Pointifications: Wide-body orders; Bombardier’s $1bn

By Scott Hamiltn

By Scott Hamilton

Nov. 2, 2015, © Leeham Co. Boeing gets an order for up to 26 787-10s.

Airbus firms up options to an order for 30 A330s, added to 45 previously announced by the same customer.

Boeing announces an order for nine 787-9s.

For all the talk of a wide-body surplus, this is shaping up to be a good year for wide-body orders.

Through September, Airbus recorded 90 firm wide-body orders, all but three for the A330 family. Boeing recorded 152 during the same period (these are net figures). Not included are any of the orders listed above, which have yet to be recorded as firm contracts.

Based on the YTD-September figures and those above, Airbus has a 42% share of orders this year; Boeing has 58%.

Any other announced orders that haven’t yet been firmed aren’t included in this data.

Boeing 787-10. Photo via Google images.

A widely expected decision by Emirates Airlines for wide-bodies at the Dubai Air Show this month has been put on hold. No decision on the Airbus A380neo. No decision on the competition between the Airbus A350 and the 787-10, the latter for perhaps 70 aircraft.

The concern about a surplus is less about new airplanes (though some analysts believe this sector is over-ordered) than it is about old airplanes. While there is debate over the residual values of used aircraft, spurred by remarks from Delta Air Lines during its earnings call, from the perspective of book-to-bill, cash flow and production gaps at Airbus and Boeing, the dearth of orders has been of equal concern of aerospace analysts.

Orders for the 787-10 largely stalled after the launch of the program in 2013. There have been few orders for the A350 and the A330neo. Boeing and Airbus both point to the lack of delivery slots for the 787 and A350 until after 2020. Now that Airbus won more than 80 orders for the A330ceo, which it says fills the production gap, attention is turned to selling the A330neo.

There has also been a dearth of orders for the Boeing 777X. The aircraft doesn’t enter service until 2020, and there has been little pressure for airlines and lessors to make decisions now.

There is a belief in some quarters that orders for A350s and 777Xs will pick up next year. This remains to be seen.

Bombardier’s US$1bn infusion

The news last week that the province of Quebec is investing US$1bn into the Bombardier CSeries program

Bombardier CSeries. Photo via Google images.

wasn’t the reassuring news the company hoped for. Stock went down as much as 17%. Aerospace analyst notes were muted. News media reports didn’t have upbeat headlines, instead calling the investment corporate welfare and questioning the wisdom of spending taxpayers’ money on the program.

Many observers note that BBD will need another $2bn to see the program through to 2020, when cash flow is forecast to turn positive. BBD,  not Quebec, has to come up with this money. About $1bn is hoped for from the sale of a minority stake in its Transportation (train) unit. If successful, this means BBD still has to self-fund the other $1bn. How this will be accomplished given the other cash challenges BBD has remains to be seen.

One thing that is a positive from BBD’s announcements last week is the $3.2bn write off against the CSeries program. This will enable more pricing flexibility in the market, something BBD to which was limited financially as well as philosophically. The latter changed when new management came in. Now the former is relaxed. We estimate this gives BBD $5m in new pricing flexibility.

BBD is hardly out of the woods yet. The next weeks and months will be critical to the future of the program and the company.

 

58 Comments on “Pointifications: Wide-body orders; Bombardier’s $1bn

  1. QUOTE:
    ” If successful, this means BBD still has to self-fund the other $1bn. How this will be accomplished given the other cash challenges BBD has remains to be seen.
    END-QUOTE:

    Not necessarily! Bombardier is looking to the FEDERAL government of Canada to kick in $1 Billion.

    http://www.cbc.ca/news/canada/montreal/bombardier-restructuring-cost-cutting-1.3298950

    Quebec politician – Justin Trudeau is the newly elected Prime Minister of Canada. He is the son of the famous former Prime Minister of Canada – the late Pierre Trudeau. There is NO WAY that Trudeau will let Bombardier fail. Bombardier is too big to fail for Quebec AND for Canada (and not to mention Northern Ireland) !

    I don’t understand why the financial markets can’t figure this out. The same is true with Boeing. There is NO WAY that the U.S. Government would let Boeing fail (just as they did not let GM fail) and yet Bombardier is traded like a penny stock?

  2. Given the currently low fuel prices many airlines probably extent operation of their existing types. Looking back into the past, what was the traditional length of backlogs? I think the current situation is very comfortable for the new widebodies.
    The A330neo serves also the purpose to extent the lifespan of the A330 program to sell further freighters and tankers.

