Pontifications: An in-depth assessment that people matter at Airbus

By Scott Hamilton

May 21, 2018, © Leeham News: In February, consultant Richard Aboulafia colorfully said Airbus was plagued by “decapitation” of its executive ranks as retirements and resignations came one after another after another.

In April, LNC raised the prospect of déjà vu all over again, discussing the Airbus departures and product turmoil beginning in 2016, recalling another one 2006 and comparing it with Boeing’s era of upheaval from 2007.

Last week, industry leader Steve Udvar-Hazy remarked at the 38th annual Airfinance Journal conference in Miami that “Airbus has its hands full with senior management leaving. Airbus has got to refocus to maintain market share.”

One day later, Carter Copeland of the Melius Research firm published a note devoted to the upheaval at Airbus.

I found the note to be of particular interest.

With Copeland’s permission, the entire note is reprinted below.

Don’t Tell Me the People Don’t Matter

By Carter Copeland

President

Melius Research

I vividly remember upgrading Airbus in 2011. In the months prior, I spent more time working on the name than any other company in my previous seven years as an analyst.

Carter Copeland

After hundreds of hours work, thousands of rows in a model that would have 70 iterations before it was finished, and several conversations with key members of management, our team finally mustered the courage to recommend the stock; it wasn’t an easy call.

We had such a disagreement as a transatlantic research team that I had to fly across the ocean to personally lead the pitch to the stock selection committee out of fear that if I wasn’t in the room, it would be undermined.

I’d also have to stand guard at the morning meeting, where the first question from a UK salesperson revealed just how tough this campaign was going to be: “Why should I recommend this rubbish company to my clients?”

The marketing blitz that followed was much the same, with pushbacks to our thesis citing, “too much career risk” to own it, a lack of catalysts to change sentiment, and the claim that Airbus “wasn’t a real company” and was just a “European jobs program.”

While it turned out to be a great call, it was a rough slog for a long time.

Here’s the back story.

Airbus and Boeing are analogous

The Airbus and Boeing situations are analogous in many ways, but Airbus was much worse.

Both companies crippled themselves in the 2000s by launching big new products and failing to execute on them. In Airbus’ case, the A380 superjumbo never looked like a financial home-run, but it had the potential to unite country-specific silos that existed for decades–a worthy goal.

In this respect, the A380 was a success, but only because it took everyone in every country to fix the program when it went off the rails.

On top of that, Airbus was a giant industrial company with perhaps the world’s largest transactional currency exposure, one effectively constructed, staffed, and capitalized to function at US Dollar-Euro parity.

The A380’s struggles and a €/$ spot rate of 1.50+ would’ve delivered a death blow to Airbus, were it not for the company’s gigantic hedge book. Those hedges bought time to cut costs, but most importantly they bought time to install and/or empower new leaders who took advantage of the crisis, changing things for the better in a way that could hopefully endure.

I honestly believe what turned the whole situation around was the people.

Airbus, Boeing leadership

At the time, Tom Enders led Commercial Airplanes, Harald Wilhelm supported him in finance, Fabrice Bregier came over from MBDA to be COO, soft-spoken, yet uber-organized Didier Evrard assumed various program management roles, and long-standing king of airplane sales, John Leahy, was re-tasked with focusing on profits rather than market share.

This team would ultimately succeed the last of the politically-selected leaders of Airbus and oversee the wholesale transformation of the company from a federation of European A&D assets to the Airbus we know today.

The company would finally be recognized in name by its strongest brand and became a credible investment after the sell-down of government shareholdings, a full revamping of the board, and the long-elusive operational and cultural integration of Airbus.

If you look closely, you can see the analogs to each of these Airbus leaders at Boeing.

Greg Smith in finance (now arguably a COO-type leader), Pat Shanahan on program management (now US Deputy Secretary of Defense), Ray Conner at the helm at BCA (recently retired, the first at BCA to do so on his own terms in 20+ years), and so on. The story is remarkably similar-visionary leaders went forward with big, risky projects that put both companies in precarious financial positions. A new wave of leaders came in behind them to clean up the mess, bringing us to where we are today.

Both companies are better positioned than any period in the last half century and for the first time are acting like a mature global duopoly.

Things are great, but, running a global airplane business hasn’t gotten any easier. What has worried us since our [company] launch, and was confirmed with this week’s announcement that CFO Harald Wilhelm will step down in 2019, is that These leaders will be gone.

Everyone in the lead roles will effectively be new-programs, sales, C-suite, finance, and strategy. To use an investment analogy to describe what we think this means, it’s like staffing a gigantic mutual fund with analysts and PMs that have never seen a cycle. Would you do that? Well, the Airbus Board just did. While it’s impossible to quantify the risk that these decisions by the Board to “clean house” have introduced, we think it’s naive to pretend that they don’t exist or won’t grow over time.

Reshuffling at Airbus

Do you think it’s coincidental that Airbus’ sales organization has undergone the only major reshuffling in the last quarter century while Boeing looks to be increasingly winning key aircraft sales campaigns? I certainly don’t. Does it seem odd that Airbus is rumored to have scrapped plans to further modernize the A320/A321 just as major operational leadership is turning over? Perhaps not.

The only plausible explanation for this management shake-up is that the Board is attempting to sterilize the upper management ranks in such a way that creates immunity from the ongoing Serious Fraud Office investigation.

That’s a legitimate goal for them to have; however, given how hard it is to successfully run a large airplane business, this level of turnover amongst well-regarded, successful and highly capable executives, isn’t something that should be overlooked by investors, yet in many cases it is.

