Orders continued to trickle in as the Farnborough Air Show winds down (there could be others not listed here).
- Airbus: Transaero, LOI for 12 A330neos and eight A330ceos; Hong Kong Aviation Capital firms up an order for 40 A320neo and 30 A321neo aircraft, announced at the Paris Air Show last year. Here is the Airbus wrap up press release.
- Boeing: Summarizes its performance at FAS with this press release; 201 orders and commitments.
Items of interest:
The FAS was fairly predicable this year: the Airbus A330neo was launched, lots of previously announced orders were firmed up (though we were surprised Emirates Airlines signed its Dubai-announced deal the week before FAS), and there was the usual sniping between Airbus and Boeing.
If you eliminate the previously announced orders that were firmed up at FAS, this year’s show orders were down vs previously years, which was also expected. While some may try and say this is the burst of the order bubble, we view this as a typical cycle.
U-Turn Al-Baker, CEO of Qatar Airways, proceeded to embarrass himself once again, providing the most entertainment for the week. He rapped Airbus mercilessly about the A380 delivery quality and said he was in no rush to firm up his Dubai order–then the next day did an about face and signed.
Despite efforts by Airbus and Boeing to assure the market there will be a successful bridging of the production gaps for the A330 and 777 classics, aerospace analysts and the supply chains are becoming increasingly skeptical.
Show notes from the analysts are beginning to appear, summarizing their views.
UBS wrote today:
Lessors dominate order tally
The overall order/commitment count at Farnborough at nearly 500 surprised to the upside with Airbus and Boeing now likely both on the way to another year of >1x book-to-bill. However, we view the order quality out of Farnborough as relatively low, dominated by lessor orders with no new orders from the large airlines.
Credit Suisse wrote:
Some investors selling the cycle on saturated backlog, soft bridge orders: Investor sentiment into Farnborough was relatively soft on expectations for fewer orders overall, and particularly for those products that need added production rate support, such as CSeries, and bridge aircraft such as 777-classic, A330ceo, and Embraer E1. And these models did come up relatively short at the Show. The models that did sell have more saturated books, and so these orders are increasingly viewed as less impactful or as phantom backlog (e.g. Emirates A350), especially given the rising percentage from leasing companies and smaller, newer airlines. While we do not see enough phantom backlog to compromise long-term production plans, there could be some mid-term pressure on rates for certain bridge programs like 777 and A330ceo.
- As widely expected, the A330neo was launched, with the also widely anticipated rhetoric. Airbus heralded the neo as fully competitive with the Boeing 787, and Boeing claimed the 787-10 still is 30% better than the neo. What’s interesting in Boeing’s comparisons is that officials don’t compare the 787-8/9 with the neo (at least not that we’ve seen), only the 787-10. It’s also interesting that, as far as we’ve seen, not one media (whether mainstream or trade) has challenged Boeing on this. We are running our own analysis to draw our own conclusions, since historically OEM rhetoric can’t necessarily be relied upon.
- UBS certainly thinks the A330neo will be a negative impact on the 787-8/9. UBS writes: A330neo will impact 787-8/9:While the A330neo introduction will weigh on A330ceo demand and pricing over the near term, we believe it will also negatively impact 787. Instead of ceding the entire 250-300 seat market to BA, the A330neo covers much of the 787-8/9 market (all but extended long range), introducing competition for open slots in the 787 skyline beginning in 2018. All together, we don’t view the twin engine widebody market (A330neo/787 and A350/777) big enough to support all four models at 10+/mo rate late this decade.
- Credit Suisse also thinks the A330neo will challenge Boeing:Airbus wins on orders, A330neo: From a headline perspective, Airbus had the best Show with the highest percentage of firm order value (63%) and also with the launch of A330neo, the sole major product introduction here. With 252-310 seats, Airbus’ compelling new entrant may disrupt the mid-size widebody market as a lower-priced (due to its mature and fully-amortized airframe), and efficient (new RR Trent 7000 engines) mid-range alternative for 787 and perhaps even A350 for customers who don’t fly ultra-long-haul routes. This competitive advantage over Boeing (which has no readily-available response) could be reflected in the relative performance of the two airframers over the short term. Compounding the problem at the lower end of this “mid-range,” the A321neo is outselling the 737 MAX 9, while Boeing remain noncommittal on a 757 replacement. However, some cannibalization of A330ceo may be unavoidable too, and so there will likely be some rate pressure there during the 2016/17 bridge period.
- Outside of the A330neo launch, Airbus didn’t have much to brag about. There were virtually no orders for the A350 (slots are sold out to 2020 anyway), and none for the A380. The A320 family did reasonable well.
- Turbo-prop sales don’t show the same demand as jet sales, but ATR had a good show. ATR continues to dominate Bombardier in this market sector.
- With 201 orders and commitments, including 50 from the Dubai Air Show, Boeing, like Airbus, merely had an “OK” presence, at least compared with previous outings.
- There were few 787 orders–the skyline is, like the A350, also sold out through 2020.
- Aside from Qatar’s firming up the 777X orders announced at Dubai’s air show, and the addition of 50 purchase rights (touted in the media as doubling the order, but not included as commitments in Boeing’s own tally), there was no activity.
- A handful of 777 Classic orders were announced, but Boeing still lags this year what it needs to fill out its production gap.
- The 737 MAX did OK; nothing for the 747-8.
- Bombardier surprised with a showing that for it was strong with LOIs and MOUs for around 50 CSeries (only a handful of firm orders were announced). BBD disappointed at recent air shows, so expectations were very low.
- Better than expected on CSeries, OK for the Q400, nothing for the CRJ. Still, BBD leaves the show feeling pretty good. Orders and commitments for the CSeries surpassed the 500 mark, and since historically OEMs have good success converting commitments, we now view the CSeries program as a success (barring some unlikely program or global disaster).
- Q400 sales now have passed 500, but with this being the only model, BBD still lags ATR. BBD introduced the Q400C Combi and now offers the standard Q400, a Q400HD (High Density) model and the Combi in an effort to broaden its appeal. Time will tell if this works.
- EMB added to its E-Jet and E-Jet E2 backlogs, and unlike BBD, had a solid showing of “firm” orders, plus options. Embraer continues to dominate the below-130 seat sector, with 62% of deliveries. While BBD continues to tout the CRJ has the best, low cost solution in the 70-90 seat sector, EMB’s E-175/190 racks up the sales.
- EMB got its launch customer for the E-195 E2, Brasil’s Azul Airlines.
- Trans States Airlines placed a sizable order with EMB, a good win for the E-Jet family.
- EMB and BBD will dominate the 100-149 seat sector, with Airbus and Boeing becoming bit players.
- A small number of sales were added to the backlog, but MRJ still lags Embraer in the 90-seat market.
- For the sales in which there is competition (i.e., A320), CFM came up the winner, something which had largely been leaked before the show. CFM won American Airlines; the announcement came at the FAS, but had been widely reported in advance. CFM also won easyJet, another deal that was leaked earlier. Pratt & Whitney won deals, too, but the AA transaction gives the show win to CFM.