Odds and ends: More Airbus NEO orders soon, engine selections shortly; tanker slips again

Odds and ends:

  1. More Airbus NEO orders are likely within the next few weeks, including from the US and Asia;
  2. Indigo is expected to make its engine selection for its A320neo within the next month or so, and it’s a real competition between GE/CFM and PW for the LEAP-X and Geared Turbo Fan;
  3. A major German bank may shun financing the A320neo, according to Bloomberg;
  4. Boeing is now saying there is only a 2%-3% direct operating cost difference between the 737NG enhanced model and the A320neo, a gap Boeing figures it can close by the time NEO enters service in 2016;
  5. Boeing thinks the A350-1000 will require enough changes compared with the -800/900 models that the -1000 will slip to 2019 EIS;
  6. This gives Boeing more breathing room on what to do with the 777-300ER;
  7. Word is filtering out that USAF will award the tanker contract in March instead of in February;
  8. Boeing believes the USAF’s Net Present Value of pricing in the tanker competition probably favors the EADS KC-45;
  9. More modifications for the KC-767 are necessary than for the KC-45;
  10. Observers have more unanswered questions about the status of the 787 program than answers following Boeing’s announcement that first delivery is now targeted for the third quarter this year;
  11. These questions include the status of ETOPS, delivery sequence, production ramp-up, how EASA (the European FAA) will handle certification, how long it will take to retrofit fire fixes for the 20+ airplanes already built, the status the tail plane fixes and retrofits, just to name a few;
  12. Dominic Gates of The Seattle Times raises the question about the FAA in this story; and
  13. American Airlines announced a purchase agreement for two 777-300ERs; we think this is only the tip of the iceberg.

30 Comments on “Odds and ends: More Airbus NEO orders soon, engine selections shortly; tanker slips again

  1. On point 4. This would indicate that Boeing currently sees a 2-3% advantage in operating cost of the 737NG over current A320s (assuming the 15% fuel burn improvement equates to a 4-5% operating cost improvement). This might well be the case, and Airbus maybe able to deal with such an NG advantage through pricing. Nevertheless, Boeing’s belief that it could close a 2-3% gap would need to see them innovate faster on ordinary improvements than Airbus (they just did a major improvement which brought I think 2% improvement claimed – does the airframe leave space for another such improvement?). It also presupposes that fuel cost are going to stay where they are, since the A320NEO advantage is primarily based on it – fuel prices rise, the operating cost increases; fuel prices fall, it decreases). Given the market outlook for oil, I think this is a heroic assumption to make. It also presupposes that Airbus does not decided around, say, 2013, to undertake some more radical changes.

    Still, if the overall cost improvements stay in the low single digits, Boeing may well be able to keep the NG competitive. Which brings me back to the question raised elsewhere – why does Leeham News believe that technologies for a 20-25% ops cost improvement are around the corner, for an EIS in 2017/18?

    Many thanks in advance for any light you can shed.

    • My understanding was that the aerodynamic cleanup and improvements on the engines
      accumulate to 2% less fuel use ( which should effect ~.6% lower operating cost.

      I would like to second the “technological light shedding” request.

      ( this may also require a look into cost reductions promised by Boeing for the Dreamliner comparing it to those gains actcually achieved/achieveable with reference taken from todays A330 numbers ! )

  2. As long as no-one states if he means fuel burn per seat (ASK), per transported payload (ATK) or per trip, a “3% advantage” can mean nothing. I wouldn’t give too much about those numbers. If they come up with hard-coded trip fuel for a mission we might listen up again. I doubt that will happen anytime soon.

    The A320 usually seats less people in dense economy layouts.
    The fuel burn is slightly better for the A320 when you hold one flight manual versus the other and pick an altitude AND add a 2t penalty on the A320 (means you compare 70t Airbus versus B737 with 68t).
    “Slightly” means 60kg per hour and can easily vanish if the aircraft can’t make a certain flight level.

  3. Pingback: Rumor: AA is considering to orders 777-300ER - Page 9 - FlyerTalk Forums

  4. Point 12, Dominic Gates article in Seattle Times about FAA certification issues

    The problem is that by not validating the software as it’s written with a proper QA audit trail, Boeing and the FAA have stepped outside process. It’s made worse because the failure to follow process has already lead to one major incident.

    • How much of an issue is the ETOPs, really? If they get slapped with minimum 2 years, how many planes would need to be flying (and where) to demonstrate reliability?

