Leeham News and Analysis
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Leeham News and Analysis
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Market sees 737 sales lagging, but matches 2010–so far
Here is a story we did for Commercial Aviation Online.
| Date: | 12/07/2011 11:40 |
| Source: | Commercial Aviation Online |
| Location: | Seattle |
| By: | Scott Hamilton |
Boeing took a drubbing in the headlines from the Paris Air Show as Airbus racked up more than 600 orders for its A320neo family while there were few announcements for the rival 737.
Many of the neo orders and some of the 737 orders have yet to be converted to firm contracts, largely a formality, but through June, Airbus is ahead of Boeing in this market segment. Boeing reported 141 gross orders and 104 net orders for the 737. Airbus reports 706 gross orders and 618 net orders for its A320 family.
For the first six months of 2010, Airbus reported 43 firm and 35 orders for the A320 family. Through the Farnborough Air Show in July last year, the figures were 179 and 153. Boeing recorded 236 737 orders through Farnborough.
While the market perception is that Boeing is performing dismally in 737 sales, in fact it is about par with the first six months of 2010, when Boeing reported 119 sales. (The Boeing website archive does not indicate if this is gross or net sales.) Airbus has simply had a blow-out winner with its neo.
“Airbus has chosen a smart single-aisle strategy and has been rewarded by the market,” says Richard Aboulafia, aerospace analyst with The Teal Group in Washington (DC). “Boeing’s core narrow-body customers are waiting to see what the company offers, but until they decide on a strategy orders will be a bit thin.”
Adam Pilarski, a consultant with Avitas, has this take:
“One, they are kind of sold out, so average Joe has to wait for a long time to get the planes. Two, US airlines re-fleeting, I believe, will start happening soon and this will bring hundreds of orders (not all to Boeing but some). Three, the uncertainty of their narrow body decision. If they re-engine, why buy old stuff now? Ditto if totally new, wonderful stuff becomes available by 2019, which is not so far off the date you can buy existing stuff in large quantities today.”
Boeing did not respond to a request for comment.
How many orders for Airbus NB craft are holdovers from last year ( effected by
the then uncertain gestation of the NE Option ) ?
My guess would be quite a few. There was pent-up demand for the NEO and a lot of Airbus operators were holding off ordering until the NEO was announced.
Most likely they wouldn’t have been 737 customers in any case.
The real measure is how many 737 operators jumped ship and ordered A320NEOs? My guess is precious few.
Boeing is talking inconclusive things about their future strategy since beginning of the year. One has to be quite desperate or quite stupid to order a B737-800 for delivery in 2016 now.
Boeing wants to pump out 737s at up to twice the current rate over a period of ten years or so. It simply cannot do so if just gets top-up orders. It needs to win big fleeting and refleeting decisions. The A320 NEO has been doing that. We assume the replacement Boeing NSA can do that. At the moment the unreconstructed 737 is not doing that.
I would disagree. With Boeing talking to AA and DL (and soon UA) I think Boeing has mentioned their plans for any B-737RE or NSA, or both. It has been said Boeing will increase monthly production of the B-737NG line-up to 42, and as many as 60. Are they trying to clean out the B-737NG backlog so they can deliver on their plans for a reengined or replacement B-737? If both DL and AA select the B-737-800/-900ER, that is about 400 new orders. No, I have no idea if one or both airlines will buy the B-737NG, or not. But, it is very possible they could. UA could also follow suit as they have several A-319/-320s that are approaching 15 years old, so are we looking at a refleet at UA in the next year, or two, too?
I doubt AA, DL, or UA are stupid or desperate. Neither is Boeing.
There is also nothing saying (yet) that these airlines can order the B-737NG now, or in the near future with an option to switch to the RE or NSA later.
Mostly correct. The A-32X-NEO has grabbed the early NB refleet sales from some airlines. But most of those refleet orders are from traditional Airbus customers, who would not consider the B-737NG in any meaningful way.
I would say most of the large A320 sales have been to leasing companies who buy both Airbus and Boeings, legacy carriers who buy both Airbus and Boeings and new and expanding airlines that don’t have a stake either way. The only companies buying 737s at the moment are those topping up existing fleets. Leasing companies in particular are likely to be holding back from buying 737NGs until they get clarity from Boeing on its product strategy. It’s possible that companies that don’t have Airbuses are also waiting to hear from Boeing before committing to further large scale purchases. I suspect, though, that airlines that run mixed fleets or new fleets are less likely to buy 737’s at this point
Yes, most of the customers who bought NEO are existing Airbus customers but this is the point. Airbus is locking their customer base to NEO, meaning that Boeing will unlikely sell them the 797. The launch of the 797 will mean introducing a new type into the Boeing customer fleets, so commonality with the existing 737 doesn’t matter anymore, and Airbus can offer NEO at significantly lower prices. Remember launching a new product will mean a long time till you get to the rate like 40-50/month, whereas the NEO will likely be beyond that rate by the end of the decade. Airbus is in the driving seat, I am afraid.
Does a rate increase make sense if the successor is around the corner? How would suppliers feel about it? For a re-engine with relatively fewer changes, I can see it, but for an ANNA (all-new-narrowbody-airplane) I can’t.
