Airbus wins annual results, trails Boeing in deliveries

Airbus announced 1,619 gross orders for 2013–1,503 net orders–and a backlog of 5,559 aircraft. The company delivered 626 aircraft for the year. It ended the year with 51% of the market vs. Boeing.

Boeing won the delivery race but came in second in orders.

CEO Fabrice Bregier said that 10 years ago Airbus delivered only half the aircraft it did in 2013.

Bregier, at the annual press conference, says “re-engining [the A330] is always an option, but not only option,” reports Reuters. “[Airbus COO-Customers John]  Leahy says Airbus could eventually add 1-2 rows to A350-800.”

Aviation Week reports the A350-800 EIS could be moved back a couple of years, also reporting it could be enlarged by two rows.

Bregier says A320 production could increase, reports say from the press conference. (We report in our e-mail distribution today what the production rates will be over the next few years–this will be published on this website next Monday.)

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Odds and Ends: Airbus’ 5th quarter; 777X RFP responses

Airbus’ 5th quarter: John Leahy, COO-Customers of Airbus, is so well known for announcing a whole bunch of orders at the company’s annual review press conference (January 13 this time) that Boeing dubbed it the “5th quarter,” and the quip has stuck. Aeroturbopower has a wrap up of how many orders could be announced at the 5th quarter.

Boeing, IAM Meet: Dominic Gates of The Seattle Times reports that Boeing and the IAM met for the first time since the 2-1 vote rejection November 13 of the contract offer in connection with the 777X site selection.

777X responses to RFP: The following news articles try to detail some of the responses by states to Boeing’s 777X site selection RFP:

Alabama

California and another California

Missouri: The county votes to add $1.8bn in tax breaks to the State’s $1.7bn.

Washington: The State adds Spokane to the list of alternative sites, according to Glenn Farley at KING5 (NBC, Seattle). (No link available.)

New York Times: Losing 777X would start a death spiral for WA State.

On Tuesday, the day the RFPs were due to Boeing, the Washington Congressional delegation released a letter to Boeing CEO Jim McNerney urging that the 777X be assembled in the state. The letter is below the jump.

This follows an Open Letter to Boeing on December 6 from Snohomish County officials (Everett is in this county), published in The Everett Herald.

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Latest twin-aisle orders shift market share; Plus Odds and Ends

The flurry of orders in September and this month from Lufthansa Airlines and Japan Air Lines tightens the wide body race between Airbus and Boeing.

Airbus and JAL on Monday announced a firm order for 31 A350s and options for 25 more. Last month, Lufthansa announced a firm order for 34 777-9Xs and 25 A350-900s.

Twin Aisle Market Share 093013Sources: Airbus and Boeing

Airbus traditionally has significantly trailed Boeing in the twin-aisle sector, but so far this year the race is running about even through September. The Lufthansa orders for the Boeing 777-9X and the Airbus A350-900, announced in September, are not reflected yet, nor is the Japan Air Lines order for A350-900s and -1000s. None of these orders has been booked yet by either OEM. Airbus would take the lead.

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Airbus breakthrough: Japan Airlines orders 31 firm+25 option A350-900s/1000s

JALAirbus scored a big breakthrough October 7 (Tokyo time) when Japan Airlines announced an order for 18 A350-900s, 13 -1000s and options for 25 more.

This is a huge win for Airbus and a big blow to Boeing’s decades-long wide-body monopoly in Japan.

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Update, 06:15 am PDT: Here are a couple of stories about the order.

Reuters: Airbus clinches landmark deal.

CNBC: Deal shows loyalty fading fast

Reuters: Airbus sees JAL deal spurring R&D in Japan

AP via Seattle Times: JAL says deal unrelated to 787 woes

Airbus press release

Reuters, 0800 PDT: 787 woes did contribute to JAL Airbus purchase, says Boeing exec

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JAL A350-1000JAL, and its rival, All Nippon Airways, had been reported nearly a year ago giving serious thought to ordering the A350 as a way to diversify its reliance on The Boeing Co., long the exclusive supplier for wide-body aircraft at the two carriers.

The lengthy delays for the 787, followed by the 3 1/2 month grounding earlier this year, are widely believed to be behind the consideration to buy the A350. John Leahy, COO-Customers, told us in advance of the Paris Air Show that he did not expect orders to be announced at the international event (and they weren’t) but he hoped to conclude something before the end of the year.

Boeing has a deep relationship with Japan and its international carriers. Japan provided around US$2bn in financing to the so-called Japanese Heavies to help fund their participation in the 787. It was suggested, but never confirmed, that Boeing might build the 777X wings in Japan to snare orders and keep Airbus from winning an A350 deal.

