The A380 investors day jinx

 

  • July 15, 2016, © Leeham Co., Farnborough Air Show: At an event like this, we pick up all sorts of snippets that don’t fit into any given story. So here’s a compilation of our Odds and Ends to wrap up our dedicated coverage of the 2016 Farnborough Air Show.

A380 and investors meeting: The Airbus A380 has been a sensitive topic for investors. Historically stock prices took a major hit when negative news about the A380 emerged. During an investors day in December 2014, one of the executives slipped that the program could be terminated. The stock took an immediate dive and other executives had to clean up the first one’s comments.

Airbus also holds an investors day during the Paris and Farnborough air shows. The latter’s was scheduled on Wednesday. The night before, the French newspaper La Tribune broke news that the production rate of the A380 will be reduced from 20/yr in 2017 to just 12/yr in 2018. Airbus scrambled to catch up to the story Tuesday night in advance of the Wednesday investors day.

The production breaks even at 20 but not at 12. Yet the stock opened down slightly and remained flat during the rest of the day before closing up slightly.

The jinx may be over, but perhaps Airbus either has to fix the A380 program or cancel its investors days.

CFM LEAP-1A: The engine proved in test flights on the Airbus A320neo to be quieter than expected. It’s going to be on specification at entry-into-service. It’s sister engine, the LEAP-1B on the Boeing 737-8 MAX, is likewise expected to be on spec at EIS next year.

737-10 launch: Despite a series of mixed messages from Boeing before and during the Air Show, the prevailing sentiment is that Boeing will proceed with the 737-10 derivative with a decision before the end of the year. LNC’s quick analysis of what we think the airplane will be concludes the 737-10, unlike the 737-9, will be more competitive with the A321neo. The question is how much it will cost Boeing in R&D to build the derivative.

More MAX upside than NEO: John Wojick, SVP Global Sales and Marketing for Boeing, told reporters this week that while the 737 MAX trails the Airbus A320neo in market share today, he believes the MAX has more upside than does the NEO.

He points out that Southwest Airlines and Ryanair have ordered just 300 MAXes compared with combined fleets of more than 1,100 NGs. The leading customers for the A320 are AirAsia and Indigo, which compared with Southwest and Ryanair are relatively new carriers. These airlines now have 830 orders but operate only 250 airplanes. Fair enough, but at one time Southwest and Ryanair only operated 250 airplanes between them. Wojick’s point is well taken, but the comparison is open to debate.

Qatar Airways: Vocal CEO Akbar Al-Baker told reporters at the Air Show he’s negotiating “seriously” with Boeing for some 30 737NGs and MAXes. Given his track record of negotiating in the press, his pronouncement has to be taken with a bit of skepticism. Cancelling the A320neo orders about which he’s been so vociferous simply doesn’t make sense. The delays for these are measured in months. Getting NGs and MAXes, even if from lessors, is measured in years.

Bombardier vs Embraer: Embraer declared war on Bombardier after the latter won an important order from Delta Air Lines, based on what EMB calls unfair competition because of “subsidies” the Quebec government. Au contraire, says BBD. The Quebec money, US$1bn, is essentially structured like a preferred stock issue (our highly simplistic description). But with BBD now EMB’s main competitor in the 100-125 seat sector in which it otherwise had a virtual monopoly, EMB is coming under new pricing pressure from the CS100. And this is what’s at the root of EMB’s complaints, says a BBD official.

More Bombardier vs Embraer: After the decision to do its own wing also for the E195-E2, Embraer’ is pointing out that the E-jet E2 series is the only aircraft family in the market which has an optimized wing for each member of the family.

Bombardier CSeries and Embraer E-jet 190, 195 E2 startup delays: The Pratt & Whitney GTF on these aircraft, like all aircraft engines, has rotor bow at some point during the cooling down after a sortie. But because Bombardier insisted that these engines (they both use the same engine, the 73 inch GTF) be mounted at the fan case and the turbine house (and not at the core like the A320 engines), the rotor bow is no problem. The engine’s natural weight bows the shaft in the opposite direction during cooling down. There is still a cooling spool period but this is so short that the engines startup time is within the standard 65 to 85 seconds. Actual startup time is 75 seconds.

