When does a larger airliner pay off? Part 2

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By Bjorn Fehrm

March 14, 2024, © Leeham News: We are doing an article series about what drove the cross-over from Airbus A319 to A320 and then to A321. We start with the ceo range to understand at what passenger numbers did a route support the A319 versus the A320 and A321.

The same change in airliner size happened for the Boeing 737, but we will limit the investigation to the Airbus range as the modern variants, 737 MAX 7 and 10, are not yet in service.

We will use our Airliner Performance and Cost Model (APCM) to model typical sectors and see at what load factors the economics favor a switch.

Figure 1. The Airbus A320ceo with it’s characteristic wing fences. Source: Airbus.

Summary:
  • We develop the Passenger Mile Costs for the different A320ceo variants, A319, A320 and A321.
  • Then, we gradually lower the number of passengers transported on the A320 and A321 until we have the same Passenger Mile Costs for all variants. This shows how many more passengers a route must support to motivate a switch to a larger model.

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Airbus and Boeing need each other for healthy supply chain

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By Dan Catchpole

March 11, 2024, © Leeham News: In the public arena, Boeing is flailing. It’s the subject of public rebukes by government officials, a new criminal investigation by the US Department of Justice, and a seemingly endless stream of scathing headlines.

However, executives at its European counterpart, Airbus, are not celebrating Boeing’s struggles.

“Airbus needs Boeing,” said Joe Marcheschi, director of flying parts procurement services for Airbus Americas. “Disruption, and turmoil in the supply chain hurts Airbus, too.”

The industry’s supply chain depends in large part on the two aerospace giants—which means, indirectly, Boeing and Airbus need each other.

Instability at the airplane makers may in some sense have furthered this interdependence by prompting many suppliers dependent on one OEM to diversify by supplying both companies and by looking outside commercial aerospace.

Summary:
  • Suppliers’ efforts to diversify beyond one OEM have deepened interdependence.
  • Labor, materials are among biggest supply chain challenges.
  • Airbus supporting suppliers to solve bottlenecks.

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When does a larger airliner pay off

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By Bjorn Fehrm

March 7, 2024, © Leeham News: Over the last decades, the choice of domestic market airliners has gone from the typical 120-seater to today 200 seats or more. We will look into what drives these decisions and where the cross-over points are from, say, an Airbus A319 to A320 and then to A321. We will limit the investigation to the Airbus range as the Boeing 737 MAX range has still not their MAX 7 and MAX 10 in service.

We will use our Airliner Performance and Cost Model (APCM) to model typical sectors and investigate what load factors favor a switch.

Summary:
  • The typical domestic cabins have gone from 120 to 150 seats to now 200 seats or above.
  • As airliner types grow, their trip costs increase. At what load factors can you motivate an A321 instead of an A320?

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Bjorn’ s Corner: New aircraft technologies. Part 48. Maintenance Program for the A320/A321

By Bjorn Fehrm

March 1, 2024, ©. Leeham News: We are discussing the Operational phase of a new airliner family. For the operational phase, the airplane must pass scrutiny for Continued Airworthiness. The biggest item in a regulator’s Instructions for Continued Airworthiness is the required Maintenance program to keep an airliner airworthy. We discussed the modern MSG-3 maintenance program for an airliner last week, why it was created, and its main analysis principles.

Now we look at maintenance data designed to the MSG-3 standard, the Maintenance Planning Document (MPD) for the Airbus A318/A319/A320/A321.

Figure 1. The front page of the A318/A319/A320/A321 MPD no 45. Source: Airbus.

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Carrots and sticks needed to achieve sustainability goals, says Airbus

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By Tom Batchelor

February 22, 2024, © Leeham News:  The sustainability challenge is redefining the aerospace industry in all sorts of ways.

