1/18/2012

BAHRAIN: Unrest hit Bahrain pins hopes on air show



By Praveen Menon
MANAMA
(Reuters) - Bahrain, keen to show its recovery after violent unrest, will not get much mileage from its air show, the first major international event since the protests, as the West remains wary of unpopular defence deals and commercial orders fizzle.
The Gulf island kingdom is pulling out the stops for the second Bahrain Air Show, which starts on Thursday and comes after the cancellation of the Bahrain Formula One Grand Prix and the Volvo Golf Championship last year.
Planemakers Airbus (EAD.PA), Boeing (BA.N), Bombardier (BBDb.TO), Embraer (EMBR3.SA) as well as defence contractors, including Lockheed Martin (LMT.N), will be at the show which generated a modest $1 billion in deals in its inaugural edition in 2010.
"The on-going political problems in Bahrain mean that the show is unlikely to be as successful as the Bahrainis would like it to be," said Michael Stephens, researcher at Qatar-based Royal United Services Institute for Defence and Security Studies.
"Bahrain relies on its reputation as a good place to do business to survive -- they do not have much oil or material resources. The air show needs to be a success for them to revive their international reputation."
The Sunni-led state, home to the U.S. Fifth Fleet, sought to crush anti-government demonstrations mounted by the country's Shi'ite Muslim majority in 2011. Protest marches have continued in recent months, sometimes turning violent. The unrest has cost Bahrain's economy some $2 billion and curbed investment.
The crackdown drew international criticism and prompted Britain to revoke arms export licences while Washington said a $53 million arms sale to Bahrain partly hinged on the Gulf monarchy halting abuses against protesters.
Given political sentiment, analysts expect no major defence deals between Bahrain and Western firms. Instead, a key focus will be potential purchases by other Gulf states.
Last month, the Obama administration sealed a $29.4 billion deal for advanced Boeing F-15 fighter jets to Saudi Arabia and the United Arab Emirates inked a $3.5 billion deal with the U.S. for an advanced antimissile interception system.
"There's fierce competition out there to grab deals from Saudi Arabia, UAE and other Gulf countries looking to strengthen their force." said Riad Kahwaji, chief executive of Dubai-based think tank INEGMA.
"These companies will be at the air show not for Bahrain but for their neighbours like Saudi Arabia and UAE."
Competition to sell fighters is intensifying amid rising security tensions in the Gulf over Iran and pressure on domestic Western defence budgets, which has prompted U.S. and European manufacturers to step up efforts to find exports.
The reticence of Western defence firms to strike big deals with Bahrain has encouraged Russia, which is making a major appearance at the air show with a display of its fighter jets including the Sukhoi combat aircraft.
"The Russians certainly see a gap in the market and they would want to exploit it," said Stephens. "But I think the Bahrainis would want to go for American or British if they had the chance, primarily for alliance cohesion and inter-operability with other weapons platforms."
COMMERCIAL ORDERS SEEN SLIM
Gulf carriers, which went on a buying spree at the Dubai Airshow in November with some $63 billion in orders, are not expected to announce any deals in Bahrain.
Indeed, Dubai's Emirates airline and Abu Dhabi's Etihad Airways will not be present at the three-day show while Qatar Airways will make an appearance.
Bahrain's flagship carrier Gulf Air, once in the forefront but left behind by intense competition from its Gulf rivals, is in focus.
The carrier, which has a fleet of 36 aircraft, has been in talks with Airbus and Boeing to reschedule deliveries and change its widebody aircraft orders to narrowbodies as part of its focus on network of regional routes.
Bombardier might gain from Gulf Air's plans with the carrier said to be eyeing the Canadian firm's CSeries narrow-body jets. Bombardier has scheduled a press conference for Friday morning amid speculation a deal may announced.
In April, Bahrain's state tender board flagged Bombardier as the front-runner for a deal valued at around $328 million, according to media reports. A Gulf Air spokeswoman said the airline had no announcements scheduled for the show.
Organizers, who say about 40 companies are participating in the show, have been promoting the event across Bahrain. Anti-government activists have called for demonstrations to protest against the event.
"Bahrain wants to mobilise the tourism sector ... it wants to say to the world that things are fine." said one Bahraini activist. "But everybody knows that things are not fine."
(Reporting by Praveen Menon; Editing by Amran Abocar and Jon Loades-Carter)