  3. Well aware that this is more of a train thing than an airplane thing, but as everything has to be considered right now, I thought it might be an option to sell the train division as a whole to Siemens and get a better price on that.

  4. I often remains frustrated towards short-sighted analysts who make headlines with questionable concerns. They forget that over 85% of North American companies are family businesses and more than 85% of M & A projects are proposed by investment banks like Goldman, UBS, etc. Also, what is the importance given to entrepreneurship? What distinction should we do not to confuse entrepreneurship, management and governance? Bombardier is asked to behave as an organization aged, mature, financially responsible. But what does that say to be financially responsible from facing unnecessary risk must be taken in the business world? Bombardier is a family business. She takes risks experienced entrepreneurs. The number of aircraft launch platform in 30 years attests. Bombardier is still at the beginning of a structural cycle that will last ten years and the company operates in an industry like no other: you have tens of billions to play, and with the support of gouverments. The stories of Boeing, Airbus and Bombardier confirmed more than once. These facts are inescapable. This is the rule of the game. The rest is chatter of mercenaries information that is ultimately that of the merchants of fear.

      • Much of this contempt is well deserved. It is true that the Beaudoin family have been visionary leaders and have been directly responsible for game-changing aircraft with both the CRJ and now the C-Series (even if the latter is never a financial success for Bombardier, it is the direct cause of the bulging narrow body order books at both Boeing and Airbus who saw the commercial threat and responded with low cost updates to their aging products which they could sell at low prices).

        The concern with Bombardier is that they tried to do too much too fast – two business jet programs at the same time as the c-series. Hubris at its finest. Perhaps the critics are right and if the business needs billions from the taxpayers, the price the government should extract is the conversion of multiple voting shares to single vote shares. Now that the company is mature and the controlling family has effectively bankrupted it, professionals need to lead the Board.

        A smart investor would ditch the aircraft business and continue as a leading global train manufacturer. A nice relatively stable oligopoly.

        If the Beaudoins have so much faith in the C-series, why don’t they put in the money, rather than investing in a (government subsidized) cement plant in Gaspe.

        • Good grief, even Quebec government seems to run as a banana republic?
          That C$1 Billion plant in Gaspe, Quebec

          “McInnis Cement was formed by members of the family that founded Bombardier and its spinoff, Ski-Doo maker BRP Inc.
          It has received financial support from successive Parti Québécois and Liberal provincial governments, as well as the Caisse de dépôt pension fund manager.
          Former premier Pauline Marois agreed to provide a guaranteed loan worth about $250 million. The province’s investment arm will invest $100 million and the Caisse will also invest $100 million as an equity partner in the Beaudier Group, the investment arm of the Beaudoin family”- CBC news.

          It would be a vote of confidence for Bombardier Aircraft if the familys Beaudier Group put up some of their ‘spare cash’ to get the plane into service.

  5. It has been widely reported that Bombardier will need another two billion dollars in cash before reaching what Alain Bellemare called the break-even cash flow point on the C Series programme in approximately five years from now (2020 at the earliest). But more than that is on the way. Here is how I expect things to unfold in the near future:

    1. The Province of Québec will invest 1 billion dollar in a joint venture with BBD. And later on it is likely to exercice its options for 200 million shares at $2.21, which will bring an additional 422 million in fresh money to Bombardier Inc. My understanding is that the joint venture is 50.5%/49.5% only for the CS100 and CS300 programmes. Anything beyond that would require more cash that would dilute the Québec’s share to less than the current 49.5% because the government has already specified that it will not put more money into the JV. For example the CS500 development cost is expected to be as much as 1 billion dollar. It is my understanding that when that money will be invested in the JV the Québec share will be diluted in direct proportion. It is also obvious that the government will pull out as soon as BBD will be in a position to buy back the government share of the JV.

    2. The next in line is the Government of Canada who is expected, as Kevin has already mentioned above, to match the initial 1 billion dollars. What is not clear to me is if the federal government will be part of the JV or if it will invest directly in Bombardier Inc.

    3. I expect the third player to be Caisse de dépôt et placement du Québec. But apparently its contribution will come in a new form, over and above its current implication as (if I am not mistaken) the largest BBD shareholder outside the B/B family. I wouldn’t be surprised if Caisse were to take a 20% participation in the Transportation division. It is already involved in this kind of business as a rail operator in various cities. The connection is obvious. If Caisse takes 20% I expect the amont to be at least 1.5 billion dollars since the Transportation division is valued at 7 to 8 billion dollars or more.

