Farnborough Air Show, July 16: Orders Summary

Here are the orders we’ve seen for today (there could be more); this should pretty well do it for the show, though it does continue through Friday and there probably will be a few more deals:

  • Airbus: Air Mauritius, MOU for four A350-900s.
  • ATR: Myanma Airways, six ATR 72-600s with options for six.
  • Boeing: After saying he was in no hurry to finalize the 777X orders, U-Turn Al (Akbar Al-Baker) did just that–Qatar Airways signed the contract for the 50 announced at the Dubai Air Show last November, with 50 options; Qatar also orders and options eight (4+4) 777Fs; Hainan Airlines, MOU for 50 737-8s; MG Aviation Limited, two 787-9s; Air Algerie, two 737-700Cs.
  • Bombardier: Nok Air converted two previously held options to firm orders for the Q400; Unidentified commitment from an existing customer for five CSeries; Unidentified order for seven CS300s and added six options; now at 513 orders and commitments.
  • CFM: 80 LEAP-1A engines (for A320neo) from Mexico’s Interjet.

Items of interest:

  • Ready for a 12 hour flight in the Bombardier Q400 turbo-prop? It will soon be available. Marshall Aerospace sent us this press release:
    Auxiliary fuel tanks for Bombardier Q400: Marshall Aerospace and Defence Group and Bombardier Aerospace are developing an External Auxiliary Fuel System solution for the Bombardier Q400 turboprop aircraft.The solution, which will be available as an official Bombardier option, will provide up to an additional 10,000lb of fuel in two external pannier tanks allowing the aircraft to fulfill a whole range of missions requiring additional range and endurance, allowing this turboprop platform to be able to sustain operations of up to 12 hours.
  • Although Airbus CEO Farbice Bregier said “no” to an A380neo, reported in The Seattle Times and linked by us earlier, today Aviation Week quotes Airbus COO-Customers John Leahy as saying a decision on the A380neo will come next year–which supports our commentary that we didn’t believe the A380neo issue is dead. Airchive reports that A350 chief Didier Evard hasn’t ruled out an A350-1100, either, just as we also noted in our commentary.
  • GE wanted to be the sole source on the A330neo, reports Aviation Week, which also explains why Airbus chose Rolls-Royce.
  • Flight Global has this story explaining how Airbus plans to be “weight neutral” for the A330neo vs the A330ceo.

Farnborough Air Show, July 15: WA State and Mitsubishi; PW GTF issue revealed, finally;

The news that Mitsubishi will stage flight testing for its new MRJ 90-seat jet program at Moses Lake (WA) is, parochially, good news. And it is exactly the type of non-industrial aerospace business that we’ve been advocating for Washington since our consulting days to the State Department of Commerce in 2010, and during our tenure as a member of the Board of Directors for the Pacific Northwest Aerospace Alliance (PNAA) for three years (2010-2013).

Washington, understandably, has been married to, and focused on, industrial aerospace. Boeing is here, of course. The supply based the supports Boeing has a huge footprint in Washington. But industrial business is highly capital-intensive, and winning this business is highly competitive.

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Farnborough Air Show, July 15: VLA program analysis: A380, B747-8I, 777-9, [and the wishful thought of an A350-1100]

Fabrice Bregier, CEO of Airbus Commercial, threw cold water on the prospects of an A380neo and an A350-1100, the latter to compete with the Boeing 777-9.

Bregier’s position on the A350-1100 leaves Boeing with a monopoly at the 400-seat marker. Boeing doesn’t view the 777-9, which nominally seats 407 passengers, as part of the Very Large Aircraft sector which begins at 400 seats. Rather, Boeing lumps the -9 into the medium-twin aisle sector (300-400 seats).

While Airbus continues to struggle with sales for the A380, Boeing doesn’t much talk about the 747-8I anymore, focusing primarily on the future potential of the 747-8F. Boeing bravely talks about the prospect of four or five customer sales for the 747-8I this year, including a strong wishful-thinking of an order from Emirates Airlines (president Tim Clark says he’s not interested).

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The struggling Boeing 747-8

News reports that Boeing is promoting the 747-8I to Emirates Airlines prompted some to leap to conclusions that the struggling program is about to get a sorely needed shot in the arm. We don’t think so.

For one thing, Emirates president Tim Clark immediately poured cold water on the idea. In the process, in the same report, he said the 747-8 can’t match the Airbus A380 economics.

For another thing, we believe Emirates is trending toward a two-aircraft type fleet for which there is no room for a third–whether it is the Airbus A350 or the 747-8I. It’s clear the Emirates business model is built around the A380 and the Boeing 777-300ER/777X.

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Analyzing the Emirates order cancellations

The cancelled order for 70 Airbus A350s before the company’s annual Innovation Days was a surprise and an embarrassment that took the edge off what was intended to be a two day promotion of Airbus programs.

