First mover or not, that is the question: A321XLR vs NMA

Discussion
First mover

Airbus and Bombardier announced in October that Airbus would acquire 50.01% of the C Series program for US$1. The deal sailed through regulatory approval and became effective July 1, just two weeks before the 2018 Farnborough Air Show began.

The CS100 and CS300 filled out the A320 product line from 100-150 seats in a way the A319neo did not. No orders were announced for the A319neo in the years leading up to the deal.

Renaming the airplanes the A220-100 and A220-300, Airbus announced 120 orders and commitments between July 1 and July 17 from US-carrier jetBlue and US start-up Moxy Airlines. Negotiations for both deals began under the Bombardier management.

No orders were announced for the A319neo.

Additional A220 orders are expected by the end of the year.

Boeing responded to the C Series deal by striking one of its own with Embraer to form a new joint venture with Embraer Commercial Aviation, producer of the EJet. Only a non-binding MOU has been reached. A detailed contract and regulatory approvals must be agreed. Target date for closing is the end of next year.

Airbus officials were almost giddy with the prospect for solid A220 sales over 20 years, pointing to a market forecast of between 6,000-7,000 sector aircraft and predicted the A220 would capture half the market.

Second mover

But the same Airbus officials say they’d rather wait for Boeing to move first for the middle of the market aircraft, the NMA, which Boeing says it will decide next year whether to launch the airplane.

Buzz around the air show indicated increasing skepticism about the business case for the airplane. Boeing sales chief Ihssane Mounir dismissed doubter during the close-of-show press conference, claiming the business case is getting stronger.

Guillaume Faury

“We believe that what we are doing with the 321neo, the LR and maybe more to come, we are extending the single-aisle business into the middle of the market,” Guillaume Faury, CEO of Airbus Commercial, said in an interview at the show.

“There is already a middle of the market on the Airbus side,” he said. “There is none with new products on the Boeing side. I believe by doing this we are making their business case very difficult. That’s the way we are moving forward. We have the A330neo as well to cover the upper part of the middle of the market.”

Faury said that when “you look at it from the Boeing perspective, there is a middle of the market. When you look at it from an Airbus perspective, it’s very narrow and there is no business case for a middle of the market airplane. When you look at it from an airline perspective, there is already an idea on offer, which is coming from Airbus.”

Faury said the company believes it’s “doing the right thing” with aircraft that are “very competitive.”

A330-800

Airbus is adamant that the A330-800 is the answer for the upper end of the middle of the market. But it now has only two orders, from Uganda Airlines. It has far more range than the proposed NMA (8,200nm vs 5,000nm), it weighs far more and the design, and even as revised into the neo, relies on technology that will be much older than that of the NMA.

But it’s here now, in contrast to the target EIS date of 2025, and there’s a wave of A330ceo retirements coming up from 2020-21, Airbus says.

Faury also says that the family of A330neos and A350s provides seating from 250 to 370 seats.

“We are monitoring what [Boeing] are doing, we are following what they are doing, and I think it’s on them to move. What we are doing with the A321 is just pushing to make that decision more difficult,” Faury said.

Market Demand

The market demand for the NMA remains a matter of debate.

LNC reported growing skepticism that was in evidence at the air show in this post. Boeing’s Mounir dismissed the doubters, saying the business case is getting stronger, not weaker.

But Flight Global’s Air Show daily assessed the replacement market and conclude that by 2026, there will only be about 900 aircraft left to replace in the middle of the market sector.

Engine makers see the market in the 2,500 range (a figure with which LNC agrees). Boeing forecasts a market of 4,000 to 5,000 over 20 years.

Boeing’s Randy Tinseth, VP-marketing, said a year ago that their forecast assumes broad market expansion, mimicking the new routes opened by the 787, which created about 180 new markets at the last publicly stated account.

But what Boeing doesn’t say is that these 180 new routes created a demand for only about 180-200 airplanes. This is a far cry from more than incremental 1,500-2,000 in the Boeing forecast.

Boeing is also talking with FedEx about launching a freighter version of the NMA. But market intelligence indicates this is a potential order for 300 aircraft. This still falls well short of the Boeing target.

As Boeing pulls out the stops for every airplane to building a business case, it’s clear Airbus will continue to press its strategy to squeeze from the bottom with the A321 and, it hopes, from the top with the A330-800.

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