July 27, 2017, © Leeham Co.: It’s mid-way through 2017 and LNC is taking its second look at production and delivery stream flows for the Big Four airframe manufacturers.
We examined Boeing Monday in advance of its earnings call Wednesday. Today we look at Airbus in advance of its earnings call today. We look at Bombardier and Embraer next Monday.
We use the Airfinance Journal Fleet Tracker as the basis for our exam.
The A380 is in a very tenuous position.
Boeing finally threw in the towel on the 747-8I and the entire Very Large Aircraft sector in its 2017 Current Market Outlook (CMO) revealed at the Paris Air Show last month.
Airbus at the PAS revealed its study for the A380Plus, a series of aerodynamic and cabin configuration changes that have a goal of improving the economics by 13%. But even this is dependent upon whether the A380’s largest customer, Emirates Airline, buys into the program.
Two weeks earlier, Airbus revealed at the annual meeting of the International Air Transport Assn. (IATA) that it is studying dropping the A380 production rate below the current 12/yr in 2019. Despite several questions, officials refused to say just what rate they are considering.
A review of Fleet Tracker enables some conclusions. We believe Airbus must drop the production rate to six or seven per year, given the dicey quality of the orders.
According to Fleet Tracker, Amedeo, Hong Kong Airlines (Unidentified on the Airbus website, but ID’d in Fleet Tracker), Qantas, Virgin Atlantic and Air Accord all are scheduled to received A380s in 2019. These account for six aircraft, out of 11 slated for delivery.
Amedeo has been deferring its orders, as has Virgin Atlantic and Hong Kong. Qantas previously indicated it didn’t want more A380s.
Emirates and Singapore are scheduled to receive five aircraft.
In 2020, Emirates is scheduled to receive seven and Singapore one. There are five others scheduled for delivery to the same questionable customers.
We expect Airbus and Emirates to adjust the delivery schedule slightly to smooth out production and Airbus to target a rate about half that of today. Airbus denied a report from a French media that the rate reduction will be to 8/yr. Perhaps there will be some information from the earnings call today.
Nine A350-1000s are supposed to be delivered this year. Continued delays from suppliers hit A350-900 deliveries and, presumably, A350-1000s. LNC sees several A350s potentially slipping into next year. Regardless, inventory is being built up and next year’s deliveries exceed the production rate because of this–although Airbus plans to go to rate 10/mo sometime during the year. Inventory build up and deliveries the following year exceeding the production rate is not an unusual circumstance for Airbus, Boeing or other OEMs.
Deferrals appear to be opening early delivery slots. Airbus has an issue with the A350 in the USA. A softening of international traffic caused Delta Air Lines to defer some early A350s. Over at American Airlines, the A350 was ordered by US Airways. When this carrier acquired American, which ordered the Boeing 787, the surviving management (US Airways) found itself with two wide-body airplanes for the same mission. America’s 787s began delivering before the A350s, and AA deferred the latter.
Fleet planning on what to do about the A350s continues. Airbus and American are talking about down-grading the A350 to the A330neo.
At United Airlines, legacy UAL ordered 25 A350-900s. When Continental Airlines acquired United, the CO management upgraded these to the A350-1000 and added 10 orders. Later, Boeing offered United cheap ($120m range) 777-300ERs in its campaign to fill the 777 Classic skyline bridge to the 777X.
The A350-1000s were intended to replace the Boeing 747-400s. The addition of the 777-300ERs enabled United to accelerate this replacement. Now, the -1000s are an airplane that is duplicative to the -300ER. United deferred the -1000s while in discussion with Airbus over the future of the A350.
With a production rate of 6/mo, Airbus has challenges next year.
According to the Fleet Tracker, Airbus has a production gap not only next year but going forward as well.
Further complicating: Hawaiian has the only six orders for the A330-800. John Leahy, COO-Customers, earlier said Airbus doesn’t want to even proceed with the -800, but has since reversed his position.
American Airlines appears more interested in the -800 than the -900 as replacements for the Boeing 767-300ER. Boeing is offering its own solution. AA selecting the A330-800 would be a way out of the A350-900. Pre-production on the A330-800 is underway.
Hawaiian has cancellation rights for the -800 and is said to have launched a competition between the Boeing 787 and the Airbus A350-900.
