Qantas defers 787s, Boeing gears up response to A330neo

Financially ailing Qantas Airways has deferred some of its order for Boeing 787s, a move that ordinarily would be seen as a negative to Boeing. But in this case, it comes at an opportune time that will actually help Boeing respond to the Airbus A330neo.

Qantas’ deferral is from 2016 to 2017 and only for a few airlines. But having posted a record loss and previously canceled and deferred aircraft, we wouldn’t be surprised if this happens again.

The A330neo is planned to enter service in 4Q2017. Airbus is counting on near-term availability to help sales.

Boeing is sold out of 787 positions until roughly 2020 but is scrounging with customers to free up slots much earlier. United Airlines swapped 787-8 orders for later deliveries with the 787-10. Boeing is asking lessors who have unplaced orders as early as 2016 to help counter Airbus. The Qantas deferrals will help Boeing find some early slots. There are 30 available lessor 787s from 2016-2018, according to the Ascend data base and 81 through 2020. Airbus announced commitments for 121 neos upon the launch, mostly from lessors.

Even if Boeing can find some slots through deferrals and lessor help, its challenge will be to price the airplanes at a figure that matches or comes close to what Airbus can sell the A330neo for: $100m or substantially less. The lessor’s airplanes are already priced–though in theory, since these are undelivered, Boeing could reprice the aircraft somewhat lower than contract, allowing lessors to offer lower lease rates. In today’s dollars, the 787s were probably sold to lessors for around $95m-$100m for the earlier timeframe (2016-2017) and $115m for the later ones.

Airbus, in announcing neo at the Farnborough Air Show, said it could offer the airplane for 25% less than the 787. Airbus uses assumptions of $125m for the 787; 25% less is $93.75m.

We believe Boeing will be hard-pressed to match this price, let alone persuade lessors to price at or below this level. But having once sniffed at the A330neo, it’s become clear Boeing is gearing up for a battle royale.

59 Comments on “Qantas defers 787s, Boeing gears up response to A330neo

  1. The Boeing 787 will not match the price of the A330neo, but that isn’t the crucial issue. The crucial issue for Boeing is whether or not Boeing’s 787 is a better financial value that the Airbus A330neo. Is the Boeing 787 efficient enough (fuel and operation) to make up for its higher cost?

    • The 787 is not efficient enough nor does it offer any tangible substance that the Neo will not have for that price difference, except perhaps for an airframe that long-term will be cheaper to maintain because there wont be any corrosion of the CRF frame.

      The 787 is basically an A330 but made of CRF and with newer generation engines. The Neo will be missing only the CRF frame but the alloy airframe will be cheaper so the maintenance cost advantage of the CRF frame may be a wash out after all.

      The main advantage of the 787 is that it comes in three versions offering a wider selection for specific missions.

      • Before saying that the A330neo is essentially the same as 787, lets see how the economics of the two types compare at 6,000 nm or 7,000 nm, instead of just at 4,000 nm.

        • Duncan,
          Obviously, customers are currently using the 787-8 are using them the way you say.
          How about future 787-8 customers who haven’t taken delivery yet and the 787-9? Do you know they will be used in the same way?

        • Both will be excellent aircrafts. The 787 will have the new factor appeal and the Neo the excellent proven track record and the more comfortable 2-4-2 configuration. If this crf frame technology turns out to be the way to go 10 years from now, then therewill be little doubt that the 787 platform will have the advantage. Same goes for the 777X, no doubt it will be a great airplane despite it being a derivative of a metal 777 which is excellent. If a stretched A350 is made with bigger wings etc, then Boeing may have to change course to a large crf twin body to replace the 777X. Same story for the A330, eventually they may have switch to a new crf or aluminum- scandium a330 replacement.

          That’s how the game goes.

        • Hi Mike the point is, Boeing made the argument that airlines would switch from the hub and spoke system to secondary airports that bypassed hubs. There are some new long range B787 flights from hubs. However, what has in fact happened is that the H/S system has become far more entrenched. And please anyone name me a single B787 secoundary airport route. Boeing’s prediction never materialized.