      As an aside, Mr. Gates quotes: “Cai von Rumohr, an analyst”. I have rarely seen a more appropriate name.

      • Actually my point is that Boeing and the FAA haven’t followed the proper process to certify the 787 for any kind of flying.

  5. Regarding #8-at first I was completely against EADS winning the tanker contest but given the amount of items Boeing has on the table (EADS has a lot on the table as well), maybe its best to let EADS have it (earn it I guess) or at the worst make it a “split-decision”.

    To a certain extent, I’m seeing the tanker contract award and eventual manufacturing of the planes a bit of a distraction and potential use of too many resources. …IMHO.

    While its nice to get a potential steady income stream-sometimes there are much better opportunities.

    2019 for the A350-1000 might just make it the “A346” of the 2020’s if Boeing decides to build something new…and by 2020, the B777 series will be 25 years old in terms of service and 30 years in terms of design…..not only that, with over 1,160 orders already and probably 1200-1300 orders by the time all is said and done, I think it will have proven to be a successful product for Boeing and its shareholders.

  6. In my view, Airbus took a realist approach to give a miss to
    complete redesign of the A320 series.
    Soon, there will arrive much more competition in this market
    segment, from Canada, Brazil, China and Russia.
    And Airbus is anyway already drowning in A320 orders:
    IndiGo 150 units
    Virgin America 60 units
    Air China 50 units
    LAN Airlines 50 units
    CAS 50 units
    BOC Aviation 30 units
    Easy Jet 15 units
    Avolon 8 units
    Total A320 orders = 413 units during the last 3 months.
    And the A320 backlog is now more than 2400 units.

  7. Boeing is now saying there is only a 2%-3% direct operating cost difference between the 737NG enhanced model and the A320neo, a gap Boeing figures it can close by the time NEO enters service in 2016.

    If they had said that there would be only a 2-3 percent direct operating difference between a “compromised” Leap-X powered 737NEO (i.e. smaller fan diameter than optimum) and the equivalent Leap-X powered A320NEO, then I would tend to believe them. To say that they can close the “gap” to within 2-3 percent without the Leap-X is utterly ludicrous.

    As for an analysis of the fuel burn delta between the A32X series and the 737NG, I would highly recommend the reader’s of this blog to look at a.net user mandala499’s comments in the following link (i.e. reply 7 and reply 21):


    Whilst Boeing has done an amazing job converting that 737 from a dead duck of a 734 (when compared with A320s with CFM56-5Bs and IAE V2500-A5s) using a handicapped engine by introducing a competitive new wing, one should also appreciate the equally (if not more) amazing wing design that when combined with a good engine, can bring the heavier airframe over 800NM with less fuel per equal payload than the 738… AT A LOWER ALTITUDE and a mere Wingtip Fence! (especially that crazy IAE engine, FL350 and it still burns less than a 738 NG at higher alt with the Blended Winglet slapped on it!).

    But then one should not be eluded from realizing that the heavier A320 airframe does put it at a disadvantage over the very short sectors under 400NM.

    Again… for carriers whose strategy is driven by fitting in the maximum seat capacity and would go to any price to sell that last seat, the 738 is the one to use. But, for carriers who are more conservative in its pricing strategy and seat configuration and/or those who likes to carry a bit of non-breathing payload under the main deck, then the A320 is the one to use.

    But where I am… it’s ISA+15 all the time and the 738 lose it’s higher cruise alt advantage plus can be a real mess when one is faced with 2nd segment climb limits at the various airports where I am (giving the advantage to the 320… and when the 320 can’t win, the 738 can’t win either and the winner is ironically the 734 because it’s much lighter than the other two!).

    Am not oblivious to its capabilities. I do find however that many (including myself in the past) do not understand the 320… the wing is more than capable to enable the 320 to cruise at 0.78M at >FL390 at 69 Tons gross weight whereas for the same weight the NG at 0.79M need to be at 65Tons to stay up there should both want to maintain the 1.3G buffet margin in ISA to ISA+10C.

    Slap a little icing at FL390 when your Opt Alt is just a bit above FL385 and on the -800 U’d be at MCT barely able to keep your ECON Speed before you know it. Gave my friend on the 738 over the South China Sea a little fright!

    Airbus decided to just stick the Max certified FL at FL397 even though it is capable of at least matching the NG’s altitude capability.