We’ve written at length how horrible this business has been over the last 40+ years and we worry that while the Board’s solution to an incredibly complex and challenging problem might result in staving off a few quarters of uncertainty and a billion or two Euros in fines, at the same time it may also introduce multiples of that in risk to the business longer term.

It’s too early to tell, but the risk is real.

At the end of the day, we think a tangible lack of leadership continuity is worrisome.

After all, Airbus is a company that struggles to bring home the full year plan each and every year, as few companies in the world of this size exhibit the same level of H2/Q4 weighting that Airbus does annually (certainly not their primary competitor).

Interestingly, they always get there, largely because the leadership won’t accept failure, notoriously refusing to let up, no matter the challenge. Over the years there have been countless stories and anecdotes to this effect-they simply don’t let up on the lower layers of management, always holding them accountable. This has become the new culture of Airbus, and now is not the time to lose a step.

Boeing is ferociously ambitious these days, and it won’t take long for them to take advantage of any weakness, should it emerge.

So, what do we do with this?

While our earnings model and everyone else’s says Airbus is a phenomenal investment at these levels, we’re reminded that the answer isn’t always in the model.

We keep asking ourselves how much better the numbers might be (due to improvements in A350 profitability and higher A320 rates) and when the best time for an upgrade to Buy-Accumulate may emerge. However, we always come right back around to getting hung up on leadership and the unanswered question of what the future may hold with a new (and potentially very green, at least in terms of the aircraft business) team.

Sure, we can’t quantify the risk and that’s the pushback we get most often, but we think it’s foolish to pretend it’s not there.

 

70 Comments on “Pontifications: An in-depth assessment that people matter at Airbus

  1. Arriving in Seattle Feb 1968, I’ve seen it all…”Turn off the lights” and so on.

    Would AB even be in USA without Eastern Air Lines’ ex-astronutz Frank Borman accepting AB’s “loan” of white-tail A300s and maybe possibly an AB ‘white envelope loan’, Frankie?

    Who killed EAL? NOT pilots, crews, mechanics, res staff. You younger Aviation/Airline types – Read some history.

    Thanks for a great article, Scott

    Norm

  2. An interesting article. Airbus has become paralysed into inaction. The SFO investigation and other issues will see the loss of far too many leaders. I sincerely hope for their sake they bring on a dynamic driver who will tackle the three interlinked and clear issues I see as fundamentals to continued success.

    First driving down costs on all programmes to better compete with Boeing
    Second to reinstate an aggressive sales strategy that is concerned with beating Boeing at its own game
    Third Instituting a full scale product review that looks at integrating the Cseries, developing further the A321 and rationalising the TA product.

    As I say to my team sufficiently often for them to recite back to me, change is inevitable, necessary and good.

    • Good thing I am not on the “team”. Mostly (maybe all) I have seen change that just keeps going downhill.

      You can’t stop change, you can only deal with it as best you can.

      Most often it means things are getting worse (well as least for most of us)

      I look forward to the day I can watch the train wreck in my rear view mirror.

    • While I can’t argue with any of the item on your list: cost reductions, sales, and integration of the CS; my number one Airbus management change would be a long term product strategy that starts with a new model that focuses on taking 50% of market share away from the 777 and decides whether the A380 has a Neo and/or freighter future and improve it or (more likely) let it die and use the resources to focus on something more profitable.

      • The A380 does not have a freighter future.

        Package freighter were the only customers (UPS and FedEx and 5 from lessor).

        Both UPS and FedEx have moved on. UPS is committed to the 747-8 (28) and FedEx so far the 777-F.

        DHL never had A380F orders though it may have been the target for the 5.

      • ” a new model that focuses on taking 50% of market share away from the 777″

        You mean the A350?

        I suggest they focus on increasing production on the A320, A350 and CSeries.
        After that they can focus on low hanging fruit.
        Like one of Keesje’s pet peeves, the A320,5 (a minor stretch).

        Slightly less low hanging fruit:
        A composite wing for the A321 (A321+) and a stretch the A322 (A321++).

        Not low hanging fruit at all:
        A new plane positioned between the B797 and the B787, the A360?
        Choosing between a A380 NEO, composite wing, B797 or A360 engines, and overall weight reduction for the A380. Or kill the A380. Though killing it is actually low hanging fruit.

        • “You mean the A350?”

          Like an A350-1100 that would be unbeatable on economics while sacrificing a small amount of range. Something lighter then the 777-8X and that earns a greater profit margin then other A350 models.

          I don’t think the A320 needs another version with its healthy backlog and long customer list. I think the A330Neo is going to sell the few hundred copies that the low end business case estimated and not many more. I think the 797 may sell like the 757–initially very well but then have a hard time defining a market. Airbus should wait to let the 797 build the market (if it can) and then enter it after they have a clearly better airplane. That leaves the new A350 which has growth on the larger side but is being starved by the 787-9, -10 on the smaller side.

          • The problem for Airbus is that the 797 can maybe take the pax loads of 2ea 737-800’s for the x 1.5 cost, hence for all busy city pairs it might be the natural choice especially if you can fill’er up and do some trans atlantic flights in between. So Airbus must do the numbers and compare the economics of a fulla loaded A321LR and then decide what an A322 250pax with single aile mass/drag/cargo should look and cost and hence operator enonomics vs a 300 seat twin aile all composite 797 with the most modern engines certified and available in volume 2027. Maybe Björn can do the numbers for us now?