If it’s Boring, we’re still going: For the journalists attending this show, we universally considered it very boring. But we still had to be here.

53 Comments on “The A380 investors day jinx

  1. “because Bombardier insisted that these engines (they both use the same engine, the 73 inch GTF) be mounted at the fan case and the turbine house (and not at the core like the A320 engines)”

    Pardon my ignorance on the subject but is there a reason why Airbus didn’t have their GTFs mounted at the fan case and the turbine house?

    • Reason is ground clearance for the engines.

      By the way – Scott, what is the noise difference between LEAP-1A and PW1100G?

  2. “The leading customers for the A320 are AirAsia and Indigo, which compared with Southwest and Ryanair are relatively new carriers. These airlines now have 830 orders but operate only 250 airplanes. Fair enough, but at one time Southwest and Ryanair only operated 250 airplanes between them. Wojick’s point is well taken, but the comparison is open to debate.”

    Most certainly. The above A320 customers are expanding. The other 2 are big carriers in saturated (some might say declining) regions.

    “If it’s Boring, we’re still going: For the journalists attending this show, we universally considered it very boring. But we still had to be here.”

    At Fanborough’18, the A330 NEO, 787-10, and A350-1000 should be there or thereabouts.

    • Indigo I am willing to wait and see.

      Air Asia? I have seen them kicking the A330 orders down the runway forever. As each new version comes along they convert to it.

      Can they use some A321? Probably. All A321? I don’t think so.

  3. There’s a good reason to order 737s even if you can’t get them very quickly, it’s called duel sourcing. The trouble Al Baker is going to have is that it’s a duopoly, kick one of them in the balls continuously and you end up having a monopoly supplier.

    • I think you meant dual, but duel is also appropriate given the customer in question…. he loves when Boeing and Airbus Duel for his orders.

      except contrary to a normal duel, it is the winner who loses when they get an order from U-Turn Al.

      • Perhaps its time to give U turn a proper western name like Hugh Turner?

    • Was in TLS in the week and there are three rather forlorn Qatar A320s engineless and parked out in the wilderness. Airbus cannot be held to account very easily for the problems of the GTF, if Al has a problem couldn’t he specify LEAP in the future on the fleet he intends to buy? I suppose it wouldn’t make sufficient headlines

      • Yep, P&W is responsible and I suspect a lot of chewing out going on.

        C Series did it right!

        • As though Al-baker isnt the only one with supplier issues, everyone else realises they have an airline to run and passengers numbers to grow and act accordingly, not like they are dealing with cut price mobile phones.

          • Actually I think that is the corporate attitude these days.

            It does make you wonder if he walks the walk or just talks the walk.

    • I read where WN is deferring some 737MAX deliveries, so maybe some early slots will be available for AL. I’d say its a 50/50 chance he will go Boeing.

      • I doubt it, its a fixable problems and reportedly has been done so.

  4. Boring?? you said…
    “If it’s Boring, we’re still going: For the journalists attending this show, we universally considered it very boring. But we still had to be here”
    I don’t understand this comment, if you love aviation and all aspects of it like most of us readers than you would be ecstatic to be there, I know I would be if that was my job. Next year if you consider it to too boring to go than please contact me and I will gladly go for you and I would do it for free!!

  5. 737-10 launch

    If they lauch a 737-10 is probably will be a two aircraft.

    The 737-9 is only slightly bigger than the -8 but already too far down the road probably (?) to be halted.

    New engines, landing gears and wing root’s

    If I was Boeing I would go for a -10 slightly larger then the current -9 (but offering better capability) and a stretch of ~4- rows above that.

    Big concern is the container capability.