Airbus’ hand-wringing frustration with Pratt & Whitney GTF-powered A320neos is well known and doesn’t need much recap here.
Delivery schedules are all bollixed up and may well go into next year to fully sort things out. The delivery scheduled in Fleet Tracker may or may not take these extraordinary events into account.
Setting this aside, Airbus is scheduled to deliver 585 A320ceo/neo family members next year and 718 in 2019. There’s a dearth of delivery slots until 2020-2021, and there aren’t a lot then.
That said, some moving around within the skyline could occur if some customers get pressed financially.
Qatar Airways is still showing up in 2018, but the industry knowns its mercurial CEO, Akbar Al Baker, wants to reschedule to a year or two later. Norwegian Air Shuttle, which is under pressure, is likewise a 2018 customer.
The A321 represents 35% of family deliveries next year, increasing to 41% in four years, based on current orders. But there is a lot of room left in the production to be filled. From a peak of 718 deliveries currently scheduled in 2019 (equal to 60/mo), the skyline drops to 545 in 2022.
Next: Bombardier and Embraer.
Hi Scott, I was expecting to get some info on the Qatar cancellations of the A350. From what I can gather the cancellation of the four frames was announced by Airbus with little to back that up from AAB.
It looks to me that Airbus are playing hardball with AAB and his way of doing business, effectively they have cancelled these as a ‘shot across the bows’. I would be grateful if you have any intelligence on this?
The outcome UAL 350-1000 order is one that really interest me.
UAL are obviously very interested in the MoM, have 100MAX10 on order, operate 787’s and getting 777ER’s. I won’t be surprized if UAL are interested in the 787-10 for higher density Transatlantic routes
After the 757 some of their oldest aircraft in their fleet are 777-200’s, 767’s and 320’s. AB’s 320/1 order book is “full” (can see UAL replacing them with MAX8’s?) and that of the 350 full to some extent. Can’t see them being interested in the a330NEO’s except maybe a theoretical A330-800″Lite”?
From the delivery stream a “settlement” could be getting 359’s from 2023 to replace 777-200ER’s?
142 deliveries for the A350 in 2018? This is a recent quotation – “The 100th A350 XWB milestone comes as we reach our fastest widebody production ramp-up, on track to meet the target of 10 A350 deliveries per month by the end of 2018,” said Fabrice Bregier, Airbus COO and President Commercial Aircraft.
If they reach 10 a month at the end of 2018 ( and this is a Big IF) there is no mathematical way they can reach 142 deliveries in 2018.
True, an output of 10 units per month will result in about 110 units produced per year (i.e. 11 month production year) — and Airbus will only achieve that goal in 2018.
As the alert reader noticed are deliverable not equivalent to aircraft produced. Airbus manufactures, since late last year ca. 8.5 A350 per month. Which is ca. 97 frames this year (11.5 month?!?). Plenty of them are waiting for cabin furnishing on the ramp in Toulouse and the paint shop in Hamburg (https://twitter.com/A350Blog/status/881939664013230080) or they belong to the 4 produced but not accepted a/c for QTR (https://twitter.com/A350Blog/status/883793664388018176)? So, plenty of room to detach the “Delivery Stream” in the chart from the production rate.
Seems a bit of a stretch, I agree.
As for the A350-1000, currently 1 or 2 deliveries are planned at the end of the year for Qatar Airways. Certainly not 9.
Talking about the 350-1000 (indirectly). See Boeing delivered between 90 and 100 B777 from 2012 to 2016, there seems to be ~75 outstanding orders for the 777ER’s and 30 for the F’s.
So whats going to happen to the 777 production line in two years time. Will Boeing start selling 777ER’s at “very” low prices? Could this be what the UAL 350K1 order “review” is heading towards, buying more 777ER’s cheap and they are readily available?
Even rock bottom prices for UAL as they could be a launch customer for the 797, this could pay for the 350K1 cancellation fees?
Thanks Scott for this article, its opening my eyes to a large extent to what is potentially going on in the Airbus boardrooms.
From this I can potentially see an A322 going into production around 2024, a year before the MoM flies in 2025?
For the A350, the graph shows there are no delivery slots until 2024. But then we need to add China and Vietnam to tge list. In all probability 2024 is also sold out or close to sold out.
