Airbus, Boeing plan for production gap of A330, 777 with near-term availability claims

On the eve of the Farnborough Air Show, the aviation industry is watching to see whether Airbus will launch the A330neo program. Officials recently tried to tamp down expectations that a program launch will occur at the FAS, but we would not be surprised if an Authority to Offer is announced.

The industry will also be watching Boeing to see if some 200 commitments for the 777X announced at the Dubai Air Show will be firmed up at the FAS. We certainly expect this to be the case. (We also would not be surprised if there is a significant order for the Boeing 787-10.)

Questions will almost certainly arise once again about the production gaps for the Boeing 777 Classic and the A330ceo. Boeing faces a sharp drop in the backlog after 2016 and Airbus faces an even sharper fall-off after next year.

Near-term availability is an important element in Boeing’s plan to bridge the period between the in-production 777 and the entry-into-service of the 777X, says Randy Tinseth.

There are no AirbusA350 delivery slots of consequence available until 2019 and the 777 has plenty of slots starting in 2017, three years before the 777X EIS is planned.

But Airbus can make the same claim for the A330 vs the 787.

Boeing has a major challenge ahead to fill the production gap for the 777 Classic to the EIS of the 777X.

Boeing has a major challenge ahead to fill the production gap for the 777 Classic to the EIS of the 777X.

Tinseth tells us that Boeing needs to sell 40-50 777s per year to bridge the production at the current 8.3/mo rate until the 777X EIS. (We see a need for 40-60, assuming 100% conversion of Options and Letters of Intent, which is probably optimistic.)
The same is true for the Airbus A330 compared with a dearth of available slots for the Boeing 787.

Airbus' A330 backlog, including Options and Letters of Intent, show a sharp drop. The A330neo is necessary to rebuild the backlog--but a gap remains in 2016-17 nonetheless. Source: Ascend.

Airbus’ A330 backlog, including Options and Letters of Intent, show a sharp drop. The A330neo is necessary to rebuild the backlog–but a gap remains in 2016-17 nonetheless. Source: Ascend.

Boeing’s Tinseth doesn’t agree.

“The 777-300ER has a substantial time to market over the A350-1000,” he says.  “With 787’s now available via the leasing channel, the A330 no longer has such an advantage.”

According to the Ascend data base, there are only about 20 unplaced 787s by lessors through 2020, most in the 2018-19 period, reducing the availability Tinseth refers to. Even with production rate increases, the 787 sales slots are sold out.

While Boeing promotes the 777 as being available sooner than the A350, the same is true for the A330 vs the 787--even with the planned production rate increases.

While Boeing promotes the 777 as being available sooner than the A350, the same is true for the A330 vs the 787–even with the planned production rate increases.

Tinseth dismisses the A330neo, which is no surprise, but he also ties the prospective airplane to the A350 strategy.

“To even be discussing the A330neo is proof of a failed A350 strategy. Bringing the A330neo is bringing back a plane they brought to the market years ago,” he says, referring the A350 Version 1, which was largely an A330 Extreme Makeover with GEnx engines that are on the 787, systems upgrades and other improvements, but retaining the metal fuselage of the A330. The A330neo will have fewer changes than the A350 V 1.0.

“The A350-800 on verge of being canceled [Airbus continues to deny this, saying it will be resequenced and hinting it will be reworked to make it more efficient] and the A350-1000 is struggling,” Tinseth says. “The 787 carries more passengers, more cargo, it flies higher and farther and has a better passenger experience that the A330.” But Tinseth acknowledges Airbus has little choice.

“If they don’t do this, they are in a pathway to a 30% market share [in the twin-aisle, medium-size sector]. We gave A330 life with delays in the 787. [But] We’re going to be competitive. We have the right airplanes whether it be the 8/9 or 10 that is more fuel efficient per passenger. They’re trying to compete with a 30 year old design. Cash and fuel efficiency costs are absolutely in our favor.”

Our analysis projects a 35% heart-of-the-twin aisle market for Airbus, and we concur that Airbus has no choice but to proceed, a position we detailed last December.

Airbus officials have already signaled that they believe the A330neo will match 787 fuel efficiency (our analysis, based on what we know and what we think we know, still shows a small gap of 3%-5%), which then will benefit from a much lower capital cost (a point with which we agree). The question is whether Boeing will drop pricing on the 787 to compete. Tinseth claims this answer is no.

