By Tim Hepher and David Shepardson

FARNBOROUGH, England -Boeing will seek to shore up its troubled 737 MAX 10 and 777X jetliners with orders officially worth over $15 billion from Delta Air Lines and Lufthansa this week, as the aerospace industry swelters at its largest event since COVID-19.

Industry sources said the U.S. planemaker, struggling to maintain a grip on its duopoly with Europe’s Airbus, would strike early at the Farnborough Airshow, which opens on Monday, after months of talks on its largest 737 with Delta.

Reuters first reported in March that Delta was discussing buying 100 MAX 10 and reported last week that the airline was in talks to order around 12 more Airbus A220s in a deal likely be announced on Tuesday.

Germany’s Lufthansa is likely to firm up a deal for around 10 large Boeing freighters, including seven of the recently launched cargo version of the 777X, sources said.

None of the parties commented ahead of the show, which is going ahead despite an emergency weather warning and transport disruption caused by forecasts for record high temperatures.

As Britain melts, aerospace firms will do their best to show civil demand is intact after the worst downturn in their history. Rising defence spending will also be in focus as the industry gathers under the shadow of war in Ukraine.

Boeing unveiled broadly stable civil airplane forecasts on Sunday.

Even so, many of the deals will be provisional ones or formal signings of business already in the works, and virtually all will be packaged as contributions to lower emissions in support of a common goal of net zero by 2050, delegates said.

EasyJet is set to win shareholder approval for a recent deal for 56 Airbus A320neos, placing it on Farnborough’s radar. Etihad has firmed up an order for seven A350 freighters, though it is unclear whether these will be unveiled at the show.

Poland’s LOT is studying proposals from existing suppliers Boeing and Embraer as well Airbus and engine firms, but will not make a decision at the show, a person close to the talks said, denying a report that the airline had already picked Airbus.

Demand for jets peaked in 2016 but remained buoyant until the pandemic crippled air transport. Now, travel is rebounding, passengers face long lines and some jets are back in demand.

Yet, apart from Delta’s expected MAX purchase, the big-ticket orders that dominated past events are rarer as airlines repair balance sheets weakened by COVID-19 travel restrictions.

Airbus and Boeing officials flew to India ahead of the show chasing a potential $50 billion blockbuster from Air India owner Tata Group. It is studying 200-300 narrowbodies and 30-70 wide-bodies split between suppliers, but hopes of a sizzling order to match this week’s temperature are on hold for now, sources said.

That means most attention will be on the MAX 10 and 777X which Boeing plans to fly in a scaled-down Farnborough display.

MAJOR HEADACHES

Both airplanes are the source of major headaches as Boeing wrestles with regulatory problems in the wake of a two-year safety crisis triggered by crashes of a smaller MAX.

Boeing has a December deadline to win approval for the 737 MAX 10 – the largest member of its single-aisle family – or meet new cockpit alerting requirements, unless Congress waives it.

Chief Executive Dave Calhoun has said Boeing could be forced to cancel the 737 MAX 10 – a move that could have repercussions across the industry including for rival Airbus, reluctant to be dragged into a race to develop new jets too soon.

However, the head of Boeing’s commercial division, Stan Deal, told reporters on Sunday that cancelling the MAX 10, which analysts say is needed to compete with strong sales of the Airbus A321neo, is “not a high probability path”.

Boeing is also close to delivering its first 787 in a year after a spate of regulatory and production problems, Deal said.

Aerospace leaders will also be under pressure this week to address concerns over supply chains and a spike in inflation that raise questions over both input costs and consumer demand.

Current market leader Airbus is sticking with plans to raise single-aisle A320neo output to 75 jets a month in 2025 from 50 now, but some suppliers fear supply chains may not keep up.

(Reporting by Tim Hepher, David Shepardson, Paul Sandle; Editing by Mark Potter and Cynthia Osterman)

By Elizabeth Dilts Marshall and Manya Saini

(Reuters) -Bank of America Corp beat analysts’ estimates for second-quarter profit on Monday, with healthy consumer spending and strong demand for loans limiting the hit from its investment banking business.

Executives at the second-largest U.S. bank painted an overall positive outlook for consumer spending going forward, saying that despite decades-high inflation, spending continues to grow, albeit at a slower pace.

