Final A330neo analysis; cabin improvements gives the A330neo gains over today’s A330

When we did our analysis of the A330neo after the Farnborough launch we limited our checks to trip fuel efficiency as we did not have enough clarity of the cabin improvements that Airbus announced. After a meeting in Toulouse last week with Airbus cabin experts we know have the missing information.

Airbus gives the A330 cabin an interesting update for the A330neo. It comprises A330 ideas (improved crew rests), A350 ideas (improved lighting and IFE) and finally ideas tried out on the A320 (SpaceFlex and SmartLav lavatories). Combined they give the A330neo cabin a better passenger experience and improved utilization of cabin space. Continue reading

After-market support becoming key to winning engine orders

Maintenance and power-by-the-hour parts and support contracts are increasingly becoming the deciding factor in deciding which engines and which airplanes will be ordered—it’s no longer a matter of engine price or even operating costs, customers of Airbus and Boeing tell us.

Ten years ago, 30% of engine selection had power-by-the-hour (PBH) contracts attached to them. Today, 70% are connected, says one lessor that has Airbus and Boeing aircraft in its portfolio, and which has ordered new aircraft from each company.

“We’ve seen a huge move in maintenance contracts,” this lessor says.

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Odds and Ends: Boeing discounting; A380 analysis; A320neo LEAP

Boeing discounting: Although Boeing alternately acknowledges it’s under price pressure from Airbus or it’s maintaining pricing on its aircraft, UBS aerospace analyst David Strauss concludes that discounting is increasing on the 737 and 777 but is somewhat better on the 787.

Strauss writes in an August 6 note that discounting on the 737 is around 59%. The 777 is now discounted at about 54% and the 787 trails at 46%. (He doesn’t bother with the 747-8.) These are for in-production models.

Strauss concludes that 737 discounting increased since the introduction of the MAX in 2011.

Current list pricing for the 737 is $78.3m for the -700, 93.3m for the -800 and $99m for the -900. The MAX list prices are $87.7m, $106.9m and $113.3m.

The list prices for the 777 are $269.5m for the -200ER, $305m for the -200LR, $330m for the -300ER and $309.7m for the -200LRF. The -8X comes in at $360.5m and the -9X at $388.7m.

The 787-8 lists for $218.3m, the -9 for $257.1m and the -10 for $297.5m.

We are hearing, however, of special cases in which the 787-9 runs for $135m or significantly less and the 787-8 for as low as $115m. We also hear of the 777-300ER being offered for as little as $128m in special circumstances. The calculated discounts UBS mentions for 737 fall within the pricing range that we hear in the market. Strauss writes that some discounts to list reached 65%, also within the range of what we have heard.

The discounting becomes increasingly important because Airbus says it can price the A330ceo and neo sharply below the 787, up to 25% less. Boeing has far less flexibility to discount the 787 than with the 737NG and 777 Classic. The former still isn’t making money while the latter have amortized production lines–just as the A330ceo line is fully paid for. Airbus has offered the A330ceo at steeper discounts to list than Boeing offers the 787, and the forthcoming neo will also see steeper discounts than the 787–unless Boeing becomes more aggressive in that pricing, which will only increase the time to profitability.

A380 analysis: Here is a good, detailed analysis about the Airbus A380 and its position in the marketplace.

A320neo LEAP: CFM’s LEAP-1A, for the Airbus A320neo, has entered production. Aviation Week has this article with the details.

Half time 2014 for Boeing and Airbus

The major OEM’s have published their half time 2014 results and we can make an analysis of their half year results together with orders / deliveries and the state of their product lines. We compare Boeing and Airbus on the high end and in a follow up article Embraer and Bombardier on the low end. To make orders and deliveries comparable we include the month of July as the OEMs collected business to be announced at Farnborough mid July.

Boeing had a strong first half 2014. Boeing Commercial Airplanes (BCA) business is now past the initial problems on the 787 program and delivered 48 units January to June 2014 (8 per month) which is the same numbers as for the 777 program. The 737 is now at rate 40 per month with a first half total of 239 deliveries. The 747-8 is at rate 1 with only 6 deliveries and the 767 has stopped as a commercial program with only 1 delivery during the first half year. The commercial deliveries of 342 aircraft drove a 4% increase in company overall revenue and a 5% increase in earnings compared to first half 2013 (both non-GAAP i.e. the core business performance), this despite a Defense, Space and Security side which was down 5% on revenue and down 15% on earnings.

