Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: New engine development. Part 4. Propulsive efficiency April 19, 2024
- Boeing unlikely to meet FAA’s 90-day deadline for new safety program April 18, 2024
- Focus on quality not slowing innovation, says GKN April 18, 2024
- Boeing defends 787, 777 against whistleblower charges April 17, 2024
- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
Odds and Ends: Boeing’s MAX to China; Airbus sees no order bubble; Boeing’s wide-body dominance; BBD’s risk
Boeing’s MAX to China: The absence has been conspicuous, but no more: China will take 200 737 MAXes, according to Reuters. It will be interesting to see what delivery slots becoe available. Boeing always holds open some slots for key customers, but the real opportunity is boosting production, as Boeing CEO Jim McNerney alluded to on this week’s earnings call and which we reported back in June. We’re looking for 737 rates to hit 47/mo by the time the MAX enters service in 2017 and 52/mo two years later. This will open slots for China and other customers that otherwise aren’t available until 2020.
Airbus sees growth: Fabrice Bregier sees no order bubble because the company expects annual passenger growth of 5%, reports USA Today. The comments come on top of Airbus’ USA suppliers conference.
Boeing’s wide-body dominance: Boeing has for decades dominated the wide-body market in its rivalry with Airbus, but this has narrowed to parity this year. Aspire Aviation has a long analysis (best printed out) concluding that Boeing’s dominance depends on the success of the 777X.
Bombardier’s risk: CEO Pierre Beaudoin gives his thoughts about the risk BBD is taking with the CSeries, in this interview in Maclean’s.
I see an order bubble. In fact, thanks to various central banks printing trillions of dollars the past few years, I see multiple bubbles across multiple industries.
When multiple carriers order 100, 200+ planes at a time, its hard not to see how this won’t end badly or at the very least, some kind of “draw down”.
“Annual passenger growth” is basically “smoothed out” data over a period of years. There are “booms and busts” and IMHO, we aren’t too far from a “bust” period.
This is my opinion and I have absolutely no problems with people disagreeing with me.
I have been worrying myself for sometime now over a possible bubble. A major correction could be on the way.
Someone commented on Lion Air’s strategy and I’m concerned that you are right about this being a bubble. Why would speculators not be in this space when you can get a discount for a large order, get early slots, and then use those slots to sell/lease to customers who have later slots. So an airline get 20 frames/ has no need for addtional frames and offers the overflow on the open market. All the airline wants is the ability to pay the note. Airbus continues to count the sale to the other airline who now has frames earlier and for a cheaper price. Thee airline writes off the deposit for their order in 2022 .
You are right to point out that all of these recent orders are unlikely to be fully implemented, if only because too many players intend to gain a dominant market share. This cannot happen.
I don’t think however that “bubble” is an adequate term to describe the situation. You have a “bubble” when assets are bought on sheer speculation, in numbers exceeding market needs, and financed on credit, which creates the risk of manufacturers building useless assets, buyers being unable to repay the loans, and banks incurring huge losses.
Such risks do not exist in the present aviation market. You may have too many speculative orders, nothing detrimental actually happens so long as the aircraft are not built. Some contracts may have to be amended to defer or cancel orders that were supposedly “firm”, but as deliveries are spread over several years, the contracting parties have a lot of time to adjust the numbers to market demand.
I suspect Boeing would not bet that Lion Air is going to take all the 737s they have on order, at least in the expected time frame, but their risk is no more than the value of ongoing production (less progress payments), so why not book the order and see what happens later ? The same is true for Airbus, except that their first goal was to get a foot in the door, and now the second one probably is to actually deliver the first aircraft.
The Maclean article says that “Beaudoin doesn’t seem like a worried man”. Yes I agree with that. He seems to have remarkable confidence in the future of the CSeries. And for good reason. He sees the necessity of this aircraft for the airlines, as well as for the future of Bombardier Aerospace.
I liked the last sentence of the articles which refers to Beaudoin: “I’m biased, but this is an airplane that can rival the best of the best,” he says. “Not many companies in the world can say that—only Boeing, Airbus and Bombardier. And one of those is in Canada.”
For the first time in decades we have a serious challenger to the current duopoly. It will probably take more time for Bombardier than it took Airbus to make its place on the world stage. But it looks like nothing will stop it, not even slashing prices down to the point of unprofitability for A & B. All BBD needs to do is to produce the aircraft on time and on budget. And it’s well on its way to achieve that.
At this point I don’t see how BBD is en route to an on time delivery of the CSeries. They have yet to fly in their equivalent of Boeing/Airbus’ NORMAL Mode/Law. So even though they’ve flown, they haven’t had much they can check off on the critical path since that flight. On top of that they have an extremely aggressive flight test schedule, making it all the harder to meet.
Yes they have an aggressive flight test schedule. But it has been officially under review since the aircraft made its first flight. It increasingly looks like a few more months will be added, possibly as much as six months. This would push the EIS date from the end of 2014 to possibly mid 2015, if not later. But no one will know for sure until the software issues are beyond them.
The present situation looks similar to what Bombardier went through with the CRJ1000: It flew only once and was grounded for a period of nine months. They had software issues with the new rudder FBW system. The CSeries flew three times and has been grounded for about a month now. The corrections is a long and tedious process. Many lines of code have to be rewritten each time and validated in the simulator, before it can be flight tested with the aircraft.
