No stress on the order backlog, says Airbus at ISTAT

Airbus doesn’t see any “stress” in its aircraft order backlog, or “skyline,” says Andrew Shankland, senior vice president of leasing markets from the European manufacturer.

Shankland spoke with us at the annual meeting of the International Society of Transport Aircraft Trading, held Monday and Tuesday this week in San Diego.

Persistent concerns are expressed about an “order bubble,” including during the ISTAT conference. Shankland told us in an interview that “we don’t see any stress; we meet every two weeks” in a process Airbus calls its “watch tower” (Boeing calls its process the “war room”).

“As long as we can move things around, and we have a pretty rigorous process to be sure every plane has a home,” Airbus doesn’t see any issue with its skyline, Shankland said.

Steven Udvar-Hazy, CEO of lessor Air Lease Corp, sees Asia as a high risk region where huge orders have been placed by carriers such as AirAsia and Lion Air, both big A320 customers. AirAsia just announced deferral of 19 A320s this year and next. AirAsiaX also has large orders for the A330 and A350, recently deferring some A330s “until the time is right.” Shankland wouldn’t discuss any individual customer, and only generally noted that Airbus and Boeing have successfully “manipulated” the skyline in the past when deferrals or even cancellations occur.

Shankland isn’t involved in Airbus’ analysis of whether to proceed with the prospective A330neo, but acknowledged that the business case for the airplane “remains to be seen.”

Odds and Ends: No 90-seat ATR for now; 777X work; JAL says A350 was ‘better;’

No 90-seat ATR: Aviation Week reports that for now Airbus Group, which owns 50% of ATR, won’t green-light a 90-seat ATR turbo-prop due to the adverse impact a development program would have on profits.

Competing for 777X work: Electroimpact is based near Paine Field in Washington and it supplies Boeing and Airbus. It’s interested in participating in the Boeing 777X work. The Everett Herald has this story focusing on the company. Meanwhile, Reuters has this story about the pressures the Airbus and Boeing supply chains are under to cut costs.

JAL: A350 was ‘better:’ Japan Air Lines says its choice of the Airbus A350 was made because the airplane was just “better” than Boeing’s offering. CNBC reports.

No highway in the sky: Just on the ground. See this series of photos to see what we’re talking about.

Boeing notified supply chain: prepare for 52 737s per month

Boeing has notified is supply chain that demand for the 737 is sufficient to support a rate increase to 52 a month by the end of the decade.

In a letter dated January 3, Kent Fisher, vice president of supplier management, set the date for going to 47/mo in July 2017. The year had previously been announced by Boeing. Fisher continued that demand is “sufficient” to take the “protection rate” to 52/mo “later in the decade.”

Production Rates to 2020

“Protection rate” means the Boeing and the suppliers need to protect the ability to increase to the desired rate in terms of tooling, machinery, parts, and their own suppliers. This notification isn’t as firm as announcing an actual production rate increase, but it’s pretty close.

Airbus, meanwhile, continues with construction of its Mobile (AL) plant, with a target operational date of next year. Initial production will be 2/mo, ramping up to 4/mo. The plant has the capacity of 8/mo. This means Airbus increases production of the A320 family to 44 in late 2015 or early 2016, then 46 later in 2016 and 48 to 50 thereafter.

The Airbus and Boeing production rates dwarf those of Bombardier, which is challenging the Big Two OEMs at the lower end of the 100-220 seat sector with the 110-145 seat CSeries, and Embraer, which produces the 100-122 seat E-190/195 E1 today and which is offering the 132 seat E-195 E2 for delivery beginning in 2018.

Airbus’ factories are in Hamburg, Toulouse, Tianjin and from next year, Mobile. Hamburg and Toulouse are currently producing 38 A320 family members a month, weighted toward the latter, and Tianjin is at 4/mo. Tianjin and Mobile have the capacity of 8/mo each; we don’t know the total capacity of the Hamburg and Toulouse plants but are told these are at capacity; Airbus declined comment. This means Airbus has the capacity to go to 54 A320s/mo among the four plants after Mobile is fully operational.

Boeing has the capacity for 63 737s a month at its single Renton (WA) factory. Embraer has the capacity for 17 E-Jets a month. Bombardier plans a capacity of 20/mo for the CSeries.

