Farnborough Air Show preview

The Farnborough Air Show is just around the corner, and we don’t expect the event to be especially newsworthy.

Here are our expectations for the show:

Airbus
Market expectations are that Airbus will launch the A330neo at the air show, and we know John Leahy, COO of Customers, would like to do so at this event. His bosses, Fabrice Bregier and Tom Enders, have been less than encouraging that this announcement could come at the show.

Although news stories last week indicated Airbus’ board may green light the program in advance of the FAS, it was nonetheless reported that a formal public launch may not be made at the show. So what might happen? An “Authority to Offer,” or ATO, might be how Airbus proceeds. We don’t think there will be firm orders ready to go when the FAS begins July 14—although certainly Airbus could also take Boeing’s 777X approach and announce “commitments” as was done at the Dubai Air Show.

We are skeptical whether there might be any A330 Classic orders announced, as customers await the neo. We certainly expect the usual orders for the A320 Family. We expect A350 orders. We’re doubtful of A380 orders.

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The case for an NSA in 2025 — successor to 737-8 MAX — (continued)

 Editor’s Note: Given the amount of interest in the prospect of replacements for the single-aisle airplanes, including the Boeing 757, our Guest Columnist provided a follow-up think piece.

By James Krebs

With the reengined Boeing 737 MAX and Airbus A320 neo families selling like gangbusters, it may seem premature, before one even flies, to be considering a New Small Airplane (NSA) successor to enter service beginning in 2025. But I’m convinced the NSA will come before conventional wisdom expects. The marketplace will demand them.

A combination of market forces could make a compelling case for a NSA in service in 2025.

-   Continuing high fuel prices

-   Increasing urgency to reduce aviation carbon emissions

-   Availability of technology for 20% fuel savings vs 737-8 max and A320 neo (at same seat number) at acceptable risk

-   Traffic growth calling for more seats for 2025 and beyond.

-   Growing pressure from the airlines later in this decade for cleaner, more economical short haul NSA’s

-   Huge global market potential for NSA families — with their performance improved through the years

-   A short haul market share by 2017-18 (neo’s and MAX in service) very disappointing to Boeing.

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Odds and Ends: LEAP vs GTF; CSeries flight testing; MRJ FAL

LEAP vs GTF: Reuters has a story looking at the intense competition between CFM and Pratt & Whitney for the market dominance of the LEAP vs Geared Turbo Fan engines.

The only airplane where there is competition is on the Airbus A320neo family; CFM is exclusive on the Boeing 737 MAX and COMAC C919 and PW is exclusive on the Bombardier CSeries, Embraer E-Jet E2 and Mitsubishi MRJ. PW shares the platform of the Irkut MC-21 with a Russian engine. PW says it has sold more than 5,000 GTFs across the platforms. CFM has sold more than 6,000 across the three models it powers.

On the A320neo family, the competition is 50-50 at this point, with a large number of customers yet to decide on an engine choice. However, 60 A320neos (120 engines) ordered by lessor GECAS never were in contested (GECAS buys exclusively from CFM) and 80 A319/320neos from Republic Airways Holdings (160 engines) were part of a financial rescue package for then-ailing Frontier Airlines.

PW’s joint venture partner, International Aero Engines, shares the A320ceo family platform with CFM. Late to the market, IAE caught up to CFM in recent years.

On platforms where they compete, the sales figures so far show a neck-and-neck competition between CFM and PW.

Update, 12:30: The link has been fixed. Update, 9:30 am PST: Flight Global has this story reporting that PW plans a Performance Improvement Package on the GTF that will further cut fuel consumption by 3%.

CSeries flight testing: Bombardier’s CSeries flight testing has been slow to this point, but it’s beginning to ramp up. Aviation Week reports that FTV 3 should be in the air by the end of this month and FTV 4 should follow in April. FTV 3 is the avionics airplane and FTV 4 focuses on GTF engine testing.

Mitsubishi MRJ: Aviation Week also reports that the Mitsubishi MRJ airplane #1 is nearing final assembly.