What counts is numbers produced and delivery dates particularly the NEO/MAX
Airbus is “selling” a lot of A320s (lets face it they are all A320s) but delivery dates are now pushing into the 2020 area.
China was slow to get slots and Boeing is the closer game in town as well as the intended ramp up which makes more available sooner. A bird in the hand is worth a lot more than a delivery slot down the road.
Wide Body Dominance: Boeing has the small end sewed up, but they are in a dog fight for the mid and large ones (and put a new engine on the A330 and….)
Rather than come out and put out the best 777 upgrade they could the inept CEO level Boeing management dithered and tried to be cute and Airbus is selling A30-9000s and 1000s at a very nice rate. Its not an optimized design, but it is good enough to compete with the 777-200 and Boeing has ceded that area to Airbus and has effectively abandoned the 777-300 area (other than LR and there are not a whole to of those needed.
They now have to hope that Airbus stumbles on design issues or execution, not a better product in that area.
We have seen what dithering did to them on the 737 replacement and and then the management repeated it with the 777 replacement. The same old story of blame the unions for a few hundred millions in costs and management blows billions left right an center and keep getting their bonuses.
777-9x is two rows of economy or one row of business larger than the 77W. They have not abandoned that market.
China has a lot of dollars that they would like to exchange for tangible value.
( and very busy reducing the associated risk with those holdings too )
Has anyone seen QR’s(or rather AAB) comment re:777X? Tactical price negotiation or seriously not interested?
Payload/range concerns using a hot base? Same as Clark’s concern.
Daniel says Boeing / GE are moving up GE9X thrust towards 105-108 k lbs. Including water injection. Maybe unrelated, maybe not.
Daniel is an avid writer, but he is lacking fundamental aerospace knowledge. This guy is what, 20 years old? He is largely repeating what a few people whisper into his ears and slapping together quotes from other sources without due diligence.
so he started his previous site at the ripe age of 15 😉
try again:
https://web.archive.org/web/20100310060234/http://airwaysaviationnews.com/about
IMHO you are off with your age estimate. I would place Mr. Tsang in the 30..40 years age bracket. ( I’d believe him if he confesses to be even older than that 😉
Close affiliation to FleetBuzz Saj is a more disturbing bit of information.
Daniel is no longer affiliated with Fleetbuzz and hasn’t been for several years.
Uwe, check the portrait image on his Google+ account.
https://plus.google.com/104630602841733718796/posts
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Best article have seen on the JAL airbus order.
http://airchive.com/blog/2013/10/07/japan-airlines-places-historic-order-for-airbus-31-a350-xwbs-jals-first-airbus-order/
I have to congratulate Boeing PR in convincing everyone, even industry press, that the 777-9X provides 50 additional seats compared to the 777-300ER and A350-1000. And base all capacity and costs per seat calculation on it. A great marketing accomplishment.
They convinced LH. Also, the -9X will have 50 seats more than the A350, but not the -300ER, so long as economy in standard configuation is 10 ABR.
l
It seems Airbus is striking back already.. “scientifically”
http://blogs.crikey.com.au/planetalking/2013/10/28/airbus-starts-seat-width-war-or-maybe-an-entente-cordiale/
These articles all miss out on some tangible points:
Fukushima: The reactor is a GE design.
Toyota: the Case of the unstoppable accelerator that evaporated completely
( But only after Toyota lost quite a bit of business )
Boeing taking large gifts from Japan but having no qualms about kicking their partners in the groin for errors that stem from their own backyard.
Significant issues with US military bases in Japan ( mostly in personal interaction ).
Being nice to the US has become much too expensive politically.
Your anti-US sentiments are pretty amusing.
The US is somehow responsible for Fukushima? Yeah right! Think again.
Also, how exactly has Boeing kicked it’s Japanese partners in the groin?
Is this part of an Airbus offensive to blunt the competitive challenge of the 777X?
http://news.sky.com/story/1160469/airbus-airline-appeal-for-wider-plane-seats
Looks like:
The company said: “However, other manufacturers are eroding passenger comfort standards by going back to narrower seat widths from the 1950s in order to remain competitive.”
No repeat of the 737 grandfathering or similar competitive behaviour if avoidable 😉
@Keesje
Will be interesting if recent less than truthfull statements from very high up
will lead to more scrutiny in general.
Narrow seats and little legroom come at an expense to businesses as well. Many or even most 10W B777 seats are occupied by traveling labour of some sort. In the old days we went straight to work on arrival, now we get a day’s rest as nobody will start work after a long flight in modern conditions. I calculate that extra time with pay and hotel costs adds an extra 6%-8% on top of my employers normal wages bill.
“They convinced LH. Also, the -9X will have 50 seats more than the A350, but not the -300ER, so long as economy in standard configuation is 10 ABR.”
Christopher, for EK and AF/KL the standard configuration is 10 ABR. For others (CX, SQ) it would remain 9 abreast. A minor detail not worth mentioning I guess. 50 extra seats / 407 sounds just fine. 40 inch business class I presume?
Only worry I have is Boeing executives actually believing this is how it is themselves and base strategy on it. There strong indications they believed on 7-8-07 the 787 would fly in 6 months, the NEO is only catching up to the 737NG, they have time to wait with the 777X because the A350-1000 is undefined, the 747-8i sports lower seat mile costs then the A380s etc, etc.