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.


  • 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

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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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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Boeing sees 4% increase in aircraft demand in next 20 years

Boeing forecasts a demand for 36,770 new airplanes during the next 20 years, an increase of 4.2%, in its Current Market Outlook. The value of this demand, which covers the entire commercial aviation line from regional jets and up, is $5.2 trillion.

The company released its annual forecast today, for the period ending 2033.

As with previous forecasts, the single-aisle demand constitutes the vast majority, with a requirement for 25,680 airplanes to cover retirement and growth, the latter being driven by the proliferation of the low cost carriers worldwide. The “heart of the market” for the single aisles has moved up to 160 seats, says Randy Tinseth, VP Marketing. This is the 737-800/8 and A320ceo/neo-sized airplane. The Comac C919 and Irkut MC-21 will join this sector when they enter service later this decade.

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Is the A330neo engine Rolls Royce’s first carbon fan model?

The Airbus A330neo program has come a long way since our 29th of December article  “A330neo prospect gains traction.” With the Farnborough Air Show days away, we understand there are now Airbus internal job postings for engineers to join the program. The speculation then reduces to “when” the program will be announced, not “if.” Another would be what improvements are foreseen for the Boeing 787-derived engines that may power the neo.

Rolls Royce reportedly gains exclusivity

Reuters recently reported that Rolls Royce might get an exclusive engine deal for the A330neo. There are many reasons Airbus might give Rolls Royce or General Electric exclusivity on an engine for the A330neo, especially if Airbus sees the likely sales of the updated aircraft to stay below 500 units. The reasons can range from how much of the $2B estimated program cost the engine manufacturer would pay to what efficiency improvements they would undertake on top of what is already on the way for their 787 engines. There is every reason to believe the GEnx-1B can match the fuel consumption performance of a further developed Trent T1000-TEN. We understand Rolls Royce will leverage developments from the A350 TXWB engines but GE can just as easily leverage developments from the LEAP program.

T1000 ALPS demonstratorThe picture shows the Rolls Royce Trent 1000 carbon fibre fan demonstrator engine from the companies ALPS (Advanced Low Pressure System) program.  Is this also the looks of the Rolls Royce A330neo engine?

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Comparing the A330 and 777 Classic backlogs

Airbus has a major image problem with its A330 backlog: the aviation industry looks at the backlog and sees “two years worth of production,” assuming on its face that after 2016, there are no orders. Therefore the program is in dire straits.

It’s not that simple, as we’ve pointed out: firm orders extend to 2019, though heavily front-loaded to the near term–and certainly Airbus does have issues with the backlog.

The same industry looks at the Boeing 777 backlog, hears Boeing say it has three years worth of backlog and six years to fill a production gap to EIS of the 777X, blithely asserting there is no problem. This assumes 100% conversion of options, letters of intent and option LOIs.

We’ve previously plotted out the production gaps of both airplanes. Below we plot the orders, options, LOIs and option LOIs (Airbus does not list option LOIs) from the Ascend data base as of July 1. The plot lines are actually very similar near-term.

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American easing away from continuous hubbing, returning to peak banking

American Airlines will ease away from the continuous hubbing that smooths operations at key airports, increases aircraft utilization and cuts costs as it returns to the peak-and-valley hub-and-spoke system adopted decades ago under former CEO Robert Crandall.

Although this will mean higher costs and big gaps in airport activity, the increased revenue potential–called the power of the hub under Crandall–will offset the increased costs, says Derek Kerr, CFO of American.

We were at American’s Leadership Council meeting for 1,500 employees yesterday. The meeting itself was off the record but we talked with Kerr afterwards on the record.

Kerr, CFO at US Airways prior to the merger between AA and US, said that the continuous hub can’t connect as many passengers as the traditional hub, leaving revenue on the table. Continuous hubbing allowed a 45 minute ground time, which is too short–an hour is needed to maximize connections.

Re-hubbing will occur this year at Chicago, Miami and Dallas.

Southwest Airlines was a pioneer in continuous hubbing, though it wasn’t called this until perhaps a decade ago. Southwest essentially rolls the airplanes up, deplanes, enplanes and departs. At its origin, long before carry on bags, bag fees, security issues and other factors arose, Southwest “turned” its planes in as little as 10 minutes. Today turns are 30 minutes or longer, in part as planes get larger and carry-on bags slow the enplaning process. Still, Southwest eschews the term hubbing and indeed its connection percentage is far lower than American and other traditional airlines.

The de-hubbing is just one step the US Airways management team is taking to remake American following its emergence from bankruptcy last year and the merger in December.

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Next new, clean sheet airplane around 2030, says Airbus

Airbus currently is planning for the next new, clean sheet airplane around 2030 and now are focusing on incremental improvements to the existing product lines, officials said at the Innovations Days annual media briefing last week in Toulouse.

Fabrice Bregier, CEO of the Airbus commercial aircraft unit, said that “innovation is on a case3-by-case basis,” with a successor to the A320 family requiring an engine “with great benefit.” He did not define this, but previously Airbus indicated a successor needs a combined 30% airframe/engine improvement to make an entirely new airplane design worthwhile.

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Appraisal firm sees little impact on Classic values from A330neo

With apparent momentum building for the launch of the Airbus A330neo, widely expected at the Farnborough Air Show, the appraisal firm Collateral Verification Tuesday issued a note expressing the likely affect on values of the A330 Classic.

Impacts to values on the in-production Airbus A320 and Boeing 737 families was a widespread concern when the Big Two moved to re-engine these aircraft types.

Airbus and Boeing each defended the values of the in-production models, saying that until the re-engined aircraft in service reach about half of the installed base of the current models, values of the latter shouldn’t be negatively impacted. We’ll see if this is the case, with the A320neo entering service next year and the 737 MAX in mid-2017. But if this theory holds, then the same should be true for the A330 Classic.

The values of the Classics have emerged as a worry going forward. Market forces believe Airbus will have to hold the line on pricing the A330neo, foregoing much if any of a premium for the new airplane. Airbus has promoted the Classic as the less expensive alternative to the higher priced, newer technology Boeing 787, and from the IATA AGM earlier this month in Doha, John Leahy, COO-customers for Airbus, called a low-cost A330neo “unbeatable” in economics.

Collateral Verifications doesn’t believe there will be much of an impact on Classic residual values. The company writes:

Over the last several months, the A330NEO has been a big part of the industry discussions. Although not yet launched, it seems more and more apparent that this may be announced in the near future. Due to this, many of our clients have approached us to find out how this may impact residual values of the existing A330 fleet. Based on the historical data we have collected on the A330-300 and Boeing 767-300ER, we have compared the impact of the A330-200 when it first entered service. Although not 100% similar to the introduction of an A330NEO, it does provide some guidance as to the potential impact of newly introduced aircraft to other in-production aircraft. The value impact on the A330-300 and the Boeing 767-300ER was about ~5-7% over their normal rate of depreciation which was not that much different from the impact on the 737 classics when the 737NG was introduced. As with any other older generation aircraft, the real value impact will be during a downturn. A330s and B767s dropped in value by 15-25% after 9/11 and dropped in value by 15-35% after the financial crisis. Overall, the initial impact of the A330NEO should not be greatly significant, unless the aircraft enters service during the next downturn.