    Even the Ops planners can misunderstand the 320… Who would have thought that doing a 250/300/0.78 Climb followed by LRC then do 0.78/300/250 descent is faster and burns less fuel than CI20-30 on the 320 with CFMs at 60T LW over 600NMs?
    The guy who refused to believe it got “dismissed” by one of the companies here (well it was his job to make the flying as cheap and as safe as possible).

    For the moment, the CFM56-5Bs and IAE V2500-A5s are enough to make the 320’s 25 year old wing competitive… the days of trying the CFM56-5As and V2500-A1s pleasing the beancounters are over just as is the 734 of the same wing design age as the 320.

    Now Airbus can either slap on a beancounting engine on the NEO or a rocket… same with the NG-reengined and we’ll repeat the same old cycle of misconceptions about the rival design.

  8. Our Newsletter readers estimate less than half of the current 787 Orders will actually be delivered! Perhaps 250? 500 . . . . Highly unlikely!

    Some will opt out because it is too heavy. Some will opt because the fuel burn is to high! Almost reading Auckland is not a viable option!

  9. The USAF should hurry up and make their decision on the new tanker before the President realizes what a terrible waste of the American taxpayers’ money that building a new tanker really is. Congress is currently looking for ways to cut defence spending and the new tanker must be put at the top of the list. President Eisenhower warned us of the MILITARY-INDUSTRIAL COMPLEX in 1960 and the new tanker is a prime example…. sample.daniel@gmail.com

    Daniel Sterling Sample
    Los Angeles

    • (Off Topic:) Actually, two days ago was the 50th anniversary of that speech.

  10. More Airbus NEO orders are likely within the next few weeks, including from the US and Asia.

    As for NEO orders from the US, didn’t the “old” United Airlines have a rfp out for new NBs? Perhaps the new United Airlines is that next NEO customer?

  11. One point to address first of all:
    “A major German bank may shun financing the A320neo, according to Bloomberg”
    Firstly: DVB Bank SE is *not* a major German bank. Its parent – DZ Bank – is pretty big, alright (fifth-largest bank in Germany by asset size).
    But DVB operates pretty independently and one should differentiate between statements from a subsidiary and the actual parent. They’re not the same thing.

    Quote from the article. “Why do you propose to the market an aircraft which is going to be an interim arrangement?” Grabowski said. “That’s bizarre.”

    Actually, it’s no more bizarre than car manufacturers giving their cars a facelift and maybe new comfort features and a new engine variant about halfway through a model’s planned lifecycle so they can still compete with other manufacturers.
    If you take Grabowski’s logic further, there should be nothing but new developments all the time.

    In short: this statement is more of the same stuff that I criticised in the comments section to this post:

    Besides this, two points I found worth noting:
    * Who will be the US NEO customer? Virgin America already ordered. We know it’s not United (yet), and Delta only just issued their RFP.
    I’ll go with an existing A320 customer, which rules out AA, Alaska, Southwest, AirTran and a few others.
    Likely candidated IMHO would be US Airways, Spirit Airlines and JetBlue.

    All of this is of course assuming that the next US customer won’t be a US-based lessor.

    • We know Bert (and have for more than a decade) and he is a sharp, sharp guy. DVB is and has been one of the shrewdest aircraft financiers in the world. We Bert speaks, we listen (to paraphrase an old EF Hutton commercial..

      • That’s fine.
        I still disagree with Grabowski’s statement that launching a re-engined version of a well-established model is in any way “bizarre”.

        As “UKair” already wrote below: I find that very statement from him quite bizarre.
        (By the way: the Bloomberg article qualifies that statement by only saying “[DVB] may shun” NEO. Note the use of “may” instead of “will”. Doesn’t seem to be as clear-cut as Grabowski’s statement suggests.)

      • Just to clarify my previous reply to this: Of course, talking about the business case for NEO for a particular lessor/bank is another thing, and I can see why NEO would not be as attractive to lessors as it would be for airlines.
        But Grabowski isn’t talking about a specific business case here (if Bloomberg represented his statement correctly), he’s objecting to the very idea of refreshing a product about 10 years before it’s going to be replaced.

      • I think this harks back to the 20-25% ops cost improvement. If Mr. Grabowski is privy to the same information you have on this, his stance on the issue is perfectly plausible.

        • This has a bit of “ring” to it.
          My impression is that that Play “Kill the A350Mk1” is performed again.

