Airbus to cut new airplane R&D, focus more on derivatives

Airbus is going to cut back its new airplane research and development spending and redirect efforts more toward derivative airplanes, EADS CEO Tom Enders told aerospace analysts at the EADS Global Investors Forum.

Buried in a Bloomberg News report of the GIF is this:

Enders also wants to curb cash-hungry development efforts in favor of milking existing products for higher returns. At Airbus, he backed the re-engining of the A320 narrow-body over building a new plane. No new jets are planned at Airbus beyond the A350, which is due to commence deliveries late next year.

“Why should we spend large amounts of money when we can make significant incremental improvements?” he said. “This principle can be applied outside of just civil aircraft.”

Airbus, like Boeing, suffered under the strain of new aircraft programs, notably the A380 and A400M. As yet, the A350 doesn’t seem to have been a black hole, with normal development costs.

Richard Aboulafia of The Teal Group was critical of Boeing for years for starving R&D for new aircraft and over-relying on derivatives while Airbus invested in new aircraft programs. He had this to say about Enders’ news:

This is only possible as a percent of sales.  Airbus is at a twin aisle product line disadvantage relative to Boeing, so this isn’t the time for them to rest on their laurels.  Some kind of response to the 777-9X is essential, even if it arrives a few years after the Boeing jet.  Whether it’s an A350-1100 or a clean sheet, it requires a significant investment right after A350XWB-800/900/1000 spending winds down.  Thus, in absolute numbers, the company would be advised to keep spending high for the next ten years.  But on the positive side, since Airbus’s revenue will grow with A350 (and incrementally with the A320 neo), the company’s percent of revenue spent on IRAD will decline.
Enders’ comments reflect the changing nature of Airbus’s shareholder relations more than anything else.  They’ll need to focus more on profitability rather than new product development over the next ten years; they may wind up looking more like Boeing.

31 Comments on “Airbus to cut new airplane R&D, focus more on derivatives

  1. Surely the ‘more than anything else’ reason is that Airbus has now completed a full product line. OK the 330/787, 350/777, 380/747 don’t exactly match up, but until the 380 & 350 Airbus was simply missing major parts of a full line.

  2. While Richard Aboulafia is correct in pointing out that Airbus is at a disadvantage with Boeing concerning the twin aisles, he does seem to miss out on the fact that advantage is significantly much smaller than it was 10 years ago. He also pushes for an A350-1100, which is a derivative aircraft and hence follows Tom Enders wishes. I guess the question is if the rest of the EADS board are in line with these wishes?

  3. “Airbus is at a twin aisle product line disadvantage relative to Boeing, so this isn’t the time for them to rest on their laurels.”

    If Airbus was in a disadvantage, they could rest on their laurels Richard. Reality is we see a 10 a month twin aisle waiting for a NEO and a A350 going pretty smooth and snooping away CX, BA, JAL, UA, AF/KL as large 777 operators.

    The A350 just like the A380 and A400 has caused enormous investments during the last decade. In one of the previous posts I mentioned Airbus has a series of derivative options this decade.

    A320NEO Plus, A322NEO, A320F, A350-1100, A388NEO, A389NEO, A333NEO, A333F NEO, A330-700, A400M stretch. They’re be busy with the NEO, A350 anyway.

  4. This statement from Tom Enders mainly underscores Airbus’ present status. After a decade of heavy investments, the group is in a position to reap substantial profits, and can take a breath. The need for a different stance will come soon enough …

    • I agree. Airbus didn’t intend to bring in a new model for the A350,but were forced into it. The moment Boeing decides to a new plane replacement for the 737, Airbus will need to respond. It could be the early 2020’s.

  5. keesje, isn’t Enders essentially saying the same thing? I don’t think all your suggested derivatives will ever see the market, but the A-3511, A-388NEO have the best chances. It would make sense if those two could share the same engine, but the thrust requirements for an A-3511 are much, much higher than it is for an A-388NEO.
    From you list, I doubt any of the A-320 versions you propose will be built. The A-320NEO should take them to the new design replacement airplane. The A-389 will not see the light of day, nor will any A-330 versions because they will also compete with the A-350 models and in particular the A-359 Regional. There will be no stretch for the A-400, it is not needed, nor can anyone afford it (due to declining defense budgets).

  6. What Airbus need is a Johnny Ive. A designer whose only concern is creating products that work beautifully. And a management that gives him/her the resources to get them done.

    Though Enders has a point. Boeing has been profitable with a product line with only one cleansheet design in the last decade and will remain so for another 20 at least. So why shouldn’t Airbus be like Boeing and focus on derivatives?