Odds and Ends: A350 state loan; Bridging 777 Classic sales; Embraer nabs E2 order; IAM chief speaks out

A350 Loan: The Wall Street Journal reports that Airbus and Germany ended talks about a state loan for the A350 program. Good. Airbus doesn’t need the loan and “divorcing” from state aid frees Airbus to make decisions for the production based on commercial considerations and not politically-driven jobs requirements.

Airbus is considering a second A350 production line to open up slots for the -1000 model. Germany made no secret that this line had to be in Hamburg in exchange for the loan. Our Market Intelligence indicates Airbus may want to locate the line outside Germany and perhaps outside Europe. Ridding itself of continue German meddling is a good thing for Airbus; now it “only” has the unions to deal with.

  • In a Guest Column in Aviation Week, Richard Aboulafia continues his A380-bashing, but what he has to say about challenges facing Airbus in the twin-aisle, heart-of-the-market sector bears reading.

Bridging 777s: Jon Ostrower at The Wall Street Journal published this story today about Boeing’s plans to support the 777 Classic sales in advance of the 777X. He reports that Boeing will try to pair 777 Classic orders with the 777X (something we forecast months ago). Boeing is also going to launch a 777 P2F program, persuading airlines to sell their older 777s to cargo carriers and replace them with new 777 Classic orders. This is a challenge because of the continuing softness in the cargo market and plenty of 747-400s available for conversion and 747-400Fs parked in the desert. Such a plan will make it increasingly difficult to support sales of the new-build 747-8F as well.

Although Boeing said it won’t shave the price on the 777 Classic to stimulate sales, we think it will (as it has on the 737 NG).

Embraer nabs E2 customer: Embraer today announced it won an order from an Indian airline for 50 E190 E2s and 50 E195 E2s with options for 50 each. The airline, Air Costa, is a current E1 customer. This is the first E2 order since the launch of the program at the Paris Air Show last June.

Reuters has an article from the Singapore Air Show quoting the Air Costa CEO. The article takes a look at the “small” aircraft market.

IAM chief speaks out: The president of the International Association of Machinists, Tom Buffenbarger, called the Puget Sound Business Journal to talk about the controversial Boeing 777X contract vote.

Why would Buffenbarger do this? He’s facing his first contested election since 1961 and his opponent is from IAM District 751 right here in Seattle. The article makes fascinating reading.

MC-21 profile: A Russian newspaper provides a profile of the Irkut MC-21 (or MS-21 or Yak-242). Talk about confused branding.

Looking ahead to 2014

Here’s what to look for in 2014 in commercial aviation.

Airbus

A350 XWB: The high-profile A350 XWB program continues flight testing this year. Entry-into-service has been a sliding target. The program is running about 18 months behind original plan and EIS was intended for mid-year following initial delays. Even this has slipped, first to September and then to “the fourth quarter.” Currently first delivery is scheduled in October to launch customer Qatar Airways, which is slated to get four A350-900s this year. Emirates Airlines is listed as getting two of the total of six scheduled for delivery.

A320neo: Lost in the shadow of the A350 program is the A320neo. Final assembly of the first aircraft is to begin in the spring and first flight, followed by testing, is scheduled for this fall. The Pratt & Whitney Geared Turbo Fan is the initial variant. First delivery is scheduled in the fall of 2015.

Others: Airbus continues to evaluate whether to proceed with developing an A330neo. Based on our Market Intelligence, we expect a decision to proceed will come this year. Concurrently with this, we expect most if not all of the remaining 61 orders for the A350-800 to be upgraded to the A350-900 and the -800 program to be officially rescheduled if not dropped. The -800 is currently supposed to enter service in 2016, followed by the A350-1000 in 2017. But recall that as delays mounted on the A350-900, Airbus shifted engineers to the -900 and the -1000 at the expense of the -800. Salesmen have consistently shifted orders from the -800 to the larger models. We long ago anticipated the -800’s EIS would be rescheduled to 2018, following the -1000. The -800’s economics aren’t compelling enough just justify the expensive list price. So we expect Airbus to upgrade the A330 to a new engine option, using either or both of the Trent 1000 TEN and GEnx with PIPs (Performance Improvement Packages) or with some modifications. EIS would be about 2018. This precludes Pratt & Whitney from offering a large version of the Geared Turbo Fan, which wouldn’t be ready by then.

