Bjorn’s Corner: Airbus’ and Boeing’s first quarter

By Bjorn Fehrm

By Bjorn Fehrm

30 April 2015, C. Leeham Co: Airbus Group presented their first quarter results today Thursday, a week after Boeing presented theirs. It is a good occasion to look at how these companies performed. We will focus on commercial aircraft for Airbus and compare its performance with Boeing’s commercial aircraft and then comment on other Airbus activities more summarily.

In a later article we will look at Embraer, who also published their results Thursday, and compare with Bombardier’s first quarter which they announce on May 7th.

Deliveries, revenue and sales

For deliveries and revenue, Boeing is clearly the leader of the two with 14% more deliveries than in 1Q2014 at 184 aircraft and posted revenues of $15.4bn, up 21% from last year. Airbus trails that by a full 50 aircraft at 134 and had revenues of 8.6bn Euros, down 4% from last year. This is 44% lower revenues than Boeing, a large difference, even when considering that Airbus closes their factories over New Year. Airbus large deficit in deliveries versus Boeing was in twin aisle where Boeing delivered 45 aircraft and Airbus delivered 20 A330, a rate of 6.7 per month, 1 A350 and four A380. The one A350 delivered is explained by start of production for the type, there are a further 14 in the final assembly line that will get delivered during the remaining months of 2015.

What Airbus needs to compete with Boeing is an A320 line at full bore (it delivered 101 A320 which is rate 36) and an A330 that has transitioned to A330neo. In addition, the A350 program needs to pass rate five, something it should do next year. As Airbus Commercial Aircraft is the motor in Airbus Group, Group revenue was also down 5% to €12.1bn. The additional deficit to 1Q2014 revenues came from Defence & Space, where only two A400Ms were delivered. D&S revenues were down 6% at €2.6bn. Airbus Helicopters bounced back a bit from a bad 2014 with €1.3bn, up 9% from 1Q2014.

Boeing booked sales of 110 net orders during the quarter versus Airbus 101. Of Boeing’s orders, 71 were for the 737 versus 67 A320s booked for Airbus. The rest of Airbus’ orders were for the A330: nine ceos and 25 neos. Boeing’s twin aisle orders were seven 777s, 35 787s and three 747-8Fs. Clearly the A330neo has saved Airbus’ twin aisle order situation during the winter. The A350 did not book a single order during 1Q. The slow sales of A330ceo is a problem for Airbus. Airbus CFO, Harald Whilhelm, stated that they will be able to keep the recently announced rate cut of six per month but that can come into question as well if sales does not pick up.

Profitability and free cash flow

Profitability for Airbus and Boeing shall be viewed in isolation as they do not use the same accounting practices and a direct comparison therefore makes no sense. I will focus on Airbus profitability as Boeing’s has been discussed since Boeing’s earnings call last week.

With deliveries and revenue down, Airbus commercial aircraft still saw an improvement in EBIT of 8% to €569m, mainly due to the large development programs now starting to dwindle down. Airbus Group has avoided a large decline in operational profits by tight expense control Group-wide and timely restructuring actions in Space & Defence to fix the recent problems there. Airbus Group EBIT was down 7% to € 651mn and Tom Enders, Airbus Group CEO, says that the disciplined start to 2015 gets the group on its way to meet full year targets, which by and large is a repeat of 2014 results.

This results forecast is plausible as the year will be back-loaded for the A350 and A380 programs and Airbus has got a large cash injection by selling a further stake in Dassault Aviation. The Dassault sale made a profit of €697m. As a result, Airbus Group has a net cash position of €9.5bn and is buying back shares with the money. Free cash flow for 1Q before M&A was € -1136m versus € -2060 a year ago, The Group expects to break even on free cash flow before M&A (i.e. without the Dassault money) for the year. Group wide R&D expenses were €701m versus €727m a year ago.

Summary

The 1Q results show that Airbus is in a transitional period. A320ceo is handing over to A320neo during the year and A330ceo is having trouble selling now that the A330neo is available (A330neo will not start deliveries until December 2017 barring delays). A350 deliveries have started and Airbus stated a total of 15 aircraft shall be delivered this year. These are expensive to produce and Airbus is taking the losses from the early part of production directly, so while A350 deliveries will increase revenue they are lowering 2015 profits, different to Boeing which evens out the costs over the first 1,300 787 and therefore can book revenue and profits from the beginning of the program.

A good point for Commercial Aircraft is that A380 will go from costing money to deliver to generating at least a black zero during the year. One shall not expect it to generate a lot of cash this side of 2020. On the Group level, the A400M will continue to cost money this year and probably next as well. After that it should slowly work itself to a cash positive program.

It all sounds a bit negative but one shall remember Airbus is now exiting a phase where they were mopping up after the A380 debacle, finishing development of A350-900, A400M and A320neo. These three programs will all deliver series aircraft during 2015 and the only larger development programs remaining will be A350-1000 and A330neo. The former should have a straight-forward birth during 2016-2017 given how solid the -900 program performed in the last years and the A330neo will profit from A320neo. The A320neo program has been run on rails, and nothing less should be expected for the copy book A330neo.

While 2015 will be a year on a Group level which by and large will be a copy of 2014, the subsequent years should gradually build up to an Airbus Group that will earn high revenues and profits. With their practice of taking the pain of development and early production directly, present heavy investments are soon done and the years ahead should be the time for harvest.