“They’ve been very aggressive in pricing the A330 today. Customers want more value for the money they spend and have a natural hedge for the fuel in the future,” he says.

Airbus has announced almost no A330 sales year-to-date, and the A330 Regional—announced with some fanfare at the Paris Air Show last June—failed to produce the up-to-200 orders from China for which the airplane was intended.

Industry observers believe potential A330 customers are on the sidelines, waiting to see whether Airbus will launch the A330neo. As for the A330R, some believe this potential order continues to be caught up in the usual Chinese game of holding orders hostage for international political goals.


25 Comments on “Airbus, Boeing plan for production gap of A330, 777 with near-term availability claims

  1. I think Randy has reasons to worry. The 787-10 and 777-8 aren’t exactly the hottest airframes around in the 300-380 seat segment. The 777-8 will remian a powerpoint concept for years to come.

    On the A330, I wonder if Randy foresaw the A330/350 selling 1600 airframes after the 787 was launched. The 2015 – 2020 period will see many Boeing 777 operators introduce A350 fleet. Tough marketing years ahead.

    • The A350-8 won’t even remain a powerpoint concept. It will be scrapped altogether.

    • 787-10 at 8 abreast economy is a nice replacement for the A333. Especially if the economics still beat the A333neo. LH, Delta?

  2. There is “in the pipe” a tentative business generally referred to as the “Chinese Regional” deal … it is of relevance to the within posting, as it concerns A330R, in numbers and CEO. Some say 150 units, some say 230 units (again some say Boeing are endeavouring to interfere, offering two 737 for frequencies instead of each one WB “people mover”. In any event, if going ahead for Airbus as said above, then the A330 CEO order backlog shortfall over 2015-18 would be resolved …

  3. Of course the same people saying Airbus’ WB strategy of A350 in 3 variants is insufficient, now say that launching the neo is proof of the strategy’s failure. Maybe. But many things have changed since the XWB’s launch in 2006. Primarily, in the market customers have been swapping 787-8s for -9s, and the A330-300 has been selling much better than the -200.

    What is often described as Airbus’ failure with the A350-800 ultimately comes down to a combination of both the market movement, and Airbus’ apparent choice to not invest more A350 money in an uncertain market segment. Not necessarily a bad decision if you are an Airbus shareholder – why increase the cost of the programme to produce an aircraft that will erode your revenue per unit produced, especially when the market is trending upwards in capacity?

    Of course, all this has left Airbus in a sticky position at the bottom of the widebody market. A problem that the launch of the A330neo seems it could resolve at fairly low cost and risk.

    It seems fair to assume that a good value for money aircraft, flying with latest generation fuel efficiencies, and with very high operational reliability should sell pretty well. Especially since the ceo has a large customer base – much larger than the 777-300ER’s.

    • There’s no point in investing in the A350-800 right now because Airbus have no manufacturing slots available on the A350 program. Even if they make a wonderful plane out of the A350-800, Airbus won’t be able to sell it. A small investment in the A330 on the other hand could be worthwhile because they have loads of availability.

      Shortage of slots also constrains 787-10 and A350-1000 sales. Sales on both these planes will take off once production ramps up and there is sufficient availability. The same may also be true for a subsequently improved A350-800

    • The A330-300 is not a small aircraft. It competes with the 772 more than any 787 An A330-300 neo will not fix that.

  4. The 787-9 will be a very good airliner, no question about it, but as to the economics of the 787 program the introduction of the A330neo will make a bad situation worse. According to CNBC (Oct 23, 2013), the 787 program projects to turn cash flow positive in the year 2015, at which its deferred production balance will top out at $25 billion. Eliminating that debt over 1000 airframes amounts to $25 million per airframe. Perhaps doable, but a tall order no doubt.

  5. No wonder the A330 order book is nearly empty then at the end of the week an airline could order an A330NEO. Many people especially at Boeing tried to ignore that the A350 was thought as the A330 replacement. With a planned A350 production rate of 10 aircraft per month in 2018 (*) the Airbus widebody production looks quite stable. Add even a few A330 per month and Airbus has a bright outlook.

    For Boeing there is just the 777 or 777X.

  6. “To even be discussing the A330neo is proof of a failed A350 strategy. Bringing the A330neo is bringing back a plane they brought to the market years ago,”

    – More like his aircraft, now that they are in service, is not as good as he promised it to be.

    When you have customers like SUH, responsible for killing the original A350 Mk1 as being not competitive enough, and then coming back to tell Airbus to do it, it tells you something about what they think of the 787’s actual competitiveness.