          • Hello Claes and Garreet,

            Regarding: “So Airbus must do the numbers and compare the economics of a fully loaded A321LR and then decide what an A322 250pax with single aisle mass/drag/cargo should look and cost and hence operator enonomics vs a 300 seat twin aisle all composite 797 with the most modern engines certified and available in volume 2027. Maybe Björn can do the numbers for us now?”

            Those interested in an A322 vs. 797 analysis by Mr. Fehrm who have paywall subscriptions can find such analysis in the two paywall series on this website that I have listed below. Reading the free introductions to these series will give one a general idea of the conclusions Mr. Fehrm reached.

            “Redefining the 757 Replacement: Requirement for the 225 / 500 Sector” from February and March 2015.

            “Could an NMA be Made Good Enough? from March and April 2017.

  3. I had to laugh at Connors retiring on his own terms.

    He got undercut by management, bailed. Not quite what Copleland meant I don’t think.

    I don’t blame him. He had that nasty idea that workers, company and shareholder all had a place.

    All too commie for curretn management (the workers part)

    He had relationship at the working level and I think there was mutual respect.

    I wonder how it would all play out if they did not have a monopoly?

    Looks at US companies that get anything they want from our lords and masters and they still have a hard time making money.

    • Ray Conner had absolutely no respect from those at the “working level”. He came from that level ,yet forgot or ignored that fact at the end

  4. Airbus does have a lot in common with the 787 hollow roll out when Boeing Bailing started.

    And it should be kept in mind, they still can’t get the KC-46 right. Thin bench.

    • the boom strike issue is a bit of a red herring, as the (reported) boom strike rate is similar to other tankers, just with the increase in stealth aircraft, it is getting higher attention. look at the nose of any A-10 and it looks like the bumper of a New York cab.

      the WARPs are a 787-level failure of subcontractor oversight. the sub had never done FAA cert paperwork and didn’t follow DO-178B SW practices and Boeing didn’t pay attention.

      aerodynamic control authority for the boom appears to have been undersized to deal with the big boys, seems like aero-101 failure

      the wiring loom separation for battle damage limitation thing seems like a dumb oversight, and seems like something that ought to apply to civvie aircraft too given what we’ve seen happen to passenger jets and uncontained fan failures

      the UHF radio fuselage skin as antenna thing also seems like a stupid oversight – pointing to a general lack of attention to detail.

      finally, the boom camera issue, anybody who has ever used a digital camera for anything knows they suck compared to the human eye in extreme/unusual lighting conditions. additionally, the lost situational awareness/peripheral vision of the human eye at the back of the plane seems to make the whole concept dubious.

      • never done FAA paperwork ?
        Not so .

        ‘Sargent Fletcher is the leader in the military hose and drogue refueling industry. All under-wing pods presently used by the U.S. Department of Defense are Sargent Fletcher products, and the company is the world’s only producer of an FAA-certified under-wing refueling pod.”

        Sargent Fletcher is the US subsidiary of Cobham and was of course involved in the KC46 program.

        • that seems like a forward looking statement. what pod are they referring to, because it sure isn’t the KC-46 pod.

          the KC-46 WARP is not yet certified, per this article, largely because Cobham screwed up the paperwork:
          https://www.flightglobal.com/news/articles/kc-46-costs-come-down-but-delays-loom-435562/

          further:
          https://www.gao.gov/assets/690/683688.pdf

          and several reports that came out when the issue was first reported attributed the delays to Cobham not having been through the FAA certification process.

        • further (H/T to Mike Bohnet’s comment on an earlier article)
          ” Check out http://www.gao.gov/assets/680/676429.pdf at the bottom of page 10.

          “Obtain FAA approval of key components: FAA and program officials report that while most of the KC-46 components have been deemed ready for certification by the FAA, two key aerial refueling systems have not. In order to obtain airworthiness certification from the FAA, the KC-46 and its components must be designed, built, and then tested through the FAA’s regulatory process. The supplier for the centerline drogue system and wing aerial refueling pods, however, built the systems without following FAA processes. Consequently, the supplier was told by the FAA in late 2014 that the FAA would need to inspect the individual parts to ensure design conformance. During this process, the supplier discovered a design flaw with the aerial refueling pods, which caused further delays.”

          • Regarding Sergent Fletchers FAA certified aerial refueling pods/drogues, that related back to around 2000
            “11 APRIL, 2000 SOURCE: FLIGHT INTERNATIONAL
            Omega Air’s modified Boeing 707 multi-purpose air refuelling tanker is expected to be certificated shortly following the completion of contractor testing..”

            Yes issues with FAA have occurred with the KC46, but its not true they havent done FAA certification before- which was the claim.

          • dukeofurl,
            According to the article you cited, Flight International, 11 – 17 April 2000:
            https://www.flightglobal.com/pdfarchive/view/2000/2000%20-%201165.html?search=omega%20air
            Omega Air only FAA certified the A-kit (plumbing and structural modifications to the 707-320B).

            “The US Federal Aviation Administration supplemental type certificate will cover “A kit” installations such as the aircraft’s plumbing and structural modifications.”

            The Sargent Fletcher centerline hose/drogue unit was part of the removable B-kit “fittings” which the US Navy validated. The article says nothing about the FAA certification of the centerline hose/drogue unit, but it only mentions the A-kit being covered by the FAA supplemental type certificate.