    When Boeing again mentions this is not really important for short haul, do they mean medium haul too?

    Thinking about efficiency is it not important the 737 and 757 because can’t do it, don’t the markets outside the US like it?

    https://freakyflier.files.wordpress.com/2014/01/cz-a321.jpg

    It seems there’s a lot of denial and hope involved.

    • Yes, for airlines, the downside of no containers and cramped flight deck, versus the upside of crew commonality.

      I think like the A380neo, they have to have enough foreseeable orders for return on investment. Requires some big names with orders of a hundred to get the green light.

      The MoM is a separate category though. A36m wing x 46m x 35K engine single aisle is not synonymous with a 46m wing x 52m long x 45K engine 2-3-2. The overlap of an Airbus or Boeing MoM with the A321 or 737-10 is minimal.

    • Keesje: I don’t get the post. It seems more to push and agenda view than anyting releavant.

      Of course the -10 is going to be longer than the -9, kind of, yea and the point is? Sun rises in the East but I don’t have to tell everyone that.

      No big concner is not conainter cpaiblity. Its not a big factor. As noted by others, while the A320 does offer that (and well done for them) its not used that much.

      Across US and short haul it does not work and anything they do freight wise they just put in with the baggage (Ak airlines does that quite a bit to Alaska due to the nasty 2500 mile road issue between us and Seattle). Most US cities have truck service that is almost as fast and a lot less cost, pretty unique for AK.

      Don’t get me wrong, I applaud Airbus for the A320 series, they did it right with more capability. I have read comments that its a better cargo hold. Nice, they pay ramp rats as little as they can, don’t much care if they get hurt and hire someone else. No one cares about ramp rats so its not for them.

      Certainly Boeing has been in denial, they are in a corner, they know it and are not willing to admit it. I always felt it was a lot better for a, I screwed up, I know it, I am working on it and lets get on with things.

      Will see what the management does going ahead, I think there is a sea change but I could also be wrong.

      New management is having to explain to the board how badly their choir boy screwed up, not fun as the boards is the ones that are supposed to supervise him and they did not.

      Frankly the board should resign but that will be a cold day in hell.

  6. A380 Breakeven
    How does A380 break even at 20? Everyone seems to take this at face value. I’m not saying it’s impossible, but you don’t magically cut your costs by cutting volume from 27 (current stated Break Even point, I believe) to 20 per year. I suspect Airbus means that they have a realistic plan for breaking even at 20. Can it really happen without a lengthy transition?

    • they7 don’t though Boeing seems to eeek out, not sure they lie ro acauly manage.

      What Airbus is sort of hinting is they will get as efficnet as possible at rate 12 and take the bullet for the losss

      Its not like it was ever going to make money.

      last I saw it was North of 550 hulls just to break even on the program.

      787 may due to numbers (break even on program, its never going to MAKE money) but after 20 years into this we are 319 A380s and a lot of those are marginal let alone the used ones soon to hit the market.

  7. @Ipper

    As I understand it they have only ever used one half of the production facility originally developed for the A380 and it is produced in a very different manner to the A330/350 with most all of the work done at one primary station (wing to body etc etc). The aim of course is to extend the massive investment in infrastructure around Europe to such a time as that the market comes to the A380.

    Looking at the history of aviation this is very possible as there are many examples of aircraft having a belated market acceptance. Adopting a relevant cost approach the costs of that infrastructure should be ignored and it is a wise move to extend manufacture for as long as is possible

    • Agreed, they have it, they are stuck with it, they can afford to string it out as long as possible hoping things change.

      Boeing is doing the same thin on the 747 and it worked with the 767 (though it had better prospect with the tanker order looming)

      • I will also add in that is why they are not going to put any money into it.

        If there is a big shift, maybe yes,, but as it stand, no way.

  8. Norwegian switched 30 A320neo orders to A321LR.

    I don’t expect the first 737 MAX 10 within 10 years. So what can airlines do inbetween except ordering A321LR? Even O’Leary will not let pass a business just because he needs another aircraft.