Andreas, it depends on the airline. Each one, partiuclarly the US ones which re now shopping, has unique needs. AA’s position is unusual because they need lots of planes now to replace those MDs and can get them right now with 738s from B because they have lots of guarenteed delivery postions under their exclusive contract with B. And if you judge AA’s fuel cost savings by comparing the MDs to the 738s instead of the A320neo, AA is still saving a lot. I think the AA order is the one which will prove or disprove B’s contention that they can beat the neo with their current customers with incremental, PIP improvements to the 737 without a 737RE. If it were not for the large 757 replacement mkt, they might be right. Problem is, carriers replacing their 757s with A321neos may have a strong incentive to for other neos unless be offers a 757 replacement by 2020. Maybe this will mean that B will have to get off the fence. I think they should do both the 737RE and the NSP (we do not know for sure if it will be single aisle).They really ought to be able to do it if they just face all their 787 mistakes for what they really are, and o not repeat them.
I wonder if the AA RFP will have an impact on what Boeing plans on doing.
As I’ve been incessantly stating, once Boeing announces their plans, they will be getting very large orders..possibly even the amount Airbus has gained the past 6-7 with their A32XNEO.
Further evidence to that today’s news that the UAE lessor DAE cancelled the 35 737s it had on order.
AA is incorrect.
DAE Capital was created by UAE at a time when oil profits were pouring in and Dubai could do no wrong. Except that the debt incurred by the state caught up to it. DAE could no longer be funded, and DAE has cancelled all Airbus orders and all but a handful of Boeing 777 and 747F orders, which most likely will wind up at Emirates Airlines either as they are or in exchange for 777 (or even 787?) orders. The cancellations were due entirely to DAE Capital’s own troubles and for no other reason.
Should AA actually have access to these advantageous delivery slots they are of little significance, AA are still bound to seriously ponder the poor long term economics of buying a new inefficent 737 fleet with perhaps a fifteen plus year service life versus the promoted immediate 15% improvement offered by the NEO
Despite AA’s delicate financial situation the initial product pricing is of little significance compared to short & long term operational saving gain, whilst I have not done the precise mathmatics the savings would be dramatic & to any accountant would be influential.
Head over heart should see the right purchase, but this is AA who may not be long for this world.
IMO the only way Boeing can prevent DL and AA from ordering A321 NEO’s is launching a re-engined 737 very soon and give them a very attractive price.
If about a 100 used DC-8s could be re-engined, doing a re-engine for 500 or more new 737s seems like an easy decision.
I would guess that the 320NEO and 737/8RE will still be an even race. The 321 will be so superior that a 739RE isn’t worth the time. The C-series will make the 319NEO obsolete before it is built.
As for a 757 size replacement or a new large end of the small size plane, NLEOTSSP, I’d like to see a 2-2-2 in economy and a 1-2-1 in business. For comfort on long flights or quicker turns on shorter flights this would be a winner.
I think reengining the 737NG in a competitive way (large fan) isn’t easy at all. That whats making think so long in the first place, a redesign of inner wing, landing gear, wingbox is in the cards. Last year I sketched a more radical 737 upgrade, getting rid of the noisy 55 yr old cockpit design too.
http://191.photobucket.com/albums/z160/keesje_pics/Radical4Bill737Upgrade737-900XG.jpg
It would give Boeing a few yrs to develop a more future proof successor..
Keesje:(Lots of changes to the NG):
What (unchanged part/assembly) enables the certification grandfathering
from the very first 737 to the current NG?
“It would give Boeing a few yrs to develop a more future proof successor..”
It would take Boeing “a few” years to get to a usable item. ( 747-8 too was
“just some little improvements and an easy stretch” 😉
Keesje #16: Someone at B was recently qoted as saying that the plans for the 737RE were on the shelf and ready to go. Albaugh said the main change required by the new engines would be a slightly lengthen nose undercarriage.
Uwe: Fair point, but not insurmountable, particularly if B has learned the lesseons it should from its recent past. (I can hear your derisive howl as I write these lines.)
Phil #23: The problem is that delivery slots at A and B are really tight, so quick deliveries of lots of planes now is not available to most airlines, except those few like AA which have exclusive contracts with B which give them preferential delivery dates. (I understand that B has agreed not to enforce them, but that does not stop the parties from mutually agreeing to abide by them.) I understand that to preserve these deivery spots, AA must give 15-18 mos notice (LEEHAMNET or anyone else- do you know the terms of these contracts and whether the parties are voluntarilly abiding by them?) so they are going to have to move fast if they want deliveries to start in a year and a half or so. In the mean time, AA will take delivery of the 35 738s they recently ordered ( the WSJ piece says they have 50 on order). No problem for B. They delivered 45 to AA last year.
You are right that AA wants something better, but no matter whom they buy from, they won’t get those in any number before 2017-18 at the earliest, and they can’t keep those MDs that long. Maybe this campaign with force B to get off the fence early, and announce the 737RE with AA as lead customer. That is probably the quickest way for them to get neo type planes.
AIyehhhhhhh!!!!!!
( obNiven: for an argument : Scream and Leap! )
I’le concede that Boeing knows they have problems, though I tend
to not be completely sure on that count 😉
But have they learned something?
Not sure.
Most real learning was on the partner side(s).
To go with Rummy Rumsfeld : Boeing has transitioned from
the unknown unknowns to the known unknowns from my perspective.
PS: the certification framework thing: anyone with details on hand?