Here are our closing views of the PAS:
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 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.
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.
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.