We also expect Airbus and the engine makers to look at re-engining the A380, driven by desires of Emirates Airlines to see a 10% economic improvement. Emirates announced an order for 50 A380s at the Dubai Air Show but instead of ordering the incumbent engine from Engine Alliance for these, Emirates left the engine choice open. This leaves open the possibility the A330neo and the “A380RE” could share an engine choice.

Boeing

After many years of turmoil, 2014 should be quiet for Boeing (now that the IAM issues have been resolved—see below).

787: Barring any untoward and unexpected issues, Boeing seems at long last to be on an upward trajectory with this program—but we’ve said this before. There are still nagging dispatch and fleet reliability issues on the 787-8 fleet to resolve, but flight testing of the 787-9 appears to be going well. Certification and first delivery should come without trouble this year, to launch customer Air New Zealand.

737: Nothing to report on the Next Generation program except ramp-up to a production rate of 42/mo is to take effect this year. Development continues on the 737 MAX.

Others: The 777 Classic is humming along. Now that the 777X is launched, we’ll be closely watching sales for the Classic; Boeing has a three year backlog but six years to 777X’s EIS. How is Boeing going to fill this gap, and what kind of price cuts will be offered to do so?

The 747-8 continues to struggle, barely holding on. Boeing says it thinks the cargo market will recover this year, boosting sales of the 747-8F. We’re dubious.

The 767 commercial program continues to wind down. The 767-based KC-46A program ramps up.

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The deeper, longer term implications of IAM’s Boeing contract vote January 3

There are deeper, longer term implications for the January 3 vote by IAM 751 members on the revised contract proposal from Boeing than have been discussed in the public domain.

  • Contract extension to 2024 brings “labor peace,” but also significantly weakens the union in the future.
  • The replacement for the Boeing 757 lurks in the background.
  • So does the replacement for the 737 MAX.

The near-term implications have been discussed ad nausea: for employees, vote for a contract that includes concessions, notably on pensions, or risk losing the assembly site for the 777X. For the states, Washington could be a winner, or a big loser. The state that’s awarded the assembly site would be a big winner. Suppliers will supply Boeing regardless of where the 777X is assembled.

Another near-term implication we’ve talked about: the fall-out on the IAM, both at the International level and the District 751 level. No matter how the vote turns out, there is a civil war within 751 members who are royally upset with their leadership and others who believe in it. The civil war between 751 and IAM International HQ will continue well beyond the vote, with the prospect that International could simply depose all the 751 leaders and place 751 under a trustee “for the good of the union.”

But there are much longer term implications of the vote.

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Odds and Ends: 777X site; A380 reconfiguration; 777 flashback; PNAA’s 13th annual conference; A350; MC-21

Build 777X “where it makes the most sense:” A Boeing executive, in a CNBC interview, said the 777X would be built “where it makes the most sense.”

CNBC writes that Shephard Hill, president of Boeing International, said, “Honestly, we’re looking within the United States at this point because of the large infrastructure we have there. But again, with the mandate to do it on time, to do it in a quality way, that will drive the decision.”

Meanwhile, Alabama officials revealed they talked with Boeing about locating “some [777X] work” at Boeing’s Huntsville operation. Stories are here and here.

A380 reconfiguration: After our post concerning the secondary market of the Airbus A380 and a figure cited by a lessor that it could cost as much as $20m to reconfigure the airplane (assuming all bells and whistles), we received two emails from readers giving a different perspective.

One wrote that Airbus took the Emirates Airlines specification, which is not as customized as perceived, and outlined three scenarios for reconfiguration.

  • Simply change the cabin colors: $600,000 from Airbus and $500,000 for Buyer Furnished Equipment (BFE).
  • Change three class to two class, with only the upper deck changing: $3.6m in Airbus costs, $1.6m for BFE.
  • High-density, all Y-class, both decks: $4.3m for Airbus costs, $3.5m for BFE.