“We observed from our data spending remains excellent, deposit balances remain high, capacity to borrow is still there, credit quality is still there,” Chief Financial Officer Alastair Borthwick said on a call.

The U.S. Federal Reserve has been hiking interest rates rapidly as it attempts to tame inflation, and though that continues to have economists calculating the risk of a recession, it meant healthy profits for banks in the second quarter.

Bank of America’s net interest income, a key measure of the difference between the interest earned on loans and the amount paid out on deposits, jumped 22%, or $2.2 billion, to $12.4 billion in the second quarter.

The bank expects it can grow NII by $900 million to $1 billion by the third quarter, Borthwick said.

With respect to its economic outlook, the bank released $48 million of reserves in the quarter, compared to rival banks JPMorgan Chase & Co and Wells Fargo & Co, which boosted loss provisions in the quarter. BofA’s total loan loss provisions as of June 30 were $500 million.

“Net interest income growth has always been its strong point and should bridge (the bank) through the oncoming recession, even if credit losses rise off of historical lows,” Viola Risk Advisors president David Hendler wrote in a note on Monday.

Bank of America’s shares, which have fallen nearly 28% so far this year, were up 0.91% at 11:45 EST (1545 GMT).

The company’s profit fell 34% to $5.93 billion, or 73 cents per share, for the quarter ended June 30. On an adjusted basis BofA earned 78 cents per share, compared with estimates of 75 cents per share, according to Refinitiv IBES data.

Bank of America’s investment banking fees fell 47% to $1.1 billion in the second quarter, as Wall Street has seen public listings and dealmaking activity slump amid volatile capital markets and geopolitical tension.

Revenue, net of interest expense, rose 6% to $22.7 billion despite a downturn in the leveraged finance markets. Borthwick said the bank will be working down leveraged loan exposure from the $300 million mark.

“Some of those deals have been funded, and we’re working through any remaining exposure to get them through the market,” Borthwick said on a call with analysts.

SPENDING & THE FED

Despite inflation hovering at levels not seen in four decades, spending by Bank of America’s 60 million household customers rose 11% to $220.5 billion over the first quarter this year.

“Our U.S. consumer clients remained resilient with continued strong deposit balances and spending levels,” Chief Executive Officer Brian Moynihan said.

Spending trends are key indicators of the financial health of consumers and Moynihan said they are seeing more customers spend on travel and fuel, due to increased prices, and less spending at retail stores. Overall, revenue for the consumer banking unit rose 12% to $9.1 billion in the reported quarter.

Total loans and leases, excluding those from the government’s Paycheck Protection Program, also grew 14% year-over-year, and it was 4% than the immediately preceding quarter.

“While all of this is good news,” Moynihan said, “it clearly makes the Fed’s job tougher when you take the statistics and combine it with a low unemployment rate.”

(Reporting by Manya Saini and Niket Nishant in Bengaluru and Elizabeth Dilts Marshall in New York; Editing by Shounak Dasgupta and Nick Zieminski)

By Alex Lawler, Julia Payne and Stephanie Kelly

LONDON/NEW YORK – Benchmark oil prices have dropped by about $15 a barrel in the past 10 days as the threat of recession clouds the demand outlook, but the physical oil trade and the futures market structure tell a quite different story.

Growing concern about the economic outlook pushed Brent crude below $100 a barrel last week for the first time since April.

But in the physical market, premiums have been at record levels. Nigerian Qua Iboe crude was offered at $11.50 a barrel above dated Brent this week, while North Sea grade Forties was bid at dated Brent plus $5.35 on Tuesday – both all-time highs.

And while the outright Brent price has fallen almost 20% since May, the premium at which the nearby contract is trading to the second month – a structure known as backwardation, which implies tight prompt supply – has widened to $4.09 a barrel.

That suggests strong underlying support for near-term prices despite the drop in the benchmark Brent contract.

“Outright prices and the structure are out of sync,” said Tamas Varga of oil broker PVM. “It implies genuine strength on the physical front that goes against the sentiment in the futures market.”