Relationships mean everything in Japan, and the strong one between Boeing, the government and the airlines combined to make Airbus a miniscule player there. Fear of offending the Japanese is why Airbus and the European Union didn’t include the government’s funding of the Heavies for the 787 in the bitter international trade dispute between the EU and the United States.

NTSB issues report of Southwest Airlines fuselage tear incident; and other stuff

The National Transportation Safety Board issued its report of the 2011 in-flight fuselage rip in a Southwest Airlines Boeing 737-300. The flight made an emergency descent and landing at Yuma (AZ).

In other stuff:

  • CSeries Report: Bloomberg News has this video report interview with Bombardier’s Rob Dewar, who is in charge of the CSeries development.
  • Airbus: John Leahy is also interview by Bloomberg video, and offers a variety of views on traffic, the duopoly and emerging competitors. Note that Leahy makes a passing reference to the entry-into-service of the A350-900 at the “end” of 2014. This compares with information in the Ascend data base that the first delivery is scheduled for July 2014. In our post of EIS dates, we have the EIS in early 2015. It won’t take much for the EIS to slip from the end of next year to early the following year.
  • Gut bomb: We got such a kick out of this story that we had to include it. It’s about the Cinnabon, and it’s pure decadence.

Odds and Ends: Slowing sales; Airbus in Japan; MRJ delay; Crandall on merger

Slowing Jet Sales: Within a few days, Bloomberg, Reuters and The Seattle Times each had stories about slowing jet sales.

Here is the Bloomberg story, focusing on cargo sales.

Here is the Reuters story.

Here is The Seattle Times story.

The theme of each is worrisome, but with Richard Aboulafia’s comments to The Times, we disagree with his view on American Airlines. American has an ancient fleet of Boeing MD-80s and aging Boeing 757s that have to be replaced, and we believe the Airbus and Boeing orders won’t go away if the merger with US Airways is blocked.

Airbus still trying Japan: Airbus, which has never had a lot of luck penetrating the market in Japan, still appears to have an uphill battle, according to this article. The Reuters piece quotes Airbus’ John Leahy at the Paris Air Show; when we spoke with Leahy by phone from the IATA AGM immediately before the PAS, Leahy wasn’t quite as upbeat as quoted in the Reuters article. Leahy tamped down speculation that he’d have a Japanese order for the A350 at the PAS (and he did not) but neither was he ready to predict any timeline when one might be forthcoming.

Aspire Aviation continues to believe Boeing may place the 777X wing production in Japan as a means to secure 777X orders and block the A350.

Mitsubishi’s delay: Mitsubishi’s latest delay on the MRJ90 program is being blamed on not following FAA process, according to this article.

Poor South Carolina 787 deliveries: All Things 787 reports that Boeing’s Charleston (SC) 787 assembly plant has delivered only four 787s this year.

Crandall on DOJ AA-US lawsuit: Former American Airlines CEO Robert Crandall (who retired in 1998) has a very good analysis of the faults of the Department of Justice lawsuit to block the American-US Airways merger in this Bloomberg TV interview. He’s first up in the 22 minute segment.

Desperation: Kingfisher sued International Aero Engines for $236m over allegedly defective and poorly designed engines on the Airbus A320. This doesn’t pass the laugh test and smacks of desperation. The V2500 has been on the A320 for decades and seems to have been designed just fine and performing well.

Leahy skeptical of Boeing plan to add 737 seats, vows to maintain 60% share of neo-MAX sector

 Airbus’ chief operating officer-customers, John Leahy, dismisses the idea that Boeing can add more seats to its 737 family to gain competitiveness over the A320 family.

 In a press briefing in advance of the air show discussing the 737 MAX (not subject to embargo), a Boeing official revealed that the company is considering changes to the galley/aft lavatory design and the use of slim line seats to add 6-9 seats to the entire 737 NG family. These changes would migrate to the 737 MAX. Airbus previously announced similar changes to the A320, gaining three seats, and more recently to the A321—which also required the addition of exit doors—to boost capacity to 236 passengers in shoe-horn configuration.

But in an interview with Leahy, was skeptical about Boeing’s possibilities.

“That’s more problematic, we’ll see,” he said. “Is this the O’Leary option where they stand at the back of the airplane?” he quipped, referring to Ryanair CEO Michael O’Leary, who has proposed a standing seat configuration.

“I’d be very surprised if they did that,” Leahy said, getting back on point. “I don’t know if they could do that (6-9 seats) but remember, we have 236 seats in the A321, so why should I be concerned if they squeeze a few extra seats in? I’d be surprised if they can. I think [the 737-900ER] is at its exit limits right now. It’s also at its performance limits.

Leahy believes that the A320neo will maintain a 60% market share vs the 737 MAX.