777-9X, 787-9 and 777-300ER in ANA colours

777-9X, 787-9 and 777-300ER in ANA colors

The troubled unit is Boeing Military Aircraft (BMA) which is struggling with its 767 tanker program (KC46A charged BMA with $187 million and BCA with $238 million due to increased development costs) and it is also fighting to not have its major military airplane program, the F18, stop 3 years from now from lack of orders. The military aircraft order drought contrasts with BCA where first half orders was 783 aircraft, mainly 737 but also 777X, where Emirates and Qatar confirmed their orders for 200 777X. Continue reading

GE analysis post Farnborough

Our wrap up of Farnborough would be incomplete without looking closer at the world’s leading engine supplier, GE Aviation, which together with partners (like SAFRAN in CFM joint venture) garnered more than $36 Billion in orders and commitments during the show. This figure was only significantly bettered by Airbus ($75 Billion) and it came close to Boeing’s $40 Billion. With such level of business the claim by GE Aviation CEO, David Joyce, that the Airbus A330neo engine business was not the right thing for GE as they have more business than then they know what to do with, was certainly no case of “sour grapes”. Continue reading

Ukraine claims Malaysian airliner shot down over air space–(Update)

Update, 1:10pm PDT: Jon Ostrower of The Wall Street Journal Tweeted that US intelligence officials confirm a SAM was fired at MH17; details to follow at The WSJ.

Photo via CNN, apparently showing MH17 falling from the sky.

Malaysian Airlines Boeing 777 (flight MH17) has crashed in Ukraine and government officials claim the airplane was shot down. As yet, this appears to be unconfirmed.

We’ve already been asked for our reaction. Here’s our statement.

“It’s hard to have a reaction within minutes of the first reporting. Reports claim the airplane was shot down, but has this been confirmed? Reports say the airplane was at 10,000 meters (roughly 33,000 ft), and cruising altitude, in-flight break-ups due to something wrong with the airplane are highly, highly unlikely, certainly suggesting an “outside force” may have been involved. But until a shoot-down is confirmed, the only reaction can and should be prayers for the victims.”

Here’s what will happen next, aside from the emergency response to the crash site:

  • Given the allegation of a shoot-down, efforts will be made to confirm this as soon as possible.
  • Flights may be rerouted as a precautionary measure until the shoot-down is affirmed or discounted.
  • Investigators will consider (in no particular order):
  1. Shoot down;
  2. Sabotage;
  3. In-flight break up due to structural issues;
  4. Mechanical issues;
  5. Weather conditions; and
  6. Crew condition, among other things.

These are, except for #1, standard areas of investigation.

 

Farborough Air Show, July 16: Snipe hunts in an era of model improvements

  • Upate, 5:30am PDT: The Wall Street Journal has an article that is more or less on point to the theme of this post.

It doesn’t matter what the competition does, it’s always inferior–until you do it yourself.

The continued, and tiring, war of words between Airbus and Boeing throughout the decades is monotonous and self-serving. If you step back, it’s also amusing.

Consider:

  • Boeing constantly dissed the Airbus concept of fly-by-wire–until ultimately adopting FBW in its airplanes.
  • Airbus dismissed twin-engine ETOPS of the 777 while promoting four-engine safety of its A340–until evolving the A330 into a highly capable ETOPS in its own right.
  • Airbus put-down the 777X, saying the only way Boeing could make it economical was by adding seats…which Airbus has now done for the A330-900 to help its economics.
  • Boeing ridiculed the idea of a re-engined A320, but then had to follow with a re-engined 737 MAX due to the runaway success of the A320neo.
  • Boeing ridicules the A330neo as an old, 1980s airplane–neatly ignoring the fact that the 737 and 747 are 1960s airplanes.
  • Airbus still calls the 777/777X/787 a “dog’s breakfast,” though we know some dogs who eat pretty well.

And so it goes.

The fact of the matter is, however, that minor and major makeovers of existing airplanes have long been a fact of life, maximizing investment and keeping research and development costs under control. The Douglas DC-1 was the prototype for the DC-2, which begot the DC-3. The DC-4 (C-54) begot the DC-6, DC-6B and DC-7 series. The Lockheed Contellation was reworked from the original L-049 through the 647/749/1049 (in various versions) and finally the 1649.

Then came the jet age, with vastly more expense, and model upgrades became the norm. The sniping today between Airbus and Boeing goes unabated in an era of historical model improvements.