Embraer continues and refines its strategy at the low-end of 100-149 seat sector

While Airbus and Boeing slug it out in the competition for the duopoly and Bombardier struggles to gain respect as an emerging mainline jetliner producer, Embraer continues and refines its strategy in the smaller-end of the jet market with its E-Jets, E-Jet “Plus” (our term) and the E-Jet E-2.

Source: Embraer, Reprinted with permission.

Source: Embraer, Reprinted with permission.

Embraer is broadening its offering from a maximum of 122 seats to a maximum of 132 and dropping its low-end E-170 from future variants. This brings the EMB family to 90-132 seats, following the decision to undertake an extreme makeover of the current E-175/190/195 line by adapting the Pratt & Whitney P1000 Geared Turbo Fan engine to a new wing design and upgrading a variety of systems in the E-Jet E2.

New Features

 Source: Embraer. Reprinted with permission.

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DXB13 Day 3: Bombardier, Boeing, Airbus announce small orders

Bombardier, Boeing and Airbus each snared some orders at Day 3 of the Dubai Air Show:

Bombardier

  • A Letter of Intent from Iraqi Airways for 5+11 CS300s;
  • Abu Dhabi Aviation ordered two Q400ss; and
  • Nok Air of Thailand announced orders, options and purchase rights for 2+2+4 Q400s.

Boeing nabbed an order from TUI Travel for two 787s. Turkish Airlines firmed options for three 777-300ERs.

Airbus announced that Air Serbia ordered 10 A320s and Air Algerie signed an MOU for three A330-200s.

Other headlines from the show:

Airbus considers boosting A320 production

Engine Alliance ponders A380 engine improvements

Bombardier launches high density Q400

Watch out, US airlines, the Arabs are coming

Emirates to compete engine supplier for 50 A380s

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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DXB13 Day 1: Airbus scores big orders, Boeing launches 777X

From the Dubai Air Show, Day 1:

Airbus

Emirates orders 50 A380s

Qatar orders A330s

Qatar would buy A350-1000 stretch

Etihad Orders A350, A320

Boeing

777 Launched: Boeing New Airplane;

Montreal Gazette, reporting from Dubai

Aviation Week: 787 influence on 777X

FlyDubai orders MAX, NG

Boeing leads Airbus after first day

Other news:

Ilyushin Finance targets Middle East

The Seattle Times has a behind-the-scenes article on the divide between IAM 751 and its International headquarters and within IAM 751.

Boeing has lessons learned from 787 for 777X

757, 737-900ER/9 MAX, A321 replacement should be the next new airplane

The Boeing 757 doesn’t have a true replacement. The Airbus 321neo and Boeing 737-9 fall short. The 9 MAX doesn’t measure up to the A321neo. Boeing has to move toward a program to replace the 757 and the 737-9.

 With the launch of the Boeing 777X a given, what’s next in aircraft development?

John Leahy, COO-Customers of Airbus, gave a tantalizing hint at the ISTAT conference last week in Barcelona, Spain, when he said the OEM was studying a stretch of the 350-seat A350-1000 to fill the gap between it and the 525 A380 and to compete with the 400-seat 777-9. But then he tried to reel it back, saying there was “no story here,” according to Aviation Week.

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  • KING5 (NBC Seattle) has this report about the 757 replacement.

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Then Boeing’s own Joe Ozimek, who heads sales for the 737 MAX, asked the lessor’s panel which aircraft do they want and CIT Aerospace president Jeff Knittel said a replacement for the Boeing 757, Tweeted AFM magazine.

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This is what we think will be the next big project.

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We reported in March 2012 that Boeing continued studies-dubbed the New Airplane Study, or NAS-of a replacement for the 757 even after launching the 737 MAX program and billing the 737-9 as the 757′s replacement.

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Except that it isn’t. Far from it.

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The 737-9 doesn’t have the range, the field performance or the payload of the 757. Neither does the Airbus A321neo, although it is much better than the 737-9.

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Entry-into-service for what we will dub the 757R is envisioned for 2025-2027, leaning toward the former.

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During the media briefings in advance of the Paris Air Show, Boeing acknowledged it saw a market for the 757 replacement. Although 1,049 757s were built in its production run ending in 2003, a solid sales effort for its era, we believe the market is far larger when you consider the general up-gauging that’s been happening and the sales of the A321ceo/neo and the 737-900/900ER/9. Through September, there have been 1,861 A321 family sales and 766 of the largest 737 family siblings sold. Combined with the 757 sales, this totals 3,676 programs sales for all three airplanes, excluding future sales.