An Airbus A350-1000 is refuelled with a 35% blend of SAF prior to its participation at the 2024 Singapore Airshow’s flying display. Credit: Airbus

For Airbus, which spent €3.2bn on research and development last year, that comes in the form of clean-sheet designs for hydrogen-powered aircraft that promise to reduce in-flight carbon emissions to zero. The European planemaker’s ambition is to bring to market the world’s first such commercial aircraft by 2035.

But Airbus is also working on a successor to the A320 family, referred to as the “next-generation single-aisle” aircraft. At the company’s full-year briefing on February 15, more details were revealed about the aircraft, including confirmation that it would run entirely on Sustainable Aviation Fuel (SAF).

“We’re working on technology to develop the next short-to-medium range aircraft before the end of the next decade, which will be capable of flying up to 100% SAF,” Julie Kitcher, Airbus’ chief sustainability officer, told LNA in Toulouse. “It will be much more fuel efficient, but also feature a new wing design and new materials; we’re working on a lifecycle approach to this aircraft.” Read more

Airbus’s orders at risk

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By Judson Rollins

Introduction 

Feb. 19, 2023, © Leeham News: After last week’s release of Airbus’s 2023 financial results, we undertake our annual analysis of at-risk deals on the OEM’s books.

Airbus has outstanding orders from airlines where there is a material probability that some won’t translate into deliveries. Most resulted from airlines with financial difficulties, but some were related to contractual disputes. When deliveries are delayed beyond a set period, usually 12 months, the customer can cancel orders if the delays are unexcused. Boeing flags such orders as subject to an ASC 606 accounting rule adjustment.

Unlike Boeing, Airbus isn’t subject to the ASC 606 accounting standard, so it only discloses the nominal value of its total adjusted order book in its annual report – but not at-risk orders by program.

LNA analyzed Airbus’s order books in July 2020, November 2020, August 2021, February 2022, August 2022, and December 2022 to identify at-risk orders and develop an apples-to-apples comparison. The above links explain our methodology.

Summary
  • Airbus is more prone to country- and carrier-specific risks than geopolitical.
  • Order risk threatens to push Airbus’s market share even higher.
  • Airbus single-aisle order risk is mainly driven by low-cost carrier exposure.
  • Widebody order risk is a mix of long-deferred orders and regional problems.

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Airbus hails ‘landmark year’ with strong 2023 results amid delivery ramp-up

By Tom Batchelor

February 15, 2024, © Leeham News: Airbus gave more details of its planned ramp-up today as it announced 2023 full-year results, with revenues climbing 11% year-on-year to €65bn and adjusted earnings before interest and taxes (EBIT) up 4% to €5.8bn.

The European manufacturer is targeting 800 commercial aircraft deliveries in 2024, above the 735 delivered last year, an increase of almost 9%. Airbus is seeking a ramp-up in production to meet increased output targets across its commercial division, including 75/mo for the global A320 family program.

Airbus FY 2023 commercial positioning. Click to enlarge. Source: Airbus.

Guillaume Faury, Airbus chief executive officer, told investors that the company was seeking to strike a balance between “very strong demand” for its aircraft and “the ability of the supply chain to meet the demand.”

Faury said 2023 had been a “landmark year” with a “record-breaking level of aircraft orders and backlog”. He added: “We continue to see momentum for civil and defense markets.”

However, the Airbus Defense and Space division continues to struggle with adjusted EBIT down 40% year-on-year, to €229m from €384m.

Across all of its business segments, Airbus said it expects to achieve EBIT Adjusted of between €6.5bn and €7bn in 2024. Read more

Airbus should tread carefully

  • Airbus announces is 2023 earnings on Feb. 15.

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 By the Leeham News Team

 Analysis

Feb. 12, 2024, © Leeham News: United Airlines has reportedly been looking to Airbus to replace the Boeing 737 Max 10s that Boeing is having difficulty delivering, due to the Alaska Airlines accident and the resulting delays in certification to the Max 7, Max 10 & 777X programs. Airbus has been searching for ways to recover/create slots to take on a premium customer and poach them from Boeing.