            So, even if Sargent Fletcher did FAA certify the hose/drogue unit for the Omega Air 707-320B back in 2000, which it clearly did not, it is still not an under-wing refueling pod. Thus, their first FAA certified under-wing refueling pod is indeed the one for the KC-46A.

    • The KC-46 seems to be a combination of underwhelming engineering by engineers that were disposable temps and a serious lack of oversight among their managers to know that disposable temps, by definition, are not responsible for the quality of their work and have very little incentive to find and fix problems that they were not directly assigned or even find and fix problems that they were.

      I just read somewhere that its all about the people.

      • Pretty much says it all. Thin bench. We can afford to let this thing linger on. Customer is stuck with us.

        While I still believe the 767 is the right air frame size, the program follows in the same footsteps as the LM F-35.

        We got him, we can stick it to them.

        • I think it became the Boeing version of “Nimrod 2000”, it sounds easy from the start at top management level but to certify it to new sets of requirements and performing a careful design review of what needs to be changed, how to validate it and its time&cost was slightly missed.

          • Nimrod 2000 was flawed from the start, using reconditioned airframes with rebuilt wings along with BAe as contractor who know nothing now about large airframes.
            If only they had jumped in with Japan with their new build P-1 which exactly fits their requirements or even a PX derived from the A319, which would have had wider sales propects.

  5. Airbus and Boeing both overvalue and respect “leadership” yet undervalue and disrespect the people who actually build the aircraft.
    However Boeing is much worse on both fronts.

      • Got it! Absolutely. As a long time “job shopper” (contractor) we generally worked hand in hand with the directs. When the bean counters decided on occasion to totally outsource an aspect of a project (say maybe software) to a supplier, that led to problems and probably was not cheaper in the long run…

  6. Interesting read, thanks Carter and Scott.

    If Airbus really are shuffling primarily due to the SFO probe (presumably also the PNF probe coordinated with the SFO) I wonder how significant they expect potential penalties to be given the major extent of the shuffling.

    • Billions and billions of euros. And don’t forget the other, ongoing German and Austrian probes also. Lastly, the U.S. DOJ should be good for a nice, good kick or two, while AB is on it’s belly. LOL

      • Do you have links to where ‘billions and billions’ is detailed please Montana? Would be interesting to see how these are derived. RR ended up paying £671mn, so well short of a single billion €.

        I don’t know anything about Austrian anti-corruption but Germany doesn’t actually have an anti-corruption agency (like the SFO) and the penalties can seem (to me) to be laughably inadequate.

        • GAN Business Anticorruption Portal dated February, 2018. German and Austria investigated the 2003 Eurofighter sale to Austria. Turns out the Munich prosecutors extracted 81.25 million euro from AB to end their probe. Austria’s apparently still investigating, looking for about 1.1 billion euros in fines. Who headed the EADS defense unit at the time? Tom Enders! (Ah, the recent AB “housecleaning” comes more into focus!) The article claims the Munich prosecutors couldn’t “find” corruption, but bizarrely claimed they were convinced internal AB controls had improved to prevent reoccurrence! The Austrians aren’t so convinced! And, in the “where there’s smoke, there’s fire” category, the AB civil case looks to be on solid ground, and you can see why AB would be as completely “cleaning house” as they have been. I’ve seen $2 billion euro fine figure quoted in an article recently—can’t remember the article. Want more on AB corruption, and, with Enders mentioned? Go to Handalsblatt Global, October 9, 2017: “Airbus Rocked by Corruption Allegations”. Very enlightening!

          • Well I guess the RR fines are well under a billion, a mere 670 million.

            As long as its undr a billion (Euros or US?) that fine.

            Of course Venezuelan dollars (rios?) it would be trillions.

            Rubble is cratering so that should be lots of billions too.

          • OK, so $2bn narrows ‘billions and billions’ down helpfully and basically to the minimum ‘billions’. Plus, absent details, feels like a reasonable target given the RR amount.

            Not surprised Austria would be seeking a lot more, given they are the receiving party. The disparity of the German settlement vs the Austrian claim does go with the inadequate penalties I mentioned.

            Back to $2bn, if assume that Airbus single aisles sort of sell themselves this leaves say US$10-15bn worth of widebodies sold per year per OEM. If the drag on Airbus sales from the upheval lasts say 3 years (maybe 2 is possible, 1 seems impossible) and reduces ‘fines’ by US$2bn, the net financial effect of the upheval seems worse than simply coming clean, paying up and making a more gradual, orderly transition.

            Enders, well I guess we’ll see.

          • You’re putting words in my mouth Transworld. I questioned ‘billions and billions’ as the known fact, RR’s £671mn, is substantially less than ‘billions and billions’ implies. £671mn is not a trivial sum and nothing I’ve written implies that I find bribery fine. I don’t.

          • Woody: The “X factor” we’re leaving out is the U.S. DOJ’s “kick” or two. Another $1 Billion? And, arguably, will the Germans “want some”? Also, I left out the AB fraud/bribery/corruption investigations by the French authorities on helicopter sales in Khazakstan, Turkey, and China. Some of these go to Enders right hand man. Again, the Handelsblatt article mentioned above is a “treasure trove” of ongoing AB corruption issues.

        • The EU might put the silk gloves on and treat Airbus like they treat VW after their missteps (a few raids and then it fizzles out to nothing). We will see.

          • Ask Winterkorn about those “silk gloves”! LOL

          • Re: VW, top managers head might be lost but very little of its money money lost to EU countries for violating emissions rules. No massive trade in programs in the EU just some software updates that cost a fraction of the VW costs in America.
            The Airbus deal might be similar with all old top managers involved in those “cost of sales” programs are soon gone so most EU penalties in the future will be void as they already are out of office and their old desks cleaned for the new superseding executive.