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Aircraft

757-200

757-300

A321ceo

A321neo

737-900

737-900ER

737-9

Sales

994

55

 1377

 484

52

530

184 

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Although Boeing claims the 737-9 is a replacement for the 757, for some 80% of the missions, and while Boeing claims the 737-9 is better than the A321neo, sales figures tell the story. Furthermore, airlines we talk to universally tell us the A321neo is more capable than the 737-9.

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The combined sales figures demonstrate that Boeing is trailing badly in the 180-220 seat single-aisle sector, with a mere 29% share of the market and even worse with the 737-9 at just 27.5% of re-engined competition. To recapture this market, Boeing has to proceed with a new airplane.

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We believe a 2025 EIS means activity will begin to truly ramp up for decision-making as early as 2017. Eight years now is becoming the norm for new airplane development lead time.

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Development of the true 737 replacement will then flow out of development of the 757R. The first 737 MAX EIS, for the -8, is slated for July 2017. The -9 follows in 2018 and the -7 in 2019, assuming the only two customers (Southwest Airlines and WestJet) don’t swap these for larger models or proceed with another solution entirely.

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We believe the MAX, coming two years behind the Airbus neo family, will have a shorter production life than the neo, especially with the poor-selling and poorer-performing -9. A 10-11 year production run is probably a reasonable expectation.

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Airbus and Boeing each have said they expect a replacement for today’s single-aisle airplanes around 2030. We believe this may be advanced a few years to as early as 2027.

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The question is, which company goes first? We think Boeing has the greater need and greater motivation. We believe Boeing will be first off the mark.

Odds and Ends: Supply chain demands; Southwest hints?; Retrospective on A320/737 replacements

Supply chain demands: Earlier this week, we talked about the prospect of production wars as Airbus and Boeing ramp up over the next five years, combined with the new entrants and the new offerings from Bombardier and Embraer.

We noted that this will mean opportunity and risk for the supply chain. Ryan Murphy from Salem Partners has a long analysis the starts with the finishing sector but which goes beyond this to discuss the broader implications. It makes for an interesting read.

Southwest: Hints of things to come? Yesterday we wrote about Southwest Airlines and the demise of the Wright Amendment that restricts travel from Dallas Love Field. We suggested several routes that Southwest would launch from Love once the Amendment passes into history.

Here’s a display Southwest erected on its countdown to the end of the Wright Amendment. We think it hints at things to come. Going clockwise: Chicago, New York and Charlotte seem to be where the airplanes are going. Then Los Angeles and Salt Lake City seem to be implied destinations. But the last one? Boise, or some other obscure city?

Or are we reading too much into the placement of these airplanes?

Source: Dallas Morning News

Our thoughts:

WN Love Field

Retrospective: We were looking at previous posts for some specific information and in the process re-read one about replacing the Airbus A320 and Boeing 737. The post dates from 2009. In light of subsequent events, it makes for interesting re-reading. We discuss the internal views of Airbus and Boeing about replacement or re-engining their aircraft and the engines from Pratt & Whitney and GE Aviation/CFM. We also touch on Boeing leaning toward not replacing the 777.

Retrospective, Part 2: Airchive has a nice set of historical looks at the development of the Boeing factory at Everett: Part One and Part Two.

Production wars coming: Airbus v Boeing

If some industry observers are concerned about the prospect of over-production now, the current state of affairs may only be the tip of the iceberg.

Airbus CEO Fabrice Bergier says he expects to boost production of the A320 and A350 families over the next few years, overtaking Boeing by 2018.

Airbus currently produces the A320 at a rate of 42 per month. The A330 rate is 10/mo and the A380 at 3/mo. Production of the first customer-destined A350 is to begin by the end of this year, with a targeted delivery in the second half of next year. Ramp-up to an initial production target of 10/mo is planned over a four year period, but the wing factory in Broughton, Wales, has a capacity for 13/mo, inferring a greater rate is already planned. Airbus is considering a second A350 production line, largely focused on the A350-1000.

Boeing currently produces the 737 at 38/mo, going to 42/mo next year. The 777 rate is 8.3/mo and the 747-8F/I rate is 1.75/mo. The 767, driven by the USAF tanker, is 1.5/mo. The 787 is ramping up to 10.mo, with a target by year end, but we believe this will be more likely in Q12014.

Boeing has notified the supply chain to consider higher rates for the 737, 767 and 787. We posted the chart below last June, reflecting the higher planning rates.

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