76 Comments on “Bjorn’s Corner: Airbus’ and Boeing’s first quarter

  1. The battle to be bigger than the other in terms of orders or deliveries, while fully understandable from an emotional and testosterone perspective, is, in a strict business sense, irrelevant.

    As long as neither player falls below a certain critical scale, the issues that matter things like quality products, efficient and reliable supply chains, cost control, the ability to compete relatively well in the key segments, etc….

    Being the bigger of the two is not a measure of business performance in itself, and neither does it have any meaningful bearing on it.

  2. Bulls eye Nicolas, we are lucky to have two competent OEM’s who is keeping each other honest.

  3. If I understand correctly, your stories state that Airbus is poised to garner significant net income/cash over the next few years as it has a clean balance sheet and reasonably cost controlled products, while Boeing has to claw back what will be around $ 30 BB deferred 787 costs at peak…while it still has significant cost challenges on the 787 (and KC 46).
    Of course big B can rely on military business (other than KC 46 where the Pentagon has limited its exposure) to fund any resulting shortfall.

  4. “Airbus’ orders were for the A330: nine ceos and 25 neos.”
    “The A350 did not book a single order during 1Q.”

    Will the A330neo prove to be the A350’s biggest competitor?

    Let’s remember that the A350, in its revised version, was developped because a simpler quasi-A330neo was not deemed good enough to compete with the B-787.

    With the A330neo, Airbus seems to have come full circle to its initial strategy, except that they now also have the A350.

    What happened?

    • My take is that Airbus elected to take on both the 787 and 777 with the A350.

      There is either a split in capacity between those and or there are operators that simply did not want a Boeing aircraft.

      When you are satisfied with an improved A330 at the time and then you move to a higher capacity A350 I have to wonder if it simply you don’t like or want Boeing (understandable to the degree that Boeing still seems arrogant)

      $64 questions should they have targeted the 777 solidly or the 787? Neither fish nor foul. They did rack up nice numbers on the A350-900, the 800 flopped as it was not going to be optimized and the 1000 seems to be a bit iffy.,

      Should Airbus have stuck to its guns and done an A330-NEO+ (wing), maybe.

      They took a lot of flack from all the experts and Hazy.

      On the other hand, with a simple A330NEO they undercut Boeing in the shorter range market for that segment (under 5000 miles as I recall).

      If your market is all under that range the 787 economics are worse (fuel use wise). A few flights over that and it still pays as you just leave passengers behind. Its all about average not one flight.

      The A330 is also a relatively simple aircraft to work on vs the more technically advanced 787. Having worked on both pneumatic actuation and electronics, pneumatics are by far simpler to trouble shoot and test (yes both are activated electrically). You don’t have to build a whole new expertise in the almost all electric 787, keep your maint ops as is as well as pilots and training.

      So its a game of slicing and dicing, who can picks off what and how well it works.

      Airbus looses a bit on the A320 vs the 737-800, wins on the A321.

      Airbus can’t match the 777 but there is a slot between the 787/A330 for the A350 (how successful long term is open but 800 some sales are good numbers).

      Delta loves the A330NEO, Hawaii does, Hazy does though he hated upgrading it before.

      And so it goes.

      • “Airbus looses a bit on the A320 vs the 737-800”

        Only on short ranges. On longer ranges A320 beats the 737-800. Add to that wider seats and window belt not positioned for little kids.

        “Airbus can’t match the 777 ”

        LOL! The A350 absolutely buries the 777 in every way. Boeing had to make 777X almost the size of a 747 to not get creamed in economics.

        • What is the basis for saying the A320 beats the 737-800 at longer distances? Do you have any supporting facts that you can offer? Or is this just typical “argument by assertion” which seems to be really popular on the posts on this board.

          • From lack of a response I assume it’s the latter Jaque. Facts just get in the way….

    • With the A330neo and A350 Airbus can now offer a variety of ranges and capacities (and prices) that neither model can offer alone. Clearly the A330neo can give the 787 a run for its money, while the larger variants of the A350 are taking the yet to materialize 777X head-on. The only thing missing in the Airbus portfolio is a twin bigger than the A350, but smaller than the A380.

      Boeing finds itself in a more precarious situation. The 787 is too over-priced for many potential customers, while being too under-priced for Boeing to make a decent return. The 777X is still far away from its first flight but it is already bleeding a lot of cash, and will continue to do so for the next ten years. When you add to all this the harsh reality that the 737 MAX is less a menace for the competition than it is for the competitiveness of Boeing in the narrowbody market, we end-up with several good reasons to be worried for the long-term future of Boeing.

      If we take a long-term view we can see that Airbus is entering a positive cycle, while Boeing is going downhill.

      • Boeing is not in as bad a shape as that, though they certainly have issues.

        You do miss the continuing production of the 767 and the possible demise of the 747 (freighter orders either forthcoming or shutdown)

        789-9 is moving to an even split which should do better in the long run.

        They each have their challengers, the A400 for Airbus and the KC46 for Boeing (though benefit of continuing 767 production)

        Boeing needs new management obviously

        • I did not mention the 767 and 747 because I don’t count them as being part of Boeing’s future. The message I was trying to convey is that the problems at Airbus appear to be behind them, while the problems at Boeing seem to be ahead of them. But if we look at the last quarter(s) we see that they are both doing quite well right now. On the other hand if something dramatic was to happen to the world economy Airbus would find itself in a less vulnerable position than Boeing.

      • Interesting thesis. You may want to act on it and short the Boeing stock since it is near an all time high.

