Odds and Ends, Post-Paris Air Show 2011

Here are our closing views of the PAS:

Boeing

Boeing did very well at the show. We know the headlines almost universally say Boeing had a bad show (which it didn’t) and was trounced by Airbus (which it was), but people easily overlook comparing Boeing’s performance vs. previous air shows.

Boeing announced more than 140 orders worth some $22bn–about equal to the 2009 Paris Air Show. By anyone’s standards, this ain’t shabby. Boeing often announces low numbers at air shows, claiming it doesn’t hold orders for the shows and Airbus does. We regard this as so much poppycock, because we know customers drive announcements and both Airbus and Boeing hold announcements for air shows at customer requests.

We know that Boeing was striving mightily to complete 747-8 deals for this air show and, although the customers were largely unannounced (and also largely leaked), the orders for the slow-selling 747-8 were a welcome and major showing for Paris.

There is no getting around that the image that Boeing did poorly permeated the coverage. Even in Boeing’s home town of Seattle, the radio stations thought so. They called us for commentary and here’s what we told them and others that asked for our view about how Boeing did:

Remember that Boeing emerged from the 2009 air show hugely embarrassed. On the Monday and Tuesday, the company assured the international press that the 787 would fly by the end of June. As we later learned, on Tuesday evening, top officials flew back to Seattle unexpectedly to deal with the fact the pilots refused to fly the 787 because of the wing-to-body join design wasn’t up to snuff. Within days of the air show, Boeing announced cancellation of the first flight.

At this show, Boeing won major orders for the 747-8, two 747-8s, a 787, a 737-700 with the Sky Interior and a 777-200LR were all at the show, the most visible presence for Boeing in years and a testimony to the company’s technology.

So we think Boeing did just fine. It’s just that Airbus did a whole lot better with the landslide of orders for the NEO.

Joe Campbell of Barclays agrees that the doom-and-gloom headlines aimed at Boeing were overdone.

At the same time, there is universal agreement that the blow-out victory of A320 orders puts more pressure on Boeing to move sooner than later with a decision on its New Small Airplane.

Bernstein Research continues to be firm in its belief that Boeing will re-engine; JP Morgan is now moving in this direction. Bank of America is in the RE camp; most others still believe Boeing will proceed with a new airplane.

Airbus

Airbus had a blowout show, with A320neo orders overshadowing the three pre-show opening embarrassments: the A400M had an engine issue which led to the decision to cancel the aeroabtics (which is too bad; it’s really quite impressive); the A350-800 and A350-1000 EIS have been pushed back 18 months–the -1000 for a refinement to the engine, payload and range and the -800 because Airbus elected to reassign resources to the -900 to meet the increasing doubtful 2013 EIS; and the A380 was directed by ground control at the air show down an incorrect taxiway and clipped a wing-tip on a building.

The show otherwise went smoothly for Airbus, with two additional embarrassing moments: U-Turn Al Baker, the unpredictable CEO of Qatar Airways who has been a camera, recorder to reporter he doesn’t love, hugely embarrassed Airbus with a public lambasting over the A350-1000 tweaks as inadequate, late and that he was uninformed. Airbus put the best face it could on this, but Al-Baker no-showed the press conference (at which reporters were gathered) intended to announce an order for A320neos and A380s. Airbus officials were visibly embarrassed at this one.

China also held back a widely anticipated order for A380s from Hong Kong Airlines out of one of its periodic political piques, over which Airbus has no control, and that is the aggressive plans by Europe to impose environmental taxes on airlines. Airbus is used to this sort of political blackmail by China (and so is Boeing), so we expect this order to eventually be announced.

Bombardier

In  the three weeks leading up to the air show, BBD announced two orders for its CSeries and three more at the air show. These were welcome for the slow-selling CSeries and would have been a major boost for BBD had it not been for the order by Republic Airways for 40 A319neos and 40 A320neos–and for Airbus COO John Leahy suggesting BBD should cancel the program.

BBD holds a firm order with Republic for 40+40 CS300s, the order which spurred Airbus into action to do the NEO in the first place–and which prompted Airbus to engage in all-out war to undermine the CSeries (which we have written about on several occasions).

Although Republic said the CSeries orders are intact, we tend to concur with the prevailing wisdom that RC will eventually cancel. The CSeries isn’t due for delivery until 2015 (the first of the NEOs, the A319, is the following year) and there is plenty of time to do so.