    If we add all this up we are close to 4 billion dollars of additional liquidities available to Bombardier to bring the Global 7000/8000 to the market (with perhaps a very short negative cash flow transition period) and the C Series to 2020 when it will start to generate its own money. The rest will likely be used to fund R&D for the CS500, CRJneo and Q400neo. Since 2 billion is required to bring the C Series to break-even (on a cash flow basis) that will leave 2 billion for the other programmes. Suddenly things start to look rather good.

    • Why isnt the familys ‘Beaudier Group’ business putting additional money up ?

      Buying existing shares of course doesnt give funds to the management unless its new equity, but there must be other ways- a loan ?

  6. Scott,

    Do you have any intelligence on the intentions of Saudia and their rumored WB purchase for the Dubai Air Show?

  7. Is the $1 billion investment from Quebec likely to cause any problems from other airframers or foreign government complaining about state financial intervention?

    I’m very much aware of the ‘pot meet kettle’ implication if the likes of Boeing or Airbus do complain, but I’d be interested to know regardless if there could be repercussions.

    • Like Airbus with Boeing, Bombardier went through this with Embraer years ago. So they had the opportunity to study the international trade rules and regulations. Incidentally, in both cases (Boeing suing Airbus and Embraer suing Bombardier) the end result was a full disclosure of the suing parties’ own illegal practices. So in the end there were no winners, only whiners.

      • …which is not answering my question, which was, is there likely to be any adverse reaction from foreign governments and/or airframers to this new (and likely future) state bankrolling of a troubled programme?

        Yes, previous battles might temper appetite for future ones, but in this case what might swing a reaction is that the C-Series is aimed at the most profitable segments of both major competitor’s (Boeing and Airbus) product line-ups.

        • So far the C Series has not received any subsidies. Following the initial launch of the programme at Farnborough in 2008 Bombardier has received reimbursable loans à la Airbus from the governments of Canada, UK and Québec which amounts to less than 800 millions. The terms met the international trade rules at the time and still do. The recent investment of the government of Québec in a Joint Venture with BBD is neither a subsidy nor a reimbursable loan. It is an investment. If there was a problem with that you can be sure we would already have heard about it at this stage. What I was trying to say in my previous post is that both the federal and provincial governments are experienced enough to prevent any lawsuit; which is normally very damaging for all parties involved, and not only for the defendants.

  8. The trouble with calling on the Federal Government to match the Quebec funding for Bombardier is that it has already loaned 1.5 billion of which only some has been returned. Within Canada the concern is that the issue is lousy management by a closely owned family structure determined not to lose any financial control – and which is unlikely to be ameliorated by additional funding. This is after all the primary reason for the failure of the Airbus alliance proposal.

    And to make matters worse the City of Toronto is about to blacklist Bombardier over the failure to deliver new street cars. Again failed management.

    • “And to make matters worse the City of Toronto is about to blacklist Bombardier over the failure to deliver new street cars.”

      This has nothing to do with the C Series, but don’t forget that those tramways are manufactured in Ontario, of which Toronto is the capital. Bombardier is a big employer in Ontario for both trains and planes. So the term “blacklist” is a bit exaggerated. The trains are late for sure but this is not a good reason to bomb the station.

      “The trouble with calling on the Federal Government to match the Quebec funding for Bombardier is that it has already loaned 1.5 billion of which only some has been returned.”

      None of this has been returned yet for the simple reason that no airplane has been delivered yet. And the Government of Canada has loaned only 350 millions to the C Series programme, not 1.5 billion. The UK government has also loaned 300 millions and the Province of Québec another 125 millions (not including the joint venture). The total amounts to less than 800 millions for the three governments. Perhaps you were including the Export Development Canada loans. But this is not for Bombardier. They are guaranteed loans for its qualified customers outside Canada. By the way Air Canada or any other Canadian company do not have access to those loans.

      • Actually the street cars are manufactured (made) in Mexico – and badly by all accounts – and merely assembled in Ontario.

        Just over 0.5 billion has been returned: The Federal money was discretionary for Bombardier and not restricted to the C series programme.

        You are perfectly correct on the loans provided for the C series but in terms of politics within Canada it is the total funding for the company that is an issue. I also suspect that you are right in that pressure from his native Quebec will compel the Prime Minister to concede in terms of funding. But not very graciously and with strong reservations over ownership issues.

        • “Actually the street cars are manufactured (made) in Mexico – and badly by all accounts – and merely assembled in Ontario.”

          How convenient it is to blame the Mexicans!

          “Just over 0.5 billion has been returned: The Federal money was discretionary for Bombardier and not restricted to the C series programme.”