    • What happened?

      Public image and (semi)professional perceptions in respect to the Dreamliner have been “rightsized” over the years.
      Even Aboulafia is going cold turkey now 😉

      Then sales are availability driven. You’ll get your A330 NEO much earlier than any A350 XWB if you want to order now.

      Does Boeing actually sell new slots when they sell 787 these days or just vacated positions ( from swaps, deferrals, cancellations )

      Re the hot discussion on sales balance A330/787.
      If one wants to compare on a likesize basis 787-10 sales will have to be left out.

    • With the A330neo, Airbus seems to have come full circle to its initial strategy, except that they now also have the A350.

      The A330neo is not really the same as the A350 Mk I. The only common denominator are the 787-derived engines. And even those aren’t the same, as the A350 Mk I got GEnX, while the A330neo gets a derivative of the RR Trent 1000.
      The last iteration of the A350 Mk I had CFRP wings, a remodelled belly fairing, new horizontal stabilisers, an optimised aft fuselage, a re-profiled upper-wing surface, a re-shaped nose section. The A330neo is not getting any of these changes.

      When the A330neo was announced Aspire or AirInsight (I think) published an Airbus brochure from 2004/05 showing the A350 Mk I, but I can’t for the life of me find this now. So the changes I listed above are taken from various PPT screenshots and articles you can find on a.net and flightglobal.com

      • When Airbus offered the A350 Mk 1 it was a timid response to the bold 787. It would have been a nice airplane but because the 787 was a clean-sheet design it made the Mk 1 look rather conservative. If the Dreamliner was a ‘killer’ aircraft the Mk 1 was anything but.

        Market pressure eventually forced Airbus to go back to the drawing board. After a long period of tergiversation they came up with the XWB. It was not as bold and innovative as the Dreamliner but any keen observer could see that it was aimed at the the 777 as well as the 787. It may not have been a bold design but it was certainly a daring one.

        I must admit that I was somewhat skeptical at the time. I could see the audacity of this move and was quick to point out that by aiming two targets at the same time Airbus could very well miss both. That was the kind of move I would have expected from Boeing, not from the more prudent Airbus. I could see the genius of that decision, but also the danger.

        When historians of aviation will study this period they may come to the conclusion that this was a turning point in the race between the Big Two. With historical hindsight they might view this move as the time when Airbus unintentionally delivered the knock-out punch to Boeing.

        • Re: The A350XWB/A350 Mk I.
          I remember that time quite well – probably the first (and only) time a just-launched plane with >180 firm orders was canned because it was deemed not good enough.
          I think at the time, a lot of it had to do with Boeing’s brilliant marketing and the drug-like euphoria about all the promises attached to the 787.
          With hindsight, the A350 Mk I would have probably been quite a good competitor to the 787, considering how well the A330 has done since and how even an A330neo is a realistic project (largely thanks to its lower acquisition cost), despite the fact that it’s much less than the A350 Mk I and will EIS about a decade after the A350 Mk I would have.
          Then again, as you point out, the fact that the re-launched A350 (now dubbed XWB) did not just try to compete with the 787, but also with the 777 – a market segment Airbus didn’t have any offering in – was an excellent move on the part of Airbus. Although one they had to be dragged into kicking and screaming.

          With historical hindsight they might view this move as the time when Airbus unintentionally delivered the knock-out punch to Boeing.
          Nah, I don’t think this was the knock-out punch. In fact, I don’t think either of the two is capable of dealing a knock-out punch to the other, nor would they really want to.

          • “Nah, I don’t think this was the knock-out punch. In fact, I don’t think either of the two is capable of dealing a knock-out punch to the other, nor would they really want to.”

            When a football player suffers from a commotion after a big hit he can walk away with a few bruises and no apparent long-term damage. But if you monitor the player closely, as I do with Boeing, you might notice that he is acting erratically and his memory is failing. That is exactly what we can observe with Boeing. Like you say there was no knock-out punch. But Boeing did sustain repeated concussions that were inflicted by Airbus over the years, possibly with permanent damage.

  5. I still have a problem with “unidentified” orders

    Re Orders for Boeing 737

    In the total announced by B in first quarter there are 51 737 for COPA already booked last year as “unidentified” … is it fair to count them once aigain this year … if not, B sold only 15 737 net during this quarter and total sold aircraft should be 59 aircraft net…

    Delivering 184 aircaft is a performance …. it takes 125 out of the backlog !!!

  6. If there is a market shift to smaller widebodies, Airbus is in a good spot with the dual offer of the A339/A359 combo. Boeing has the 788/789. Whether the A350-1000 and 777x are embraced by all, or are too big remains to be seen.

  7. @ TransWorld

    “My take is that Airbus elected to take on both the 787 and 777 with the A350.”

    Absolutely!

    “…with a simple A330NEO they undercut Boeing in the shorter range market for that segment (under 5000 miles as I recall). If your market is all under that range the 787 economics are worse (fuel use wise).”

    You forgot the most important point: the acquisition price is considerably lower for an A330neo than a 787.

    “The A330 is also a relatively simple aircraft to work on vs the more technically advanced 787.”

    The 787 was sold on the premise, and promisse, that it was going to be more economical to maintain. This is actually playing against Boeing today because the 787 is more sophisticated than necessary. For it is going against the ‘kiss’ rule.

