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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Implications of the Dubai Air Show orders

With the Dubai Air Show wrapped up, it’s time to assess the events and the implications.


Boeing launches 777X

Boeing launched the 777X at the show with orders and commitments for 182 777-9s and 43 777-8s, the latter the Ultra Long Range (ULR) version. These orders were driven by Emirates Airlines, which ordered 115 -9s and 35 -8s.


All had been widely telegraphed, and follow Lufthansa Airlines’ order for 34 777-9X previously anounced.


The 777-8 competes directly with the 350-passenger Airbus A350-1000; the 777-9, at 407 passengers, is in a class by itself between the -1000 and the 467-seat Boeing 747-8.


Boeing forecasts a 20-year demand for 670 350-400 seat (including the 405-seat 777-9) sector. Airbus forecasts a need for 779 aircraft in this sector. Airbus had booked 176 A350-1000 orders going into the show and added 10 more.


This means Airbus and Boeing have sold 186 and 259 aircraft in this sector respectively, or 445 in total. Boeing converted three options of the 777-300ER to a firm order. Now we’re at 448, of 67% of the Boeing forecast or 58% of the Airbus forecast. There are 278 777-300ERs in backlog, for a total of 692.


There are 306 747-400 passenger models in service and another 23 Combis, or 329. There are 501 777-300s in service. This equals 830 excluding the 777-300ER backlog or 1,108 including the backlog,








In Service


















 Sources: Airbus, Boeing


We believe the Airbus and Boeing forecasts understate the 20 year demand just on the replacement potential of today’s 1,108 747-400s and 779 777-300ERs in service or on backlog. In addition to the replacement requirement, traffic growth will support more aircraft orders.


Airbus and the “A350-1100″

We previously analyzed the Airbus dilemma over how it should meet the development of the 777-9. Airbus doesn’t have a direct competitor to this aircraft, though officials claim the A350-1000 is this competitor. We disagree and so do Emirates Airlines and Qatar Airways. According to our Market Intelligence, Airbus has held conversations with Emirates about a stretch “A350-1100″ version. Qatar’s CEO, Akbar Al-Baker, publicly expressed interest in an “1100″ model.


Airbus previously dismissed the idea of an “1100″ of roughly equal capacity to the 777-9 because it did not see a market for the airplane of this size. Based on its forecast of 779 airplanes and the existing sales, this logic is apparent. Since then, however, Airbus officials indicated they are at least looking at the possibility, though no formal study is underway.

There is a concern in some quarters that Airbus has already missed this opportunity and Boeing has too great a lead.

We continue to believe Airbus will eventually proceed with the “1100.”


Boeing 747-8

We think it significant that no orders were announced for the Boeing 747-8I passenger model or for the 747-8F. We have long believed the 777-9 spells the end of the 747-8I. While Lufthansa Airlines has ordered the 8I, the 777-9 and the Airbus A380 and sees a need for each of these as each serves different market sectors, there is little the 747-8I can do that the more economical 777-9 can’t. Lufthansa likes the 747-8I for hot-and-high airports, such as Mexico City, but there are few of these markets that support the continuation of this airplane now that the 777-9 is official.


The 747-8F’s future depends on the recovery of the cargo market. Boeing forecasts this to occur next year. But one cargo conversion company, which doesn’t play in the 747 space, doesn’t see the business case of a new-build 747-8F when there are abundant 747-400Fs parked in the desert and those 329 more passenger and combi aircraft available for conversion at a far less expensive price than it costs to buy new. Additionally, this company believes the belly capacity of the 777-300ER and Airbus A330-300, and the existence of the 777-200LRF, provides plenty of capacity that diminishes the economics and requirement for the 747-8F.


Airbus A380

The order by Emirates Airlines for 50 A380s is a badly needed shot in the arm for the program, which saw sales stall at 262 for an extended period (259 net of cancellations). There are several orders that are iffy (Hong Kong Airlines, Virgin Atlantic, two for Air France) and dead (Kingfisher Airlines), among others. Emirates plus a pending confirmation of an MOU for Doric Lease are needed to fill near-term production slot vacancies and boost the book-to-bill deficit in the program.


But customer concentration is increased with the Emirates order, now accounting for 140 (42.5%) of the 329 orders confirmed and announced. Airbus continues to bank on airport congestion and traffic growth combining to boost sales. We think the 777-9 will cut into this demand. The question is whether Airbus proceeds with an A350-1100 to retain some of this diversion in the family or whether it allows Boeing the monopoly to do so.

DXB13, Day 2: A350 Regional; New Libyan airline; 777X production timeline; More on IAM-777X issue

It looks like the big news of the Dubai Air Show has already come-and-gone. There was little order activity on the second day.

A350 Regional: Etihad Airlines’ order for Airbus A350s include a regional version, with lighter weight, lower range and lower thrust. Aviation Week has details.

Libyan start-up orders Airbus: A new airline in Libya has placed an order for Airbus A350s and A320s.

