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

Airbus A330-800 and -900neo, first analysis, part 3: performance

In our first two parts of the analysis of the Airbus A330neo launch at the Farnborough Air Show, we have gone through the information provided by Airbus and Rolls Royce and provided comments on what these really mean from a practical point of view.

Areas we wanted to verify with our independent model have been how the A330neo would perform versus the A330ceo, especially on shorter ranges, than the Airbus example of 4,000nm and how it would stack up against the Boeing 787.

We give the first answer to these questions with data from our proprietary, independent model. This is first-cut data and we bring it forward in time as there is some confusion on what Airbus has said about the shorter range performance of the A330neo. Continue reading

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 A330-800 and -900neo, first analysis part 2: engines and maintenance costs

Further to our initial analysis of the launched Airbus A330neo, here is our follow up diving deeper into engine matters and maintenance costs.

The A330neo engine

We met with Rolls Royce Vice President Customer Marketing Richard Goodhead to talk about the Trent T7000 for the A330neo and to straighten some misconceptions around the engine. First the base facts as presented by Airbus and Rolls Royce Monday: Continue reading

Airbus A330-800 and -900neo, first analysis

Airbus cleared the air about the A330neo, which we concluded was a must last December, and made the 2014 Farnborough Airshow go off to an exciting start. A lot has been speculated about the A330neo, and in the end it did come out bit stronger than what most had anticipated. Some of that is marketing but a lot is real, and here we give a first assessment of what was launched.

Let’s start with the specifics as given by Airbus and Rolls-Royce today in presentations and discussions. Here are the A330-800neo and -900neo’s main features: Continue reading

Farnborough Air Show, July 14: A330 program analysis after neo launch

It was pretty much the worse-kept secret in advance of the Farnborough Air Show this year: Airbus launched the re-engining of the A330, designating the new engine option the A330-800 (the A330-200 successor) and the A330-900 (the A330-300).

Rolls-Royce, as had been widely reported, becomes the sole-source engine provider of the Trent T7000. Airbus also gave it new A350 style winglets and have made enhancements to the cabin with improved seating, IFE and mood lighting, In total Airbus claims to have improved the fuel consumption with 14% per seat. Deliveries will start in Q4 2017.800x600_1405309967_A330-900neo_RR_AIB_01Rebranding the A330, dropping the -200 and -300 names, and adopting the more modern -800/-900 speaks to the significant upgrade of the airplane. Parenthetically, this also follows the pattern set by Boeing decades ago when it went from the 737-200 to the 300/400/500, then the 700/800/900 and now the 7/8/9. It speaks to adopting new technology and is consistent with the sub-type branding of the A350.

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Farnborough Air Show, July 13: CSeries program analysis

The unexpected pre-Farnborough Air Show announcement by Bombardier for letters of intent for up to 24 CS100s is welcome news for the company and the program.

Although an announcement by Falko Regional Aircraft Leasing of a firm order would have been more welcome, history shows that LOIs tend to be converted into firm orders eventually, whether these are from Airbus, Boeing, Embraer–or Bombardier. With the Falko LOI, BBD now has 471 firm orders and commitments for the CSeries.

Hand-wringing headlines and stories over May’s engine incident in which a Pratt & Whitney P1000G Geared Turbo Fan during a CSeries ground test and the assumed hugely negative impact on the program these stories and headlines suggest are way overblown.

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