Leeham News and Analysis
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Leeham News and Analysis
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Air Lease Corp.’s A220 order may be followed soon by others
By Scott Hamilton
Airbus A220-300 for Air Lease Corp. Photo credit: Airbus.
Nov. 16, 2021, © Leeham News: Air Lease Corp. added another 25 Airbus A220s to its backlog with Airbus. The letter of intent, announced at the Dubai Air Show, brings ALC’s A220 backlog to 75, the most of any lessor.
ALC also is the first customer to publicly order the new Airbus A350F.
ALC announced the LOI yesterday at the air show. It was part of a package of 111 aircraft. In addition to the A220s, ALC signed for 55 A321neos, 20 A321XLRs, four A330neos and seven A350Fs.
Airbus has 643 firm orders for the A220: 90 for the smaller A220-100 and 553 for the larger A220-300. The -300 competes directly with the Airbus A319neo and the Boeing 737-7.
With the Dubai Air Show underway, LNA learned that there are at least two big orders that might emerge before year end that boost the book to nearly 800. One deal is with an exclusive Boeing operator, who also is in talks for an A321neo order. The sub-type couldn’t be learned, but given the carrier’s route system, it almost certainly will include the LR and/or XLR.
Interest in the A220 continues to pick up under the Airbus ownership. With the pandemic slowing, additional orders appear to be in the offing sooner than later.
Airbus continues its cost-cutting efforts on the program. LNA reported detail in a Sept. 28 post. During the IATA AGM Oct. 3-5 in Boston, Airbus’ chief commercial officer, Christian Scherer, elaborated.
Progress, but not there yet
“Progress is being made on all fronts on design-to-cost and reducing lead times on renegotiating supplier agreements when the opportunity presents itself,” Scherer said. “I’m not going to tell you we’re 17.5 months away, or 4.5 minutes away, or I don’t know, but it’s converging. What I will say is that the 220 program has a program performance goal from a financial perspective and time and reliability, etc. It has an evolution curve that is known to us, that we’ve seen before on successful airplane programs. That’s very encouraging, so we’re on the up.”
Scherer, in an interview with Andreas Spaeth published in AirlineRatings.com, said it’s a matter of when, not if, the A220 will be stretched into the A220-500. The -500 is directly competitive to the A320neo and Boeing 737-8.
But Scherer, in LNA’s interview at IATA, was cagey about when.
“I won’t venture a date. What I will say is that we’re running by now a very comprehensive business with several programs and new development on the freighter, constant, with continuous improvement on all of our programs. If I’m not giving you a date today, it’s not because it’s confidential or anything like that. It’s because there isn’t a date,” he said.
Profitability needed first
Airbus has a healthy backlog of the A320. A 220-500 would compete with the 320. It’s been suggested to LNA that Airbus will launch the -500 when orders for the A320 largely dry up and the backlog is reduced. Scherer didn’t directly address these speculative points. But he did say the 220 program needs to achieve profitability first.
“When we see the program profitability performing as we anticipate it will, and we’re on trajectory to do that, then when we can no longer hold off market pressure because we are experiencing market pressure for the stretch of the 220, clearly,” he said.
Airbus doesn’t reveal profit or loss by program, but one London-based aerospace analyst estimates the 220 program currently loses about $400m per year on a production rate of 5/mo. Airbus wants to increase the rate to 14/mo by 2025, which, with cost-cutting, will further trim costs.
Resource allocation is also needed. Bombardier, which developed the A220 when it owned the program then known as the C Series, already designed the “CS500”. Preliminary analysis suggests the A220-500 will have significantly improved economics over the A320neo and the 737-8.
Redirecting engineers
“Engineering resources are still very much focused on the cost reduction of the program, and on the ramp-up,” Scherer said. “Right now, we’re producing five airplanes a month. We want to go up to 14. There’s a lot of resource that needs to be deployed on that. Then we’ll most probably see the stretch.” Scherer said customers at the IATA AGM were asking Airbus to stretch the A220.