    My impression is that at the turn of the new millenium Boeing was starting to feel behind Airbus in terms of new technologies and needed to make a statement. Hence, the Sonic Cruiser, from which the Dreamliner is more or less derived. Wanting the gain back the upper hand Boeing perhaps went a little too far to surpass Airbus and are now paying the price for their hubris, like Airbus did (and still does today) with the A380.

    The irony is that with all its modernity the 787 is still flown with a yoke perched on top of an antique control column. Had Boeing elected to get rid of its vintage yoke it would have been forced to acknowledge that Airbus was there first. Instead they chose to speak of a different ‘design philosophy’. On the NSA Boeing will have no other choice but to get rid of the yoke, or the joke as I like to call it, because the new side sticks do everything a yoke does in terms of physical feedback. And they will then be able to say “Yes but ours is different, it is much safer than what is offered by Airbus.” Except that when we get there (NSA), in five or ten years from now, Airbus will have already been offering the side stick for more than thirty-five years, with the 1988 A320 EIS.

    “Airbus looses a bit on the A320 vs the 737-800.”

    I am not so sure, especially with the A320neo equipped with the GTF. (Leeham did a detailed comparison). The 737 will still have a few more seats but each seat will burn more fuel. Boeing is losing the game in the narrowbody market. But to see this we have to look beyond the next quarter.

    “Airbus can’t match the 777”.

    If this was true it would make me more optimistic for Boeing’s future. But it is only true if you apply the suffix ‘x’ as in ‘777X’. But even that is not enough to qualify. You have to specify 777-9X. The 9, and only the 9, is more competitive than the A350. But there is a possibility that Airbus will be able to offer similar economics in the near future with a stretched A350. But for now the 777X will do the job until Boeing finds a way to reinvent itself.

    • I am going to disagree with you in regards to the tech and where its going.

      As much as I love pneumatics, they no longer install the air to operate them. All new installations use electronics which means a power supply someplace and costly as each needs its own (50 va roughly for my stuff)

      It all costs more and is difficult to trouble shoot.

      The best was hybrid of computer control and pneumatic actuation via a valve or transducer. It would be easy to do that, they simply don’t, so like social interactions, while I don’t get it that’s where its going.

      So while I agree fully with KISS, they keep pushing it to complicated, go figure.

      Future new aircraft will go where Boeing went (I believe) just as the are going with the Li batteries.

      • For the A350 Airbus examined the bleedless technology closely and decided that it was not worth it. The gains do not balance out the disadvantages. But ultimately it’s going to be the customer who is going to decide if he wants the technology or not. But apparently there is no urgent need to get rid of engine bleed, other than marginal gains in terms of fuel burn. If Mcnerney says no moonshot it’s because the customers said to him no moonshot.

        Boeing rested on its laurels for a very long time. Then Airbus came out with the A380 and they were caught with their pants down. Boeing had called Airbus on this because they thought they were bluffing. As we all know today they were not bluffing at all. Airbus needed to show their capabilities and the A380 was the best possible way of showing their knowhow.

        Not wanting to ceed its leadership Boeing responded in a big way. They did nothing for so long and now they wanted to do everything at once: Sonic Cruiser, Dreamliner, 748-8, NSA. Their moto was “Yes we still can!”. The only survivor of this poorly conceived plan is the Dreamliner. But instead of showing Boeing’s capabilities it exposed Boeing’s weaknesses.

        Next year Boeing will look back at what it has accomplished in the last 100 years. They indeed have a lot to be proud of. For half of that period, roughly between 1950 and 2000, they were the model of the industry. Everyone wanted to emulate them, starting with Airbus. Bombardier and Embraer as well.

        So in 2016 Boeing will proudly celebrate its one hundredth anniversary and I count on them to trow a memorable party. But when the party is over it will be time to sober up, find a new CEO and a new direction.

    • How do you propose Airbus will power their new a35k with the non-existent RR-Trent 1100 since GE has an exclusive 777x deal?

      • I will let Airbus and Rolls-Royce figure that out. All I know is that RR is getting more and more exclusive with Airbus, just like GE is with Boeing.

  8. I keep hearing about the strch of the A350 but don’t see it happening.

    the 1000 is already different than thte 900 and another stretch and how much more different?

    Agreed its the 9X (not like the 8 is getting much publicity) but also a mixed fleet is going to take a serious look at the combo if the 8 is in low numbers as the commonality of it has value of its own.

    Enough not and then yes the A350 comes into play.

    Its an interesting mess for sure.

  9. I see a strong medium term future for Airbus, there product line has struggled to a coherent range and as such they have the measure of Boeing in many key areas. They also have a range that is consistent in terms of operation re standardised cockpit and ancillary operations.

    In the market A330neo/ a350 bracket comfortably the b787 with the exception of very long thin and small twin aisle.

    The A350 also covers the b777 with the exception of b777x 9 in terms of volume and this will be addressed in some sort of 1100 if needed by 2021, either restricted range/ high commonality or extended range/ lower commonality.

    The pain of the a380 is now gone as it reaches breakeven per unit and this gives it the potential going forward in the very possible (no means certain) situation where that market takes off.

    The massive risk is not competition, as Bjorn so clearly points out B and A are here to stay and in the next 20 years there is no viable competition from China/Russia/Brazil etc. The risk suffered by both OEMs is economic, we have had a boom to end all booms and the issue is whether this will continue or abruptly stop. The world economy is a total mess and could effectively fail due to many factors that have been papered over for years and only get worse.