“We’re outselling the MAX 2-1 with a 65% market share. We’re not talking about the first couple of hundred airplanes, we’re talking about the first couple of thousand that the neo will have 60% of the market and they’ll have 40%. We’ll give them 40% of the market. It looks right now that the [neo] market will go higher than that but we’ll stay there.”

Wide-body airplanes get plenty of attention at IATA; Leahy comments on 777X, A350 and A380

The 69th AGM of IATA just concluded at Cape Town, South Africa, and wide-body aircraft drew a lot of focus in these articles from Bloomberg News and Reuters.

We spoke with John Leahy at the end of the AGM, and though tired and off to sell more airplanes before the Paris Air Show begins June 17, he had some pithy comments about Boeing’s 777X and a strong defense of the A380 sales.

Boeing will have a public briefing of the 777X at the air show, but there have been plenty of leaks before now in which the 777-9X is said to be 20% more fuel efficient than the 777-300ER it’s conceived to replace.

“Be careful with the numbers there,” Leahy said, referring to the 20% figure. “We’re not at all worried about the 777X. They are known for their paper airplanes. No one seems to remember that they already not just marketed but sold 777-200s with folding wings, and of course none was produced. No one seems to remember the ‘game-changing’ Sonic Cruiser, which of course was a joke. No one seems to remember the 747-500, the 747-600 or the 787-3. The Japanese remember the 787-3, which [Boeing] sold with legally binding contracts and just never delivered.

“Yeah, they’re worried about the A350-1000, and they’ve come out with one paper airplane after another and declaring victory, declaring that the world is beating a path to their door. Naw. It’s BS. It’s typical Boeing marketing hype.”

As we remarked to Leahy, “tell us what you really think.”

Leahy repeated previous statements that he could sell a lot more A350-1000s if he had the production slots.

“We could substantially increase sales for the A350-1000 if we could substantially increase production. I need a second line, a dedicated line and we’re debating that internally. We’re doing the business case. I’m confident we can make that decision before the end of the year.”

We asked a leading question about the rate he’d like to see, but Leahy didn’t bite.

“I don’t want to tell Boeing exactly what we are up to.”

We also asked where the additional line would be, if approval is granted: France, Germany or Mobile (AL). “It’s not going to be Mobile,” he said. “Let’s start building CEOs and NEOs there first before we start getting into wide bodies.”

Although there have been a number of stories reporting that Japan Air Lines and All Nippon Airways may buy the A350-1000, breaking Boeing’s decades-long monopoly. It won’t be by Paris, apparently.

“I’d be very surprised, but I can say I’m looking for an improvement in our market share in Japan. We have nowhere to go but up. I would be hopeful we will get a breakthrough in Japan, but I don’t want to predict a timeline,” Leahy said.

A380 sales have been poor, but Leahy is sticking to his prediction of 25 sales this year.

Question: The A380 isn’t selling very well.

Leahy: Excuse me, I haven’t modified my forecast. I said I’ll sell 25 this year, and I’ll sell 25 this year. If this were December, maybe we’d have a discussion. I’ll sell 25 this year.

Q. You fell short last year.

Leahy: “Bad things happen to good people.”

Q. The VLA forecast 1200-1300 since 2000. Sales and delivery rates fell short every year to maintain that pace.

Leahy: “The one thing that doesn’t change is that [everybody] all agree[s] that RPKs double every 15 years. We have to have larger aircraft. Larger aircraft are the only solution [for key airports].”

The Airbus forecasts assumed Boeing would capture a 50% share of the VLA passenger market. In fact, Boeing only has a 10% share. Leahy predicts this split will be maintained.

“We will have 90% market share for VLA. The A380 will do very well and I am confident the book-to-bill will be maintained. No, we’re not going to sell 60-70 aircraft a year. But we will sell 25-35 and we will build 25-35 a year,” he said.  “A380 do get high yield passengers.

Note: Because readers won’t behave, comments are closed.

Odds and Ends: Boeing moves jobs from WA State; CSeries FTV 1; A350 power up; 787-9 assembly; 777

Moving jobs out of Washington: The Seattle Times has a story about last Friday’s announcement that Boeing is moving more engineering jobs out of Washington.

CSeries: Airliners.net had this photo over the weekend. The first flight is expected after the Paris Air Show.

Bombardier CS100 Flight Test Vehicle #1.

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Airbus has powered up the engines on the A350 for the first time. First flight is expected within weeks, likely before the Paris Air Show.

A350

Airbus photo.

Smaller jet demand: The smallest Airbus and Boeing jets have weak demand, reports Aviation Week. And we’re not just talking about the A319 and 737-700/7.