          I don’t believe this. You have either invented it or you are simply confused. Whatever it is you are talking about, one thing is for sure: it has nothing to do with the C Series!

          “I also suspect that you are right in that pressure from his native Quebec will compel the Prime Minister to concede in terms of funding.”

          You got that from someone else for I have never mentioned anything like “pressure from is native Quebec”. What I said is this: “The next in line is the Government of Canada who is expected, as Kevin has already mentioned above, to match the initial 1 billion dollars.” Harper was not a native of Ontario, yet he ingested big money into that province. And I have no qualms with that, for it is in line with my own vision. The auto industry is extremely important for the Ontario economy and the governments of Canada and Ontario were right to intervene. But I respect those who do not share my opinion.

  9. @Bruce Levitt

    “Much of this contempt is well deserved.”

    No it is not. Perhaps from Airbus or Boeing, but certainly not from influential editors in the home country.

    “The concern with Bombardier is that they tried to do too much too fast – two business jet programs at the same time as the c-series. Hubris at its finest.”

    My answer to this is “what were they thinking when they decided to launch an expensive R&D programme on the Learjet 85 with little hope of any return on this massive investment for a product that is not even important for the future of the Business Aircraft division.” That is totally incomprehensible to me (call it hubris if you want) and I consider it the single biggest mistake ever done by the normally audacious but extremely clever Beaudoins (especially the father).

    “Now that the company is mature and the controlling family has effectively bankrupted it, professionals need to lead the Board.”

    That is Bay Street ideology at its best. But the fact of the matter is that family controlled companies in Canada (of which Couche-Tard is good example) return an average of 12% year after year to their shareholders, while “professionals” return on average only 6%. So that is a really poor excuse for the Toronto press to practice their favorite sport: Bombardier bashing. Until only a few months ago it was Laurent Beaudoin who was “leading the Board”. And when it comes to doing business like if it was a chess game Laurent is universally recognized as a Grand Master. And many would consider him a genius. He is getting old for sure but he is still very influential and we can still see his hand pushing the King & Queen on the political chessboard.

    “A smart investor would ditch the aircraft business and continue as a leading global train manufacturer. A nice relatively stable oligopoly.”

    Personally I would do the exact opposite: ditch the Transportation division and launch an all-out assault on the commercial aircraft duopoly fortress.

    “If the Beaudoins have so much faith in the C-series, why don’t they put in the money, rather than investing in a (government subsidized) cement plant in Gaspe.”

    The Gaspé project uses the same template as BBD itself: the B/B family, the government of Québec and the Caisse. It’s just another way of doing business, whether you like it or not.

    • I wouldnt say doing business, its better known world wide as crony capitalism

    • And school teachers from Bay Street continues with the lesson that other newspaper …
      http://www.thestar.com/opinion/editorials/2015/11/02/say-no-to-bombardier-bailout-editorial.html
      And if we asked to replace Bombardier in this Editorial by GM, Ford and Chrysler? What would be the reaction of the public? Once again, it is an infantile reaction of a parent frustrated that the little guy does not make money at home … Let’s turn to the future to make it lie and shame on him …

      • That was because of the GFC, which slashed new car sales dramatically , and poor management over decades.
        Bombardier has the second one, dont think there has been dramatic slow down in this class of aircraft orders ?
        Werent you predicting some ‘big orders’ for CSseries a few months back ?

      • In 2009 the Government of Canada has ingested along with the Government of Ontario 13 billion dollars to salvage GM and Chrysler, but not Ford which was still solvent. That kind of government intervention goes against the Bay Street ideology, but the Toronto press has not been as adamant about it as they systematically are for Bombardier. The different treatment stems from the fact that The Globe and Mail, The Financial Post and The Toronto Star are all based in the same province where the auto industry is based. But it is harder to explain their complete silence towards the heavy tax credits à la Boeing that are arbitrarily allocated to the oil industry which is based in another province. This double standard is a predictable outcome of the Canadian dual identity that Hugh MacLennan referred to as “The Two Solitudes”.

        • The financial intervention by the various governments included bankruptcy and wiping out existing management and shareholders. Effectively they owned the business, lock stock and smoking engines.
          For Bombardier, they get a soft loan, on top of all the existing deals, thats the difference.
          Is this what Canada expected when Canadair and De havilland were taken off their hands all those years ago, that 30 years later it would still be a state aid basket case.
          Where is the investment from the family Beaudier Group ?

    • Hardly an objective article IMO. I doesn’t have to be either. They hired legendary A380 “hater” Richard Aboulafia to add taste.

