Sept. 14, 2015, © Leeham Co.: Randy Tinseth, Boeing’s VP Marketing, spoke with Bernstein Research last week on a variety of topics. In a note issued after the conversation, analyst Douglas Harned reported:
demand in the early 2020s.”
Tinseth told Harned that cancellation and deferral rates are well below five and 10 year averages. Some cancellations are conversations to other models (eg, 737NG to 737MAX). He also says Boeing continues to see cargo demand recover to 4%-5% growth in late 2016-2017, resulting in a demand for 50 larger freighters a year.
Boeing sees oil prices returned to $60-$80 over the long-term. While current oil prices have slowed replacement of aircraft, Tinseth said Boeing still forecasts an annual replacement of 2.5% to 3% of the in-service fleet, retaining airplanes six months to a year or longer than originally planned.
Boeing views the Airbus A320 as now too small, with a large gap between the A320 and the A321.
“I think we’ve seen an interesting dynamic here, when we take a look at the sizing of our planes and the sizing of our Airbus counterparts. We actually see a situation where there’s a really big difference between an A320 and an A321. And we’re seeing markets, frankly, where the A320 is too small for the marketplace. And if you’re committed to Airbus, you’re going to ask yourself, ‘Do I want to fly an airplane that’s too small for the market? Or do I want to up-gauge into an A321?'”
With a smaller seating gap between the 737-800 and 737-900ER, Tinseth sees a greater market share in the future for the latter airplane.
Tinseth notes that the 787 line is essentially sold out to 2021, and this inhibits sales of the 787-10. According to the Boeing website, there hasn’t been an order for the 787-10 since December 2013. There have been 146 sales.
A few Odds and Ends:
A career aviation journalist has retired and will be missed. Terry Maxon of The Dallas Morning News took the paper’s buyout to retire early. The paper chose the date-9/11, an odd coincidence, indeed.
I’ve known Terry for decades. His irreverent attitude and wry, self-deprecating sense of humor always was welcome in an industry filled with pompous, self-importance. His “Three thoughts for Friday” in his blog at The DMN were always entertaining.
Last week Terry posted a long column about his years covering Robert L. Crandall, long-time CEO of American Airlines until he retired in 1998 (so long ago!). Having known and covered Crandall for many years myself, I related to Terry’s stories. Terry wrote that after he returned to the aviation beat following a stint covering Texas oil, American’s fortunes went south for five years, making life at AA difficult for Crandall.
“I note, however, that you shifted blame of all; AA troubles to Bob after you arrived on the beat. Seems to me there’s more than a little nexus of your arrival and AA’s troubles,” I wrote Terry.
Ever the humorist, Terry wrote back, “Look, I got on the beat on Oct. 1, 1990, and the industry immediately goes into the toilet. I returned to the beat in March 2001 and the industry immediately goes into the toilet. I returned to the beat in July 2006 and, though it takes more than a year, the industry goes into the toilet. They should have paid me big bucks to stay out of their industry. I end long profit cycles and kick off long loss cycles.”
Aviation journalism won’t the be same without Terry.
Clean Sheet Airplanes
Seeking Alpha last week had this thought piece about clean sheet airplanes from Airbus and Boeing.
RanSdy talks a good game on MAX vs neo, but the sales figures simply don’t match his rhetoric.
If, and I don’t believe it, the A320neo is ‘too small’, it seems Airbus customers are very happy to move up to the A321neo, which is leaving the 737-9 in its dust. The A321 backlog is now over 1,300 frames.
Make that over 1,400 frames!
Wizz just firmed their order for 110 A321neos (with purchase rights for another 90).
Not quite firm; still needs shareholder approval:
Then they must have gained it since that tweet.
Airbus announced it as a firm order today.
Ah. Hadn’t seen that. Thanks for the correction!
I would assume that if the A320/321 gap is too wide (which I think is a valid point), the effort to close this gap with an “A320.5” is rather small. the only question is if such aircraft would be build around the A320 wing (limiting it to ~80t MTOW) or the A321 wing with high capability. the reason why A320 and A321 are so far apart is that the A321 (compared to the B737-900) is so much more capable in terms of MTOW, and hence capacity & range.