    • I understood that O’leary has been told to never darken the door of Airbus ever again

      • Grubbie:

        If you have the cash they are fine but he is not getting any deals and there is no need for Airbus to do so on the A321.

        One aspect Boeing is not saying is Airbus can sell those for a much better profit than A320 as there is NO competition .

        That means more money and all the market split yadi yadi I the world does not change that. Boeing lauds how much more their wide body profits are, well single aisle goes to Airbus hands down.

        Boeing love to compare their blue chips vs Airbus rag tag, but a good price from a Rag Tag is better than a low price from a Blue chip and they are oversold so its not like they are in a corner.

        It may not be a 747 per Boeing hey day, but I bet its a real yippeed when they sell another 20 or 30 of the A321s.

      • August 2011 the MAX get its go. First delivered is expected for 2017.

        The MAX 10 requires engines with more power e.g. more fan diameter, …
        Maybe 2023 in case Boeing gives the go ahead by the end of the year.

        The A321neo will start into service by the end of the year. In your best case only 5 years for Airbus to deliver 20 A321 a month (20 x 12 x 5 ~ 1,200 A321neo and several A321 LR). Boeing has produced 1050 757.

      • Ted:

        They better launch it NEOW. A321 NEO is beating MAX anything all hollow.

    • Pretty much in a nut shell but O Learky structure is not Norwegian.

      Ak Airlines is a better cross check, they have the A321NEO and a good price and I would not be surprised to see them pick it up.

      Otherwise if a small up-scale does not work, 737s customers are in a bind (and hard to get A321NEO!)

  9. When CFM says they will be on spec is that referring to just the noise or performance as well?

    • It’s noise and performance, and it was Airbus and Boeing. not CFM.

  10. Scott, Bjorn
    Thank you for an outstanding reporting. On point and with objective commentary.

  11. The assessment that the A380 is what drove down the stock price during the 2014 investor day is wrong. An announced (kind of a surprise to the market) cut in A330 production, Qatar’s announcement that it was delaying acceptance of the A350 the same day as the event, and poor overall stock market performance led to the drop in Airbus’s share price. The A380 was a very distance fourth.

    • Boeing must have a whole communications team whos sole mission is to chip away at any good news about the A380, maybe they have a private PR firm on retainer to do the dirty so they cant be caught out. I know its the ‘kardashian of planes’ so that any speck of news is magnified over but it cant just have so much mythologizing without help

    • Exactly correct, actually the new aircraft models take time to mature in a world where already previous aircrafts are functioning, with the likes of 747,777,330 these models have got trust over the decades, while airlines phase out older aircrafts there will be room for newer ones as in aviation industry everything requires heavy finance and long term planning, in other some years maybe it will be feasible for airlines to induct 350 380 787s while in prospect of aircraft body, Boeing is clicking right on wide bodied since the start, while airbus always excelled with narrow body, and currently in this time of era everybody wants to travel quick regionally as well, so more narrow body business happening, back then taking a flight was generally to travel to far of places, and back in the day flying was for rich and prestigious, and business strategy has changed from luxury to more efficient, profitable and budget.

  12. I am one of the many who was very disappointed that Boeing went with the MAX and not a new single aisle aircraft. But now it looks like they have a program: MAX 7.5, 8, 9 ,10. They are in many ways dated and too narrow for a perfect world but they will be reliable, safe, efficient, and profitable. The size steps from one to the next are much closer than the (for now) A-320 product line.

    I’ve argued for a new wider single Aisle or 2-2-2 with two wing choices to cover the whole the whole 150- 250 seat range and the other kind of range too.

    Now I bet we get the Max family and a 2-3-2 MOM (if we get a MOM). The MAX will soldier on until a new single aisle can be built that offers some of the not yet mature and kinda radical design changes for a big (20-30%? or more?) efficiency improvement. EIS for such a plane: 2035, maybe sooner.