  7. AB have commercially and technically good aircraft in the 320- and 350-families. New management will hopefully have the ability to improve production out put and reduce costs.

    But AB needs a champion aircraft in the 200-300 seat market, a new team with drive might just take up this challenge (I hope). With its association with PW (GTF’s) and RR (Ultrafan) AB could be in a better position than perceived.

    • Hmmm, not so sure an association with RR is a good deal and the Ultrafan is still concept proof not a production engine.

      Will have to see what the XWB does over time as well.

        • RR has also tested their CFRP fan: https://www.youtube.com/watch?v=q5rCxwt5Dnw

          As it’s mounted on a Trent 1000 it can only be the fan for the Advance, not for the Ultrafan (which will turn slower, so the blades will have a different shape).

          It seems the plan is to have the Advance in production during the first half of next decade and the Ultrafan towards the end of it, so probably around 2030.

          It appears RR is in pole position when it comes to large engines with geared fan. I have no idea how far the P&W gear system can be scaled up. They will also need CFRP fanblades, the aluminum ones of the GTF, though very economical for the smaller engines will probably not be good enough for a large engines.

          In case RR makes good progress with the Ultrafan, P&W and GE might some day be forced to cooperate so that Engine Alliance will have a second product and worthy successor for the GP7000. GE could supply the carbon fan and some part of the high pressure system, P&W the gear and low pressure systems, topped up with some MTU and Safran turbines and compressors. I wouldn’t be surprised to learn som time soon that there is already something going on in this direction.

        • no load first test of the first test article is a looooong way from done. again, it took PW 20 years to develop and prove the GTF gearbox (a 3:1 ratio planetary box). they have long been working on the next step, a 4:1 star box for ~100K thrust level engines, so I would suspect they are much further along the dev curve than RR is.

          considering GE bought Avio, PW’s gearbox manufacturer, I would expect to see a JV or GE license PW tech for large engines.

          • @bilbo

            Could you please provide a link to where P&W is actually testing epicyclic gears with a reduction ratio of 4:1 in a planetary gearbox?

            Meanwhile, Roll Royce has already started power runs on the gearbox for the UltraFan engines at its Power Gearbox (PGB) facility in Dahlewitz, Germany, marking what is obviously a significant step in the development of the UltraFan engine. Of course, RR’s PGB operates differently to the gearbox in Pratt & Whitney’s GTFs as it has a sun gear and five planet gears but the casing is stationery, meaning the through-ratio of rotational speeds is 4:1 if the sun and planets are the same size (whereas it is 3:1 on the GTF where the drive is through the outer rotating ring gear).

            Rolls-Royce today announced that it has set a new record for the world’s most powerful aerospace gearbox, just months after testing began. Speaking at the International Society for Air Breathing Engines (ISABE) conference in Manchester, UK, Paul Stein, Chief Technology Officer at Rolls-Royce, confirmed that the Power Gearbox had successfully reached 70,000 horsepower while on test at Rolls-Royce’s dedicated facility in Dahlewitz, Germany. The Power Gearbox will play a central role in the company’s next-generation UltraFan® engine, helping to deliver improved efficiency over a wide range of thrusts.

            Testing of the first demonstrator gearbox began on a specifically designed rig in May and having proven that the Power Gearbox is capable of managing the equivalent power of around 400 family cars at full throttle, testing will now focus on lower power functions such as endurance and reliability.

            Rolls-Royce’s Power Gearbox is designed to run all the way up to 100,000 horsepower and future demonstrators are expected to achieve these levels. When running at maximum power, each pair of teeth on the gearbox will transmit more power than an entire grid of Formula 1 cars between them.

            https://www.rolls-royce.com/media/our-stories/press-releases/2017/04-09-2017-rr-sets-new-aerospace-record-with-ultrafan-power-gearbox.aspx

    • It might be the A322, but leaving the 300 pax market to the 797 hurts, especially since the first Airbus was the A300-300 seater MoM Aircraft. Doing their version of the 797-7 as a much lighter composite shorter range A330 replacement cost 10-20$bn. They could do it with the same old good A300 cross section but as light as it can be done today with the new 797 Engines, or RR version if rejected in America for the 797.

      • @Claes: “leave” the 300 pax market to a non existing plane? Well, that doesn’t seem to hurt too much I’d say.

        There is neither an engine available for the 797 nor a production infrastructure for the CFRP fuselage. So it’s still not much more than a concept. Besides, I don’t think anybody has an idea as of today how to make this plane at the price airlines are willing to pay for, but still make it profitable.

        I do agree with you that the cross section of the A300 is really usefull, so maybe some day it will be reborn with a CFRP fuselage, but first of all we need a better way to produce those faster and at lower cost.

        • Everybody want to know how Boeing will produce a carbon fuselage 300 seater Aircraft for $70M by robots. They might pull it off but a pair of its Engines will cost almost the same…

      • What about a “middle of the market” A310neo?

        1) Keep the basic wing box, but modify the outer wing box in order to incorporate an outer aileron. Wingspan extended from 43.9 m to about 51 m — leading to a similar wing aspect ratio as that of the A330neo wing (i.e. wing area increased from 219 m2 to 230 m2).

        2) Remove the inboard aileron and re-design the trailing edge by incorporating A320-type continuous single-slotted flaps along the wing’s trailing edge (fly-by-wire) and A330neo-type composite sharklet wingtip devices.

