Each OEM has a small number (20-30) of “TBD” deferrals in the Ascend data base. These include Airbus A380s at defunct Kingfisher Airlines and “Unannounced” customer(s), believed to be Hong Kong Airlines. Over at Boeing, 19 787s from Aeroflot are listed as deferred to the year 2500, Ascend’s way of saying it doesn’t know when these airplanes are supposed to be delivered. Aeroflot pretty much said it’s cancelling these orders and some A350s, also listed in the “2500” slot.
Unidentified customers on the Airbus and Boeing websites are not in the Ascend modeling.
Figure 2 illustrates the scheduled Airbus wide-body deliveries through 2030. The “average” 150 wide-bodies that reach 25 years old each year is identified. The chart illustrates that Airbus alone is comfortably within the theoretical retirement-plus-growth supply-demand requirements for years to come.
Figure 3 illustrates the situation with Boeing deliveries. Boeing’s current production rate for wide-body airplanes is higher than Airbus’, and there are still “extra” 787s to add to deliveries (the TerribleTeens) over-and-above the current and rising production rate. On the other hand, rates on the 777 Classic and 747-8 are coming down due to softening demand and the transition between the Classic and the 777X. The first X is scheduled for delivery in early 2020.
Figure 4 combines the scheduled Airbus and Boeing deliveries, continuing to identify the ~150/yr retirement forecast. The combined deliveries far outstrip the aging aircraft benchmark, meaning that growth has to accommodate the anticipated delta between retirements and deliveries (Figure 5).
Announced Production Rates
Airbus and Boeing have announced production rates for all of their wide-body aircraft through the end of the decade. LNC‘s next graphic, Figure 6, illustrates these rates. We don’t incorporate our forecasts into this chart.
demand by 2019. Although LNC disagrees and believes the program will terminate in 2018 upon delivery of the new Air Force One fleet, once again we’re not adding our forecast into this chart.
Add all this up and you get a production rate of 456.6 wide-bodies a year in 2020, with the presumption these are all deliveries. Given the ramp of the 777X and Airbus vacation schedules, we believe the number is less. For purposes of this discussion, we’ll use a figure of 450.
If one accepts that the aging aircraft factor means there will be about 150 retirements in 2020, then growth must account for 300 aircraft.
There are signs today that demand flown in wide-bodies is softening. Delta Air Lines deferred four A350s for a year. Lufthansa Airlines announced it’s grounding two Airbus A340-600s. Several airlines have talked about softening trans-Atlantic yields. (US domestic yields are also under pressure.)
Some wonder if this is the start of the oft-discussed “bubble-burst.”
LNC believes there are several factors at work.
Low fuel prices also have had an effect on tamping down new airplane orders, both for wide- and narrow-bodies.
New aircraft orders are already below previous, recent levels. Yet with record backlogs, a breather is in order. It’s certainly not time to panic.