“Internally, we’re also making progress from the realization that this is not a matter of protecting the A320. We offer both A220s, A320s. The bulk of the A320neo operators will continue to add 320neos to their existing fleet. Then the nascent and growing population of A220 operators will continue to add to 220s and naturally will add to 220-500s. Then you have the population of those that operate both A220s and A320s,” Scherer said.
“One deal is with an exclusive Boeing operator, who also is in talks for an A321neo order. The sub-type couldn’t be learned, but given the carrier’s route system, it almost certainly will include the LR and/or XLR.”
…. 🙂
Trying to figure out an exclusive Boeing operator that needs A223 and A321NEO’s, also for longer flights.. Are you sure they don’t operate any Airbus type? There aren’t many..
Icelandair?
Nope
Aha…tidbits of info are being given away!
Are we allowed play “20 Questions”? 😉
If so:
(1) Is the mystery customer NB-only?
(2) Is it an LCC?
(3) Is it European?
…
I sense a reprimand coming… 😉
1. No
2. No
3. Yes
My half-working brain says it may start with the letter K??
Didn’t they show the A220 to airlines in Croatia, recently? Who went to see it?
Norwegian?
Bryce:
No, just a incarceration in Hotel California
Does that make it TUI then?
Transavia in its various branches all Boeing NG, maybe around 100 in service
My guess:
1:KLM (their A330 gonna retire soon so Imma include them anyway)
2.LOT
3.TUI airways
4. Air Europa
TUI already has 737 MAx in their fleet. Its unlikely they want to expand their fleet. The TUI mangement is not very fond of their airline division.
I think it is an operator that is an Boeing exclusive with NB’s.
Of all the contenders KLM seems to be fitting the bill when looking at airlines that are in a sales campaign…
Qantas would be my tip if it’s Boeing exclusive on NBs. I’ve heard they’re due to make an announcement next month.
KLM, while operating Boeing aircraft is also an Embrear and Airbus operator?
iceland air? they have a ton of 757s…
maybe they are not big enough though. they only have 35 aircraft in total…
I think Scott pretty much answered.
I’ve been wondering before if a bigger A220-300/- 500s together with A321s could replace 737-7(00)s /-8(00)s -9(00)s & A319s, A320s.
The gap between an A220-500 and the A321 would be significant, specially seeing the popularity of 180-186 seat single class aircraft.
A A320Plus might become inevitable, W’ll see.
Cargo factors into it as well. The A320 can carry cargo, the A220 not so much. So while I see the A319 going away I think the A320 will remain.
Wrong way round.
For some reason the existing operators of the A220 list a greater cargo
load with their A220 than the A320 when they both are full pax
Look up Swiss for the numbers, it will surprise you
> One deal is with an exclusive Boeing operator, who also is in talks for an A321neo order.
As sentences go, that feels a little like burying the lede 😉
It’d be bad if it was a flydubai or Virgin Australia, but catastrophic if it was one of the Big Two…
Virgin Australia is a good guess, imo
“One deal is with an exclusive Boeing operator, who also is in talks for an A321neo order.”
Wow…who could that be?
– Probably not Alaska…it just ditched its A320 order.
– Probably not Southwest…it had its chance and went with the MAX 7.
– Ryanair? Its main competitors have A321s , which it can’t match; it has many (potential) thinner routes that would fit an A220 well; one of its competitors (Wizz) is expanding to The Gulf, so it could use LRs/XLRs itself.
– Any other operators capable of placing a “big order”?
My guess is KLM
I also thought of KLM. However, technically:
– KLM isn’t an airline of its own right…it’s merely a branch of AF-KLM, and AF-KLM as a whole is not a “Boeing-only” airline;
– KLM of itself isn’t “Boeing-only”, as it has large numbers of Embraers also.
But I certainly get your point 😉
KLM makes sense as the A220 is one natural Fokker replacement and depending on range requirements the A321neo/XLR mix if there are slots available, maybe Airbus has reserved 100 for Air France & co otherwise you must call the leasing companies and pay up?