    The combination of a substantial shock is high, and it will be potentially fundamental in a way the financial crisis was not. It combines with lower fuel costs which take away the rationale of buying new super efficient aircraft. This could leave both OEMs high and dry with massive costly ramp ups at 12 per annum and 50+ on single aisle and effectively no customers within a very short period of time.

    Sorry for being the prophet of doom, I will be available for comment in my fallout shelter

  10. Bjorn, Good analysis. Thank you.

    Our own biases aside, let us think seriously about what is going on. Looks to me like Boeing is using perfectly legal accounting “tricks” to hide the fact that it is bleeding money on the 787. Deferred charge is, in my opinion a gimmick, since the company gets to pick the number over which to spread it. You might remember that originally it was 1000. Now it is 1,300. Who can say what it will be 2-3 years from now? The fact remains that, while the Dreamliner was a bold, innovative design, its execution was badly botched. Who knows if it will ever turn a profit and entities like Boeing must earn a profit just to survive, let alone prosper. On top of that, they have embarked on the 777X, with a risky folding wingtip design (which Airbus could have adopted for its A380 to reduce the induced drag, but rejected as suboptimal) and Al-Li fuselage crammed with seats that are frankly not too comfortable for western customers (perhaps OK for China and the far east), to reduce the “paper” specific fuel burn. I am not at all sure that the program will yield expected returns, even though the initial orders are encouraging. Given its 747-8 debacle and tanker debacle-in-the-making (did Airbus “trick” Boeing to bid low, like Boeing “tricked” Airbus into committing to A380?), I am really worried that we will lose one remaining vital industry in the US, Commercial Airliners. Often we have to be brutally honest with our shortcomings to overcome them, and the very nature of businesses like Boeing’s makes them use gimmicks to beat analysts’ expectations or risk slaughter in the market. How unfortunate!

    Just ask yourself how profitable Airbus would look to be, if it “deferred” its A380 charges to say, pick a number, 1000 aircraft?

    • Frankly the only “trick” involved in Airbus and their Free Lunch Aid (now referred to as FLA, grin).

      That is based on a secret number that only becomes disclosed IF the aircraft is made in numbers sufficient to return money to the payees, if not then its free money that does not have to be repaid (Boeing shot itself in the foot with the 787 as it allowed the A330 to reach those numbers).

      We do not know on the A380 what the minimum number is that starts payback (reports are in the 1000+ range) . So in a twisted way Airbus also uses deferred to get the FLA.

      That said, Boeing uses a legal but shoddy practice (IMNSHO) that causes program cost to not only go on forever but creates the atmosphere where they pander to shareholder to maintain stock value while that debacle continues (get it done and over with). It should change.

      I do note that Airbus is also buying back stock now though.

      You seem to miss the purpose of the folding wing tip. Its not induced drag per say, though it factors in with the longer wing) its gate sizes that allows the 777 to fit in existing gates and not created the need to change infrastructure like the A380 did.

      the first proposed (original) 777 folding wing tip was risky as it involved control surfaces.

      This one does not and it will fly fine (just not efficiently ) if it fails

      Please note that a F8 Crusader took off with a FODLED WING (can you imagine how brain dead that launching crew was) and it flew well enough to land back on the carrier.

      You might also ask yourself how profitable Airbus would be if their had to borrowing all their money on the market to start their operations up originally? Boeing at the time grew their business from their profits and they bet their own future at a time when there was no free money.

      Sadly those times are gone and its all the Corporate welfare.

      • “You might also ask yourself how profitable Airbus would be if their had to borrowing all their money on the market to start their operations up originally?”

        You might also ask yourself how profitable Boeing would be if they had to borrow all their money on the market to start their operations instead of getting Free Lunch Aid from the US Air Force. That is how, among other things, the B-2 technology allowed Boeing to barrel-roll the Dreamliner fuselage.

        • Normand:

          And Airbus did not gain anything knowledge wise from the A400 project, Typhoon etc?

          Let be real. Of course Boeing will take advantage of what it learns on one project (military in this case) and translate it into civilian.

          B52 and the B47 let into the 707.

          If Europe would spend the money to defend itself it could do the same thing. So far its happy to depend on the US.

          Don’t complain when those US paid programs are spun off into civilian sector.

          • “Don’t complain when those US paid programs are spun off into civilian sector.”

            I am not complaining. I actually approve of governments who subsidize aeronautical research in a variety of disguise. It doesn’t matter where the money comes from, as long as it’s legal and goes along the international trade agreements, which they all more or less follow nowadays.

            I also believe NASA is not doing the job it was supposed to do when it was created in 1958 to replace NACA. By the way NACA had been created in 1915, that is 100 years ago this year. NASA stands for National Aeronautical and Space Administration. The aeronautical portion is no longer receiving the subsidies it was supposed to receive initially.

            There is a lack of vision from the US government. It is partially ideological and derives from the “leave it to the private sector” mentality. That is what the British government decided to do as well. But following that decision in the seventies, the once glorious British aerospace sector was practically wiped out. The RAF was too small on its own to support a viable R&D programme. And yes Airbus benefited from the A400M and there is nothing wrong with that. It’s the same thing with the KC-390, which will benefit Embraer as whole. Again, there is nothing wrong with that.

          • For both Airbus and Embraer there is much more going from civil Know How over to the military side.

          • The US does not “defend” itself.
            And they don’t “defend” Europe either.
            They aggressively try to further their interests by way of full spectrum warfare ( .. and not only on European turf ).
            So you cannot compare a war budget with a defense budget.