Helping to keep supply tight, outages have reduced Libyan and Nigerian production, Western sanctions are forcing a re-routing of Russian oil flows, and OPEC and its allies have been unable to meet pledged output hikes.

“While a deep recession cannot be discounted, we remain focused on the objective fact of physically tight markets,” BCA Research said in a note. That, it said, “will keep oil markets volatile and biased to the upside”.

In the United States, WTI-Midland and WTI at East Houston traded in June at a more than $3 premium to U.S. crude futures, the highest in more than 2 years.

Though both grades have since edged off those highs, they are still trading more than 60% higher than at the start of June.

U.S. crude stockpiles are at about 427.1 million barrels, about 2.4% lower than during the same time last year, Energy Information Administration data showed.

But while market tightness is, in the words of one European trader, “definitely what’s being talked about”, the risk of recession still looms large.

The tightness, says Varga, “could also mean further upside potential; however, stubbornly high global inflation and its impact on oil demand might just change the ‘buy-the-dips’ attitude to ‘sell-the-rallies’.”

(Reporting by Alex Lawler, Stephanie Kelly and Julia Payne; Editing by Jan Harvey)

LONDON – Britain’s competition regulator said on Monday it would carry out another review of Facebook owner Meta’s acquisition of Giphy after a tribunal quashed its original decision to block it.

Britain’s Competition and Markets Authority (CMA) last year ordered Meta to sell animated images platform Giphy, which it acquired for a reported $400 million, because of its concerns about a loss of a possible competitor in advertising, and the potential impact on social media rivals.

Last month, the U.S. tech giant partially won an appeal against the regulator, when Britain’s Competition Appeals Tribunal (CAT) said that the CMA had “failed properly to consult” and had “wrongly excised portions from its decision”.

The CAT said it had quashed the regulator’s ruling and referred the matter back for a new decision.

In response, the CMA said the tribunal had endorsed its approach to reviewing mergers that might harm innovation, but had agreed to reconsider its ruling.

“We will commence our review shortly,” it said.

(Reporting by Shanima A in Bengaluru; Editing by Shailesh Kuber and Michael Holden)

By David Milliken and Andy Bruce

LONDON -A top Bank of England official pushed back on Monday at suggestions from a leading candidate to become Britain’s next prime minister that the government should set a “clear direction of travel” for monetary policy.

Michael Saunders, one of nine members of the interest rate-setting Monetary Policy Committee, said the foundations of Britain’s monetary policy framework were best left untouched by candidates to lead the Conservative Party.

Since 1997 the BoE has had “operational independence” to change interest rates as it sees fit to meet an inflation target set by the government which does not generally comment on monetary policy.

However, Foreign Secretary Liz Truss, one of the front-runners to succeed Boris Johnson, at the weekend said she wanted to look again at the BoE’s mandate to “make sure it is tough enough on inflation,” and would “set a clear direction of travel” on monetary policy.

Kemi Badenoch, a former equalities minister who is also standing to be Britain’s next prime minister, has also said the BoE had been insufficiently scrutinised by government at a time when inflation of 9.1% is far above its 2% target.

Saunders said greater government involvement would make it harder, not easier, for the BoE to control inflation.

“The foundations of the UK monetary policy framework, I think, are really important and best left untouched,” Saunders said at a Resolution Foundation event in London.

“The government very clearly does not set the direction of travel for monetary policy,” he added.

Saunders said Britain’s monetary policy credibility was at stake. He was speaking in a question-and-answer session after a speech – his last before stepping down next month – in which he said interest rates could top 2% in a year.

“The MPC’s ability to loosen monetary policy promptly and effectively during the recession of 2008-09 and during the pandemic … rests on the credibility of that policy framework.”

Saunders also said a greater focus on money supply – something suggested by Truss – would not help. The BoE already looked at money and credit growth, and explicit targets had failed when tried in the 1980s.

It is rare for rate-setters to criticise politicians although in 2016, then-governor Mark Carney said he would not “take instruction” from politicians after the prime minister at the time, Theresa May, said the BoE’s policies had “bad side-effects” and would have to change.

Last week, Governor Andrew Bailey stressed to lawmakers the importance of central bank independence – including on regulation – but would not be drawn on the Conservative contenders’ plans for tax cuts.

