Filling the production gap at three OEMs


Airbus, Boeing and Embraer face production gaps of several years in three key product lines. Two of these, Boeing and Embraer, relate to transitions from current generation airplanes to new derivatives. Airbus faces a large gap for its ambition to continue one popular airliner well into the 2020 decade.

Airbus wants to continue production of the A330 at least to 2022 and perhaps later. Boeing last year launched the 777X to succeed the 777 Classic. Embraer also launched a new derivative, the E-Jet E2, to succeed the E-Jet E1. Based on current production rates, the OEMs’ current backlogs produce the following picture:



At 12/31/13


Rate Today

Per Month

Current Backlog Ends

EIS of New







May 2016


6 yrs

777 Classic



Feb 2017


3 ½ yrs

E-Jet E1



Nov 2016


1 ¼-1 ½ yrs

* Publicly identified continued production goal

** Boeing says 2020;we assume 1H2020; Market Intelligence indicates Boeing would like to achieve a 2019 EIS.

Leeham Co. Chart. Sources: OEMs.

The key, and obvious, question is what do the three OEMs do to bridge this production gap.

 Embraer arguably is in the best shape. EMB’s chief executive officer told Bloomberg News last week that he sees about 150 E-Jet orders through 2015—but the news report didn’t specify how many might be today’s E-Jet E1 or the re-engined, next generation E-Jet E2. If these 150 turn out to be the E1, the production gap is basically filled. If these 150 are a mix of E1s and E2s, EMB could still have challenges. EMB could, like Airbus and Boeing, combine current and next generation deals into one.

 EMB officials have also gone on record that they won’t cut prices to spur sales of the E1. What else can they say publicly? They are certainly not going to say they’re open to bidding wars, and we’re not at all convinced there isn’t sharp discounting in EMB’s future. Bombardier has famously refused to offer discounts demanded by potential customers and mediocre CSeries sales reflect this. Boeing and Airbus claimed they would maintain pricing on the 737NG and A320ceo families in advance of the re-engined derivatives, but both complained about price cutting by the Other Guy and our Market Intelligence certainly tells us each has engaged in sharp, sharp discounting against each other (and in Airbus’ case, against Bombardier’s Cseries).

 We fully expect Boeing to offer discounted package deals to customers to sell the 777 Classic with the 777X and Airbus certainly expects Boeing will cut the price of the 777 Classic to close the production gap.


Click this link: Airlines beginning to push for discounts on 777 Classic.


 Airbus has the greatest challenge: currently a six year gap between today’s backlog and the previously stated goal to maintain production to at least 2022. Airbus has been more successful with the A330 than officials ever expected (helped in no small measure by the 787 program debacle). With a production line long-since paid off (which is also true for the 777 Classic), Airbus has a lot of pricing flexibility (as does Boeing). But while Boeing has a successor product for the Classic, Airbus positions the A330 as a complementary airplane to the A350, not a successor. The launch last year of the A330 Regional is an effort to refresh the line and add sales, but so far none has been announced. Proceeding with an A330neo would breath new life into the program, probably adding 10-15 years to production.

 Another way to bridge the production gap is to reduce rates and spread out delivery dates. But this repositions cash flows and profits, and it’s something we don’t think the OEMs will want to do.

 We think price discounting, as with the 737NG and A320ceo, will be the more likely solution.


15 Comments on “Filling the production gap at three OEMs

  1. Some of Airbus’ pricing flexibility will presumably be eroding though as the Forex trend is clearly back toward something close to parity EUR/USD, compared with the brief 1.55+ peak at around the turn of 2008.

    • Paritiy is far, far way.
      go down to the “since 1999” graph.
      Even the PIGs couldn’t drive it down significantly.
      But notice : A lower valued Euro should _increase_ Airbus pricing power
      as cost in Europe will translate into less dollars. During the overvalued Euro @1.55$ phase Airbus was extremely unhappy ( another reason for having production means in the US-dollar domain).

  2. ” Another way to bridge the production gap is to reduce rates and spread out delivery dates. But this repositions cash flows and profits, and it’s something we don’t think the OEMs will want to do.”

    I recall Airbus saying to reduce A330 production rate from 2016.

    The scheduled Beluga capacity suggests the same:

    • Interesting to see the Beluga retirement at 2025. Its planned replacement,the A330 based Beluga XL is likely to start production after 2020 and Airbus will want A330 production to continue at least up until then (even in small numbers). The XL will have longer range than the old planes and wll clock up far more hours, this is another good reason for a new engine, otherwise Airbus will be flying up until 2040+ with already old engine technology.

      • FF for the Beluga was in 1994 with another 4 having been built, one per year.
        In 2025 the oldest will be 26 years old.
        2 years design/build phase : we’ll never see that again probably.

  3. When orders for Pax-B777 become less, it might be an opportunity for cargo airlines to get more affordable freighters.

  4. I read in the A330NEO therad on that LH is pondering more 777F’s (I think the tagline here is “if they can have a big enough discount”).

  5. A straightforward way to make transient use of 777 vs A330 FAL throughput capacity is to join twice x (three quarter) of the regular fuselage frames side-by-side in the x/y-plane into a BWB (blended wing-body) to be lifted by a Prandtl-winged BWB (best wing-box) quadri … in the case of A330 this would result in a 333″ wide hence AGA-compatible (loaded transversally) SuperFreighter. First come/first served ?

  6. This whole Airbus timing looks strange to me. If they want to do the A330 until 2022, how are they going to do it? If what Scott says about a NEO adding 10 to 15 years of production to the program, then it will be going way beyond 2022. If they don’t do a NEO, very few people believe that it will sell until 2022 as now, or even with minor mods. All of this begs the question, “Just what are Airbus’ plans for an A330 successor?” or do they even have any plans for one? Personally I think the time is ripe to go for a successor. That could seriously erode the 787 business case, based on the double hit of “speculated” low prices for the first 700 or so as well as the initial delays/service issues/grounding.

    Whether the time, business case, moeny and resources are there for an A330 NEO as well is probably the big issue.

    • “This whole Airbus timing looks strange to me. ”

      Obviously as this discussion has zero direct input from Airbus 😉

      Next step Airbus will be chided for not knowing what to do,
      moving in several directions at once and posturing for laughing stock
      in the general airline industry.

      Nonetheless this can and is an interesting discussion.
      Second guessing technical and business decission is fun.

  7. Congratulations to the Seahawks. Thar was a nice job they did last night.

  8. In general, why will airlines accept new deliveries of any legacy aircraft (bundled with new engine options), e.g. A330ceos along with neos? Are airlines going to put the ceos on different routes, or is the discount just too good enough to refuse the purchase, which ends up justifying the greater fuel burn? I don’t understand the economics of purchasing an economically inferior product..

    • Phil so many factors play a role. Financing, capacity requirements short term, the age / capabilities of the aircraft up for replacements or short term market growth opportbuties, price.

      E.g. Delta and United ordered large fleet s of 737-900ERs recently. Not because anything better can’t be ordered but because they are still are very efficient aircraft, fully compatible with existing fleets/infrastructure, its runway restrictions aren’t that relevant for most of their networks and Boeing needed to fill slots until the MAX goes into production. If you use them replacing noisy, fuel guzzling 30+ yr old 757s, 762s, DC9s, from next year, with GECAS/ CFM 10 yrs engine guarantee, its good business.

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