Dissecting Wide-Body deliveries through 2030

Discussion

Airbus Deliveries 2016-2030

Figure 2. Airbus Wide-Body Deliveries 2016-2030. Source: Ascend. Click on image to enlarge.

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.

Boeing Deliveries 2016-2030

Figure 3. Boeing wide-body deliveries through 2030. Source: Ascend. Click on image to enlarge.

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.

Airbus-Boeing Deliveries 2016-2030

Figure 4: Combined Airbus and Boeing wide-body deliveries through 2030. Source: Ascend. Click on image to enlarge.

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

Growth Replace WB through 2020

Figure 5. Projected growth and replacement wide-body aircraft demand. Source: Air Lease Corp. Click on image to enlarge.

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.

  • A330ceo/neo: Airbus announced a rate of 7/mo for the CEO. As the neo enters production and begins delivery (slated fro December 2017, but more likely 1Q2018), there will be a transition between the two airplanes. The nature of this transition hasn’t been announced. Whether Airbus will “shoot blanks,” as Boeing announced for the transition of the 777 Classic to the 777x, remains to be seen. The ceo theoretically is supposed to cease production about two years after the neo is introduced. For purposes of today’s post, we assume the production rate for the A330 will remain constant.
  • A350: A production rate of 10/mo is the target in 2018. Airbus can go up to 13/mo and is studying it, but there is no decision.
  • A380: The rate is coming down to 1.8/mo. LNC believes it has to come down further, as Figure 2 indicates, but we’re not inserting our forecast into this illustration.
  • 747-8: Boeing is bringing the production rate down to 0.5/mo and claims this will suffice until what it hopes is a recovery in the air cargo market and replacement

    WB Deliveries 2016-2030

    Figure 6. Wide-body production rates by 2020. Sources: Airbus, Boeing. Click on image to enlarge.

    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.

  • 777: Boeing acknowledged the production rate of the Classic will come down to 5.5/mo in 2018, though through rhetoric related to the “shooting blanks” issue tries to claim the production rate is higher. But facts are facts and 5.5 is the operative number. The 777X isn’t supposed to deliver until 1Q2020, though Boeing wants to bring this forward to at least December 2019 if it can.
  • 787: A rate of 14/mo has been announced “by the end of the decade.” This depends on selling the remain 150-160 787s in the current 1,300 accounting block.

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.

Softening demand

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.

  • Expansion by the “Middle East 3,” Emirates Airline and Etihad and Qatar airways, across the Atlantic. In a direct poke in the eye to Delta, Qatar opened new service to Atlanta (Delta’s #1 hub), initially with an A380 but continuing with a 777-300ER.
  • Expansion by low cost carriers across the Atlantic. Norwegian Air Shuttle gets all the headlines, but Canada’s WestJet is now offering 767-300ER service and even flying some routes with the 737NG. Icelandair is beginning to add 767-300ERs to its fleet to open up US markets beyond the reach of the 757-200W.
  • Terrorism fears. The attacks in Paris and Brussels have had a deleterious effect on traffic. Fears the disappearance of Egyptair MS804 may also have an affect on traffic to Europe and the Middle East.
  • Genuine signs the economy is softening.

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.

 

 

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