My view is that Airbus must commit to 12 or 13/month, the FAL can only handle 13, or lose a substantial number of orders to Boeing
The same applies to the A320, remembering that production is only 49/month, 539/year. In this case production is to increase to 60/month, 660/year, but that still means there are only a few delivery slots remaining through to the end of 2024
Question, should Airbus go beyond 60/month? My own view is no. They need to think about a replacement
Airbus have announced that the A380 will go to 8/year. Further evidence that Emirates is slowing down. 777X?
For those in the know, what of the 320/1’s or 350’s could potentially be build at the A380 and/or A330 production lines.
AB will have to consolidate, they will lose sales to Boeing in he end due to backlogs. They are restricted to develop potential good aircraft such as a 320+ or 321+/322. Sometimes better to cut-off a finger than to loose a hand?
At XFW “roofed volume” destined initially for the A380 has been repurposed.
At TLS A330 and A350 share some production facilities.
A320 family production facilities are afaics completely separate.
But XFW has opened another FAL line recently / or is in the process of … doing that.
“The A321 represents 35% of family deliveries next year”
The A321 represented 40% of all A320 family deliveries in 2016 and will be close to 50% in 2017. Where is this 35% figure coming from?
News that you couldn’t make up. UK export finance has gaurenteed polish Boeing 787s on account of their Rolls Royce engines. Flight international ,I have only seen it on paper copy.
Arent the engines bought separately ? In that case the guarantees only cover the price of the engines.
Interesting that its a switch of engine supplier from the GEnx used in their 787-8s. The planes are the bigger 787-9 which are leased.
I think they are all RR engines. The US offers the same gaurantees to support US companies, so I’m not sure what being said
Everybody does it:
Usually to buffer the local actors in commercial transactions from political vagaries abroad.
EXIM bank and similar constructs extend this to providing the financing too ( beyond just taking up the tab for ( political ) risk alleviation.
Everybody does it? Maybe someone should suggest Exim could finance Airbus planes that have been built in Europe,but not Boeings built in the US.
IMU there is a gentleman’s (hr. hrmm.) agreement around to not do that ( either direction).
Neither the EU nor the USA are “politically risky” investment areas. ( OK, US just changing with a strongly nationalistic streak.)
With regard to your comments. RR claim to have won 60% of contested business with regard to the 787. In other words, contested business has been restricted
American Airlines appears more interested in the -800 than the -900 as replacements for the Boeing 767-300ER. Boeing is offering its own solution.
What solution is Boeing offering?
@Rick, I know but can’t say given how I learned about it.
This could lead to some “fun” ideas/peculation?
“The A321 represents 35% of family deliveries next year, increasing to 41% in four years, based on current orders. But there is a lot of room left in the production to be filled. From a peak of 718 deliveries currently scheduled in 2019 (equal to 60/mo), the skyline drops to 545 in 2022.”
The A321 represents close to 50% of family deliveries next year. The A320 backlog includes 1000 “hidden” A321s based on recent conversion and production rates. Everybody sees, it’s why the defensive 737-10 was born.
Hi Keesje, while I got you on the line.
What will the commercial viability be of a 330-1000F (~4.8m stretch of the 339) to compete with the 777F when the older model’s production line stops?
Airbus only has its A330-200F in production, which is the old version. They do have a conversion from passenger A330-300 to package freighters
They are in 60-70 t payload class.
I dont think they are going to make the jump to the 100t class of the 777F. Thats a massive amount of stregthening for an A330. The 7478F is up to 138t
Most likely is A350-8F , maybe in the 90t payload area ?
Thanks, what I know about Freighters are more than dangerous. Totally off line, flew for the 1st time in a 737-700 today, <3 hour flight though, but field performance was impressive (and pilot in a rush I think), liked the "little thing".
Boeing will continue to try price out the A350-1000 with the -300ER. US airlines are buying into it.
Any news on the alleged Emirates 787 order?
What kind of rebate for 25% more fuel for the frames lifetime?
Does Boeing try to push Airbus out of the new orders market via “can’t walk away from” rebates?
( … and the stock market imbeciles still think that Boeing earns much more money with the 77W than they ever need to fill the voids created by the 787 😉
Isn’t that Airbus domain: to gift away airplanes for zero profit in scope of a socialist jobs programme ?
Hmm, actually we see some similarity to the current overall US behaviour: a final run expending all : finish or founder.