We’re also not sure the A319neo will be delivered, either. Although the NEO order was clearly connected to a total financial restructuring of the company in which engine provider CFM (GE) played a major role (we’ll have more about this later this week), the fact remains that Republic subsidiary Frontier Airlines is battered by United and Southwest airlines in Denver and Southwest/AirTran and Delta Air Lines in Milwaukee. There is no city that can support three hub carriers and United, Southwest and Delta are behemoths that can crush Frontier–and we think eventually will. As goes Frontier, so goes Republic.

As long as Republic chooses to fight these hopeless battles, and it really has little choice, for there is nowhere else for Frontier to go, the very existence of Republic is in doubt. It takes a long time for airlines to die, but we would not bet on either BBD or Airbus delivering those airplanes.

The sooner BBD’s order is canceled, the better off BBD may well be. The delivery slots would be opened for better, stronger airlines and this weak company would then be a problem it doesn’t have to face.

That BBD is now the target of Airbus and Boeing is what is a clear campaign to undermine BBD tells us both manufacturers are worried about the CSeries. As we’ve noted on AirInsight, we find this sort of attack distasteful but it is how the game is played.

Engine Makers

CFM fully lived up to expectations and announced large orders for its LEAP engine, achieving close but not quite parity with Pratt & Whitney’s GTF for the NEO family. CFM was forced to revise its engine somewhat because fuel burn was as much as 4% short vs GTF. According to CFM, the revised LEAP is now 1% better. PW says LEAP is still 1% worse, Airbus says the two engines are about even and now, for the moment, so are sales.

PW now has had the first flight of the CSeries GTF, an event announced at the air show. By the time the GTF-powered A320neo enters service in October 2015, PW says the GTF will have about 1 million hours of flying on the BBD CSeries and the Mitsubishi MRJ and test engines, while the CFM LEAP will still be 9-12 months away from NEO EIS. This will be a major advantage to PW, but CFM is a tough, tough competitor with the advantages of a huge installed CFM 56 base and the strength of family ties in the form of GECAS (the mega-lessor) and GE Aviation, where “global” deals can be cut (as one was in the case of Republic) to spur sales. PW is the underdog in this race, out of the gate with a surprisingly strong start.

As we can see from the results at Paris, CFM can’t be counted out. And nobody has done so.

34 Comments on “Odds and Ends, Post-Paris Air Show 2011

  1. “.. top officials flew back to Seattle unexpectedly to deal with the fact the pilots refused to fly the 787 because of the wing-to-body join design wasn’t up to snuff.”

    That tidbit is completely new to me. Is there any definitive source available?
    ( At the time unbounded guessing was going on and I never saw anything
    resolving this in an official way )

    • There was perhaps a hint of it in the reporting:

      “Preliminary analysis was that we could have a credible flight-test envelope, but then during detailed analysis the envelope narrowed to the point that it would not be useful for flight-test,” says Boeing Commercial Airplanes chief executive Scott Carson.

      Translation: We were desperate to get this bird in the air, come what may. But the Flight Test Department put their foot down …

      • Yes, I remember that. My personal interpretation at the time went more into FAA obstructing first flight on spec grounds
        while others had “kinder” reasons at hand, even absurdly
        positive ones.

    • Uwe, there has been a rumor about this for 2 years now. But, both Boeing and its test pilots deny the story.

      “Although Republic said the CSeries orders are intact, we tend to concur with the prevailing wisdom that RC will eventually cancel. The CSeries isn’t due for delivery until 2015 (the first of the NEOs, the A319, is the following year) and there is plenty of time to do so.”

      Scott, I thought the A-319NEO was the last model to be delivered. Is the A-320NEO in 2015, A-321NEO in 2016, and the A-319NEO in 2017 the ‘official’ schedule that Airbus put out?

      But, I agree, I think RC will not be around long enough to take delivery of CS-300, A-320NEO, or A-319NEO.

      In the long run, both EADS and BBD will be better off without RC.

      I said before Boeing had a great PAS. EADS did too, even without counting all the NEO orders. Boeing announced orders for each of its product line-up (although some were clearly just identifing the “undisclosed” buyer.

      China needs to get a life, they do not run this world. But, then again neither does the EU.

      • A321NEO is the last model out of the door, A319NEO is the second one in 2016.

        • UK is correct; when Airbus advanced EIS of the A320 from 1Q or 2Q2016 to October 2015, the EIS of the A319neo was advanced to the A320’s old slot. The A321neo EIS did not move.

      • “Uwe, there has been a rumor about this for 2 years now. But, both Boeing and its test pilots deny the story.”

        Which rumour/story? The one about the test pilots refusing to fly or the one where the FAA stepped in and said forget it?