Boeing produced this slick video to introduce the 777-8/9. As you might expect, the quality is top rate. Boeing has some subtle digs toward the A350, cleverly done as they were.


Headlines from the air show:


Bombardier may take the CSeries to Wichita (KS), where it has a facility, for flight testing if weather in Canada is poor.

Other News:

IAM 751-777X Vote

In Dominic Gates’ Seattle Times article taking a behind-the-scenes look at the IAM 777X contract fiasco,  Gates wrote:

Buffenbarger also raised a concern about the vote outcome. He said that the final vote tally Wednesday showed that 5,000 members hadn’t voted.

While he said he’s not alleging vote fraud, he said the absence of those votes leaves the outcome “questionable.”

“To have that big a number that didn’t vote stands out,” he said.

Buffenbarger needs to check his math. With 31,000 machinists, 5,000 “not voting” means 26,000 did. Sixty-seven percent rejected the contract, or 17,420, and 33% voted to approve it, or 8,580–a difference of 8,900. Even if all 5,000 had voted for the contract (a highly dubious prospect), it still would have lost by nearly3,900 votes. Buffenbarger’s comments to Gates (and we assume accurate reporting) further illustrates to buffoonery of IAM International in this entire mess.

Countdown to 777X site selection: Bloomberg News reports that Boeing will decide within three months where to build the 777X. This doesn’t leave a lot of time for the IAM to get its act together.

Boeing in Puget Sound after the IAM 777X vote: bleak, unless something changes

With the rejection last week by the International Association of Machinists Local 751of the Boeing contract offer that would have located the 777X airplane assembly and wing production in Puget Sound (Seattle), the inevitable question arises: What is Boeing’s future here?

Seattle media and state elected officials are worried that if Boeing locates the 777X outside Washington State, and given the toxic relationship between the machinists and Boeing as well as within its own union, that this could be the start of an exodus from the state.

We agree, although we believe it will be a slow, downward spiral, not a rapid exodus–unless something dramatic changes with the current situation.

The chart illustrates our forecast of Boeing’s gradual departure from Puget Sound based on the current set of circumstances.

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Airbus’ A350-800 dilemma

Last week we discussed Airbus’ A350-1000 dilemma. The -1000 will be a fine airplane, but we concluded the company needs to go forward with a larger capacity “A350-1100″ to match the size of the Boeing 777-9X, but take the Boeing 787-10 approach and be content with sacrificing range in lieu of designing a new wing and engines.

Airbus’ A350 dilemma doesn’t end there. What’s it to do with the A350-800? One fleet planner told us a year or more ago that the “-800 is an expensive A330-300″ with the same operating costs as the larger capacity A350-900.

Airbus has been encouraging customers to move up to the larger A350-900, with Hawaiian Airlines and US Airways the key hold outs. Conventional wisdom says US Airways will swap its order once the merger with American Airlines goes through (which is looking more and more likely, given settlement talks with the Department of Justice). American has a large order for the Boeing 787-9, making the -800 unnecessary in a combined carrier fleet plan.

There are now around 80 -800s in Airbus’ backlog, and even officials at Airbus have been ambiguous about green-lighting production of the -800, which is supposed to enter service in 2016 (after the -900 but before the -1000). We have written several posts in which we concluded the -800 would be re-sequenced to 2018, after the 2017 EIS of the -1000.

We believe there is a very good chance the A350-800 will be dropped in favor of proceeding with an A350-1100.

So what’s Airbus to do in the 250-300 seat space now occupied by the -800 and the aging A330 family?

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Airbus’ A350-1000 dilemma

Airbus has a dilemma with what to do about the A350-1000.


Does the OEM stick with the -1000 as it is, ceding the 400 seat segment to Boeing with its new 777-9X? Or does it stretch the -1000 (we’ll call it the “1100″ for a placeholder) for what appears to be a very limited market segment?


If Airbus does stretch the -1000, what does this stretch look like? One that will match the 9X range and capacity? Or one that matches the capacity but not the range?

Here are the implications of the dilemma facing Airbus.


Stay the Course

For a long time, Airbus officials said they were satisfied with the design, once tweaked, of the -1000 and they didn’t need to respond to a “paper” airplane. The characterization had a ring to it, for that’s what Boeing officials often said about the -1000: it wasn’t a “real” airplane, they didn’t know what it was, it was a “paper” airplane or some variation thereto.


Of course, this was rhetoric by both parties. Lufthansa Airlines ordered 34 777-9s. A huge order+option commitment is anticipated at the Dubai Air Show from Emriates Airlines for the -9 and the smaller, ultra-long range (ULR) -8 that is sized directly across from the -1000. Airbus is now faced with the prospect of Boeing once more having a monopoly position with the 777-9 as it did for many years with the 777-300ER.


Does Airbus want to cede the 400-seat segment to a Boeing monopoly? The question is, how big is this segment? Is there a business case to build the airplane, or one that’s big enough for two airplanes?