A320 production rates are headed towards 75 a month in the 2025/2026 time frame, with Airbus confident that its supply chain can meet the demand and will commit to the rate for the long term. These are record production numbers with the previous high-water mark reached in 2019 with 863 total deliveries: 642 of those from the A320neo family, or 54 a month. The A220 program is also headed for an increased production rate of 14 a month at about the same time.

However, Airbus has its own kinks to work out, along with concerns outside its control:

  • Geared Turbofan (GTF) on wing engine issues from supplier Pratt Whitney.
  • The A220 & A330Neo lines aren’t selling as well as they’d like to
  • 2024 US presidential election could really upend the apple cart.
  • Another Max accident would be a bad thing, even for Airbus (more below).

There has been speculation and calls for Airbus to push the envelope even more, reaching 90 a month to offset the Boeing shortcomings.

75 & 14 a month are already huge goals and pushing suppliers to go past those targets might compromise quality. People will cut corners when they are greedy. Besides, a little scarcity when you are the top dog isn’t the worst thing; Boeing isn’t coming to the party with anything new in the near future.

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Instead of progress, Boeing must deal with new crisis of Alaska Flight 1282 on Wednesday’s earnings call

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By Scott Hamilton and Judson Rollins

Jan. 29, 2024, © Leeham News: Twenty-twenty-four will be a crucial year for Boeing.

A door plug blew off a Boeing 737-9 MAX Jan. 5. The company must deal with the fallout on its 2023 year-end earnings call Wednesday. Credit: Capt. Chris Brady.

An unexpected twist is the crisis  from Alaska Airlines Flight 1282, in which a door plug blew off a 737-9 MAX at 16,000 ft. Nobody died, and injuries were light. But the MAX 9 fleet was grounded in the US by the Federal Aviation Administration. The FAA launched a formal investigation into the “quality escape” that is believed to have led to the accident. Last week, the FAA put a freeze on current production rates of the 737 and, for now, killed Boeing’s plans to add a line at its Everett (WA) plant.

Beyond dealing with the 1282 aftermath, Boeing hopes this year to clear its inventory of 737 MAXes and the 787. Clearing the inventories brings cash and some profits. But will this move to the right while Boeing is under even more scrutiny by the FAA?

Boeing planned to be positioned for 2025 to pay down debt incurred during the MAX grounding and the COVID-19 pandemic. Progress toward free cash flow targets of $10bn per year by 2025/26 was forecast at its Nov. 2, 2022, investors day. This is almost certainly inoperative.

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ZeroM, Airbus’ effort to reduce traveled work

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By Scott Hamilton

Jan. 16, 2023, © Leeham News: Traveled work is the bane of any airplane manufacturer’s production line.

“Traveled work” is when parts are unavailable when the plane is in final assembly. To keep production moving, the manufacturer—whether it’s Airbus, Boeing, Embraer, or some other firm—notes the missing item and continues production. The airplane is rolled off the line and the work is finished on the ramp when the part becomes available.

Jurgen Westermeier, Airbus Chief Procurement Officer. Credit: Airbus.

The OEMs (Original Equipment Manufacturers) approach the issue differently. Some prefer the parts to arrive “just in time,” which keeps inventory to a minimum. This reduces cash outflow.

But just in time creates the problem of missing parts. One time, Airbus was assembling A320s, and USB ports failed to arrive while planes were on the assembly line. The ports had to be installed later—traveled work.

Another option is to create an inventory. But to minimize the cash commitment, and the space taken up by inventory, the OEMs limit the supply. Airbus, for example, has a “buffer” of between a few weeks and a few months, depending on the parts.

Airbus also attacks the challenge with a program called ZeroM. LNA met last month with Airbus’ chief procurement officer (CPO), Jurgen Westermeier, on the sidelines of the Aviation Forum in Hamburg. He explained ZeroM and how it works. Below is a transcript of our meeting. It has been edited for clarity and space.

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