      Airbus has the A330, A350, A380 as widebodies.

      The first one is becoming the most used WB of all time, managed to fill the CEO gap and seems on it’s way for another 10 years of production. After doing the M11, 767, 777, now the 787 seems the next target.

      https://www.flightglobal.com/assets/getasset.aspx?itemid=60566

      The A350 had a relative smooth development, has 6-8 yrs of backlog, including most of the big 777 operators. The A350 looks better then anything out there and while EK didn’t order 150, it dominate its segment. It seems the A350 is cleaning Boeings clock in the 300-350 segment they used to dominate. Unless you feel the 787-10/777-8 combination is superior.

      The A380 refuses to fail, annoying the fleet of long term A380 doom prophets. Who don’t seem to origin in Europe and Asia for unclear reasons. Will it have 11 abreast, better wing tips, new engines and 5-6 meters more (75 -100 economy seats) ? Probably. Follow up orders operators and version will continue to come for the next 15 years. Without competition.

      https://s-media-cache-ak0.pinimg.com/originals/ce/7e/bc/ce7ebc4c23dc2f7c2510bac1bafec531.jpg

      Narrow looks even better. Airbus ” having” to make all kinds of decisions seems a feel good thing of the opposition. At least until 2020 Airbus looks rock solid & drawing their own plan, discussing with their wide customer base.

      Boeings big decisions for the next few years will be, if they honestly believe their own 737 MAX projections. Behind closed doors and all numbers on the table, there might be bigger priorities than MoM.

      • Richard maybe is a an a380 hater but he is talking with facts. There is no one interested in buying the a380. Qatar and Etihad are not interested turkish and cathay pacific want more frequencies and british airways and the chinese are getting the airport capacity they need and we know the us carriers. Also are looking to cancel orders. Transaero air austral virgin and air france it is nearly sure that they will cancel their orders. Amedeo if it doesnt find an airline to lease the a380 the will have to cancel the order.Furthermore
        there is an unidentified order for 10 planes. This is speculated to be the hong kong airlines order. All these are facts. It is a magnificent aircraft but with key weaknesses that make it uncompetitive.

        • “There is no one interested in buying the a380.”

          Apart from Emirates.

          BTW, Dubai is building a new airport that will have 400 wide body aircraft contact stands, when it’s finished – 200 stands each for Code E (777) and Code F (A380) aircraft. Two hundred stands for the A380 would suggest that Emirates eventually is planning to operate more than 600 A380s, since at least two thirds of the fleet is away at any given moment.

          Richard didn’t foresee the rise of the ME3 and the reasons for their success. Doesn’t fit this US-centric universe – the place in which he operates.

          December 2007 Letter

          Excerpts:

          As an aircraft forecaster, I like things simple. Expensive fuel = high ticket prices = fewer passengers. Airlines get squeezed between slack demand and higher fuel-related operating costs. Airlines buy fewer jets. Bad. All bad.

          Unless of course high fuel prices are good. The recent Dubai Air Show confirmed what we’ve suspected for years: the Gulf States are converting their oil wealth into an aviation industrial policy. A rainstorm of jetliner orders in a desert of aviation in a strained metaphor going nowhere…let’s look at the facts. If you take the current jet backlog and run it through Teal’s pricing estimates, you come up with impressive numbers: Mideast carriers represent 14% by value of the total Airbus/Boeing backlog (492 jets worth $66.4 billion out of a total backlog of 6,329 jets worth $486.6 billion) and 21% of the twin aisle backlog (421 jets worth $63.2 billion out of a total backlog of 2,168 twin aisle jets worth $291.1 billion).

          Contrast these backlog figures with Airbus and Boeing’s latest 20-year demand projections. Airbus says the Mideast should account for 4% of future jet deliveries (by planes). Boeing says 7% (by value, so the two forecasts are compatible). Mideast orders, therefore, are running at twice the anticipated rate. Three ways to explain this:

          1. It’s a bubble. The traffic numbers sure look that way. Mideast origin & destination traffic growth figures don’t justify that backlog (again, see those Airbus and Boeing forecasts, which are based on traffic). But if a bubble is well-funded, it’s not a bubble. If oil stays above $60-70/barrel, the money will be there. Bill King, Washington State’s Aerospace Trade Manager, Dubai show attendee, and fellow metaphor dispenser, went skiing at that legendary indoor shopping mall. As he explained, that desert ski slope is an artificial creation, like an airline capacity bubble. But as long as somebody pays the snowmaking bills, that ski slope is with us. So rule out a bubble, leaving two other options:

          2. Mideast airlines are hunting other people’s traffic. Yep. Singapore has done a great job playing the Sixth (and Fifth) Freedom game for years—using Changi as a hub for traffic between two other points. Now imagine the Mideast as Singapore, only with better geography and an awful lot more cash. Emirates is just the start. Qatar, Etihad, and Yemenia (Yemenia???) all want in on the action too.