      • The F8 takeoff were from a shore base at night. Something simliar with the F4, but that was because the wing folds werent locked before takeoff

        Ive seen a picture of an F14 with asymmetric swept wings. Seems to have been a test flight.

        But the NASA free lunch in research continues:
        ” It’s NASA’s Super Guppy and it will land at Langley Research Center in Hampton.
        It’s carrying a lightweight composite, futuristic hybrid wing body aircraft made by Boeing Company. Researchers at NASA Langley will bend, pressurize and eventually break the 30-foot, 25,000-pound composite fuselage cross-section, officials said”
        Dec 2014
        http://www.13newsnow.com/story/news/local/mycity/hampton/2014/12/11/whale-shaped-plane-landing-at-nasa-langley-today/20234249/

    • “Just ask yourself how profitable Airbus would look to be, if it “deferred” its A380 charges to say, pick a number, 1000 aircraft?”

      Well the difference is Boeing will sell 1300 787s while Airbus will never come close to selling 1000 380s!

      Regardless it all evens out, Boeing’s profits will be depressed over that run due to the accounting choice. They take at the beginning and give back a lot at the end.

  11. @ sowerbob

    I will summarize your comment with the following statement coming from my previous post: “If something dramatic was to happen to the world economy Airbus would find itself in a less vulnerable position than Boeing.” I did not make that statement out of the blue. It is the conclusion I came at not long after the 787 debacle started to unravel. Everything I saw then, and since, has reinforced that impression.

    It may sound like a negative view of Boeing’s prospects and indeed it is. But I am trying to take a more positive view as well. For instance I see Boeing coming out quarter after quarter with impressive profit figures, massive amounts of cash and optimistic deferral projections. The latest numbers also show unequivocally that Boeing is again solidly no 1 for deliveries. And this is important because each delivery brings more cash in. And above all the long troubled 787 now ‘behaves normally’.

    At least that’s the way Wall Street analysts like to look at the situation. It’s a short-term view. Proof of that is the fact that each time a new figure is different than what they had expected they start to panic. For example in the last quarter analysts were taken aback by the unexpected cash flow figures. Some of them even suggested that Boeing had cooked the books. Instead of just checking Boeing’s pulse and pressure every three months they should monitor more closely their patient’s health habits and overall fitness.

    Basically, Boeing Commercial Airplanes has three products in its portfolio. One is here and two are coming later on: 787, 737 MAX and 777X. Airbus has four and they are all here, or almost here: A320neo, A330neo, A350XWB and A380. And most importantly they are all paid for in ‘real time’.

    With the 777X Boeing has a formidable machine in its hands. Except that for now it exists only on paper. And it will be competing with airplanes that the competition has already started to deliver. I don’t know exactly when the 777X will EIS. All I know is that until then it will cost an enormous amount of money to develop. And by the time it will EIS the A350 will have been cash flow positive for a long time, with no long-term debts on the programme. But how much is it going to cost to develop the 777X and how long is it going to take for Boeing’s new high-tech 777 wing factory to generate a profit?

    The A350 was supposed to be squeezed between the 787 and the 777. At least that is what I was afraid could happen. But instead it looks like it is the 787 that will be squeezed between the A330neo and the A350XWB. When the Dreamliner started to fly passengers is when the general public realized that Boeing had a ‘problem child’. But the new medication appears to be effective and the kid is doing just fine. The only problem is that in its follies the kid accumulated debts and they won’t go away magically.

    Like if this was not enough the parents are now discovering that the family’s grand-father is ill. While the A320neo is already flying and makes Bombardier look like amateurs, the 737 MAX is showing its age, long before it will even EIS (although in this case EIS could stand for End In Sight). Enough so that by the time it reaches the market shelves it will already be past its ‘best before’ date.

    And when I think about Boeing in general those are indeed the two words that come to my mind: best before.

  12. Normand

    I was attempting to make a comment re the real risk to Airbus without reference to Boeing ie not competition but instead the systematic economic and political risks. The same applies to Boeing of course and as you say they are probably in a worse position from that perspective. I think it would be cold comfort to Airbus though as they stand to be seriously affected regardless.

    Bjorn made the point that Airbus and Boeing are here to stay and as such glorying in the misfortune of the competitor is not very helpful to either OEM in my view (not that I am suggesting you are).

    I was also trying to reflect the idea that Airbus is in a relatively healthy position product line wise. Nothing is perfect but they seem to have come up with a range that is competitive and reflects a lot of market needs in the medium term.

    The proof will be seen in future market success, key aircraft eg A330-300, b777-300er have had substantial success in recent years that suggest that specific market points are very important to hit and specific variants more important than the range in meeting key market demands

    • My answer to your post may not have sound this way, but I did agree with everything you said. The same applies to this post as well. I think that basically we are on the same page with this issue. Everything looks fine for the Big Two right now but things could change rapidly and dramatically. Airbus will find the situation difficult and it might slow them down to a standstill. Cash would stop coming in but at least the accumulated debt would be manageable. For Boeing the situation involves a much higher degree of risk. Basically fro three reasons, one related to each major programme:

      1. The 787 has accumulated a huge amount of deferred costs.

      2. The 777 is Boeing’s daily bread. But that programme is coming to an end fast. Its replacement, the 777X, will cost a lot of money and will not generate a return for more than ten years. But it is essential if Boeing wants to remain competitive in the widebody market.