Another reader wrote that the $20m figure is correct if all existing cabin stuff is tossed and the reconfiguration starts from scratch, but seats and other equipment could be sold to reduce the cost. Going one class, this reader wrote, had a price of between $8m-$10m (slightly higher than that reported by the first reader) and a two class configuration would cost about $5m, roughly the same as noted above.

Flashback on 777 successor: Jon Ostrower, when he was with Flight Global, Tweeted out a flashback down memory lane when we did a podcast with him six years ago, talking about a Boeing 777 successor. We looked pretty smart back then, as it turns out.

PNAA’s 13th Annual Conference: The Pacific Northwest Aerospace Alliance has released the agenda for its 13th Annual Conference held Feb. 4-6, 2014, in Lynnwood (WA), north of Seattle and south of Everett. Crafted well before the Boeing 777X events of last week, the conference is entitled “What’s Driving Change in the Aerospace Industry”.

Boeing says it will decide within three months where it will build the 777X, or in December or January, the latter just before the conference. Whatever this decision, this specific action will clearly come up at the conference, though it is not specifically a topic on the agenda.

We’re presenting on the State of the Airline Industry on the first day and share a panel on the third day with analysts Michel Merluzeau of G2 Solutions and Richard Aboulafia of The Teal Group. We’ve done this panel each year for several years now, and it’s a free-wheeling discussion of what we’ve heard throughout the conference and events generally.

This conference has now become the largest of its kind on the US West Coast, with nearly 450 attendees this past February. The Big Four airframe OEMs, the Big Three engine OEMs and a host of suppliers and lessors present.

MC-21 program update: ATO.ru, a Russian publication, has this update on the Irkut MC-21 program.

A350-1000: Akbar Al-Baker, CEO of Qatar Airways, is known for his about-faces at a whim, so much so that he has the nickname U-Turn Al. Once a vocal critic of the Airbus A350-1000, he now says it is a great airplane, according to this interview in Gulf Business. He urges Airbus to consider a larger version of the plane.

CFM LEAP accelerating in test program; Airbus and the A350-800

Aviation Week has a long, detailed story about the test program for the CFM LEAP engine, which is accelerating rapidly.

In its 737 MAX program update yesterday, Boeing said the LEAP-1B has begun testing and it will benefit from the testing already underway for the LEAP-1A, the version that is designed for the Airbus A320neo family. The LEAP-1C for the COMAC C919 is on its original schedule for certification in 2015, despite the fact the C919 has slipped to at least 2017, reports AvWeek.

The 737 MAX is exclusively powered by the LEAP, as is the C919. The former has more than 1,600 firm orders and the latter just hit its 400th order/commitment. CFM faces competition on the A320neo family from Pratt & Whitney’s P1000G Geared Turbo Fan, where PW holds a 49% market share against CFM, which previously held a larger, more dominate position in the A320ceo competition. A large number of orders don’t yet have an engine selection.

PW is the sole-source engine provider for the Bombardier CSeries, the Mitsubishi MRJ and the Embraer E-Jet E2. PW splits the engine choice on the Irkut MC-21 (soon to be renamed the YAK 242) with a Russian engine.

Just as Boeing’s LEAP-1B will benefit from the experience of the LEAP-1A now in testing for Airbus, Airbus will benefit from the testing and experience of PW’s testing of the GTF on the Bombardier CSeries.

Aviation Week also has a story about the Airbus A350-800 with the blunt headline, The airplane Airbus doesn’t want to build. This refers to the A350-800. AvWeek muses that the outcome of the merger between US Airways, now the largest customer for the airplane, and American Airlines, may be the deciding factor for the airplane. We agree. With American’s large order for the Boeing 787-9, the A350-800 would be unnecessary.

That would then leave Hawaiian Airlines as a key decision-maker. We hear in the market that Hawaiian is just sitting back and waiting to see what kind of incentives Airbus will offer to entice a switch to the larger A350-900.