        3) By increasing the MTOW to a maximum from 164 metric tonnes to 180 metric tonnes, the wing-loading will still be slightly less than the wing-loading on the 777-300ER (i.e. 783 kg/m2 vs. 788 kg/m2).

        4) Maximum thrust requirement will increase from 57,900 lbs of thrust to more than 60,000 lbs of thrust. Suitable engine: A de-rated Trent 7000 engine. In contrast, the Trent 1000 engine on the 787 is rated at 64,000 lbs of thrust for the 787-8.

        5) A310neo family:

        – A310-700: Identical fuselage length as that of the A310-200/300.

        -A310-800: stretched by 11 frames, while keeping the 6-door configuration. In fact, the aft fuselage can be stretched by a maximum of 5 fuselage frames with the distance between Doors 2 and 3 not exceeding 60 feet, as no passenger emergency exit shall be more than 60 feet from any adjacent passenger emergency exit on the same side of the same deck of the fuselage.

        – A310-900: Identical fuselage length as that of the A330-200/-800 (i.e. A330-200/-800 fuselage mated to a wing that has less than two thirds the wing area as that of the A330 wing)

        – A310-1000: Identical fuselage length as that of the A330-300/-900 (i.e. A330-300/-900 fuselage mated to a wing that has less than two thirds the wing area as that of the A330 wing)

        6) A310-700: MTOW of 180 tonnes; 7000 nm plus range.

        7) A310-800: MTOW of 180 tonnes; 6000 nm range.

        8) A310-900: MTOW of 180 tonnes; 4500 nm plus range.

        9) A310-1000: MTOW of 180 tonnes; 3000 nm plus.

        10) Maximum use of “grandfather rights” — e.g. no need for static and fatigue tests of the wing and fuselage etc.

        11) Entry into service for the A310-700 some three years after launch. The fuselage and engines are already in-production. What’s needed are new wing jigs and up to date wing manufacturing facilities.

        https://en.wikipedia.org/wiki/Airbus_A310#Specifications

        • I believe AB is at the x-roads in the 200-300 seat market. Panel beating/band-aid aircraft won’t sell if there are 787’s and 797’s as competition in the market.

          The time has come for a clean sheet aircraft, ideally an all new 2-4-2 (maybe 17.5″ seats, still better than 3-3-3 with 17.2″ seats), EIS 2030 is fine, ready for 787-(8) replacements and A330’s that has been delivered from 2010 (will be ~800).

          In the mean time do the 320+ and 321+ as well as competition to the 787-10 such as and 359+, technical low risk, engines available and not massive capital projects.

          Aerodynamically the 350 fuselage could work for an “all new” aircraft with 250+ seats, will save costs and time, then the 32X+ will have to cover the <250 seat market.

          • @Anton

            The 797 won’t enter into service until 2026, at the earliest. The problem for Boeing, though, with the 797 MOM aircraft is that in the Asian market, operators seem to be more interested in WBs capable of carrying a significant amount of additional cargo on the lower deck — something that won’t be possible with the latest iteration of the 797.

            Meanwhile, there are no new, fully optimised short range WBs on the horizon. IMJ, a “cheap” A310neo family, available in the near-term, would provide for both an A333/A339-sized A300-type short-range WB and a 7000 nm (plus) capable, long-range A312/A313-sized WB (new market segment) — in addition to both an A300-sized WB and an A332/A338-sized WB and where range is traded for capacity — both of which would make a 797 business case that much harder if the Asian market, in particular, would already be saturated with various members of an A310neo family. Furthermore, the cheap A310neo family would squeeze the very expensive 797 from “above”, while a cheap A322 would do the same from “below”.

            So, what I’m talking about is maximum bang for the buck using existing resources while taking maximum advantage of a paid for platform that was never developed further.

            As for an A350-derived aircraft, IMJ it’s better to wait another decade for the RR UltraFan.

          • Addendum

            May I add that an A310-800F would be larger, more capable and have, at least, a 15 percent lower trip fuel burn than the 767-300F.

        • Any A310 metal derivative will be too heavy compared to the 797 and the 797 Engines will probably be optimized at lower thrust than a comparable A310-XX with similar payload-range.
          The A310 was not a mega sales success and the surviving ones are cargo haulers nowdays. But I agree that its general layout is a good start for an Airbus MoM, if Boeing can produce its 797 in CFRP by robots Airbus has to quickly follow for a 300 seater with 4500nm range.

          • @Claes

            The 797 family would still much smaller than an A310neo family. Its largest member would probably just have a slightly larger cabin floor area than the 767-200 (i.e. 160 m2). The difference now would be an entire family of WBs taking advantage of the “small wing” — an aerofoil that’s still quite advanced and that would be significanly upgraded with new leading and trailing edges and a significant span extension — and where the two largest members would be able to carry as many passengers as the A332/A338 and A333/A339.

            The cabin floor area of the A310-300/-700 is about 179 m2. For the A310-800 (i.e. 11 frame stretch), A310-900 (i.e. 21 frame stretch) and A310-1000 (i.e. 31 frame stretch), the cabin floor areas would be about 210 m2, 238 m2 and 266 m2, respectively.