      3. The 737 is the butter on Boeing’s bread. But it is obsolete and will need to be replaced. That is another major programme that is essential if Boeing wants to remain competitive, this time in the narrowbody market.

      Does anyone see a pattern here? I am talking about a deadly convergence that could strain Boeing’s finances to the limit of its present capabilities. I use the word ‘present’ to suggest that in the future Boeing’s finance could be hit really hard by a large-scale world recession which would leave Boeing in an extremely precarious position.

      Here is a temporal assessment of Boeing:

      Past: Glorious
      Present: Vulnerable
      Future: Precarious

      Here is a temporal assessment of Airbus:

      Past: Precarious
      Present: Glorious
      Future: Vulnerable

  13. Interestingly,I read in Janes that Airbus is also now planning share buyback. I didn’t realise before Bjorn pointed it out,that they can strip layers of carbon out of a stack on a certified plane.if they can tweak little bits of new production technologies all over the aircraft like this I think they should be able to sort the costs out reasonably quickly. Would Leehams model be able to tell us how an A330neo with a new carbon wing would have turned out?

    • I believe Airbus is currently doing so. I don’t have the citation but I read it in the last week.

    • I have never understood the sense in share buybacks in such industries and it simply smacks of the worst form of financial engineering. I suppose it improves the value of share options for senior executives. All at the expense of diminishing the permanent sources of capital for future investment.

      If I were Washington state and tax breaks for Boeing or the governments backing Airbus with RLA I would question how buybacks are possible given the supposed need for such assistance.

    • That is what I call extreme propaganda. It reminds me of the time when the Soviet Union was trying to convince the rest of the world that it had a better system. It worked for a time. Many intellectuals (analysts) followed them. Then ‘market reality’ started to catch-up with them. That is when the empire crumbled.

      • Kesjee,
        Using a document made by Boeing as a sales document for Paris air show 2013 is some what distorting the facts …as Normand says its a Soviet style manner … sorry

        • I suppose that was the objective of this exercise. The Sovietisms emanating from Boeing 😉

      • Soviet Union was dissolved by way of their citizens being able to compare and a reduction of perceived threat . ( Mostly due to German Ostpolitik ).

        If you can keep a system like that closed off it could have existed forever. ( See the DPRK for such an example.)

    • The 737 NG was a response to losing UA to the A320 order. You left this out, Keesje (and so does Boeing, what a surprise). Max is a response to NEO.

      • MAX was not a response to the neo. Like the NG, it was a response to loosing a major order. That is symptomatic of a corporation that is reactive instead of being proactive. At the time of the NG Boeing was still dominating and the introduction of the A320 was its first wake-up call. Unfortunately Boeing went back snoozing.

        • MAX was not a response to the neo. Like the NG, it was a response to loosing a major order.

          The two aren’t mutually exclusive.
          Airbus wouldn’t have won that AA order without NEO. And Boeing wouldn’t have lost UA back in the 80s without the A320.
          So while the NG and MAX may have been immediately triggered by the loss of huge orders, their respective business cases didn’t just rest on those orders, but on the underlying market dynamics set in motion by new competition (the A320 and A320NEO, respectively) entering the scene.

          • If the NEO (+18%..20% ) is very marginally catching up to the MAX (+12%..14%) one wonders how Airbus ever sold a single A320 frame against a quantum leap better performing 737NG 😉

          • The fact that loosing a major order was what triggered Boeing’s commitment to the NG, and later on to the MAX, is indicative of a company that has no long-term strategy other than pleasing its shareholders.

        • “That is symptomatic of a corporation that is reactive instead of being proactive.”

          The great leap that was the 787 was quite proactive.

          • A haphazard comglomeration of sexy tech surfing on a perfect PR wave that died on the beaches of production isn’t what I’d call proactive. That is reactive. And hasty at that.

          • Reactive to what? What exactly did Airbus have that compared to the 787? Also no modern jet is haphazard but it’s no surprise you refuse to give credit where it’s due when it comes to Boeing.

            Of course I can why you are defensive…

            2014 orders
            A350… -32
            787… 41

            2015 Orders
            A350… 0
            787…33

            Since 2014 Airbus is at negative 32 orders for the 350 compared to 74 for the 787. Wow I guess that “PR wave” is still cresting as airlines ignore the 350 and buy the 787! How can that be?

            Oh yes, total orders…

            787… 1104
            350… 780

            [Edited]

      • On Boeing document it is said “to compete with” not “response” to me it is quite a difference in terminology … but I am French so my knowledge of US culture and language is poor !!! I try to improve !!

    • Nice find keesje.
      NG versus neo? Holy time warp.
      Is that what a forward loss position means? 🙂

      • Well, for China’s economy we are expecting 7-8% growth this year and that makes investors quite concerned. Apparently for China that is equivalent to an economic recession. Perhaps we should use the same standards to evaluate Boeing’s economic claims.

  14. Sorry … again

    I realise that kesjee’s comment is a joke

    comments by Kesjee are most of the time quite good and factual

  15. I am in the industry for 25 years plus. The airbus A330 NEO is not more efficient than the 787-8 or-9 at any range low or long range. In fact at 400 miles you can already see the deficit in fuel burn in favor of the 787. The A330 is very viable only because of the aquisation cost and availability. Rolls pricing on the engine also help.

    • How can you see a deficit at 400 miles when the A330neo has not flown a single mile yet?