KLM has a size-able A330 fleet & is committed to the E195-E2. US / Canafdian airlines seem committed / have Airbusses, European ones too. I think it must be an Asian airline?
The E-Jets are operated by KLM Cityhopper, the regional subsidiary of KLM. The A220 is not flying in the regionals, but mainline fleets.
A quick look at planespotters:
https://www.planespotters.net/airline/KLM-Royal-Dutch-Airlines
shows they have the -700, -800 & -900, with the -900’s being the oldest.
Wiki has them retiring the -700’s in 2022.
https://en.wikipedia.org/wiki/KLM_fleet
with no NB’s on order.
But yah, they would essentially be operating 4 types of aircraft:
Embraer (regional)
Airbus original
Boeing
Bombardier design (A220)
Not optimal
KLM’s -700s are being replaced by the KLC E195-E2s.
The RFP is actually for NB replacement primarily at KLM and Transavia within the AF-KLM group. A321neo is on the cards due to higher max capacity and range than MAX-10.
And think of it this way: to lose a KLM / Transavia order to Airbus would be a very large nail (and maybe one of of the last) in Boeing Commercial’s coffin. Especially after losing SAS and Jet2, among so many others.
Also a CFM / SAFRAN angle: with the A220 & E2 already incumbent within AF-KLM, an A320neo family order which could well be GTF also could see the whole group eventually having no CFM-powered a/c in the (ok, distant) future. Almost unthinkable.
So KL / HV / TO most likely.
@ Frank
Good analysis! The Embraer’s are, indeed, Cityhopper rather than regular KLM.
KLM’s fleet has always been a highly mixed bag, so your “not optimal” observation is nothing new for them.
@Bryce
Thanks. The only thing wrong with it is that KLM already has A330’s in it’s fleet, which does not make them ‘exclusive’, as Scott put it.
I guess we’ll see.
@ Frank
Indeed, where A330s are concerned.
But in terms of its NB fleet, and excluding Cityhopper, KLM is all-Boeing 😉
FlyDubai? They fly internationally to Moscow, Pakistan etc. There might be some in China and South America.
Yes, FlyDubai is a possibility.
They probably see all the A321s that Qatar has on order and — perhaps — think that a little competition would be a good thing 😉
No way it is Ryanair. They recently walked out of negotiations with Boeing due to price. Airbus, with its huge A32x neo backlog would laugh at any offer O’Leary could possibly send.
Maybe flydubai? They reduced MAX order several months ago. Maybe due to lower demand, maybe in preparation to change of strategy.
All good points regarding RY. But O’Leary may just have to swallow his pride if he ever wants to move into the large NB segment. Do you honestly think that O’Leary could have MAX-10s before 2025, seeing as the plane has yet to be certified à la Boeing?
Do you think he could have A321XLR before 2025 considering EIS is planned for 2023 and the production line is pretty much booked solid? Ryanair’s business strategy is ruthless cost-cutting and I don’t believe introducing A321XLR would be compatible with that. Loss of single-family efficiencies coupled with the fact that Airbus has no reason to sell cheap.
No, he won’t have the XLR before 2025.
However, he could have the A321neo from 2025 onwards if he moves now. And he could also have the A220 without too long a wait.
He can choose between loss of single-family efficiencies and loss of market share to Wizz.
Ryanair upset Airbus way back and Boeing giving them sweet deals upset European carriers who then turned to Airbus A320’s. So if Ryanair wants A321neos Airbus most likely tell them to talk to the leasing companies. LOT is another possibility but the Poles upset Airbus earlier in helicopter deals but they fit with just Boeing aircrafts bigger than the ERJ’s and EU (still) and feel the squeeze of Wizz A321neos expanding everywhere.
@ claes
Since Ryanair was brought here up we’ve since been told by Scott that the mystery customer is not an LCC — so there’s no point in considering that line of thought.