Boeing’s current 20 year forecast indicated there is a need for 4,530 “small” twin aisle, 200-300 seat jets and 3,300 for “medium” twin aisle jets, 300-400 seats, for a total 7,830. Airbus forecasts a need for 4,694 250-300 seat jets and 2,085 350-400 seaters, for 6,779 jets, a difference of nearly 1,100-but, then, Airbus doesn’t have a competitor to the 787-8 at the lower end of the small jet sector.


Airbus further breaks out its forecast: 2,438 250-seat and 2,256 300-seat jets within the “small” twin; and 1,306 350-seat and 779 400-seat jets within the “medium” twin category. Boeing doesn’t subdivide its forecast.


The 777-9 will kill the near-dormant 747-8 Intercontinental and will likely eat into sales of the Airbus A380. Does Airbus avoid cannibalizing its own product or does it allow Boeing the monopoly to do so?

A350 Range

Source: Great Circle Mapper

Match the 777-9

Airbus could decide that, despite a its own narrow forecast for a 400 seat segment, it would be better to play in this sandbox, whatever the impact on the A380, than to cede this segment to Boeing. The question then arises, does an A350-1100 match the 777-9 in seats (or come close to it) and range, around 8,100nm-8,400nm?

To match means a major undertaking for a small number of airlines that need a plane with this range. It means a new wing–typically a $3bn project, more or less–and new engines in the 104,000-105,000 lb thrust range. The Rolls-Royce Trent XWB on the A350-1000 is 97,000 lbs and it can’t be pushed any farther, our information tells us. The cost of developing an entirely new engine for such a narrow market doesn’t have a business case. One might exist on the presumption that engines have to get bigger, and a new engine design would provide the basis for an entirely new generation of engines. After all, the Trent fundamentally has been around since the A330. It may well be time, but is an A350-1100 the product from which to develop it? Furthermore, it takes at least seven years to develop a new engine and probably a lot longer. The engine is the pacing item, far more than the airframe. Even if the go-ahead were given this minute, Airbus and RR would be hard-pressed to come up with an A350-1100 by 2020, when the 777-9 EIS is anticipated. So…

The 787-10 Approach
The most viable option for stretching the A350-1000 appears to be following the approach Boeing took with the 787-10: a couple of simple fuselage plugs, some enhancements to the existing engines, the same wing and reduced range that covers 90% of the markets required by the airlines–foregoing the miniscule need by Emirates Airlines for that last 5%-10%.

DXB ranges

Source: Great Circle Mapper

An A350-1100 with reduced range of 7,000nm-7,500nm and a 400 seat capacity would have highly favorable cost per available seat miles. It wouldn’t get you from Paris to Tahiti, but how big is this market? It wouldn’t get you from Dubai to Los Angeles, but are billions of dollars worth of R&D to do so going to get the return on investment to make sense for this airplane?

The clear choice, the financially responsible choice, and the expeditious choice appears to follow the Boeing approach and develop an A350-1100 (or, perhaps, the “A350-1000-10″).

Airbus’ McArtor on VLA, 777X, 757 replacement and Airbus future products

Airbus Americas Chairman Allan McArtor.

Allan McArtor believes there will always be a market for the Very Large Aircraft (VLA), but he’s not surprised Boeing cut the production rate of the 747-8.

McArtor, who as chairman of Airbus Americas, is hardly an unbiased observer. He says the 747-8 Intercontinental is uneconomic and the market for the 747-8F is weak. But he also acknowledged that the dearth of sales for the Airbus A380 has been a challenge.

Airbus has forecast 1,200-1,300 VLA-Passenger deliveries over a 20 year period every year since 2000, while Boeing has steadily reduced its forecast to just 540 VLAPs in its current forecast. Airbus believes it will capture 50% of the market, based on its forecast. In fact, it currently is capturing between 86%-90% of the sales.

Each forecasts several hundred more VLA-Freighter deliveries during the next 20 years. Boeing currently holds a monopoly in the VLAF sector, but sales haven’t been on a pace to meet either company’s forecast, nor have sales of the A380 remotely maintained a pace that suggests Airbus will meet its own forecast, without dramatically adjusting both the total market and its market share expectations.

In an interview with Leeham News, McArtor maintained there will “always” be a demand for the VLA. He acknowledged that one can quibble with the forecast or the timing, but airport constraints and growing markets between key cities, such as London-Tokyo, London-New York, Paris-Tokyo or New York and similar segments, will demand a VLAP.

Airbus so far this year has has a net order for the A380 of minus three, but it signed a Memorandum of Understanding for 20 from specialty lessor Doric during the Paris Air Show. This is expected to be firmed up before the end of the year, potentially at the Dubai Air Show.

Boeing is also expected to make a splash at Dubai with the highly anticipated public launch of the 777X, with a large order from Emirates Airlines. The airplane, with a new composite wing, new engines, systems upgrades and cabin modifications, will come in a 350-seat 777-8 and a 407-seat 777-9. The 777-8 directly competes with the Airbus A350-1000. The 777-9 doesn’t have an Airbus competitor and at nominally 407 seats falls just within the VLA sector, which begins at 400 seats.

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