            Now, it’s interesting to look at the ratio of OEW to cabin floor area of the A321neo and A330 and 787 families:

            ———————————-OEW / Floor Area
            A321neo:—50,800 kg /128m2 = 397 kg / m2
            A310-300:–79, 207 kg /179m2 = 442 kg/m2
            A300-600:–88, 626 kg/215m2 = 412 kg/m2
            A330-200: 120,000 kg /238m2 = 504 kg/m2
            A330-300: 129,400 kg /266m2 = 486 kg/m2
            787-8:——119,950 kg /232m2 = 517 kg/m2
            787-9:——128,850 kg /266m2 = 484 kg/m2
            787-10:—–135,850 kg /299m2 = 454 kg/m2

            A310neo family (i.e OEW estimated):

            ———————————–OEW / Floor Area
            A310-700:—82,000 kg /179m2 = 458 kg/m2
            A310-800 :–87,000 kg /210m2 = 414 kg/m2
            A310-900:–95,000 kg /238m2 = 399 kg/m2
            A310-1000: 104,000 kg /266m2 = 391 kg/m2

            So, it looks like the two largest members of an A310neo family would have a lower OEW/floor-area ratio than even the A321neo. I’m not sure, though, if a Boeing NMA would be able to beat the OEW/floor-area ratio of the A321neo and an A310-800neo, an A310-900neo and an A310-1000neo.

          • Correction and addendum:

            Of the WBs, only the A310-1000neo would have a lower OEW/floor-area ratio than the A321neo.

            Of course, the A321neo has only one aisle, while the WBs and Boeing NMA “waste” floor space on a 2nd aisle — indicating that the A321neo is still the most efficient option in its size segment.

          • Nice comparison by OV-099, still the 787-8/-9 are designed for very long ranges and carry the empty mass due to this. A 787 MoM will have max 5000nm range and much smaller cross section with a narrowbody cargo hold (for now) and that would reduce empty mass alot. The new engines will have substantial mass and cost. Boeing might sell the aircraft cheaply and squeeze its suppliers but when the customers buys its engines the millions will be rolling.

          • @Claes

            still the 787-8/-9 are designed for very long ranges and carry the empty mass due to this.

            So does the A338/A339. The larger A310neo models would not be designed for long range flights and would be significantly lighter due the reduced range requirements. It would also put considerable pressure on the 787. In fact, the Middle of the Market (MOM) segment is a lot bigger than the one that’s narrowly defined by Boeing.

            A 787 MoM will have max 5000nm range and much smaller cross section with a narrowbody cargo hold (for now) and that would reduce empty mass a lot.

            A re-winged and stretched A322 could just as easily have a design range of 5000nm range and it would have an even smaller cross section.

            The new engines will have substantial mass and cost. Boeing might sell the aircraft cheaply and squeeze its suppliers but when the customers buys its engines the millions will be rolling.

            An A322 powered by RR UltraFan engines could very likely stop a CFM-powered Boeing NMA dead in its tracks.

          • the right answer is likely an A322/757-250 sized aircraft with carbon down-folding wings (see AB patent) that are C gate on the ground and D/D+ on the runway, 5k nm range@ ~210 pax

            do sufficiently well on the wing and GTF with a 90″ fan and today’s core should be sufficient

          • Hello OV-099 and others, posting in this thread,

            Regarding: “I’m not sure, though, if a Boeing NMA would be able to beat the OEW/floor-area ratio of the A321neo..”

            For anyone who has a paywall subscription and is interested in a far more detailed analysis of weight, drag and operating expenses of a stretched A321 vs. an elliptical fuselage 7 abreast Boeing NMA, done by someone who has trained and worked as an aeronautical engineer, see Bjorn Fehrm’s February and March 2015 series on this website that was titled “Redefining the 757 Repalcement: Requirement for the 225/500 Sector.

            Mr. Fehrm’s estimates of OEW per seat for an elliptical fuselage 7 abreast Boeing NMA and an A321 stretched, re-winged, and beefed up structurally to match the passenger capacity and range of the Boeing NMA, differed by only 0.3%. Mr. Fehrm’s estimate of fuel used per seat for a typical mission was lower for a Boeing NMA than for the stretched 321, but not hugely lower (see part 6 of the series).

            Below are some of the free summaries from this paywall series.

            The following is from the summary for part 4 on 3-8-2015

            “We could see that a single aisle aircraft started to have trouble with weight at around 220 passengers using our normalized seating rule set. This would with normal OEM seating rules be around 230-240 passengers. At the same time the dual aisle aircraft becomes stronger the more seats one assumes. The reason is their thicker fuselage, Figure 1, lends itself better to aircraft which passes 50 meters/160 feet in length.”

            The following is from the free summary for part 6 on 3-18-15.

            “Summary

            The rational further stretch of Airbus A321LR is a re-winged/re-engined A322 with 30-40 more passengers, or five to seven additional rows.

            We compare this development with optimized models from our MOM studies and the A321LR.

            For the comparison we focus on efficiency in weight, drag and fuel for the different alternatives. How competitive will a stretched A321 be and how close in weight and drag comes an elliptical MOM model?”

          • Interesting details there Robert.
            The longest 757 mode the -300 certainly was about 180 ft and that had an OEW weight of 64 tonnes.
            while the shortest lightest 767 model the -200 had an OEW of 80 t.
            The engine thrusts were very similar 44k for the 757 and 48k + for the 767, so some weight difference comes from the engines. Range was about the same, 4,000nm.

            Thats a lot of ‘oval fuselage difference’ and length difference ( single ailse is 20 ft longer )to make up -15 t for planes designed at the same time and using what was standard construction for the era.