But, to address one of your points: even though Airbus and O’Leary are not best friends, I imagine that Airbus would very much enjoy ending the BA monopoly at such a big customer…and, to that end, Airbus may be willing to show more flexibility than one might think.
Westjet?
– The A220s could replace their 737-700s
– The A321LRs/XLRs could efficiently connect Canada to Europe and Carribean/Latin America
And yet another A220 order…this time a small one from IbomAir in Nigeria:
“Breaking: Nigeria’s Ibom Air Orders 10 Airbus A220s”
“Nigeria’s Ibom Air has placed an order with Airbus for 10 Airbus A220s. The order is broken down between the types, with the A220-300 being delivered from 2023, with the A220-100 to follow. The order pushes Airbus to an even stronger lead in terms of orders placed on day three of the Dubai airshow, as well as the total orders for the Dubai Airshow so far.”
https://simpleflying.com/ibom-air-airbus-a220-order/
“Resource allocation is also needed. Bombardier, which developed the A220 when it owned the program then known as the C Series, already designed the “CS500”.”
Most of the design effort is in the detailed phase with very labor intensive tasks that require large teams of engineer. I would be surprised if Bombardier went that far back then with the CS500.
Not only designed, but it’s flown in it’s computer simulation program thingie
(that’s the technical description of it)
There is a very wide range of simulations that can be made with various level of fidelity. This really doesn’t tell much.
‘Preliminary analysis suggests the A220-500 will have significantly improved economics over the A320neo and the 737-8.’
This is the ace-in-the-hole that AB has, waiting in the wings, for any attempt by BA to roll out a new narrowbody that would cost them at least $15 billion (which they would have to pass along to customers) versus a stretch.
It’ll be interesting to see how AB plays this;
1) A cheapie plug fore and aft of the wing, not too many other changes, a slight loss of range – but pass the savings onto the customer
or
2) A full bells and whistles stretch. with aux fuel tanks and all the trimmings.
I’m guessing it’s predicated on what BA does next in the segment and where the market demand lies.
Here’s that batting order in the foreseeable future:
A220-100
A220-300
A220-500
A321Neo
A321LR
A321XLR
I think the -100 and the LR are going to be the two low men, on the totem pole.
Where the heck does BA go with their next aircraft? Those guys must be losing sleep over this…
Frank:
Calhoun is too busy rolling in his dough at night to loose any sleep!
I suspect an A220-500 will try to maintain if not improve range a bit and go for maximum fuel without Aux tank. Engineers usually figure out how to stuff more fuel in to existing before resorting to aux tanks.
“Ladies and Gentlermen – we are about to begin our beverage service with a choice of hot and cold drinks. Please be advised that the coffee may have a slight gasoline flavour to it, as we needed the extra fuel on the previous leg. We’re sorry if this causes you any inconvenience.”
To keep or improve the range will require an increase in MTOW. The A220 has already seen at least one and perhaps two increases in MTOW taking up slack in the design margins so there is probably not much left. I don’t think AB will add structure to the A500 as that will be far from a quick stretch. So that implies a slight reduction in range. It will still be easily US transcontinental.
Agreed. Except the likes of JetBlue and Breeze have been making noises about taking it overseas. I wonder how Air France is considering using theirs, as they also have been keen to order it.
I guess it depends on how many operators ask for a heavier version, with more range. No sense in doing a plug job, if what the airlines want is something that will fly further with more pax.
Good comment.
> Where the heck does BA go with their next aircraft? Those guys must be losing sleep over this… <
Yes, if staying in the commercial passenger aircraft business is Boeing's long-term goal; evidence that that's their aim is not readily available.
I think the A320 will remain for those routes where cargo or where the airline wants to keep cockpit commonality.
I think Airbus will go for maximum efficiency with an A220-500. Unbeatable economics up to 5 hours. Perfect for Europe, East Asia and US coasts. Keeping the A220-300 MTOW of ~71t to avoid costly modifications and lengthy certification.
Column F; https://groups.google.com/group/aviation_innovation/attach/428066dad4bcf/Flies%20scrapbook%20NB%201.4.jpg?part=0.1&view=1
For more range / capability the A320 family is better suited and not a competitor.