Saunders, however, warned that tax cuts now – when Britain’s economy has little spare capacity – would likely mean extra interest rate rises would be needed to cool inflation.

Truss has proposed to reverse more than 30 billion pounds ($36 billion) of tax rises which her leadership rival, Rishi Sunak, announced while finance minister.

“Truss’s policy platform still poses the greatest risk from an economic perspective in our view with an unseemly combination of pro-cyclical tax cuts and institutional disruption,” U.S. bank Citi’s chief UK economist, Benjamin Nabarro, said.

($1 = 0.8350 pounds)

(Reporting by David MillikenWriting Andy BruceEditing by William Schomberg and Toby Chopra)

By Paul Sandle and David Shepardson

FARNBOROUGH, England -UK-Japanese collaboration on fighter jets and a multibillion-dollar Boeing passenger plane order gave a lift to the aviation industry on Monday as the Farnborough Airshow returned in a heatwave tipped to break UK records.

A national emergency has been declared in Britain for Monday and Tuesday, with temperatures set to rise above 40 degrees Celsius (104 Fahrenheit) for the first time.

Despite warnings to limit travel, delegates battled crowded trains and shuttle buses to reach the show in southern England. Problems were exacerbated by climate protesters holding a mock funeral for the Earth outside the show.

The industry has been reeling from its own travel disruptions and the head of Emirates airline, which has clashed with London’s Heathrow over enforced capacity cuts, said a badly disrupted air travel industry would return to equilibrium in 2023 and must “tough it out” until then.

The air show, which alternates with Paris, is the first at Farnborough since 2019, and rising defence spending is in focus amid the war in Ukraine.

Britain announced it was collaborating with Japan and existing partner Italy on its next-generation fighter jet programme, potentially leading to decisions on deeper partnerships by the end of the year.

Three sources told Reuters last week that Britain and Japan were close to agreement to merge their next-generation Tempest and F-X fighter jet programmes to help save costs.

“I am a passionate believer in the potential of our burgeoning partnership, not just with Italy, but with Japan,” British Prime Minister Boris Johnson said in opening remarks at the show.

On the civilian side, Boeing, under pressure to make up ground lost to rival Airbus, struck an upbeat tone on aircraft demand despite a faltering global economy.

“I think we’ll see the glory of the old days – and then some,” CEO Dave Calhoun told CNBC, adding he was keeping a close eye on the economy. “For right now I am enjoying the robust demand that we see.”

Boeing received a boost for its 737 MAX 10 jet, which has hit regulatory snags, with Delta Air Lines announcing an order for 100 of the aircraft worth $13.5 billion at list prices, confirming a Reuters report..

India’s Jet Airways is near a deal to buy 50 A220 jets from Airbus, two people close to the matter said.

FRUSTRATION

Demand for jets peaked in 2016 but remained buoyant until the pandemic crippled air transport. Now, travel is rebounding, passengers face long lines and some jets are back in demand.

But the big-ticket orders that dominated past events are rarer as airlines repair balance sheets weakened by COVID-19 travel restrictions.

Aerospace firms came under pressure from customers at the start of the show to stabilise fractured supply chains and feed resurgent jet demand, even as airlines and airports are struggling to smooth their own operations after the pandemic.

Airbus CEO Guillaume Faury told Flightglobal in an interview published on Monday that engine delays holding back plane deliveries would peak at mid-year.

But the head of the body representing global airlines, IATA Director General Willie Walsh, said manufacturers had wasted chances to shore up assembly lines.

“Airlines are frustrated by the delays around delivery of aircraft; they’re frustrated around issues like access to spare parts,” Walsh told Reuters.

“I think (manufacturers) should have taken better advantage of the lull in demand over the past two years to have been better prepared for this recovery.”

Industries worldwide are facing gaps in supply chains and labour shortages. Even the Farnborough Airshow itself has had trouble recruiting enough hospitality staff, insiders said.

Aviation is also under pressure to build greener planes and stop adding to what Johnson called the “carbon tea cosy” heating the planet. “We know that we must fix it. We know that time is running out,” he said.

(Reporting by Paul Sandle, Nick Carey, Tim Hepher, David Shepardson and Kate HoltonEditing by Mark Potter)