The cancellation by Emirates Airlines was certainly not good news. But it probably should not have been a total surprise. That it was had more to do with people not paying attention. Emirates had been signaling for some time it had issues with the program ever since Airbus rejigged the A350-1000 a few years ago, without consulting Emirates in the process.

Headlines were bad and while most analysts were measured and reporting balanced, there were a few exceptions of hand-wringing disaster for breathless stories.

Airbus tried to downplay the cancellation, without much success. But an objective analysis suggests Airbus and the rationale analysts are correct: while a blow, it’s hardly a program-defining moment, any more than the Bombardier CSeries-Pratt & Whitney engine failure last month was a defining moment in that program.

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Logical conclusions: Airbus wide-body decisions

A330 programme. The long range programme presents no new challenges. However, managing the order book beyond 2016 becomes more challenging due to competition from A350 XWB and Boeing 787.

—From the Airbus Group 2013 Annual Report

We have written previously that Airbus faced a production gap, a major drop in backlog orders from 2016, with no orders at all from 2020 (excluding the 27 orders placed in March by China, for which we don’t currently have delivery data yet).  Back on December 29, we noted that the prospect of the A330neo was gaining traction–and it’s even more so today.

Market Intelligence from multiple sources indicate that Airbus will announce at the Farnborough Air Show that it will proceed with re-engining the A330 into a new engine option configuration, including sharklets similar to that on the A320 family.

This will give a needed boost to the A330 line. There have been a dearth of orders, in part, no doubt, to the industry waiting to see whether Airbus will proceed with the A330neo. Recall that there had been a drop in A320 family orders in the run-up to the launch of the A320neo.

We have now completed a comprehensive study about the business case for the A330neo and how competitive it would be vs. the Boeing 787-8 and -9, and what price Airbus has to offer to help make the airplane competitive. This proprietary study is based on our proprietary economic modeling which, along with our own Market analysis, concludes that there is a business case to proceed with the A330neo. We concurrently believe Airbus will discontinue offering the A350-800, although this announcement may not come for some time. Among the reasons: Hawaiian Airlines wants the A350-800 as offering the passenger capacity and the range it desires. The A350-900 is too big, officials currently believe. But an A330-300neo won’t offer the range Hawaiian wants (it will fall about 1,500nm short, according to our estimates). If Airbus discontinues the A350-800, Hawaiian may well re-issue its Request for Proposals that will give Boeing a shot at getting the 787-9 into Hawaiian. Given the planned production boost to the 787 line (12/mo in 2016, 14/m0 in 2018 or 2019), Boeing now has delivery slots to offer to match that of the A350-800 schedule.

But we don’t think Airbus is done once it launches the A330neo. We believe Airbus continues to look at the prospect of re-engining the A380, c.2020, given additional impetus from the large customer for the A380, Tim Clark of Emirates Airlines. This article in The Wall Street Journal is the latest on this topic.

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Odds and End: ExIm fight, again; A350 interior; C-17 production ending early; 787’s longest routes; That’s no bull; MH370

ExIm fight, again: Republicans and the conservative Heritage Foundation are once again attempting to kill the US ExIm Bank, which providing financing support for Boeing airplanes.

This isn’t a sexy topic for our readers, but it’s an important issue we’ve written about many times. While the Republicans and Heritage call this corporate welfare (of which we’re generally disdainful), we disagree in this instance. It’s a matter of competitiveness.

Loren Thompson, with whom we’ve often disagreed, and whose institute is partly funded by Boeing, takes on the effort to kill ExIm in this column. His underlying facts are valid, though his tiresome shot at Airbus subsidies and Boeing’s innocence is laughable once more. The WTO found Boeing received illegal subsidies, too, and of course we just witnessed Boeing getting the largest subsidy in corporate history from Washington (State, that is)–all of which Thompson ignores.

But this National Review magazine (a conservative one) fails in its taking Thompson to task to even mention Airbus, the principal thrust of Thompson’s piece. This is as silly as Thompson’s continued Airbus bashing.

The reason we support ExIm’s continued existence has nothing to do with who gets what subsidies; it has everything to do with the fact that Europe’s export credit agencies fund Airbus airplanes and Boeing needs to have ExIm to compete. (We’d be less harsh about Thompson if he would stick to this topic rather than beating the subsidy drum with highly selective facts on an issue for which he was paid by Boeing to issue a study during the WTO dispute.)

National Review’s critique of Thompson totally ignores the Airbus export credit support challenge. There may be merit to many practices about ExIm to criticize, but these critics need to focus on the ECA competitive advantage for Airbus should ExIm go away. Boeing’s right on this one.