        • Duncan,
          Much is being made of Boeing’s so called “bet” on point to point besting the hub and spoke. I think it is really more of a bet that airlines will want smaller long haul aircraft that can be used on thinner routes.

      • The fact that Airbus has to sell the A330 at a 25% discount, tells you that it can’t compete on performance.

        • The fact that they CAN still making money with a 25% discount, tells you that the 330NEO was the right decision

        • The fact that Airbus has to sell the A330 at a 25% discount, tells you that it can’t compete on performance.

          They’re not necessarily selling it at 25% discount, they just said that they will be able to price it ~25% below the 787.

          But you’re right – the A330neo isn’t a 1:1 match for the 787-8/-9 on 100% of missions. Nobody ever said it was.
          Its selling point is that it is very close (equal or only 1-3% worse) to the 787-8/-9 on a lot of missions, while being 25% less expensive to acquire. Oh – there’s availability as well as a factor in the A330neo’s favour.

          Will Airbus thus win 100% of RFPs where the A330neo is pitched against the 787? No. They may even get less than 50%. But they’ll still sell enough to make a profit on the programme, while they’re also already forcing Boeing to sell the 787 at more aggressive prices and to also free up earlier 787 slots.

    • The B787 is flying with an engine which was on the design board already 10 years ago. Of course a totally new engine can make considerable improvements. That’s why the B737Max and A320neo sell so well

      • Of course, the A330neo won’t have a TOTALLY NEW engine, it will have a tweaked 787 engine. Those tweaks will be available to Boeing too.

        • Afaics the comparison here set the A330 NEO up against a 787 model of similar engine advancement. i.e. not a 2017 A330 against a 2008 787 ( similar to what has been presented as a A350 / 777X match up )

  2. At 10 B787 per month, Boeing will have over 550 Dreamliners delivered (if the actual build ratio keeps up and not subsequent grounding of this airplane) by the end of 2017. That will be a great deal of B787 out there and stiff competition between airlines that have this airplane and those that don’t. If the B787-9 can get to a few more percentage points in few efficiency (Engines?) by the end of 2017, The A330NEO can also have its work cut out for it.

    • I agree with your thoughts there Karl. I have often wondered about airlines like Emirates who book every production slot available. Perhaps its a very strategic decision. You have all the most fuel efficient aircraft and the competition is stuck flying all the clunkers

      • Exactly. Probably the reason why airbus did not bow and make the A350-1000 to Emirates specs because they knew that Boeing would take the bait and that Emirates is known to play that game. Emirates booked the A350 slots to hold them, forcing and waiting for Boeing to produce the bigger 777-X and knowing that they would cancel them once they got what they wanted from Boeing. Now that they got their X’s, they want an A380 Neo. Whats after that? A 470 pax 777-XXX?

  3. I believe Qantas turned all their firm order other than 14 for Jetstar into Options. If I recall they expanded the ability to turn -8s into -9s (not that it means anything if they don’t buy them) .

    Jetstar gets the 787-8s and turns the A330s they have over to Qantas

    Qantas is sinking fast, really bad moves (they ordered A320s for Jetstar Honk Kong with no operating certificate, had something like 7 parked at one point and they never will get the operating certificate from Hong Kong as Qantas said they would control the franchise when in fact its required that local control do that.

    Of course what Boeing really needs to combat the A330NEO in that range segment is a shorter range more efficient aircraft. If the efficiency is there then the price is not as big an issue as you can recover investment via savings on fuel. Cost is not a zero factor then, but you can calculate the payback and present that as the gift that keep on giving where as cost is a one time thing.

    If you can recover the difference in 3 years and you keep operating the aircraft for 20, you have 17 years of upside.

    • With MRO services in southeast and pacific Asia saturates by 2018s, it is unlikely 3 years turnover will ever come true. The current trend is offloading aircraft within 1000 FC after D check. And really, there is not much to fuel benefits to talk about after 6th years.

    • $2.8B loss …. but that includes a $2.6B write-down in the value of the Qantas International fleet (largely due to the change in exchange rates over the years).