          3. Mideast lessors are hunting other people’s leasing business. Also likely. Orders at Dubai positioned DAE Capital to be the world’s third largest lessor, right after ILFC and GECAS. As with Emirates and the Emirate wannabes, DAE is inspiring many other Mideast lessors to get in the game. Sure, they’re buying at the peak of the market, but they don’t care. Like Mideast carriers, they’re a lot less focused on profit and have access to virtually limitless capital. They’re also hiring talented people. Legacy lessors face the unpleasant choice of yielding market share or competing on price, watching margins erode. This is totally compatible with the traffic explanation. Mideast lessors can work in tandem with local airlines to absorb and re-market excess or retired jets.

          Most other airlines and lessors care solely about profit. They price their products and run their businesses accordingly. These Mideast players are trying to preserve oil wealth by converting it into something tangible—airlines, aircraft leasing, and aviation services. They don’t need to make money, at least in the short term. Even an A380 won’t lose value the way money can—dollar reserves in central banks have lost 25-30% of their value over the past year

          The big beneficiary of this oil-fueled aviation market share grab: Airbus. The numbers are clear. After Dubai, Airbus has a 65% share of the total Mideast backlog by value. Mideast orders comprise 9% of Boeing’s backlog and 13% of its twin aisle backlog. But the Mideast market accounts for 19% of Airbus’s total backlog by value and an astonishing 33% of Airbus’s total twin aisle backlog. Some reasons why:

          1. The A380. Airlines that focus on profitability can only use the behemothliner on a handful of routes. But if you’re out to grab market share, the A380 has its uses. Accordingly, Emirates is the only airline to make a large commitment to this plane, holding about 30% of the total order book. These orders increase the mid-term outlook for this otherwise marginal aircraft and help Airbus’s widebody standing until the far more relevant A350 comes on line. An old airline maxim is that nobody ever went bankrupt flying a plane that was too small. Emirates has turned that on its head—anybody can grow market share flying a plane that’s too large.

          2. A350 XWB. Boeing has won the 240/280-seat battle. For profit-focused airlines, the 787 is basically unbeatable. But Mideast carriers are emphasizing bigger planes (why focus on the front cabin when you can fill the whole plane?). The 787-8/9 is playing a minor role in the Mideast, and for some odd reason Boeing hasn’t definitized the 787-10. This leaves the A350-900 to attack the 310-seat market. Also, while Boeing slowly contemplates its 777-X/787-10+ roadmap, the A350-1000 is starting to take orders from the almighty 777-300ER. If a carrier really isn’t too concerned about fuel costs, even the pokey-looking A350-800 makes some sense. Hell, given Mideast carriers’ fuel cost apathy, even the fuelaholic A340-500/600 makes sense. Almost.

          3. Politics. The US isn’t exactly winning the popularity war in the Mideast. Since Mid-East airlines are owned or heavily influenced by governments, aircraft purchase decisions are often made at the top. Favoring Europe for large aircraft contracts—civil and military—expresses diplomatic disapproval and avoids annoying the anti-US crowd. Access to European airports could play a role too.

          http://www.richardaboulafia.com/shownote.asp?id=258

      • … and keesje, not to mention that your A380-900 with extended fuselage looks better than the original -800.

        • You are wrong Bernard. The A380-900 doesn’t look better, it looks much better! 🙂

      • Keeje,

        You do both yourself and Aboulafia a disservice by simply labelling him as an ‘A380 hater’.

        Aboulafia has no dog in this fight other than his own profession as an analyst. And what’s more, his outlook has been mostly correct to date: the A380 is a commercial failure.

        Perhaps the project was launched principally due to hubris, perhaps the company genuinely did believe there was a significant business case…whatever, only the most blind of believers could maintain that it has been a success in a business sense. “Refuses to fail”…it already has; it will never sell enough copies to repay the investment.

  10. I thought it was pretty well written and supported.

    When was the last A380 sale to a new customer?

    In the meantime as noted orders are deferred and MAS is dropping their and trying to get rid of them. If anyone needs to pad their existing fleet there are slots and spares to be had (Skymark anyone, that’s two more)

    Lots of challenges for both A and B as their are going to be a ton of A330s hitting the market, we are seeing the 767s come through Anchorage in numbers from JAL and ANA.

