Pontifications: 50×2

By Scott Hamilton

June 3, 2019, © Leeham News: Airbus and Embraer are 50 years old this year.

Airbus broke out the party hats last Wednesday. It arranged a formation flying of all its in-production aircraft, including the Beluga XL. It launched a website microsite with its history. A new book, Airbus, The First 50 Years, has been issued. A celebration is planned for the Paris Air Show.

Embraer’s anniversary is Aug. 19, so at this point, its party plans haven’t been solidified, but there will likely be something at the Paris Air Show. Embraer plans to have its new specially painted E195-E2 at the air show.

The first 50 years

Airbus now, by some measures, is the No. 1 airliner company in the world.

In most years in the recent decade, Airbus landed more orders than arch-rival Boeing. But Boeing, several years ahead of Airbus with the 787 vs the A350, and for many years a broader wide-body offering with the 777-300ER and cargo aircraft in the 767 and 777F leading the way, often out-delivered Airbus.

Airbus clearly has the better single-aisle product line in the A320neo and A321neo, vs the 737-8 and 737-9/10.

Competition between the 737-8 and A320neo tends to be about even. But the A321neo clearly is the preferred choice over the 9/10 MAX. The market has spoken clearly, ordering the 321 by a ratio of typically 3:1.

It’s a far cry from Airbus’ first 35 years.

Early airplanes

The A300B was a mediocre airplane, good for medium haul routes but clearly inferior to the Boeing 767. Even the early A321 didn’t measure up to the Boeing 757. The A310, likewise, fell short when compared with the 767.

The first A330s were good airplanes but limited in range, as Airbus positioned the 330 to serve medium haul routes and the four-engine A340 for the long haul.

The 340 became handicapped before it got out of the proverbial gate.

It was supposed to be powered by the Pratt & Whitney “Super Fan,” an early concept from which today’s Geared Turbo Fan evolved. PW threw in the towel early in the program. Airbus had to go shopping for an engine, settling on the CFM56—something that didn’t offer anything new and provided no advantages promised by the Super Fan.

Later versions of the A340 used Rolls-Royce Trent engines. These proved expensive to operate and expensive to maintain.

In the meantime, Boeing’s new twin-engine 777-200 and, later, the 300/300ER, proved more popular and more economic than the A340.

9/11 creates a shift

When 9/11 occurred, striking at the heart of the US in New York and Washington and collapsing US demand followed by a decline in the rest of the world, Boeing—whose order book was then dominated by US carriers—cut production.

Airbus did not. Although roundly criticized, Airbus maintained production levels through one of the worst periods in aviation history. Orders flowed toward Airbus and by the end of the decade, the European company surpassed Boeing in orders on a regular basis.

Airbus climbed from an 18% market share in 1984 to 50% in the 2000 decade. It’s never looked back.

Making mistakes

This is not to say Airbus didn’t make mistakes.

Airbus launched the giant A380 in 2000, predicting it would capture half of a 20-year demand for 1,300-1,700 (depending on the year) Very Large Aircraft. Boeing was much more conservative in its forecast as it placed its bet on the 777 and what would become the 787.

In February, Airbus threw in the towel on the A380. Officials announced it will terminate the program with the last delivery in 2021, with only some 300 sales.

Airbus misfired, several times, with the A350.

Officials were caught flat-footed by Boeing’s program launch of the 7E7, an all-composite airplane that was named the 787 with the official program launch in December 2003.

Dismissing the 787 as another of Boeing’s false start, paper airplanes, initially this seemed the right call. Only 54 787s were sold in 2004, four of them to an airline nobody had ever heard of and 50 to ANA.

Then Scott Carson became president of Boeing Commercial Airplanes. He dropped the price and sales took off.

Airbus responded with the A350. But the airplane at first was nothing more than a re-engined, re-winged A330.

Sales were tepid while Boeing began to run away with the market. After public criticism by Steve Udvar-Hazy, then-CEO of mega-lessor International Lease Finance Corp, followed by the CEO of Singapore Airlines, Airbus revised the airplane. But the revision drew criticism as well. Three more versions were done before landing on the A350XWB.

Even then, there was a misfire.

The A350-800, a shrink, was dropped. The A350-1000 needed a more powerful engine and some wing modifications to reach its desired range of more than 8,200nm.

Years later, Airbus launched the A330neo. Essentially, this was the first version of the A350. Sales have been slow.

Home run and a triple

But Airbus hit a home run with the A320neo. In fact, it was a grand slam, hit right out of the park.

Launched in December 2010, it reached 1,000 orders by the following summer, when Airbus landed one of the gold standards of the industry: American Airlines. American had an exclusive supplier agreement with Boeing. The defection caused Boeing to launch the 737 MAX, an airplane it didn’t want to build.