I honestly doubt that “the gap” is so bad that it costs Airbus significant sales. It is rather one of the few nice things you can say about the B737-900MAX.
With the neo I thought Airbus would take the opportunity to turn the A320 into an A320.5 by adding a couple of frames to bring it on par with the 737-8 (or MAX-8). I was surprised that they did not do so. Perhaps they wanted to keep the 737 alive…
The sales of the A320neo suggest that the airlines have no significant issue with its size (despite Randy telling them so.)
Stealth66: “It seems Airbus customers are very happy to move up to the A321neo.”
Why would they not be equally happy to move up to the A320.5? Is the market moving up, or is it not? You can’t have it both ways. I believe a 162 seat A320 (1/37″) would have destroyed the 737. Boeing had the courage to do it with the NG (the 737-800 is a stretched 737-700) as a response to the arrival of the A320, and it was a tremendous success. But Boeing had no choice. It was a do or die situation. Airbus were in a more favourable position and did not have to stretch the A320 to remain competitive. The 737 NG was a well thought-out aircraft tailored to keep the A320 at bay for a while (until the neo). But I remain convinced that with the A320.5 (A320neo stretched) Airbus would have made the MAX-8 instantly obsolete. And this time around there is nothing Boeing could have done about it. Except of course to come up with a clean-sheet design. And that may explain why Airbus were so reluctant to stretch the A320. It’s a poker game and it looks like Airbus now has a better hand. Boeing had the Joker but they did not use it.
“Why would they not be equally happy to move up to the A320.5?”
Quite possibly, but it doesn’t really matter. Airbus has sold over 4,300 neos before EIS. They simply can’t build enough to supply the whole market, but taking a solid 60% of the market is a big deal. I suspect, despite Randy’s bluster, that Boeing is far from happy with 40% of a market they used to dominate.
“…It doesn’t really matter. Airbus has sold over 4,300 neos before EIS.”
Exactly: it doesn’t really matter indeed. They don’t need to. And don’t want to, for the reason I have explained earlier. But why is this? Because Boeing shot themselves in the wings with the MAX.
Imagine now if the GE engine of MAX is not meeting its promises of reliability and fuel economy ! What will Tinseth front of his audience? What will be the first airline to cancel its order Max ? Ryanair ? Air Canada?
Quite improbable that anyone would cancel an order for not getting the promised fuel at this point. You’re better of making some money right now with it than waiting several years down the road waiting for new slots. What’s probable in such a scenario is that, depending on what’s written in the contracts, they’ll get some kind of compensation for not meeting guarantees.
Yes, a 6-7 frame stretch of the A320neo (e.g. A322X?) is probably not what Randy is banking on – neither would a 10 frame stretch of the A321neoLR (e.g. A323X? – same MTOW as the A321neoLR).
A back-of-the-envelope calculation would seem to indicate that a 97 tonne A323X – A321neoLR stretched by 1o frames – would have no less range capability than the current A321ceo and still be able to fly US transcon routes with a reasonable payload.
As for the wing of an A322X, I’m not sure if a 6-7 frame stretched A320 would require the A321 wing- even if the MTOW is raised For example, an A322X could have the same MTOW as the 737-900ER (i.e. MTOW of about 85 metric tonnes), which AFAIK is flying around with the same wing as the 738 (i.e. slightly larger wing than the one on the A320). For the purpose of comparison, the MTOW of the A321ceo is 93.5 tonnes (97 tonnes for the A321neoLR).
Also, the sharkleted A32X-ceo series have better take-off performance than the A32X-ceo series using the wingtip fences.
“I think we’ve seen an interesting dynamic here, when we take a look at the sizing of our planes and the sizing of our Airbus counterparts. We actually see a situation where there’s a really big difference between an A320 and an A321. And we’re seeing markets, frankly, where the A320 is too small for the marketplace. And if you’re committed to Airbus, you’re going to ask yourself, ‘Do I want to fly an airplane that’s too small for the market? Or do I want to up-gauge into an A321?’”
I feel almost guilty having boosted this view (and my A320.5 solution) for 9 years now. E.g. http://www.pprune.org/tech-log/483658-200-seat-a320-plus-inbetween-a320-a321-feasible.html, I’ll send Randy a copyright compensation proposal. He is of course right on this (how can’t he 😉 )
But: “.. the A320 is too small for the marketplace”
– A320 NEO firm orders : 3293
– 737-8 MAX firm orders: 2592 (487 from “Undisclosed”)
..everything is relative I think. For Leahy it’s hard to make an investment business case when you’re sold out for 7 years.