  7. Even if Airbus doesn’t launch the A330neo, they can still get 50% of the twin aisle market with the A350, if they can ramp up production to 16/month in several years. In terms of raw cost to produce, is it cheaper to build an A333 than an A359 or 789?

    • “…is it cheaper to build an A333 than an A359 or 789?”

      Yes! For example, in 2012 A330-200s were selling for about $84 Million/copy while the 787-8 was selling for $115 Million/Copy – and costing twice as much to produce (i.e., $230 Million) Yeah…those are real numbers. Hard to believe, huh?

      Anyways, the cost to produce a 787 is steadily being reduced, but it has nevertheless cost Boeing over $25 Billion to produce what they have sold so far (yes…Boeing has lost this money on the 787s it has sold so far). And I’m talking about production-costs only…I am not including Research and Development Costs (which are estimated at about $18 Billion additional Dollars). How about them numbers, huh?

      In short, while the Plastic Jetliner seems like a great idea, economically producing one seems very difficult – Expensive!

      • Thanks, 20 to 30 million is a big production cost to make up in fuel savings. This would seem to bode well for the longevity of the production of metal fuselages. Good for the A330, and good for the production cost of the 777x as well.

  8. I’m not sure why I keep reading the A350-1000 is struggling. There are 169 orders from 9 different airlines. Aside from the Middle East 3 and two big Asian airlines, most other airlines which do not need the range of the 8X or the size of the 9x have not began their 777 or A340 replacement plans yet.

    • I think until it got some improvement in 2011 the A350-1000 was a bit weak on payload range versus the 77W, and this started some negative noises rolling. However since the 2011 improvement it is a very formidable aircraft.

      Nowadays, those who like to sow doubt over the aircraft focus primarily on the fact that the 777-9X will be bigger. I don’t really understand this reasoning since it assumes that all the airlines will flock to a big aircraft and that the market segment that the 777-300ER has occupied for just over 10 years will somehow be rendered unattractive by the 9X’s appearance.

      The recent EK story is interesting. Although I am sure there were many factors involved in their cancellation, certainly one of them is that Mr Clark got more of the definition he wanted from Boeing for the 777X than from Airbus with the A350. Especially on payload range capability.

      Now, all that capability has to be paid for in airframe weight. Additionally, the stretch is needed in order to bring the 9X´s unit cost position in line with the A350-1000. So we will see two aircraft competing with roughly the same unit costs but the 9X will cost a lot more to fly per trip.

      Ultimately both will sell just fine. Boeing has a long history in long haul and that legacy gives them an advantage. And fortunately for Boeing, the capacity jump to the 9X from the ER is small enough for even a conservative airline to accept they could fill up some seats based on market growth.

      However I would personally rather be offering a 300 seater and 350 seater in a family of two optimised designs than one slow selling ultra long hauler, and a 400 seater with no unit cost advantage versus a smaller cheaper to operate competitor.

    • Joe,

      If you think the situation with the A350-1000 is weird, then consider the A350-800. I mean, a lot of people are reporting that Airbus is facing some existential crisis because they don’t want to build and compete the A350-800 against the 787-9. Well…duh!

      The A350-800 may be a nice plane, but it is a shrink of an aircraft which is truly optimized for 350 passengers. As such, the A350-800s fuselage is 11 inches wider than the 787s and it wings are much bigger and heavier. Seriously, weight and drag penalties preclude the A350-800 from ever becoming competitive with the 787-9. So…Airbus has chosen to revamp the A330 to the A330neo in the interim, and I can’t blame them.

      And the A330 has a lot of good life left in it, and it’s real cost is probably about $30 Million/Copy less than the 787 – and this will make up for any fuel burn deficit the A330 may suffer.

      • Remember when Airbus tried to sell the A340 at a discount to juice sales. It didn’t work, and now the A340 is relegated to the trash can of Aircraft history.

        • My understanding was that they never tried very hard, because every cheap A340 sold was going to take a away a premium A330 slot

  9. Given you statements I would be grateful if you could respond shortly to following simple questions:

    1) On what basis you affirm that the A330neo will be less costly than the B787??. as already the List prices of the latter, even if considering their longer rangem are lower as the today’s A300???

    2) Do you therefore assess that it would be sold at a lower price in spite of the higher cost, the difference diminishing A’s profit or ore probably generate a loss,??

