The Zhuhai Air Show begins next Tuesday and a visit by President Obama to Beijing for a regional summit starts on the last day of the show, Nov. 16. Accordingly, we expect at least some orders to be announced during the show by Airbus, Boeing and perhaps the other airframe OEMs, including the home-grown COMAC, developer of the C919 and parent of AVIC, the developer of the ARJ21.
The Zhuhai Air Show has evolved into China’s premier show. While not on the international reputation and prestige of the long-established Farnborough, Paris and Singapore air shows, it’s become an important must-attend for OEMs and others wanting to do business in China.
Here is our forecast for next weeks’ event.
Airbus: There are a couple of large A320 family orders that may be pending in China, including one for 100 that was leaked just last Friday. Other A320 deals that have been committed to this year might be firmed up into contract at the show, such as this one for 70. The latter deal was announced, but not as a firm contract, when Airbus agreed to build an A330 finishing center in China. The latter was previously tied to the prospect of an A330 Regional order for between 70-200 aircraft. The A330 Regional, announced at the Paris Air Show in June 2013, is a lighter weight, lower engine thrust variant intended for domestic use. No order was announced at the following Zhuhai or Singapore air shows the following November and February, nor at the Farnborough show last July. China often ties orders to political events or air shows, and for many months it refused to order any A330s because of disputes with the European Union of emissions regulations. These has been postponed, apparently clearing the way for A330 deals–if the Chinese are interested. The finishing center might be the final inducement.
Airbus needs orders for the A330ceo to full the production gaps from 2016-2018. The first A330neo is scheduled to be delivered in December 2017. Airbus announced a production rate reduction from 10 to nine per month beginning in 2016, but the current backlog doesn’t support even this lower rate. So perhaps that rate reduction was based on the knowledge of the long-hoped for Chinese order. We shall see.
Boeing: Boeing has been telling institutional investors it plans to announce orders at or during the air show. Whether the announcements are held to the 16th when Obama is also in town or they come exclusively during the air show remains to be seen. But whatever deals are announced, carefully watch whether they come out of Boeing’s huge backlog of Unidentfied customers or whether these are new, incremental deals. Boeing has more than 900 737s listed under Unidentified. There are 25 777s in this category. We have seen large Chinese deals emerge from Unidentified in the past so we wouldn’t be surprised to see some buried in these today. The key program to watch will be the 777 Classic. If Boeing announces any orders for these, are they from Unidentified or are they incremental? If the former, it won’t help the production gap for the 777 Classic. If from the latter, there will likely be little impact. Although Boeing claims it “only” needs 40-60 777 orders a year to top off the production gap, this presupposes 100% conversion of existing options and letters of intent–a highly unlikely prospect. The backlog drops dramatically in 2017 and tapers off each year thereafter to 2020’s EIS of the 777X. We still expect Boeing to eventually announce a rate reduction, but not until next year or early 2016, effective in 2017.
Bombardier: It rarely does well at air shows. There might be some deals announced for the CSeries, CRJ or Q400, but don’t count on it.
Embraer: There might be some deals, but Zhuhai hasn’t traditionally been a big event from EMB.
COMAC: China’s indigenous new entrant OEM has typically announced C919 deals and occasionally some ARJ21 transactions. Look for C919 orders.
Flight Global last month published an update on the C919 program (cumbersome free registration required). Notable is how conventional the C919 has become. No composite wings, only 10% composite for the entire airplane.