Another issue that is less relative;
“.. the 737-9 is too small for the marketplace”
find the numbers & customers yourself.
Looking forward having Terry Maxon joining this blog (for fun). I love the “but I was there” perspectives from seniors (where’s Rudy Hillinga?)
“But: “.. the A320 is too small for the marketplace”
– A320 NEO firm orders : 3293
– 737-8 MAX firm orders: 2592 (487 from “Undisclosed”)”
Yes, if the 737-8 was trouncing the A320neo by anything like the margin the A321neo is whipping the 737-9, I’d say he had a point. But it isn’t.
685 NEO vs 206 MAX this year so far.
Including 110 firm A321NEO’s signed today (WizzAir). Reality is catching up faster on Boeing in the NB sector than they foresee.
A major UA, JAL, Delta A321NEO order, “undisclosed” MAX customers vaporizing and pressure will build up so rapidly, Boeing might have to launch an conceptual NSA before the MAX flies.
Exciting times for Muilenburg. People will take a closer look at the NEO/MAX orderbooks. The worlds major airlines seem unconvinced on the MAX.
Comfortably having discussions, taking time to fully understand where they stand, where the market is going, not listening, might hit back hard. Like the ’11 NSA/MAX drama that got them here.
Boeing has to deliver a state of the art 200 seat aircraft with folding wingtips that fits in a 36M gate, by 2025. 3-3, 2-2-2, or 2-3-2?
The MAX 8 is fine against the A320. Probably a thousand of those A320 orders are conversions to the A321. The A321 is where the market is going, so jumping slightly ahead of that is the next place to go, the next wing to optimally size and build.
And leave the bottom end for the CSeries or is there no mileage in that market sector any more?
Agree with both Ted and Sowerbob. Going too large / capable makes it heavy/ weak in the heart of the market, where most aircraft are used; ~ 170 seats 1000NM. A low risk 3-3 LD3 carrying seems to become inevitable as Boeing is pushed into defense.
I have a theory about this. Narrowbody aircraft either come in four, five or six abreast models. Each category (4/5/6) has an optimum size that tends to be close, but not at, the maximum capacity for a given width to length ratio. The closer we get to the maximum ratio, but not too close, the more interesting (economical) the aircraft becomes (too high a capacity could affect range). Provided the capacity of the aircraft does not exceed the operator’s requirements.
Embraer came out with a fantastic aircraft that perfectly used the potential of the four abreast. Before that Airbus had done the opposite. They brought to the market the A320, a superlative six abreast aircraft, but one not optimized for its fuselage width. And instead of stretching it they shrank it into the A319; and like if that wasn’t stupid enough they went further the wrong way with the most ignominious design ever: the A318. But how did they get away with this? Very simple: there was no competition. But that was until the C Series arrived. Since then the A319, and of course the A318, have magically vanished from the market.
The morale of this story is that the market moves up or down in terms of seat count in accordance with what is offered (and the state of the economy). And if for a while there was no market for the 100-150 segment it is simply because there were no descent aircraft offered during that period. There is no magic about it.
I’m not sure one wing can cover 150 seat and 200 seat aircraft anymore. Boeing has to choose a CFRP wing, 36m for 150, 40m folding for 200 seat(mixed class), or a 50m longer range.
Depending on fuselage choice, they can eventually build another wing to plug on the same fuselage section. Assuming the next wing is a 40m on some fuselage, 3-3 means they could eventually build a 36m wing for a 150. Twin aisle is the option to rewing at 50m for the middle market.
“I’m not sure one wing can cover 150 seat and 200 seat aircraft anymore.”
I agree. Here is what in my opinion Boeing needs to do. They have to replace the the 737 and 757 with a single six abreast fuselage of various lengths, but with two different wings. All systems would be more or less identical, but scalable. One wing would be optimized for the 150-190 segment (continental range) and the other for the 190-230 segment (intercontinental range). Boeing would then have two aircraft in one.