    At some point that will affect orders

    • According to my knowledge will the new MAS keep a big part of its A380 fleet.

      As long as the A380 production will make no huge deficit Airbus will produce this aircraft to keep the 777 boxed.

      The 777X first needs to fullfill the promises like comfortable 10 abreast seating or working folding wing tips.

      • I believe MAS has parked two, trying to lease them out.

        They are canceling the London routes the A380 is flying on (I forget which aircraft replaces them 777 maybe.

        The quote is we can’t fill them up enough to make money.

        And that’s its issue, it only works on certain routes and no place to put it if its not working.

        • According to flightradar24 MAS still operates A380s on the flights to London.

          I can not imagine that it would be cheaper to lease an A330 or a 767 and store the A380s MAS has. Except MAS can’t even fill a 767-200 on that route.

  11. Funny how people slam Bombardier when Boeing is getting 8.7B in tax incentives for just the 777…let alone all the subsidies that are posing as military programs.

    • The real difference, however, is that Boeing could probably afford to bankroll the 777X itself, if it wished…the same can’t be said of Bombardier and the C-Series, therefore the feeling is that this state intervention is a step too far.

    • Mark:

      Every0one benefits form their military orders, its not new.

      I do agree on the billions from Washington State, that’s ugly and even uglier when Boeing could do it out of loose cash (instead they buy their own stock back, sell low and buy high?)

      Frankly when you have to buy your stock back you have become frozen.

  12. That’s quite a few widebody orders here in recent weeks for the manufacturers.

    My advice to forecaster Richard Anderson of Delta is to not quit his day job!

  13. That article was pretty spot on. It highlights what decisions Airbus has before it. The current A380 is not as attractive as it once was. Plain and simple. As noted above, it has Zero orders in_____ and those who have them on order are NOT in a hurry to pick them up. It doesn’t matter if it has no competition if nobody wants to buy it.

    • Why should Emirates replace the A380 with a smaller an less profitable aircraft? For sure Tim Clark is gambling for the best conditions for an even more profitable aircraft. Everybody else is just awaiting a decission before ordering an aircraft with outdated engines.

      • Last I saw Clark was pushing for the full sized 900 pretty enthusiastically. One problem with the A380 from Airbus´ perspective must be that it´s success with EK is bankrupting other airlines which might have bought it and given EK a bit of a monopoly over the orderbook.

      • I’ve posted several times that the new Al Maktoum International Airport will have – when phase two of the expansion is completed – 400 aircraft stands; 200 of which will be designed for A380s, or equivalent sized aircraft. If fully utilised, 200 stands is equivalent to a fleet of at least 600 A380s/VLAs

        However, nobody seems to bite. 🙂

  14. Rotate, if within a year the backlog has grown 3 years, a Super380 is on the brink of being launched, are we going to conclude Richard Aboulafia & Boeing were wrong and Airbus was right afterall?

    You know the answer, there no way some of us ever going to agree the A380 isn’t such a bad idea. Observers, almost all from the USA, are dug so deep on this one, they can no longer move.

    From where I stand the aircraft is in service since 8 years, meets/ beats its performance specs, has a backlog for the next 5 years and operators and passengers love it.

    And that’s not what Richard expected. It ain’t. http://www.richardaboulafia.com/shownote.asp?id=221
    That’s not bad, we are all overly pre-occupied and/or patriotic sometimes.

    https://youtu.be/I_ACwbbF8RY?t=1m55s

    • Keesje:

      No one is argu9ing it did not meet specs. A lot of use will disagree on the so called backlog (solid backlog is what?, i.e. how many years of production.

      MAS is abandoning theirs as has been the case, it only works for certain airlines that are big enough and certain routes.

      A super sized A380 would only kill its current orders. No win situation. Stay tuned. So far its trailed off as predicted.

  15. Keesje the a380 is a record breaking aircraft. It is stretching aircraft design to the limit. I have to admit that airbus has manage to design a beautifull reliable and comfortable aircraft. But it is too big and has too small cargo capacity and because you beat your performnace specs doesnt mean you are competitive. Furthermore backlog is far weaker than you except. The air austral order for 2, transaero 4 virgin atlantic 6 air france 2, udisclosed customer(Hong kong airlines) 10 and maybe amedeo for 20 reduce backlog to 2018. Finally the growth in the backlog is from emirates and amedeo which first has to find a customer for it.

    • A low cargo capacity? How bad is this really for a passenger aircraft? I think the A380 uses its space far better for passengers than for LD3.