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Airbus, Boeing plan for production gap of A330, 777 with near-term availability claims

On the eve of the Farnborough Air Show, the aviation industry is watching to see whether Airbus will launch the A330neo program. Officials recently tried to tamp down expectations that a program launch will occur at the FAS, but we would not be surprised if an Authority to Offer is announced.

The industry will also be watching Boeing to see if some 200 commitments for the 777X announced at the Dubai Air Show will be firmed up at the FAS. We certainly expect this to be the case. (We also would not be surprised if there is a significant order for the Boeing 787-10.)

Questions will almost certainly arise once again about the production gaps for the Boeing 777 Classic and the A330ceo. Boeing faces a sharp drop in the backlog after 2016 and Airbus faces an even sharper fall-off after next year.

Near-term availability is an important element in Boeing’s plan to bridge the period between the in-production 777 and the entry-into-service of the 777X, says Randy Tinseth.

There are no AirbusA350 delivery slots of consequence available until 2019 and the 777 has plenty of slots starting in 2017, three years before the 777X EIS is planned.

But Airbus can make the same claim for the A330 vs the 787.

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Odds and Ends: A330neo more likely; Boeing cockpit commonality; Monarch Airlines

A330neo more likely: The Financial Times of London has a long interview (including a five minute video) with Airbus Commercial CEO Fabrice Bregier (free registration required) in which he says the launch of the A330neo is becoming more and more likely. It remains unclear (and probably unlikely) that the launch will come next week at the Farnborough Air Show, but we don’t think it will be long afterwards.

Air Lease Corp, CIT Aerospace, Delta Air Lines, AirAsiaX and Virgin Atlantic are among those that have publicly expressed interest in the neo. We’ve heard a couple of other names as well.

Although Bregier told us last month he thought the market potential was about 400-500, he says in the FT article it could be more than 1,000.

We’re told there is still some internal division over proceeding with the program, but at the same time signs are continuing to build that the decision is all but a done deal to do so.

Boeing cockpit commonality: Airbus has for years promoted cockpit commonality across its airplane line as an economic and operational advantage vs Boeing. Given the longevity of Boeing’s product development, the 7-Series hasn’t been a common cockpit, though there have been some common elements.

With the development of the 737 MAX and the 777X, this “disadvantage,” if you want to call it that, is diminishing. In a recent interview with Boeing’s Randy Tinseth, VP Marketing, we asked about this. His response:

I don’t think there is any question that over time we have worked to raise the bar across the flight decks, worked to have common training and transition times and we have minimized transition times. We seamlessly transition from the 737NG to the MAX. We have leveraged the 787 and we have continually moved for more commonality. The 787 and 777 have common type ratings. You take your recurrent training in every other simulator training time. With 777X we will look to gain [even] more commonality. You have to find the right mix between commonality and capabilities.

It’s important but not the biggest swinger in the campaign. It doesn’t drive the answer in an economic campaign.

Monarch Airlines, Boeing and Bombardier: Monarch’s widely reported (but still unofficial) selection of Boeing’s 737 MAX for its re-fleeting probably means Bombardier won’t get a slice of this order, a huge disappointment to BBD, which put up a good fight for the deal. Airbus is the incumbent and this will be an important flip for Boeing. BBD was hoping to get a slice of the pie in any Boeing win for the larger mainline jet, with the CSeries taking the smaller end. But we’re hearing Boeing’s ability to offer better commercial terms for a sweeping package aced out BBD’s ability–or lack of it–to offer a similar commercial deal. BBD had hoped for the deal for next week’s Farnborough Air Show. Instead, the headlines will go to Boeing.

Our Farnborough coverage: Leeham News and Comment will be at the FAS, with reporting by our new European associate. Watch for reporting at the end of each day (UK time).

Boeing should “dual source” 737 fuselage work–right here in Puget Sound

Boeing’s 737 line suffered a second disruption when a train carrying fuselages from Spirit AeroSystems derailed in Montana, sending three of six down an embankment and into a river.

Source: PBS.

The disruption may be short-lived, but nonetheless highlights the issue of relying on Spirit as a sole-source supplier for 737 fuselages. This is the second time in two years there has been a disruption for the 737 line. A tornado struck the Spirit plant in 2012, closing the facility for a short time. Damage was slight, but had the twister been more of a direct hit, the impact on Boeing would have been severe.

With Boeing planning to bring production of the 737 line to 47/mo by 2018 and pondering rate 52 and even rate 60, the company should consider creating a second fuselage production line–and it should be right here in Puget Sound.

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