There is mileage in that segment, but the A319ceo/neo and 737-700/-7 are too heavy and expensive to operate compared to the A320 and 737-800/8.
Between them, the A319neo and 737-7 have accrued a measly 109 sales out of a mind-boggling 7,172 combined neo+MAX orders. Frankly I’m pretty surprised Airbus and Boeing are going ahead with the smallest members of the family.
But that’s the whole point. The NEO is supposed to kill off the C Series. If they didn’t offer the A318/!319, Bombardier would most certainly have a few more C Series orders in the pocket.
Sorry. I mention Airbus because they started it, but Boeing would pursue, and have done so, the same strategy.
Well, there is no A318neo and the A319neo has only managed to gather 49 orders. I really don’t see how that’s had any significant impact on the CSeries and I don’t think they were necessary to “kill it off”.
I think the CSeries has bigger issues than any competition from the two big boys. For me, it falls between two stools – it’s too big for an RJ and too small for a mainline plane. Less than 250 orders in seven years, at a time when airlines have been buying thousands of planes, including significant numbers of E-Jets, says a lot.
“I think the CSeries has bigger issues than any competition from the two big boys. For me, it falls between two stools – it’s too big for an RJ and too small for a mainline plane.”
The problem for Airbus and Boeing is not the CS100, or even the CS300. It is the CS500. The latter poses a direct threat to the Big Two. And therefore they will do everything they can to undermine the C Series. For A&B understand the potential of the C Series better than most readers of this blog. They can see today that the coming larger variants of the C Series will completely outclass the 737 MAX-8, and even the A320neo.
“Frankly I’m pretty surprised Airbus and Boeing are going ahead with the smallest members of the family.”
The A319neo and 737 MAX-7 are in the catalogue, but we will probably never see them in the air. And that’s because the C Series made them obsolete before they came off the drawing board. But Airbus and Boeing will keep them in their portfolio as an alternative to the C Series they can offer to their customers, with an upgrade in mind fo later on. It’s like when you make reservations to rent a car; if when you arrive at the airport there are no cars in the category you have chosen they offer you an upgrade; i.e., A320neo or MAX-8.
Terry Maxon: “I end long profit cycles and kick off long loss cycles.”
Terry is probably a short seller that specializes in bear market cycles. 🙂
If I’d been smart, I would put my 401(k) in AMR shares for 24 cents a share in January 2012. But if I’d been smart, I would have never gotten into writing about airlines.
🙂 live is full of should have’s , welcome!
Enjoy your retirement Terry!
“I end long profit cycles and kick off long loss cycles.”
Scott & Bjorn must be thrilled to see you pop-up 😉
If you need an aircraft for 120-150 seats aircraft you select the CSeries.
That is, if fleet commonality, cockpit commonality and cargochain commonality are unimportant.
“The MAX 8 is fine against the A320. ”
I think that is the generally accepted assumption. It’s the best sold MAX for sure. Probably half the public thinks it a ~draw. But, is it really?
The order gap between 737-8 – A320NEO (even when we include CEO & NG’s) has become too large to ignore, 700. It’s as big as the A321-737-9 gap.
2014 deliveries, 738-386, A320-306, a whopping 26% advantage for the 738.
Will the A320c/n ever outdeliver the 738ng/m?
In a decade, if ever.
2014 deliveries, A321 – 150, 737-900ER – 70, a whopping 115% advantage for the A321.
Will the 737-900ER/9 ever outdeliver the A321c/n?
What’s your point?
I’m expecting a lot of A320neo orders to be switched to A321neos. I believe a significant number of A320neo orders are just placeholders for the airlines and closer to delivery, we’ll see many conversions.
My point is, “The MAX 8 is fine against the A320. ”
Yes. As long as Boeing is happy with 40% market share.
Maybe not, at the rate airlines upgrade to theA321. Not that anyone will loose much sleep over it, at Airbus.
I would rather have Airbus position in single aisle than Boeings!
Not too shabby on the A330NEO either.
If Airbus has a single aisle problem (big if) then they have a fix. Boeing? not so much (well none really)
Of course we really need to see the MOM layout that Leeham did under the wall, that’s one I really would like to see.
The only time Airbus should and would be bothered about that “gap” would be if Airlines were going to Boeing to fill that gap, but they aren’t