      The actual operating loss was about $650M. Not as spectacular, but still worrisome.

      • the slicing and ding goes on and on and not being a CPA, my take is when each time you announce something and its a huge loss, you are in extremely deep in not fatal trouble.

        If you follow Qantas, its gone way beyond worrisome, death spiral is the term that comes to mind. And the band played on.

  4. Serious question; is the anticipated airframe/cycle life on the CFRP frames materially greater than the (older) aluminum ones? I know some (Japanese 747SP) widebodies hit 130K cycles before being cut up, but will the 787/A350’s have trouble hitting much higher numbers with proper care/maintenance?

    • “proper care/maintenance” is the keyword and comes at a price.

      The plastic fantastic was advertised as needing significantly less TLC than the previous generation. IMHO it is still open if the 787 will ever achieve VW beetle status. ( Keeps running, running, running, … )

      • For all the doom and gloom talk around here about how impossible the Ethiopian 787 would be to repair in the wake of the ELT induced fire, the plane was returned to service incredibly fast.

        • I think it was around 6 months, that would have taken about a week or two with a conventional aircraft

        • Duncan,
          A week or two!? Ha! What are you smoking? Assuming that the damage on an aluminum structure would have been limited to the same area, which may not be a good assumption (I’ve heard that the damaged area likely could have been considerably larger for Al) an aluminum patch that large, the entire crown over a 20 ft length, with all the associated stringers and frames, could be fabricated and installed, and certified in a week or two? I don’t believe it.

          As it was, this was a first of kind repair job, with most of the time devoted to fabricating the patch and to repairing the other (non-structural) damage, not the least of which was smoke damage to the entire interior. Six months to return to service was not bad at all.

        • In principle your correct Mike, Duncan’s enthusiasm for a two week return to service for a similar repair on what might be termed conventional design is somewhat over optimistic

          In the LHR Ethiopian case once Boeing identified the consequences of a delayed repair to their new baby, Boeing threw everything to ensure its early return to a flyable transit condition. Breaking new ground Boeing learnt a great deal from this exercise whilst other 787 operators breathed a sigh of relief. Meanwhile the nature of the repair procedure & Boeings demands at LHR came as a great inconvenience to LHR’s operator.

        • Phil,
          I remember being a bit surprised at the time when I realized that the repair was going to be performed in a temporary shelter, which, from the photos I was able to see, did not look like it was climate controlled. I was thinking that Boeing would have spared no expense to get their new baby into a hangar to do the work. As busy as LHR is, the stand was probably one of the only spots available.

        • What am I smoking. I work at the Boeing plant at Everett and have seen the Boeing AOG team in action. A couple of frame & stringer splices and a scab patch- really you have know idea how fast these guys can work. I see it every day. I’ve also worked myself on aircraft structures since 1979.

        • I take your point about the smoke contamination. There was an unreported in the press incident involving a B787 battery fire on an Air Canada B787 here at Everett that they managed keep under wraps, and the smell contamination issue was a major concern. It was their very first aircraft.

        • Duncan,
          Well, I probably laid it on a bit thick with my smoking comment. Sorry about that. My main issue with 1 to 2 weeks was the size of the patch, a 20 ft long section of the majority of the crown, with more than just a couple of stringer and frame splices. However, unlike you, I’ve never personally seen the Boeing AOG team in action, so I admit I could very well be wrong.

        • I would have liked to see a significantly “bit” more on how the repair was done
          and at what cost. The QF32 repair had significantly better presentation in that respect.

          Interesting to hear about heretofore unreported battery fire(s?).
          Did that happen before the grounding?

        • Didnt Boeings repair people get into big trouble over a JAL 123, a 747 that had the rear bulkhead fail? That led to 520 dead.
          The subsequent repair of the bulkhead did not conform to Boeing’s approved repair methods. The Boeing technicians fixing the aircraft used two separate doubler plates, one with two rows of rivets and one with only one row when the procedure called for one continuous doubler plate with three rows of rivets to reinforce the damaged bulkhead.[23] The incorrect repair reduced the part’s resistance to metal fatigue by 70%. According to the Federal Aviation Administration, . Wikipedia.
          Maybe working ‘too fast’ wasnt such a good idea

    • To your specific question, CFRP has two major advantages over Al for maintenance: Corrosion as mentioned, but also fatigue. CFRP exhibits very little strength degradation due to fatigue (which is what took down the Comets). Fatigue on wings is a function of flight hours so CFRP makes lots of sense on long planes that spend lots of hours in the air.

