Orders slow, Boeing says problem with 787 brakes

FARNBOROUGH (Reuters) - Orders slowed to a trickle and BOEING (BA.NY) announced a problem with the software on the brakes of its yet-to-fly 787 Dreamliner, adding to a somber mood on the second morning of the Farnborough Airshow.

However, there was talk a significant leasing deal may be announced during the afternoon.

The biggest deal announced early on Tuesday was a 16-plane order from Tunisair worth $1.9 billion at list prices for three Airbus A350s, three A330s and 10 A320s.

Qatar Airways unveiled a deal to buy up to six Airbus A321 planes and said it could set up a budget airline within 90 days to repel any attack by a rival airline on its home market.

Chief Executive Officer Akbar al-Baker also said he was in negotiations with Airbus to buy further A320-family aircraft and hoped to make a further announcement soon, and he was interested in Bombardier's new CSeries 100-145-seat aircraft.

The orders were thin in comparison with unprecedented demand in the past three years at similar air shows, with airlines reeling from triple-digit oil prices and many cutting capacity.

Dozens of airlines are struggling to raise finance to stay in business let alone invest in new fleets, but this is not the case for Gulf carriers who shelled out $25 billion for new planes on Monday, led by Abu Dhabi's Etihad Airways.

"It is not over yet," said veteran air show observer Howard Wheeldon of BGC Partners, who expects 280 plane sales this week.

"My main concerns are that this is as good as it gets. The Middle East is resilient, but from now on aircraft makers and airliners will have to batten down the hatches and manufacturers will have to set the ground for some likely cuts in production."

An even bigger concern for capital markets relates to the airline industry's ability to finance itself, he added. Boeing and European rival Airbus conceded this week they would be forced to offer some financing for airlines, though the European company is particularly reluctant to do so.

PRODUCTION PROBLEMS

Boeing and Airbus are producing at full speed to meet a record order backlog that each brought into the show, but both face production delays on key aircraft programs.

The head of Boeing's 787 Dreamliner program said verifying software in the brake control system was the latest problem holding back the first test flight.

The first of the 787s, originally meant to fly last summer, has been held back by three major production delays due to parts shortages and incomplete work from suppliers arriving at its assembly plant near Seattle.

The plane is still on track for a first flight in the fourth quarter -- in line with the last schedule announced in April -- but the newest "air bubble" in the timetable is in the brake systems, Pat Shanahan, general manager of the 787 program, said at a briefing at Farnborough Airshow on Tuesday.

"We need to push harder on the brake system," he said.

The work on the brake control and monitoring system is being done by U.S. company Crane Co , which was subcontracted by General Electric Co's Smiths aerospace unit.

Crane's spokeswoman was not available for comment.

French company Messier-Bugatti, which provides the wheels and brakes, denied its own work on the plane was running late.

The mood at the aviation jamboree, held on alternate years in Farnborough and Paris, was fairly t grim as executives assessed how to tackle oil at records highs at $145 a barrel.

Compared with previous years, the show got off to a painfully slow start, mirrored by the slowing pace of industrial economies squeezed by credit fears and the specter of inflation.

The main action on Monday came from Etihad which split a $20 billion order between Airbus and Boeing on Monday.

(Writing by Dan Lalor, Tim Hepher; Additional reporting by Bill Rigby, James Regan)