      The A380 is also not streched to the limits. A stretch is even possible and was already mentioned by Airbus as an option.

      A stretch would add cargo capacity because the wing box will not grow.

      • I interpret that as the aircraft is as big as it can get and still function, including how many can afford to be bought and actually utilized.

        Airbus does not seem to want to make it a 900, you have to figure there is a reason for that. To spell it out, if its too big for most, bigger means its too big for all but Emirates. Of course if they order enough and take delivery often enough that works.

        It does indeed fall short (current) in freight, I well remember the squawking that occurred when they realized it was full of pax luggage and could haul little freight. Clark amongst them I believe.

        For Emirates not an issue maybe, others, freight makes some routes work, no freight no aircraft thank you.

        Maybe this is a case of too big to succeed? Like the dinosaur with the two brains so it could function?

        • Airbus will IMJ make extensive changes to the wing of an A380 Next Generation (i.e. not just a “neo”).

          The new Al Maktoum International Airport will have – when phase two of the expansion is completed – 200 aircraft stands, measuring 85m x 85m for the A380 or equivalent sized aircraft. IMJ, this will be the new global standard, going forward.

          So, how could the “new” wing look like. First, re-engineer the wing with composite wing covers and spars; 2nd, insert a chord-wise, one frame (0.635m, or 25″) extension in the wing box; 3rd, incorporate a downward hinged wing tip device – as explained in the new Airbus patent*; 4th, extend the fixed wing to 84.75m in wingspan; 5th – and finally – incorporate in the downward hinged wing tip device an upwardly extending winglet (i.e. in the flight configuration), in order to increase the effective wingspan to about 100m.

          http://worldwide.espacenet.com/publicationDetails/originalDocument?CC=GB&NR=2524827A&KC=A&FT=D&ND=3&date=20151007&DB=EPODOC&locale=en_EP

          The “new” wing would have a wing area of about 930 m2. The current wing has a wing area of 845m2 and a wing span of 79.75m. BTW, the “new”, larger wing should be good for a MTOW of at least 800 metric tonnes – nice possibilities for a NG mega freighter, as discussed in this thread:

          https://leehamnews.com/2015/04/28/a380-10-years-later/#comment-106865

          The aspect ratio of the “new wing” would be: 100^2/930 = 10.75

          In comparison, the aspect ratio of the current wing is ≈ 79.75^2/845 = 7.53

          So, you’d have an increase in aspect ratio of 42.8 percent – a massive improvement. Induced drag varies from about one third of total drag on most aircraft, to around 50 percent of total drag on the A380. So, we could be looking at a fuel burn reduction of up to 20 percent by modifying the wing only. Add new engines etc., and it may look as if you’d be able to reduce trip fuel burn of the current A388 by a staggering 35 percent.

          In order to “solve” the A380′ perceived cargo “problem”, I’d suggest that both a 10 frame stretched A380-900NG and a 19 frame stretched A380-1000NG, both could be outfitted as combi-versions. The area set aside on the main deck for general freight carriage would be in the area between doors 4 and 5.

          So, a combi version of an A380-900NG would be able to carry some 50 percent more cargo than the 777-9, carry slightly more passengers than the current A388 – and have a trip fuel burn some 25 percent lower than the current A388.

  16. Lots of 787-9 to make, Norwegian has preference as they got slots early and they still have not made a -10 and there are a couple hundred of those.

    I think the order book has stayed about the same (I could be wrong) but has not shrunk a lot if not.

    And they have lost (supposedly) orders as not available though I would not believe Delta comments if I was given a gold bar (not that I am against them wheeling and dealing but outright lying does not sit well (i.e there was no completion, Delta was fixed on the A350 and the A330)

    • Yeah, I don’t think Anderson was going to order the 787 or 777 at all. He was completely fixated on the A330 and A350 and was basically giving Boeing a courteous kick in the shins, and a hand in the face at the end of the day.

      Anderson is hot about Ex/Im and he ain’t a friend of Boeing because of it. The whole competition for the widebody order was a facade.

      • For Delta the A350 seems a pretty good machine for the Pacific. Better than the 787 (small) and 777X (large, heavy).

        For the Atlantic the 787 (-9 -10) are excellent aircraft. That’s why he ordered them, in 2005. Boeing misinformed / disappointed him x times in the 5 years after. The rest is history (State ImEx financing for EK/QR 777s didn’t help either).

        The A330 proved the most profitable aircraft in the NWA/Delta fleet over the last decade, hard to beat a full A333 transatlantic. Making the A339NEO low hanging fruit for Delta.

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