  7. Bregier will announce the flight safety max seatcount for the A320 is lifted to 189 seats. No pitch reduction compared to 180 seat seat charts.

    2 Lavatories + a mini galley instead will replace the large galley complex in the back and probably 3 seats extra in front. It has been behinds the curtains for some time. Now Bregier will anounce it according to Twitter.

    Lufthansa Group will probably retrofit 200 A320s.

    Same seatcount as 737-800. Adjust the CASM comparisons Randy.

  8. This just points out how much Boeing needs to INcrease it’s r&d spending. After years of cuts it’s now reaping the benefits with a strong CURRENT widebody offering. In a few years, Airbus is in the position Boeing is now, with no more 747-8 to steal the few sales it has, with a winding down old 777 (even the X), and it’s narrowbody is stronger today than the 737. If anything, Enders is right. It’s premier competitor is behind/overtaken, and there is nobody on the horizon WIDEbody wise. I’m sure Airbus will keep every entrant at bay with the next gen narrowbody, with the 320neo hoding the fort until late 2020’s. Airbus is Boeing-izing now, and it can do it. I just hope it can Airbus-ize back when the Chinese are going full wide body in about 15 years.

    For Boeing I am very concerned and don’t believe they’ll be around much after 2030. Losing engineers and skills left and right in their silly drive to make planes for free and sell them for gold.

    • Boeing will do the NSA sooner then they say, even think / hope now. Because the MAX is what it is.

      • I don’t think so, that’s why Albaugh wanted to do the next narrow body in 2011. The problem is (I’m not too technically savvy), but ‘experts’ expect a ‘breakthrough’ in engine technology around the second half of the 2020’s, such engines could make for new narrow body designs like the Easyjet/Airbus mockup etc. Like not tube and wings, but a tube and wings in the aft with the engines there also, and even canards etc. You get the picture. Such model should have about 20% better FE than regular tube and wing designs. God pity the manufacturer that comes out with a traditional (though more efficient than NEO/MAX) a few years before the other one does a open rotor or something and leapfrogs it. That’s why they have to ‘hold the fort’ with the MAX until it becomes available.

        I think Boeing should be doing a 10/11 abreat 797 NOW for 2021/2022 that will kill the a351 AND 747-8/a380. Such model would make any stretch/neo a380 obsolete as well, which the 777x won’t.

        I hate Boeing’s CEO and BoD with a passion. Strangling the corporation for shakeholders who are already extremely rich. Sad for a company with such beautiful history that made me a fan.

    • Airbus is in the position Boeing is now, with no more 747-8 to steal the few sales it has…

      The 777 and 777X will steal A380 sales just as they have 748 sales.

  9. Surely the most pressing question for Airbus is a decision on the A330 replacement? Could this ‘derivative’ statement imply they are now favouring a NEO ‘derivative’?

    I believe that unless they invest in a ‘non-derivative’ replacement, a huge strategic opportunity will be squandered, and they will concede the bulk of that large market sector to the B787 for the next 15-20 years.

    • Presssing? What pressing. Airbus has nothing pressing in the widebody segment what are you talking about? Boeing can’t be pressed if you put them in a vise. Think about it, Airbus has been PRESSING Boeing for 4 decades now and Boeing doesn’t do much. Airbus is AHEAD in every segment except the 787 midsize widebody, which they’ve CEDED to boeing. Sometimes fanboys make me laugh. Everything seems pressing.

      If that were true, Boeing would have done an all new narrobody in the late 90’s instead of a 737NG, and would be doing a large widebody 797 right now. They’re losing BIG and the board of beancounters can’t be pressed even by the press.

      • “Airbus is AHEAD in every segment except the 787 midsize widebody, which they’ve CEDED to boeing. ”

        er, you mean they’ve ceded the largest part of the WB market to Boeing and that’s okay??

        Boeing (ref. Mr. Tinseth) like to promote the view that they will dominate and squeeze Airbus in the future WB market via their 777 & 787 models – and if you think it through, it is plausible… unless Airbus respond in the mid-market and high-end (777-9).

      • I think somehow Boeing has got into the position that they have products that “box” the A350 but miss the hart of the market, 300-350 seats long haul.

        http://i191.photobucket.com/albums/z160/keesje_pics/GMFaIRBUS2013_zpsf8c12dba.jpg

        The 787-10 is payload range restricted for flights to/from Asia and the 777-8i probably expensive and heavy. So yes they offer a lot of aircraft 787-8, 787-9, 787-10, 777-8i, 777-9i but the line of thought they “boxed” the A350 might be correct but missing a point; sales volumes.

        http://i191.photobucket.com/albums/z160/keesje_pics/A350boxedin_zpsc007e373.jpg

        And we might ask ourselves the question if airlines think 17 inch wide seats of the 10 abreast 777 and 9 abreast 787 are the road ahead for 14 hour flights.