        If it is the test pilot variant, do you really think for just a fraction of a nanosecond that either Boeing management or the test pilots would actually publically air this?!

      • An neither does the US…

        which many Americans still can’t grasp (and don’t flame me for this, I lived many years in the US, working in aerospace and enjoying myself greatly…).

        The days of one (or two) superpowers are over, now we have (in no particular order) EU, US and China with India, Russia and Brazil slowly making their way, and they’ll get there in the end.

      • Aero Ninja:

        do you really think for just a fraction of a nanosecond that either Boeing management or the test pilots would actually publically air this?

        The point, according to the story, is that Boeing managementdidn’t overrule their test pilots. If the decision was made by the FAA then it’s taken out of Boeing’s hands. But at the time Boeing was desperate to get the 787 into the air after all the delays and just days after they had announced the first flight at the Paris Air Show. If they could just fly the plane once they could spin a subsequent delay as a small setback.amidst great progress. The decision on whether it’s safe to fly is made by the test pilots and Boeing management ultimately respected that. But I could imagine a fair amount of moral pressure was placed on the test pilots on the lines of “You do realise that Boeing’s credibility will be shot to pieces if we don’t get this bird into the air?”

        This makes the story credible to me.

        • Hi FF,

          I believe we are talking at cross purposes here. I am not questioning the validity of the story. As I had asked TopBoom, I merely wanted to know which story he was referring to (FAA or Boeing test pilots).
          I could very well believe that the test pilots refused to fly the plane. The fact that this issue seems to have gone so far as to result in the public humliation at Paris in 2009, before the Boeing honchos decided to back off (Realise how deep they were in it? Figure out how much they had underestimated their problem?) is, for me, truly disturbing. If it was the FAA that had to step in to stop the circus, it would be even worse.

          My point is that even if the Boeing test pilots had refused to fly the plane, I do not believe they would confirm this to the public. That, for them, would be a Boeing internal issue and not something for discussion outside of the company. Hence to claim that since Boeing and the pilots deny the story, it did not occur, is a bit misleading and somewhat altruistic.

          To sum it up, if the pilots forced Boeing’s hand, shame on Boeing management but hats off to the pilots. If the FAA had to step in, not a very nice story at all.

  2. Definitely a hitherto unknown revelation.
    Thank goodness the pilots insisted on common sense.
    Speaks volumes for the professionalism of the Boeing management that they even wanted to fly.

    • I can’t (won’t) believe the pilots only voiced their objection at the last possible moment. Someone higher up knew they (the pilots) didn’t want to fly and figured a bit of leaning would get them airborne.
      I sure hope that person got the bonus he (/she) deserves.

      • Could this be the start of a “rewriting history” campaign?
        Not uncertifiability but fickle Test Pilots were Boeings undoing.

        Wiffs of 1984 imho.

  3. The 737 sales numbers are worrying. If it’s purely a blip while airlines work out what Boeing’s strategy is, then that’s fine. In a previous post, I reckoned Boeing needed to sell an additional 2500 737’s over the remaining lifetime of the plane, in addition to their backlog. Otherwise they will have to do a re-engine to drive demand for the 737 and keep the production levels high and steady. You pointed out in a subsequent report that Boeing will want to run the 737 for a number of years in parallel with the new plane to ensure a stable transition. In that case Boeing may need to sell an additional 3500 planes. On an unre-engined plane that’s looking doubtful. So far this year they have sold about 100 737’s, compared with nearly 1000 A320 family planes.

    The new plane is a given, I think, and I don’t believe that Boeing will delay its entry into service by more than a few years if they do decide to re-engine the 737.

    The 777 had a good Air Show and has continued its success so far this year.

  4. Thanks for the great round up, Scott, and your daily commentaries from PAS.
    I agree that it would be silly to claim that Boeing had a bad show. They had a few good deals + brought 748i and 787 to show off, always good for publicity. However looking at some commentaries, I came across Aboulafia’s assessment of the Boeing NB strategy:
    “They don’t have one, that’s the thing,” he said. “This industry is like steering a supertanker. Just because you’re in calm waters one day doesn’t mean you don’t have to worry about what’s coming soon.”
    http://www.chicagotribune.com/business/la-fi-boeing-20110627,0,3733019.story
    Interesting, given his views of Boeing.