You arent going to get 5 hr flights ‘in service’ on an A220-500.
Once you add in greater weight from extra fuselage frames , the seating and as max range is with passenger baggage only that part increases the weight which reduces range. Some advantage aerodynamically from longer fuselage but not much
Well, considering that the A220-300 now has a range of 6,667 KM
https://www.flightglobal.com/air-transport/airbus-extracts-more-range-from-a220-300-with-further-weight-increase/143001.article?adredir=1
and 5 hours at cruising speed of 829 kmh gives a range of 4,150 KM
I’m not sure that I agree with your assessment that it will lose 1/3 of it’s range with a double plug, fore and aft of the wing.
But hey – the Boeing guys were probably saying the same thing about the A321 when Airbus decided to roll out the XLR…
Boeing has finally secured a sizable order in Dubai…the new Indian startup Akasa has ordered 72 MAXs. Interestingly, the mix includes the 8200 type that was previously a Ryanair exclusive.
https://gulfnews.com/business/aviation/dubai-air-show-2021-indias-newest-airline-akasa-places-a-near-9b-order-for-boeing-737-max-1.1637065729121
Akasa says they are going to start flying in summer 2022, which is some 7 months away.
Can you get a jet off the line that quick, from order to delivery? You probably need a month or so to play with it first, get your crews used to it, etc…
I’d say it’s a fair bet that they will probably take a few of the white tails that BA still has.
Could probably take 4 or 5 leased planes within a month to do all that
Or they could take some of these 14 jets that Boeing has sitting there, with nowhere to go:
https://www.planespotters.net/production-list/Boeing/737/737-MAX-8?sort=airline&p=4
But GECAS does have 7 Max’s stored, sitting somewhere:
https://www.planespotters.net/production-list/Boeing/737/737-MAX-8?sort=airline&p=7
It must be so much fun, to be the guys on the ramp and in operations, who have to play tetris – trying to find a way to move an aircraft from deep with the pile and blocked in on all sides, by moving a couple hundred other planes first.
Imagine, if you will, a cargo ship from say…Japan, loaded up with cars. It gets to the port and the bosses tell the stevedores;
“OK – we need THIS one car here first, in the middles of the pack. All of the others stay on the ship. Move ’em around and pull it out.”
Could probably take 4 or 5 leased planes within a month to do all that
Except leasing companies want to make a profit on their leased assets = higher rate charged to airlines than the cost they will pay for buying white tails direct from Boeing.
AND
Someone has to spend the money to change the interiors and get it to Akasa’s spec’s, which means someone has to pay for it. GECAS wants someone to take those planes for the long term, not a stop gap until you get your fleet up and running. Unless Akasa is willing to launch with whatever interior is in the those aircraft right now.
The report mentions the -8200 on order. Those are probably coming off the line as Ryanair is the only other carrier that flies it.
Who knows, maybe they take some of those Norwegians sitting there;
https://www.planespotters.net/production-list/Boeing/737/737-MAX-8?sort=airline&p=10
-> “Could probably take 4 or 5 leased planes within a month to do all that”
Always looks easy when you’re an outsider.
@ Frank
Indeed…I’d say a fair portion are whitetails…and they’ll probably have a (very) low profit margin..
I’d say that’s a fair assessment:
Ever hear about a comic named Russell Peters?
https://www.youtube.com/watch?v=oSzgCDIUzq0
https://www.youtube.com/watch?v=7WRygosOAQw
Oy yah, this one too:
https://www.youtube.com/watch?v=BwtVkvIMnIc
In general, what’s the lead time for a new from the ground up airline from taking first delivery to first revenue flight?? Around three, four months??
Boeing’s website is showing the following YTD ASC606 adjustments:
MAX: -717 (17.7% of backlog)
777: -84 (21.3% of backlog)
787: -77 (15.8% of backlog)
https://www.boeing.com/commercial/#/orders-deliveries