        • I have to admit, keesje, that is a funny reply. The Airbus sales projection chart you linked to is equally funny as it has no resemblance of reality.

          BTW, do you care to comment on the new 16.7″ wide seats JL and Airbus are suggesting for the new A-340 configurations? I seem to recall it was just weeks ago JL suggested the new minimum seat width was 18″. I guess that is all changed now.

          Of course these new 16.7″ wide seats will help the A-3510 get to 400 seats, so no A-3511 will be needed.

      • KC135topboom: “The Airbus sales projection chart you linked to is equally funny as it has no resemblance of reality.”

        What is the reality then? Boeing actually forecast 3,300 300-400 seat aircraft, but seem reluctant to sub-divide further (ref. http://leehamnews.wordpress.com/2013/10/31/airbus-a350-1000-dilemma/ )

        I expect that Airbus have indeed used figures that make their model selection look good, but some hard counter data would be of most interest?

      • BouncerN, I don’t see it. Airbus HAD the entire ‘largest’ WB segment with the 330, while Boeing had ‘ceded’ it with the 767. Boeing dominated the LARGER 777 segment, which it is NOW ceding to the a350. As I see it, the entire mid widebody segment is turned upside down, with now Boeing taking the old 330 slot and airbus the 777 slot. VLA is pure Airbus territory sadly, because Boeing doesn’t dare to invest. Bunch of HACKS in chicago, they are running the proudest ENGINEERING company as a hedge fund.

        Boeing could kill the a380 and a350-1000 with a large twin widebody of between 380-480 passengers. The tech is here NOW. As they themselves (boeing) said before, full composite aircraft only make more sense when they’re bigger. So why not a large 11 abreast twin the size of a large 777? 75 meters long for example. And they also always say the market is always veering towards larger models. So that would be a natural 30 year replacement and could carry over 1500 orders. The 777x might be done after 500.

      • Agree 380-500 seats is a market left open by the 747, not filled by the -8i or 777X. It seems natural Boeing would be the ones to fill it because they dominated it for 40 years. 11 abreast seems a weak proposition because you can’t use the huge attics and belly’s efficiently. 100 years ago I sketched a small twin deck VLA, Ecoliner, Henry Lam did the graphics. Fuselage width the same as the 777. Everyone keeps saying its a twin. Looking closely you can see the APU is rather large, its a ATPU. So its a twin and a half.
        http://www.youtube.com/watch?v=CVWQ5h5UOfk&feature=youtube_gdata_player

        Boeing filed a patent later on that looks a lot like it.

  10. Well it’s not like they NEED to do anything really. The narrowbody segment is settled. The A330 replacement if it happens will either come from an A330NEO or a more optimized A350 and the 777X reply will come from the A350 stretch. And even if the A380 dies today, that’ll probably be that for that market. So till 2030 probably, I doubt they’ll be anything “new”. Boeing included.

  11. No new products till 2030 has serious implication for maintenance of design capabilities.
    But then I noticed Airbus’ interesting research looking into things like hybrid electric propulsion driving multiple fans with advanced aerodynamic integration into wings to achieve effective high bypass ratio, with optimized cruise power and electric surge capacity for take off. Proposed application: regional jets right in Embraer/Bombardier/Sukhoi’s backyard.

  12. The A350 doesn’t seem to be a black hole, but remember, they sold the first 200 as the A350 Mark I and had to convert all those orders to the more expensive A350XWB. In spite of a leisurely seven year development schedule, they still suffered a year delay, which will impact ROI.

    • Compared to the disastrous 787 development and introduction the A350 will be a money making machine so not so bad.

  13. Well someone will need to build a wing inbetween the NB’s and large a330-A350-787 sized wings. And either put it on a NB or a330/767 sized fuselage. Because the hole in the payload-range portfolios is much larger then the stereotype 757. The A300/310 and 767s are there too. Around 2500 aircraft in the next 20 yrs. Around 250 seats up to 5000NM, not more and an OEW significantly below 100t. I guess a E3-4 Billion investment for a new wing, wingbox and Ldg and engines if Airbus would select the A330 fuselage for that role.

    http://i191.photobucket.com/albums/z160/keesje_pics/A330-700A321A350study_zps6f069c2a.jpg

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