787-9 Assembly begins: It was a busy weekend, with all of the above and capped by the start of 787-9 assembly. The first three 789s will be built on the Surge Line at Everett.

777 Painting: We linked two stories last week, to KING 5 and to The Seattle Times, about the robotic wing painting for the 777 line. Here is a photo:

777 Automated Spray Method

Boeing photo

Boeing currently is only robotically painting wings going on even-numbered line numbers. Wings going on the odd-numbered lines are still painted by hand for now. Because the program is new, the programmers continue to adjust the software between the even- and odd-numbered line wings, and eventually all the 777 wings will be painted robotically.

The paint shop is big enough to accommodate 777X wings, including the folding wing tips. This, of course, implies the 777X will be assembled in Everett. It’s unclear where the wings will be built.

The robotic painting is part of the 777 Lean manufacturing begun in 2005, which in the entire process has enabled Boeing to boost 777 production to 8.3 a month within the same assembly line space.

While this is the highest twin-aisle rate Boeing has produced to-date, Airbus has been assembling A330s at rate 10/mo for some time and is considering going to rate 11. Boeing, of course, will be at rate 10 for the 787 by year end. Airbus long ago announced plans to go to rate 10 for the A350 four years after EIS, but John Leahy is already pushing for a second assembly line to accommodate A350-1000 demand.

Assessing the A350 program

News from EADS that it is beginning to consider another Airbus A350 assembly line, or ramping up production more quickly than currently planned, to accommodate increasing demand for the -1000 validates a desire expressed months ago by John Leahy, COO of Customers for Airbus, that he could see more -1000s if he had the capacity to build them.

Delivery slots for the A350 are essentially sold out to 2020. Orders for the -1000 stalled in part because of this, in part because Airbus tweaked the design, in part because Boeing engaged in an effective campaign to cast doubt over the model and in part because Tim Clark of Emirates Airlines and Akbar Al-Baker of Qatar Airways can’t resist negotiating in the press to pressure Airbus to do more.

We believe the -1000, at 350 passengers, is a bit small. It compares with the 365 passengers in the Boeing 777-300ER. We felt from the start that Airbus should have had at least 30 more passengers. But the -1000 threatens the -300ER. Airbus claims the -1000 will have 25% lower trip costs; even Boeing’s own presentations grant the -1000 about 20% lower trip costs.

With Boeing planning a 350-passenger 777-8X and a 406 passenger 777-9X, the need for a larger “A350-1100″ becomes acute. Boeing has had the monopoly with the 777-300ER, which will be broken by the -1000. The 9X will retain a monopoly; Airbus, to be fully competitive, needs to match this size.

This will mean a new wing and larger engines, of course, no small investment. There is already a huge gap between the -1000 and the A380. The 777-9X, which will be more efficient than the 747-8 (and which will kill the dying 748), will eat into the A380 demand. So will an A350-1100, but better to do so from within than to see your competitor take the sales.

The A350-900 is moving forward with continued market demand.

This leaves the A350-800.

Boeing engaged in a public campaign to cast doubt on the viability of the -800. Airbus has poorly defended the airplane, and its efforts to switch customers to the -900 further casts doubt. But officials insist the -800 has a future. The question is, when?

The current entry-into-service plan for the family is the -900 in the second half next year (we think it could slip into early 2015); late 2016 for the -800 and 2017 for the -1000. There are only two -800s scheduled for delivery in 2016, with the bulk in 2017, when the -1000 is due for delivery in reasonably sizable numbers.

We’re told from several sources that Airbus is switching customers from the smallest model to larger versions in part to de-risk the program. Schedule on the -900 is already tight and resources are focused on this sub-type. Switching customers relieves pressure on these limited resources.

Another reason, expressed by Leahy: the -900 is more profitable for Airbus (though we are also told reliably Airbus is offering incentives valued at “millions of dollars” to switch).

Leahy also says switching to the -900 gives customers earlier delivery slots. We’re not quite sure how, but this is what he told us.

We believe the increasing demand for the -1000 will prompt Airbus to resequence the EIS, moving the -800 from 2016/2017 to 2018. This will open slots in 2017 for the -1000 and ease integration pressure for Airbus.

But will Airbus keep the -800? Our checks in the market with customers so far suggest the answer is yes. Abandoning the -800 will totally cede the middle-twin-aisle sector to the 787 and we doubt Airbus wants to do this. The A330 will be approaching its 30th year from EIS in 2024, and by then will reach the end of its natural life cycle, if not somewhat before. Airbus needs to come up with a solution to replace the A330 (perhaps that ever-talked about NEO?).

Airbus needs to address (1) the absence of a competitor to the 777-9X, (2) the future of the A350-800, (3) the absence of a new technology competitor to the 787-8 and (4) the successor to the A330.