      For the major “D” checks, planes go through after several years in service are thorough checks for both corrosion and fatigue cracks. The CFRP planes have longer intervals between major checks which lowers maintenance costs. Many times an airline will time the selling/retiring of a plane to avoid these very expensive checks.

      Fatigue of the fuselage is more a function of pressurization cycles/day which is more important for short range planes 747SR’s (SP was pre -400, shortened fuselage for long range), or 320/737 class planes that can go through many pressurization cycles relative to flying time. So for A350/787’s, and 777’s the CFRP wing is probably more important in terms of fatigue than the fuselage.

  5. How many times does a plane need to have repairs to airframe, and what is expectation of CFRP repair costs versus Aluminium ? Or is it too early to tell for CFRP ?

    • I think composites are probably on a winner here. There are some unknowns of course, but corrosion is not one of the. Having said that, with current corrosion preventive measures on tin aircraft that battle is won.

    You write
    “”Even if Boeing can find some slots through deferrals and lessor help, its challenge will be to price the airplanes at a figure that matches or comes close to what Airbus can sell the A330neo for: $100m or substantially less.””
    1) Lets consider $94m as you write further below. The List price of the A333ceo is $246m, which means a discount of 62%!!! This without considering that the new RR engine of the neo is more expensive!!
    To attribute this to the fact that the basic model is amortized seems absurd. I have not the figures, but if the amortization were completed as late as after 1,000 units sold and evaluated so much as $6M /unit at today prices, this meaning that the development costs were $6B (!) this would still mean that the equivalent discount would be an dangerously high 59.5%, probably implying a loss. And of course. The new Engine cost would remain in-amortized!
    IMHO, before discussing the competitive B787 effect on the economical powerhouse BOEING, we should assess the consequences on the cash flow strapped AIRBUS. Obviously the management of the latter is fully aware of above. And this was the stated reason it was so reluctant to authorize this venture, which was finally imposed by the undeniable fact that the lack of expected sales of the available WB models.
    Ironically, the A330neo, as a unintended consequence to confront the B787, is damaging the A359 perspectives.
    I can not support above statements with hard facts, but certainly with what lawyer would call a very strong and expectable CIRCUMSTANTIAL EVIDENCE.

    2) And equally important: you seem to pre-establish as a fact that the efficiency of the NEO would be equal or near to the B787, if not so BOEING would not need to match AIRBUS prices! I acknowledge that you have offered to share the assessment of LEEHAM but I would consider that to make such manufacturer outside assessment would need host of precise info by AIRBUS which is not available.
    And no number crunching comparative positive result for the NEO would be credible if contradicted by the simple fact that the max. fuel load capacity at equal range stated by AIRBUS for the NEO is substantially larger as for an equivalent B787, as obviously cannot be expected that AIRBUS is flying around with unnecessary large tanks, nor that BOEING uses too small tanks to comply with the range guarantee!!
    An as above approximate imprecise evaluation of A332ceo vs. B788 or A333ceo vs. B789 shows that the fuel burn of the A330ceo at full load and range is about 20-25% higher as for the B787 (and incidentally, AS FOR THE A359!!) Assuming as a fact (see 3)) that the new Engines compensate 12% of it (14% adding the winglets effect) , a very substantial efficiency gap would remain if so!

    3) And the 12% alleged engine improvement CEO/NEO need some explaining: Several A330neo supporters have stated that the original decade old engine model was upgraded progressively until the present stage of the CEO , but still is bettered by the NEO model by the full 12%, which seems a stress if such upgrades were really meaningful.
    I think it will be useful to establish relative to what stage these 12% are factual

    • You know, Onton, trying to be factual with you is an exercise in futility.