      • I think Daveo probably meant 4000 miles, but can’t be sure (his ISP traces to Southwest Airlines). There’s been a fair amount of analysis out about this already.

        • Since the A330neo is still a paper airplane we have to speculate. Like daveo, I have seen a number of Airbus fan boys claiming that the A330neo was actually going to be more economical than the Dreamliner on short distances. Wether that is true or not I don’t know. I don’t even know what Airbus are themselves projecting in terms of fuel burn. But we have every rights to expect the A330neo to represent a considerable improvement over the A330ceo in terms of performances. Wether that will be enough to beat the 787 on short distances remains to be seen. Perhaps someone here could offer a reliable analysis that would help us to make up our mind as to what to expect.

    • I cannot imagine the 787 being less fuel efficient then the A330. It has a more dense cabin, better, newer aerodynamics, newer higher BPR engines and unlike the A330 wasn’t compromised by a heavy 4 engined variant.

      The A330 NEO has some selling points of its own though:
      – Existing customer base of 100+ A330/340 operators
      – Existing global MRO structure for the 1400 aircraft delivered sofar
      – A pool of thousands of qualified experienced pilots
      – Airbus A320 cockpit commonality
      – Existing cargo and tanker variants
      – A predictable life cycle / MRO / rest value and associated lease rates.
      – An extensive option catalogue and certified mods for all kinds of customizing.
      – Soon an established Pass to Cargo conversion STC

      • You forgot to mention that the A330 is optimized for relatively short distances whereas the 787 has been optimized for long thin routes. I believe this is the argument that is used by those claiming superior performances for the A330neo over the 787 for short distances. If I recall correctly, you have yourself used the same argument in the past in favour of the Fokker against the CSeries.

        • How can the A330 neo be compromised ‘by a heavy 4 engined variant’?

          The engine placement for A330 was a bit closer to fuselage than would be normal to allow for 4 engined version. But as the A330 has been built for some time, if there were any wing structure that was common for a heavier version, Im sure that would be removed in the A330 neo redesign.
          Maybe the heavier neo engines may be suited to the slightly stronger wing? But it will be more than just static weights.

          • dukeofurl, the A330 shares its wing design with the A340-300. Look at the MTOW of this aircraft, and it becomes clear the wing, wingbox, nose landing and supporting structure for the A330 must have been a bit overdimensioned at the start.
            This also however proved an significant advantage for the life cycle strategy of the A330. Airbus was able to continuously bump up MTOW, payload, range. Also, when the A340 was discontinued, Airbus immediatly started cut weight to lighten up the A330. So these days, this weight compromise has been mostly neutralized by weight cuts and capability upgrades.

  16. I’m not sure if the A330NEO will be better on short trips/ high cycles. Why would it if it’s not lighter or more fuel effiecient. Same for the F100, a good light aircraft in its days, but things have changed over 25 yrs..

    Of course the A330NEO would have newer RR engines. RR build the Trent1000 a decade ago, then the Trent XWB and will put all lessons learned together with new R&D into the new same sized Trent 7000. It can’t be worse somehow , can it?

    • The relevant comparisons are 787-8 vs A330-200 / -800 and 787-9 versus A330-300 / -900, the Dreamliners are more efficient then the A330’s regardless of distance. Not by much over the A330-800 and -900 which is why a good price can win the deal like for Delta transatlantic routes. This assumes the 787 run latest engine variants. The Trent 7000 is identical to Trent 1000-TEN except for a different gearbox with only one generator (787 has two hefty ones) and air starter (Trent 1000 starts on one of the starters/generators).

      • “Dreamliners are more efficient then the A330’s regardless of distance.”

        That is what I wanted to know, once and for all. Some times the Airbus fan boys make a lot of noise and that makes it difficult to hear the truth. It’s no different for the Boeing fan boys. Only worst.

        • It boils down to a trade-off between fuel savings and acquisition costs savings.

          787 – higher fuel savings, higher acquisition costs
          A330 – lower fuel savings, lower acquisition costs

          If you plan to use the aircraft in a way that can generate more fuel savings offsetting the higher acquisition costs, then the 787 is for you. If you think you can save more on acquisition costs than the fuel use, then the A330 is for you.

          787s are always more efficient, but if fuel savings are dependent on the use and length of the stage, then there could be a stage length below which acquisition cost savings are bigger than fuel savings. I believe this is where Delta found the A330neo so attractive, primarily TATL flying.

          It is also apparent that lessors find the A330neo attractive. Low acquisition costs means they lose less when the aircraft is not in use.

          • That is a nice summary of the situation. If the gap in favour of the Dreamliner had been huge for any distance, there would be no contest. But because in some circumstances the 787 fuel burn advantage is not that big there are other considerations at play that could be more advantageous for a given operator.

            Since you and Bjorn both mentioned Delta as an example I have to assume that the myth that says the A330neo is more economical than the 787 over short distances was probably inspired by that particular transaction.

      • If we ignore the A330 selling points I mentioned yesterday and just look at fuel efficiency and aquisition cost, we’re in for a severly restricted view of airline fleet aquisition decisions.

        • I’m aware of those points. I used the term “acquisition cost” in a broader context including investing in maintenance, spares, training and other costs associated with the type’s addition to the fleet, and not just the purchase price of the aircraft.

  17. Is fuel efficient the same as fuel use in the sub 4500 mile range?

    I though Leeham said there was a 3 or4% fuel better economics in that area.

    Could be wrong of course

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