Dec. 26, 2017, © Leeham Co.: It’s been a miserable year for Airbus.
Corruption investigations. Delayed deliveries due to engine issues for the A320neo. Delayed deliveries due to interior supplier issues for the A350. A year’s delay for the A330neo due to engine development issues.
Production reductions and doubts over the future of the A380. Continued cash drains and write-offs for the A400M. Internal turmoil as CEO Tom Enders dramatically changes responsibilities and reporting lines.
Getting walloped by Boeing at the Paris and Dubai air shows, losing the wide-body order race in a landslide and losing the narrow-body order race.
Next year will have continued challenges.
The one bright spot was the surprise deal with Bombardier to acquire 50.01% of the C Series program. The deal was hailed as a coup by all but the fiercest Boeing partisans and, of course, Boeing itself.
While there is divided opinion what Airbus really gets out of this transaction—mainly centered around whether there is a big enough market for the 100-150 seat sector to make the C Series worthwhile for Airbus—the deal in theory puts pressure on Boeing that BBD could not apply alone.
Airbus now has a solid offering in the 100-150 seat sector once the deal is closed. The A319neo is essentially dead (as is the 737-7). With the CS300, Airbus has a good replacement. Boeing doesn’t.
There is a lot to sort out yet, principally whether the plan to build a final assembly line in Mobile (AL), next to the Airbus A320 FAL, moots the Boeing trade complaint.
This story continues to evolve.
Through November, which includes the Dubai Air Show, Airbus trailed Boeing badly in orders. Although Airbus announced an historic 430-airplane deal with Indigo Partners (not to be confused with India’s IndiGo Airlines), it’s unclear if this commitment will be concluded into a final contract by year end.
Regardless, Boeing thumped Airbus in wide-body orders. More will be discussed on this point in tomorrow’s Boeing wrap-up.
Through November, Airbus had 333 net orders, well below a 1:1 book:bill.
Airbus’ issues with deliveries for the A320neo family and the A350 are well known. It’s going to be challenging for Airbus to meet its delivery goals this year due to the supplier issues with Pratt & Whitney and Zodiac. For a time, even CFM had challenges with its LEAP-1A deliveries for the A320neo. Nevertheless, Airbus is optimistic of coming close.
LNC sees these issues continuing into 2018, but fading. Airbus will identify its targets in the first quarter with its financial results on Feb. 15.
Airbus has a problem here.
Low fuel prices lessened the need for customers to upgrade from the A330ceo to the neo. The skyline customer quality is generally mediocre. And there is only one customer for the A330-800, Hawaiian Airlines, for six airplanes.
But Airbus professes confidence in the A330-800 and says it’s day is coming.
Airbus continues to be hampered to some degree by the lack of production slots for the A350. It’s still in ramp-up phase, going to 10/mo by the end of this year. LNC previously revealed that rate 13 is planned, probably for 2019. Airbus officials would not confirm this, but the number (but not the timing) was buried on an obscure page on the Airbus website.
But this is only part of the problem. The A350-1000 isn’t selling. (The only consolation: neither is the rival 777-8.)
Has the market shifted to the smaller, more popular A350-900 (not selling, mostly due to the production issue) and rival 787-10? There’s certainly anecdotal evidence to suggest this might be the case.
The future of the A380 remains in doubt. An order for about 36 of these behemoths was expected at the Dubai Air Show from Emirates Airline, the customer that has orders about half of the total sales so far and which is the only realistic near-term customer for more.
But EK and the UAE wants a guarantee production will continue for 10 years if the order is place.
This seems like an easy task—if the starting point is “today.” The order, at the current production rate of 8/yr, would add to the current backlog, which ends around 2024.
Ten years from 2024 probably is doable, though challenging.
But LNC is told the starting date asked for begins at the end of the delivery of the new order (or from 2028-ish). Given the current demand, or lack of it, this is a huge “ask,” and one that couldn’t possibly be guaranteed.
This problem child will be on Airbus’ mind next year.
If the A380 is a problem child, then the A400M is a juvenile delinquent. The write-offs never seem to end. Something new seems to turn up every year and sometimes several times a year.
Any review of Airbus in 2017 must touch on the plethora of investigations. The UK’s Serious Fraud Office, France’s prosecutor and the US Department of Justice are looking into violations that range from failing to property report this or that to more serious allegations of bribery in defense and commercial sales.
While CEO Tom Enders caused some of the headaches by voluntarily disclosing some of the issues in the interest of compliance, German press speculation raises the prospect Enders himself may have to go as part of the price to clean up these messes.
Billions of dollars in fines may be levied.
These headaches will overhang Airbus in 2018.