Aerospace Supply Chain challenges for planned production rates

Airbus and Boeing have announced production rates for their single-aisle airplanes of 42/mo each and are thinking of going as high as 52/mo. Boeing last week announced a planned rate of 14/mo for the 787. Airbus has plans for 10/mo for the A350 XWB, and is considering a second final assembly line.

Bombardier, Embraer, COMAC, Irkut, and Mitsubishi each have new airplanes coming on line soon. There are more than 22 new and derivative airplanes planned to enter service between now and 2022.

How will the supply chain meet the demands of the OEMs?

It will be tough, says J. C. Hall, the chairman of the Pacific Northwest Aerospace Alliance, headquartered in the Seattle area. PNAA represents small-to-medium suppliers.

We sat down with Hall to get his take on the challenges ahead for the supply chain.

Odds and Ends: MC-21 to be renamed; Boeing buys land; seat wars ahead?

MC-21 to be renamed: After creating a brand for the Russian Irkut MC-21, authorities have decided to rename the airplane the Yak 242, according to this article in Flight International.

The article is too brief to explain the reasons behind this, other than to indicate the MC-21 evolved out of a design that was designated Yak-242. The MC-21 is somewhat larger than the 242 and it is a direct challenger to Airbus and Boeing in the 150-210 seat sector.

Among our activities, we engage in branding. We don’t think this is a particularly smart move on Russia’s part. Returning to the Yak name is a throwback to the old Soviet Union and the history of Soviet airliners that left a lot to be desired. The “Irkut MC-21″ name creates some distance to this history in the effort to sell the airplane outside the old Soviet political sphere.

The Sukhoi Superjet SSJ100, which has had some success selling beyond the sphere, nonetheless reinforces the history of troubled Soviet airliners. Production has been painfully slow and in-service reliability difficult.

We think the Irkut name should be retained, a move toward the future, not one toward the past.

Boeing buys more Charleston land: The US government shutdown delayed the land purchased by Boeing of federally property around the Charleston (SC) airport. Now that the government is open again, the purchase has moved forward, according to the Charleston Post and Courier. According to reports, Boeing now owns or has under contract slightly more land at Charleston than it owns at Everett.

Boeing has been shifting work from Washington to Charleston, and the trend toward purchasing land means this will continue. We continue to believe that when clean-sheet airplanes come out of the Boeing shop to replace the 737 and 777, production of these will be at Charleston. Hopefully the demand for the 737 replacement will be high enough that production will be split between Washington and Charleston. We can foresee a scenario where Boeing has a more equal split between the two locations, such as Airbus has with Hamburg and Toulouse.

But the immediate question is whether the 777X derivative will be built in Washington or Charleston. We’ve heard both scenarios but don’t have enough information to know which is correct.

Seats Wars pending? Airbus has called for an industry standard for 18-inch wide seats in coach. Plane Talking has an analysis of this. We’ll point out that Embraer already has 18-inch seats as standard in its E-Jets and Bombardier has 18-inch window-and-aisle seats plus a 19-inch middle seat for its CSeries. This makes the E-Jet and the CSeries the most comfortable domestic airplanes available, with the middle-seat bonus for the CSeries.

We haven’t flown coach internationally for years, but we do so domestically and have been crabbing about the 17 inch seat on the Boeing 737 for a long time. With the Airbus A330 and Boeing 777 nine-abreast essentially the same width, we believe airlines and their drive toward cramming as many seats in as possible to the total disregard of passenger comfort certainly merits international standards at 18 inches.

But we’re not deceived that this proposal is altruistic on the part of Airbus. Boeing’s ability to accommodate one more row of seats with a slightly wider standard than Airbus, reducing CASM in the process, is clearly the motive. When Boeing compares today’s 777 against the A350 in sales campaigns, it uses 10 abreast in coach vs nine abreast for the A350 and argues superior CASM costs. Customers tell us this indeed reduces the CASM advantage the A350 has at an apples-to-apples 9 v 9 (the A350 continues to maintain a trip cost advantage).

We agree with Airbus on the principal. But far chance it will happen.