            An interesting issue is the first class seat width on Delta who still fly 757 and 767 types.
            They have 21 in wide flat bed seats in First on their 767-400s but at 4 abreast.
            on the 757-300 they have 21 inch seats, still 4 across.
            This seems to show that the premium seating at these two fuselage widths are still 4 across, and no advantage for twin aisles – other than each seat aisle access.
            Im assuming longer range needs flat bed width for premium seats.

          • Hello dukeofurl,

            Regarding: “This seems to show that the premium seating at these two fuselage widths are still 4 across, and no advantage for twin aisles – other than each seat aisle access.”

            But aisle access for all seats is considered very important by the people who pay the $$$ for premium lie flat seats on flights where they will be trying to do some serious sleeping!

            Even if you are traveling with a spouse or close friend it is non-luxurious to have to do a gymnastics routine to get to the aisle past a sleeping row mate, and people who are spending $8,000 to $10,000 for a trans-Atlantic ticket expect and can afford luxury. Being woken up from a dead sleep by someone tripping and falling on you while they are trying to get to the aisle is also non-luxurious.

            See the links below for some typical travel site opinions about the importance of aisle access for premium lie flat seats.

            https://www.ausbt.com.au/why-direct-aisle-access-is-so-important-for-a-business-class-seat

            https://thepointsguy.com/2017/10/business-class-cabins-to-avoid/

            Regarding: “They have 21 in wide flat bed seats in First on their 767-400s but at 4 abreast on the 757-300 they have 21 inch seats, still 4 across.”

            The first class seats on Delta’s 757-300’s are recliners, they are not lie flat seats. The only 757 type on which Delta has lie flat seats are a premium first class (“Delta One”) sub-fleet of their 757-200’s (Delta type 75S with 168 total seats vs. 199 total seats for non-premium 757-200 types 75D and 75H and 234 for 757-300’s). See links to Delta’s 757-300 and premium 757-200 seating charts below.

            https://www.delta.com/content/www/en_US/traveling-with-us/airports-and-aircraft/Aircraft/boeing-757-200-75s.html

            https://www.delta.com/content/www/en_US/traveling-with-us/airports-and-aircraft/Aircraft/boeing-757-300-75y.html

            Although Delta lists width 22.2 inches for their premium 757 sub-fleet seats, and width 21 inches for their 767-400ER lie flat seats, to me the 767-400ER lie flat seats are far more luxurious. The 767-400ER seats are far more private with a large storage area to the side of the seat, and every one has aisle access, while the 757 lie flat seats are separated from the adjoining seat by a surface that is much wider than a coach armrest (as it should be for $10,000!), but if memory serves me correctly, not greatly wider than a regular first class armrest. To me the feeling on the 757 is like sitting next to someone else in another lie flat seat, whereas as the feeling on the 767-400ER is much more like being in your own private sleeping compartment. Those who have not been on these aircraft, or were but turned right instead of left when boarding, may find the cabin pictures at the links below of interest. While I think the 757 lie flat seats are very nice for daytime transcon flights, and I prefer 757’s to 737’s and A32X’s when I am in first class because I don’t get pummeled by the hand luggage of 150 coach passengers if I am in an aisle seat and board early (757’s usually board through 2L), if I was seriously needing to get some sleep in on a long flight I would only book a lie flat seat on a 757 or A321 if I could not find a lie flat seat on a wide body with direct aisle access for me and anyone seated near me.

            https://onemileatatime.boardingarea.com/2017/12/21/delta-business-class-767-review/

            https://thepointsguy.com/2017/12/delta-one-lax-jfk-flight-review/

          • When I was writing the above post I was looking for reviews with good cabin pictures and didn’t closely read the reviews that I linked to. Now I have done so, and to my surprise the author of the Delta One 767-400ER review that I linked to, which has some pretty good 767-400ER Delta One cabin pictures, likes 757’s and A321’s better than 767-400ER’s! Different strokes for different folks. Tracking the way airlines are spending dollars on premium cabin refurbishments, it seems to me pretty clear that most airlines do not believe that this reviewer’s preferences are typical.

            All of this must sound pretty whiny to those for whom economy is the only option, as it was for me for several decades. All I can say in my defense is that if I grab a hamburger at McDonalds while rushing to a meeting, and it turns out to be a typical McDonalds hamburger, I will feel like I got what I paid for and be happy , but if I go to a high priced restaurant and my $50 beef entry tastes like a McDonalds hamburger, I am going to feel that I did not get what I paid for, will demand my money back from the manger unless they can correct the problem, and will not be a repeat customer unless the service failure is resolved promptly and courteously to my satisfaction.

            I actually think it is easier to get up past a sleeping coach passenger than it is to get up past a sleeping passenger on a lie flat seat. As long as a seat does not have a footrest that extends out, you can probably find a place to put your feet on the floor while stepping past a passenger on your way to an aisle; however, if the aisle is blocked by a flat seat, the only way out is up and over the bed/seat, which can be a problem for those who did not excel in long jump in high school track. This will be a particular problem for those who are no longer young and agile, or women (or men – this is the 21st century?) in tight skirts.

  8. A company without strong leadership could get into a disadvantageous position. Kidd’n..

  9. It would be nice to see your analyst note roundups posted on a regular basis again.

  10. The A322 might be the new 757/727, leaving the 797 as a 767-200/-300 replacement with todays (and tomorrows production technology) maybe so reliable and economical that it will replace 2ea 737-800 departures within 15 minutes flying the same routes making 2ea 737 free for other missions or tear down for spares.

  11. Checking to see if comments post here. Failed on the top one this am (Sunday)

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