    About the 748I ‘order’ I have also come across this:
    “Boeing said an unidentified airline had provisionally committed to 15 747-8 passenger jets worth $4.8 billion… Boeing also rarely announces deals before they are confirmed.”
    Does this mean it is an MoU rather than a firm order?
    http://www.chicagotribune.com/business/yourmoney/sns-rt-us-airshow-chinatre75n4w1-20110624,0,5371570.story

    Also, given the fact that Airbus just delivered 2nd MRTT to RAAF and Boeing is defining their tanker, has either OEM been talking about their military programmes and their outlook?
    Seattle Times report that Boeing is already facing cost overrun on that project.
    http://seattletimes.nwsource.com/html/businesstechnology/2015420023_tanker25.html
    Was anything said during their briefing?

    As far as Airbus is concerned, I have a funny feeling that A350-800 is not going to face an easy birth… Flightglobal is reporting that Airbus is ‘encouraging’ airlines to switch to the -900 version. -800 is certainly their weakest offering in the family, we’ll see how it pans out.

    • Boeing did not say anything about the tanker at the Boeing briefing in Paris.

      As for the single-aisle strategy, or lack of it (in Aboulafia’s words), it is believed that the Board of Directors wants to see the 787 and 747 delivered and in smooth production before green-lighting another new airplane. The lack of single-aisle strategy may have more to do with this than any confusion on the part of Boeing management.

    • That last link caught my attention… how long is left on the program and “just” 6%.
      I think we all knew both A and B offered their proposals at cost. Government projections may well be a bit more conservative and if it then finds such a small cost overrun, I’m sure B is very happy! (and did a good job)

      • “After the contract was awarded, Boeing revealed “that it proposed a ceiling price that is less than its actual projected cost to execute the contract,” according to an Air Force statement from spokesman Lt. Col. Jack Miller. “There is no legal barrier that prohibits pursuing a below-cost proposal strategy, and Boeing’s met all rules.””

        Weren’t various american politicians, as well as Boeing, all over Airbus about submitting a money losing bid?
        Oh the irony. Oh the hipocrasy!!

    • Interesting point about Boeing deliberately underbidding for the tanker project. They presumably expect to recoup their losses later on when the customer is locked in. Government contracts are tricky. On the one hand there can be all sorts of scope for padding. But if governments are in a stingy mood, you’re stuffed. They’re the only customer and you have nowhere else to go to. As EADS discovered with the A400M.

      Like UKAIr I have my doubts about the A350-800. Personally, I think Airbus made it too small. They obviously wanted to cover the whole A330-A340/B777 range with a single family. It makes marketing sense but the result is a plane that is inefficient. I suspect they would have done better to have designed a two model family in the first place – the 900 model as is, and a more powerful and perhaps slightly bigger 1000. It raises the question of how Airbus plans to address the 767/787 space, now they don’t have an effective model there. A lightweight twin?

      • The airlines are not chained to a certain capacity. The A350 certainly is a growth model over the A330/340-300 and in case of the A350-1000 a one.on.one replacement of the A340-600 (and 80-90% of the B777-300ER).

        The A330-200 capacity is not well covered. However, we don’t know if all airlines really bought the A330-200 because they were attracted by the capacity. Alternatives were rare, only the much larger B777-200ER.
        As long as the A350-800 costs less per seat with A330-200 capacity it is attractive. If the airline retain some growth capability even better.

        What clearly becomes apparent: a wide gap between the smallest (by payload-range) twin aisles and the largest single aisles opens. The A321 is 93t MTOW (largest single aisle), the B787-8 is 200+t MTOW (smallest twin aisle).

  5. Looks like I am not attached to that specific grapevine 😉

    Apropos KC46:
    After Boeing did that step change in price to be certain to underbid EADS ( for avoiding a capabilities comparison ) the chance that they got themselves into hot water in case of winning was a near certainty imho.

    “China needs to get a life, they do not run this world. But, then again neither does the EU.”

    China is just learning to wield their weight gain. Essentially the idea behind the EU carbon offset scheme is a GoodThing TM. I do have issues with excecution, it is open to fraud ( by Internet inventor AlGore or anyone else ).
    As a side note China is, contrary to some well placed media campaigns, not the environmental tail end. Probably further along than the US if we keep in mind that
    the biggest lagger doesn’t even do meaningfull basic industrial output anymore.

    IMHO most learning will have to be done by the US. No more bullying other nations into
    detrimental positions.

  6. As for the notion that Boeing did not have a bad airshow, my take is that if Airbus did not have such a great airshow, most people would have said that Boeing had a good airshow. But there is the rub, Airbus had a stunning airshow and we all know, everybody likes a winner. Or the corollary to that, nobody likes a loser.