          The Dreamliner then was lifted well beyond the measly gains one could
          take from sliced bread.
          All the pundits, analyst and fans were absolutely sure that the vast
          performance gap between effectively an A330NG and the technological
          quantumleap “Dreamliner” condensed from a New Worlds superiority
          would be a completely undesirable product sitting on the apron in TLS
          like the first set of A300, history making a turn and ending there ( for
          Airbus )

          Well, beyond prose this might be a bit over the top, but I hope my
          general idea comes across.

  12. Given that:
    – “More Airbus NEO orders are likely within the next few weeks”
    – Positive feedback in the press from Delta, WN and FR…

    … it is the attitude of the banks and the lessors that I find ‘bizarre’. NEO seems to be on the verge of market acceptance and they will have no choice but to fall in line. It is a matter of time, in my opinion. Let me ask this, what will happen to the resale value of the A320 if Airbus cancel NEO and launch A30X tomorrow?

    On point 5, “Boeing thinks the A350-1000 will… slip into 2019′, more like wishful thinking. This is nothing more that to convince themselves that “Boeing has more breathing room on what to do with the 777-300ER”. Which makes me think that they will in the end launch 737NEO. Let’s see what Bert will say then…

    • I’m not sure about schedules for completely new airplanes any more. The last few years have left me dazed and confused.
      The A350-1000 could slip into 2019… Planned EIS is late 2015, so early 2019 would mean a slip of a bit more than three years.
      I don’t think that’s impossible. But not by its own – on the back of a two-year slip with the -800 and -900, I can see the -1000 slip into 2019 or even 2010. But with the baseline models entering service roughly on time (give or take six months), I’m not sure how the -1000 on its own should accumulate more than two years’ worth of delays.
      Then again, “people have seen horses throw up”, as a German saying goes (meaning “weirder things have reportedly happened”).

      • I think if the A350-1000 is four years late it will be due more to production issues on the A350 line than technical hold ups. If the A350 ramp up happens more slowly than planned, it probably doesn’t make sense to rush the introduction of the 1000 model only for it to displace an 800 or 900 model off the production line.

      • The wisdom from “The Mythical Man Month” ( deep book on IT project management )
        says in a reasonably sane project early
        delays can avoid later delays ( with an exponential growth prospect on time and resource drain).

        In a non sane project they indicate the beginning of an avalanche of misssteps.

        So the key question is about the “saneness” of the A350 project.

  13. I agree that lessors have an important opinion and Airbus therefore needs to Grabowski’s comments seriously. There isn’t enough detail in the article to allow us to understand what Grabowski’s issue with the Neo actually is and what he would like Airbus to do instead. Does he want Airbus to stick with the existing model instead? If residual values are at risk doesn’t that suggest the existing model is falling short and in that case why wouldn’t Airbus and airlines want to upgrade it sooner rather than later? Or would he rather Airbus bring out a brand new model as soon as possible, which won’t be that soon anyway because of the other programs they are having to work through? In the meantime wouldn’t both sales and residual values of the A320 wither away?

  14. Mr. Grabowski is assuming that B will start delivery of a new 737 replacement by 2020 AND be able to ramp production up quickly to very high numbers. My view is that regardless of what B does, there will be a significant mkt for the neo at least thru 2025 if not 2030 because the mkt for replacement of legacy 330s/737s will be so large that B won’t be able to meet it even if they produce 50 new planes/mo, so customers will continue buying neos until AB produces its new replacement. Even if AB and B together produced 100/mo, it will take years to replace the legacies. Most likely, this replacemesnt process will be gradual and constantly in flux.

    Grabowski’s assumption is also wrong, I think, because it is not likely that B will opt for a new plane this decade. This is the case, as I have said elsewhere on this blog, because their primary imperative must be to get the 787 up and running, not just the 788 but the 789 and the 7810. This is where the money is, and A’s A350 delays may leave open a door for B to dominate this most profitable segment despite their years of mis cues. Also, B simply cannot risk repeating its 788 failures with the 789 and 7010. This necessity overrides all else, including maintaining their high single asile mkt share if it comes to that. Thus, B cannot afford to create any reasonable risk that it may not have the resources to to respond to the challenges it faces to achive its 787 goals, particularly the unanticipated ones like the failure of the 787’s electrical system. They create this risk if the proceed with a new 737 replacement during the same time they are trying finish up the 787. Luckily for B,l SW has taken some of the pressure loff by re-afirmng theoir loyalty to B. See Sandra Arnoult’s piece today. http://Www.flightglobal.com.

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