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Filling the production gap for A330 and 777 Classic: huge challenge ahead

Two orders were announced this week for the Airbus A330 and Boeing 777-300ER, important for filling the production gaps of each airplane. In the aggregate, the current backlogs go through 2016, though in reality, they stream beyond that date. See our charts below.

Airbus announced an order for 27 A330s from China, but these were the airplanes long frozen in the push-back by China against Europe in the emissions trading scheme objected to by China and a number of other countries. China routinely freezes airplane orders (among other commercial deals) to express its political displeasure.

At current production rates for the A330 or 10/mo, this adds 2.7 months to the Airbus backlog, but offset with deliveries, the aggregate backlog (i.e., if all deliveries were bunched together) means the backlog ends in 2016. With the Chinese order, Airbus announced 31 sales year-to-date.

 

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Development of the GE9X for the Boeing 777X

Jason Brewer, general manager of GE Commercial Engines Marketing, appeared at last week’s Pacific Northwest Aerospace Alliance 2014 conference on the Big Engines panel.

Brewer discussed the development of the GE9X for the Boeing 777X, outlining the new technology going into this big engine for Boeing’s latest 7-Series aircraft.

One slide–which is available to the conference attendees–showed a market forecast of 3,000 aircraft in a context that appeared to suggest GE sees a market of this number of airplanes for the 777X. We clarified this with Brewer after the panel; the forecast is for the 350-400 seat sector. Brewer told us that GE hopes to capture 1,700 of these aircraft.

This is the first time we’ve seen this sub-sector broken out–Airbus and Boeing typically forecast for the larger 300-400 seat sector in their 20 year forecasts. Airbus and Boeing have previously indicated they think the demand for the 400-seat aircraft (i.e., the 777-9X) is between 670-780 respectively.

The sound is pretty soft on this. It will best be heard with headphones.

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Updating the A380: the prospect of a neo version and what’s involved

Recent headlines and this column report that Airbus is considering re-engining the popular A330 with GE Aviation GEnx or Rolls-Royce Trent 1000-TEN power plants. A New Engine Option and other changes would improve the A330’s economy by an estimated 10% percent after offsets for increased drag and weight.

But the A330 isn’t the only Airbus airplane being considered for new engines made popular by the A320neo family. Tim Clark, president and chief operating officer of Emirates Airlines, urged Airbus to improve efficiency of the giant A380 with engine technology found in newer generation aircraft.

How feasible is an A380neo? What are the technological issues? Would there be enough of an economic gain? And is there a market for an A380neo?

The A380 of today

The A380 has been hailed as a highly efficient airliner since it went into service 2008, assuming the giant plane can be filled. But only six years later, the first voices have been raised that this will not continue to be the case should the continuous improvements that have been flowing into the airframe not pick up speed.

The launch of the Boeing 777X also brought focus on the state of the A380 come the latter part of this decade when the 777-9X enters flight testing in advance of its planned 2020 entry-into-service. Tim Clark expressed  that “it is time that the A380 gets an injection of the new technology which is now becoming available for the A320/737 in the form of GTF/LEAP and GE9X for the 777X. “

Before we look into what can be done short-to–mid-term to inject improved efficiency, let’s establish the baseline as it exists today. The A380 is considered by some the most efficient way of flying passengers between two long haul points if there is enough of demand. The competition today is the Boeing 777-300ER and 747-8i.  (Qantas Airways is dropping some A380 flights that have 50% load factors, demonstrating the aircraft is inefficient if the demand is insufficient.)

Let’s assume we want to transport passengers between San Francisco and Hong Kong, one of the longer flights which are made non-stop in both directions. Going West, it takes a Cathay 777-300ER 15 hours and going East, 12 hours, the difference being due to prevailing headwinds going West. For our check, we will use the more demanding of these legs, which then works out as the equivalent of flying 7,200nm. To compare the three different aircraft in a fair way, we need to load them to the same payload, in our case passengers with luggage. We will not consider cargo in this initial analysis. The leg chosen is not one which allows much weight for cargo, but cargo certainly belongs to a complete analysis of an airplane and we will point out where it will affect any conclusions.  

When comparing the standard three-class seating numbers between the OEMs, it is clear these are not made to the same standards of comfort. Airbus has admitted that the A380 is too lightly loaded at 525 passengers. The 777-300ER at nine abreast and 365 seats is equipped with a comfortable 18’’ economy class at 32’’ pitch but the business class is modeled with a non-standard 48’’ pitch. The 747-8i at 467 seats is not laid out to any comfort standards comparable to the other two. To ensure an apples-to-apples comparison we have equipped all aircraft with the same three-class cabin with a standard seating consisting of first class at 81’’ pitch, business class at 60’’ pitch and economy class with 32’’ pitch. Seat widths are 37’’, 22’’ and 18’ respectively and the ratios of the different premium seatings vs. economy are kept the same. Here the aircraft are listed with the in-service year and with their respective payload capabilities:

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