    In a strategic sense, Boeing did quite well by getting some 747-8 orders and by adding to their already impressive 777 backlog but on the PR side, I am with everybody else that is of the opinion, despite all the planes they had at the show, that they got slaughtered on the sales front.

  7. Paris Airshow Le Bourget 2011 Orders & Commitments

    Total orders and commitments as of 23.06.2011, 15:41 h

    Airbus 598 (firm $60 bln) & 312 (provisional, $28 bln)
    Boeing 47 (firm $7.5 bln) & 94 (provisional, $15 bln)

    Source: http://uk.reuters.com/article/2011/06/23/airshow-orders-idUKLDE75I0B720110623

    Airbus Press release 23.06.2011:

    New order record at Paris Airshow
    Total of 730 aircraft US $72.2 billion worth of business

    320neo family backlog since launch in Dec 2010 is now 1,029 units,
    by far the best selling airliner in history of commercial aviation.

    Source: http://www.airbus.com/newsevents/news-events-single/detail/airbus-with-new-order-record-at-paris-air-show-2011/

    Total orders and commitments as of 24.06.2011, 15:00 h

    Airbus: 939 aircraft, Boeing: 144 aircraft, Others: 204 aircraft

    Source (w. table) : http://www.airliners.de/thema/paris_airshow/index

    AFTER the Airshow 28.06.2011

    Airbus gets firm order for additional 88 A320 family aircraft (from CAS and ICBC)

    Source: http://www.airbus.com/newsevents/news-events-single/detail/chinas-cas-and-icbc-leasing-buy-88-airbus-a320-family-aircraft/

    CONCLUSION:

    Airbus most probably has been selling more than 1’000 aircraft during the last two weeks !

  8. What I miss in the PAS commentaries, is the important fact that a second engine choice on the A350 XWB is now very likely.

    RR & Airbus agreed on RR exclusivity on the A350-1000. Keeping the door open on the -800 and -900. Which is what GE wanted all along (honoring their deal with Boeing on the 777) . For many carriers the more expensive beefed up -1000 will be outside of their requirements, or covered by the 777-300ER and their probably future enhanced version(s). Expect some GE/Airbus announcements soon.

  9. Pingback: The GE Powerhouse and how it wins deals « Leeham News and Comment

  10. Racking up orders is one thing, getting airplanes out the door is another, look at the 787 and the 380. Production rate and procuction time frames may have more importance on who wins or losses than the sales show.

  11. Very good comments from the PAS Scott!
    In spite of the staggering number of orders for Airbus, prinarily from Southeast Asian countries and the Middle East, I’m more optimistic about Boeing’s future, because of the following:
    It makes sense that the Boeing Board of Directors was not happy about launching another new airplane program, before the 787 and 747–8 airplanes start delivery smoothly later this year.
    Once that it has taken place, a lot of money will start rolling in from three Boeing models, the 787, 747 and the increasingly popular 777.
    This should give Boeing management the confidence and the strength to launch an all new 737 model later this year or early next year, deliveries for which will start at about the same time, or a only a few years after those for the A320NEO.
    A re-engined 737, simply does not make any more sense after the enormous number of orders for the NEO, which will make an all-new 737 a better airplane compared to the
    A320NEO and thus an absolute must for Bowing, to prevent that market from being
    totally absorbed by Airbus with the A320NEO!
    Irrespective of any other considerations, the future market for aircraft of any size is so
    huge, that only one manufacturer, cannot and should not handle it all, for obvious reasons!
    Therefore, I feel much more confident about Boeing’s future, than I have for the past 10-
    15 years!

  12. A new plane is all nice and well, but the current backlog runs into 2016. I can imagine the amount of profitable large contracts for the 737 won’t rise, in the company of the C919, CS300, NEO and MS-21. Boeing has been producing 1 767 every 2 months during the last 5 years to cover the 200-300 seat segment. I think they are not in for repeating that with the 737.

  13. The 767 was only kept going to win the T/T competition!

    The 737/A320 replacement market is huge and Airbus cannot handle
    that replacement market by itself, the airlines would not like it AND
    the all new 737 would beat the pants of the NEO!

    So, keesje, why does that situation have anything to do with 767
    and why should Boeing not dive into that program ASAP?

  14. What was interesting is that both A330 and 777-300ER are still making more orders than A350 and 787! Seems at the moment airlines are willing to make long term decisions only on A320NEO.

    • After Airbus stirred up some waves and Boeing muddied the waters
      completely for “what to expect from an airframers new product” most
      buyers seem to stand well back and nurse their burnt fingers.

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