    3) Have you any reliable info regarding the changes incorporated in the A330neo, which allow you to state that without meaningful use of composites  it would achieve nearly a performance equal to the B787??

    4) Do you agree that if above were factual, not only this aircraft would  damage the the sales of the A359 (the A358 is already virtually dead) 

    5) Do you agree that in such case, both A and B, would have made a colossal flop in developing aircraft with high proportion of composites, as the same results were attainable by upgrading some old model without incorporating light materials?? And is the history of A. planning/edesigning, technically- and/or timing wise stellar enough to ensure such extraordinary deed (see the A359 story, A340, A350, A380, A380F, A400?   5) Given above, What makes you say that A. can deliver the still not designed A330neo way before 2020?? 

    6) By the way, do you know the REAL reason why TIM CLARK cancelled the 50 A359?? The analysts strangely try not to mention the fact A359, not A351 and the reason stated can believed only for the larger A351, whether it is  standardization  or inability to compete with the B777X) 

    7) Can you explain, if the potential of the A330neo is so rosy as painted, why the A-Board and even Mr. Enders  seem very reluctant to go avanti with the project, in spite of the pushing of the directly involved?? As the cancellation occurred just at the end of the initial  test flights of the A359, it is logical to consider the possibility that the results were not as expected and caused the reaction of Emirates, which would obviously be detrimental for the future of this all-important model and now the (not new and A350 damaging)) Plan B of the A330neo push suddenly intensified exponentially In such case, to not endanger the sustainability of A’s Wide body operation, it suddenly appears not so illogical to go forward with the A330 neo, even it would mean losses by under-pricing, so giving time to correct the planning and designing policy !!! 

    • @1) John Leahy mentioned during a press conference at Farnborough a list price of $275 million for the A330-900 (A330-300NEO).

      @2) I guess Airbus will make more profit on an A330NEO than on an A350.

      @3) Most changes are related to the wing to accept the heavier engine. Just the wing tips will be made of composites. According to a Airbus press conference at Farnborough the fuel burn of the A330-800 will match the 787-8 and the A330-900 will match the 787-9 or will even burn “slightly less”!

      @4) The difference between the A330-900 and the A350-900 are about 1,750 nm more range for the A350. According to profit I guess there is no damage to Airbus as long a costumer will buy an A330 instead of an A350 or a 787.

      @5) The A350 was not an A330 replacement aircraft. It is an attack on the 777 market. The EIS is said to be end of 2017 (see PDF) because the required changes to the wing are rather small. The cabin design will be same as for A350.

      @6) I can just guess why Jim Clark canceled the A350 order. Maybe the deal was offered by Airbus to get more A380 orders.

      @7) According to my knowledge the A350 is doing quite fine and even better than expected. I can even imagine Emirates to order some A330-800 to cover routes with less traffic. Due to the location of Dubai the A330-800 has enough range to reach most parts of the world. Just the South American west coast with Quito, Lima, La Paz and Santiago de Chile is out of reach. Even the 787-8 could hardly reach this cities.

      Here is the official presentation from the program launch press conference – “launch” and not just “authority to offer”!

      On page 14 you will find a range comparison between A330s and B787s. Reminds me somehow of Boeing’s seating calculations…

      On page 19 the A330NEO program timeline.

      Fabrice Brégier announced also the Airbus widebody fleet for the next years:

      The press asked about the A350-1100 and a new A330NEO customer (lessor) answered that he would buy this aircraft with sufficient range and the A350-800 is to much aircraft for the passengers carried.

  10. There’s been a lot of secretiveness surrounding the last EK A380 order. I wonder if the A350 deposit might not have been used for it, as has been rumoured, leaving EK without an A350 order in all but name. That would help explain why EK seem to be in the market for an A350 type plane again. Why re-bid instead of starting making a new A380 order? Maybe pressure Airbus into an A350-1100 similar to the aircraft EK originally wanted? Prices? Timing of deliveries? Avoid seeking new finance at an undesirable time? Who knows.

    • The ME3 can be strangely unpredictable but wield a lot of bargaining power. EK may have lost early discounts on the A350 order but they know that Airbus will fight again to offer them another deal. So they will look at it.

      What may be different this time is that they want a regional aircraft and they can now try and negotiate for the A350 regional for an even better price.

      It sounds strange, but you can recall EY running up A350 cancellations as well, only to come back an place a huge order for more, including…surprise, surprise…A350 regionals. This is in addition to their 787-10 order, too.

      So, I see no reason to rule out the A350 yet.

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