is upgrading another 70 already in its fleet. 

And Boeing sees opportunities for that aircraft or the F-18 in the United Arab Emirates, Qatar and Kuwait. But while the region presents lucrative opportunities, the competition for business has grown stiffer. "The fact that U.S. and European [defense] budgets are down is creating more competition in other markets," Muilenburg acknowledges. 

Meanwhile, Boeing's proposal to sell Super Hornets to Brazil has been "paused" for six months, until next spring. U.S.-Brazilian relations have been strained by revelations of spying by the U.S. National Security Agency, so the delay could benefit the company by providing time for tensions to cool. "Good government-to-government relations ... help feed the order pipeline," Muilenburg says, adding that Boeing's proposal includes work with Brazilian aircraft builder Embraer. "The industrial relationships we've built around our proposal are very beneficial."

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