      1. I know what the A330ceo is being sold for in the market place today. You don’t. I know what the launch customer pricing of the A330neo was at Farnborough. You don’t. I know the amortization of the A330ceo. You don’t.
      2. We’ve written on many occasions the results of our studies of the A330ceo v 767 and ceo v 787; and the anticipated economics of the neo v 787, based on a proprietary, validated model five years in the making. What economic model do you have to make your assertions and conclusions about fuel burn? None.
      3. Yes, the 330ceo engines have had PIPs over the years. Nobody, other than perhaps you, doesn’t take this into account when comparing the 330neo to the 330ceo fuel economics.

      We’ve been in the aviation business since 1979. How long were you in? Zero.


      • re 1: will you please share this info? I am very interested (as I have expressed in earlier posts) with understanding what typical actual sale prices are for aircraft.

        As I have said in previous posts, the current regime of reporting “$XX Billion at list price, of course no one pays list” is very a harmful practice of the aviation press and manufacturers with respect to small investors without the resources to understand the actual economic impact of these sales on stock prices. In effect, this gives an unfair advantage to large institutional investors and is a violation of at least the spirit of the public disclosure rules if not the letter.

    • All I would say to this is that Boeing claims that their somewhat bigger B747-8 get 16% better fuel consumption than the SMALLER B747-400. How is that matching up to these arguments.

      • On a per seat basis that could be a reasonable value. ( actually this appears to be from a Boeing presentation : “per seat 748 16% better than 744” )

  7. For anyone who’s interested, I noticed these rather forthcoming Steven Udvar-Házy comments on Boeing’s competetive response to the Airbus A330neo (from Farnborough and per question by Jon Ostrower, WSJ).

    Paraphrasing quite a bit, Udvar-Házy says that by trimming production costs, Boeing could potentially offer the 787-9 at an improved price, and they could also offer, as I understand, a de-rated variant of the 787-9 that is more efficient for lower payload/range missions. In agreement with Leeham Co., Udvar-Házy believes Boeing will ultimately be hard-pressed to match the price of the A330neo.

    I personally feel that the market for small (250-300 pax) widebodies is likely going to be huge, the supply limited, and numerous carrier fleet planners will desire an airplane with long/ultralong-haul capabilities. And since the Boeing 787-9 is a highly efficient and capable airliner, it should reasonably be very highly demanded. However, the sharpened price competition will probably be more warmly welcomed by carriers and flyers, than by OEMs and their suppliers. (rhyme unintended)

      • DuncanS, what point are you trying to make?
        The 787 line has been sold out for a long time. Most airlines are very reluctant to order planes so many years ahead. It’s just so much exceeding their planning horizon. I think we had that argument here with the A350, too.

        “Boeing Co., the world’s second-largest commercial-aircraft maker, has booked 642 orders for its 787 Dreamliner and is now sold out for the next eight years, program manager Michael Bair said.”

        Bloomberg, 2007:

      • I don’t think so. But it may get you lower landing fees and maintenance costs (less wear on the engines) which could help a bit when comparing total operation costs against a A330-Neo. If you are using a power-by-the-hours contract I’d expect to get lower prices for derated engines.

    • Dont forget the fuel cost ‘per seat’ is 16% better, but the plane total cost could be 16% more

  8. When did that Air Canada 787 fire happen? That is a SIGNIFICANT event. Very concerning to say the least that regulator and lobbyists look the other way and even more so concerning that airlines look the other way just because they save money while flying it.

    • If it was indeed the first 787 for Air Canada, then it was LN-160, which rolled out of the FAL on 2/4/2014, first flew on 4/22/2014, and was delivered on 5/12/2014. Thus, it spent 77 days in pre-flight, which is a bit out of the ordinary, but not much, and it spent 20 days in pre-delivery flight testing, which is fairly typical.

      • I think it might actually be AC’s third aircraft, LN-174 which was delivered in July and which seemed to have spent an inordinate amount of time in pre-delivery. First flight was a couple of months later than other birds in the 170 range and I know the delay was not at the customer’s request.

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