    Get used to MAX the it’s here for a while! At least the windows are bigger than the 320 line.

    • Been saying that for some time, though I expect the 797 is a go

      They need to get their butt in gear and quit talking though, as Leahy has noted, sans that the A321 is the MOM of now.

        • 2-2-2, yes way. Granted it is a long shot.

          Because, a 2-2-2 with a 38-40m folding wing, but 100t MTOW can offer more range, capacity, and quicker turn time than the A321, and eliminate the need for the 737-10. It can then get a 45m wing at 150t for a stretch and range to cover middle range market.

          The 2nd option is build the 737-10 and 2-3-2 MoM.
          The 3rd option is build a new single aisle.

          • You mention turn around times which has been a bee in my bonnet for years.
            Although much improved, the interior of a modern airliner is still based on the turn of the 20th century railway carriage in terms of layout.
            Consider that the overhead bins as an example are not usable for probably 30% of passengers though infirmity, age or the kids are too small. That is a damning indictment on designers.
            Consider how the airline seat compares with your trip to the theatre.
            The squab lifts up giving much more space to get by without apologies for standing on someones foot. The lifting seat provides a great place for on board storage instead of the overheads which create chaos and maybe as much as 10 minutes of the boarding and disembarkation time because of the 30% who cannot use overhead bins.There IMHO is a pointer into how to speed up the loading and unloading issue.

            A final point in my little Sunday morning rant is for Airbus.

            The French invented that wonderful piece of relief art known as the pissoir.

            Why is there not one on board airplanes. A three holer would take up a very small space, and with a bit of research could probably demonstrate that one WC could be eliminated, one row of three seats added, and be of great comfort to the male population.

          • I can’t say I have any problem using a toilet, I do it at home all the time!

            Give them more space and they just do more cramming.

  13. The A380 was dead on arrival over 10 years ago when it was launched.

    It didn’t take a rocket scientist to figure that it was a very niche market.

    Airbus executives should just move on and stop looking for face saving ways out of this financial debacle with a slow unwind. Chances are the current executives have no responsibility for the ego laced decisions of their dumb predecessors.

    • The A380 is dead because of the 777-300ER, without that aircraft the situation would have been different the last 10 years. After designing the A350-2000 Airbus should have enough engineers available to dig their teeth into the A380neo. Airbus cannot hire and fire engineers like Boeing so projects need to roll in at an even pace. Can the A380neo be much more efficient than the 777-9/-10 and reach 1-2 hrs further Airbus could get the $300M-$450M for it. Most likely it will be new RR Advance engines and a new efficient carbon wing before SQ, AF, LH, BA starts drooling and reach for the check books.

      • Well that’s the big question, can Airbus get any money for it?

        They were running 60% discounts to sell them.

        450 million gets you two or three 777s and more flexible.

        It was not ahead of its time, it was an ego thing that Airbus thought they had to have a big aircraft to be equal to Boeing.

        They didn’t, they were doing well and far better than Boeing overall.

        If there is any consolation, the 747-8 was the same thing, oddly its one of the best looking jets of all time (Stretch DC-8 the best IMNSHO)

    • True, also different times and it cost all of 16 million when they came out with it as I recall. Production rate was planned as low from the git go as you did not sell aircraft in the numbers they do now.

      The numbers are not dividing up either. I have it as 1968 produced, 46 years, that average out at 3.56 a month.

      Airbus designed the A380 program with 4 a month production. That’s a tough nut to cut down to 1 a month.

      I don’t know that Boeing is not loosing money on the 747 now either.

      • 1968 747s produced ? I see a production list with ln 1530 or so current.
        The last 400 was ln 1419
        Where are those extra 430 ones you say that have been made
        The first 747-121 was delivered to PanAm on 03 Oct 1970

  14. There was 1522 747 deliveries including military versions – from 1969 util now i.e. around 2.7 per month. Dukeofurl is correct.

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