The A321neo propelled Airbus to a wide margin market share lead over the 737. It consistently has held a 55%-45% share or better since launching the re-engined A320 family, depending on the year.

This compares with struggling at times to win 50% of the wide-body market against Boeing’s line up.

Airbus in 2018 acquired 50.01% of Bombardier’s C Series program. It appeared this was going to be another home run, but so far it’s only a triple. Initial sales announced in July were left-over Bombardier negotiations. A nice set of orders were announced in December, but by and large, sales have been disappointing under the Airbus banner.

There are still high hopes. But there is no question the combination prompted Boeing to acquire Embraer Commercial Aviation in a joint venture. Government approvals are pending.

Corporate changes

In its 50 years, Airbus moved from being government controlled and a jobs program to a true shareholders’ company with commercial returns the leading consideration. This doesn’t mean jobs within Germany and France aren’t a sometimes-limiting factor in decisions-they are. But the two governments no longer dictate terms.

Still, a different form of government influence overhangs Airbus.

Some five years ago, the UK’s Serious Fraud Office began an investigation into bribes and corruption. Probes expanded to Germany, France, Austria and the US. The investigations continue to this day.

The entire executive suite officers are gone as a result. Some retired, some were fired, some left for other reasons.

Below the executive level, a ruthless purge swept out some innocents along with those implicated.

The disruptions appear to have affected sales, which were down in the turmoil.

There’s now a new CEO, COO and CFO at the helms.

It’s the start of the next 50 years.

Coming: A look at Embraer’s first 50 years.

40 Comments on “Pontifications: 50×2

  1. A300 FF in 1972
    B767 FF in 1981
    If Boeing couldn’t have shown progress for a decade of waiting .. 🙂

    A310 FF in 1982
    IMU 767-200 and A310 were matched. in time , in performance.
    Airbus turned to the A320 for further progress,
    Boeing pushed the ( rather conventional) 767

    • It appears that Airbus’ wide body strategy is a mess.

      • How so? I suppose your argument is that the A330 and A350 are similarly sized. The question whether the B777x has a sufficient market beyond the ME3 and whether the ME3 will take up the numbers they originally planned to. In my view there are two ‘pearls’ in the A359 and the B789. Beyond that it is a bunfight.

        The B787 as a whole has great orders but there seems to have been a very cavalier pricing policy both when they launched and subsequently when they decided to attempt to kill off the A330neo.

        The A350 programme is also fighting at the top end but seems to be making solid progress, re pricing it would be interesting how much the B777x is affecting the A35k.

        From where they were 10 years ago Airbus seem to be in a solid position in my view, number 2 but with a portfolio that works. I think both OEMs must be thinking why the hell did they get so excited about TA, with massive investment of around $80bn on A350/A380/B748/B787/B777x in the past 15 years….

  2. Aren’t the bribes investigation connected to Airbus Military? Essentially it was the consortium which has been running for 20 yrs before Airbus took on what was EADS Typhoon fighter jet (BAE is the other part of the consortium). I’m sure the military side has run it’s own silos even after joining up the civilian airliner side.

    • Maybe they are all connected but as far as I understand there are separate probes firstly into Airbus airliner sales to do with a Paris based Airbus sales group + middlemen in the Mid East, Indonesia etc, and secondly into the military side, again Mid East but also eg Austria and ties in with Enders/Vector Aerospace and German control at Panavia/Eurofighter.

    • Duke, Commercial is also under corruption investigation.

  3. So Airbus are in the big league. My view is that the aircraft they have developed have benefitted from the critical advantage of iterative design. This has meant there has been a steady improvement in products with each new model benefitting strongly from the previous model. I would take issue with the rating of the A300 as mediocre. It took the consortium from nothing to a player and outsold and killed off the DC10 and Tristar. Pretty impressive for a new entrant.

    The fun starts now, Airbus have not had the issue that has been at the core of Boeing for years. They have not had to launch a new plane to replace a cash cow. So now it is for Airbus, as a mature operator to be savvy in its development strategy.

    Airbus must be confident, but their issues are to enhance profitability which languishes againstBoeing and to improve its reading of the market (something Boeing appears to excel at). Here’s to another 50 years. Where next?

  4. Writing as a passenger, the one thing I think Airbus have got consistently right is what it’s like for passengers to ride their aircraft.

    Things like the 777, 787 as originally envisaged (9 and 8 across) were very good too, but Boeing made the mistake of making it possible to change that to 10 and 9 across. For some reason this doesn’t seem to happen on Airbuses, and that’s a good thing.

    For the Airbus products to be as competitive as they are without requiring an extra seat to be jammed in speaks volumes for how poorly Beoing think through their design specifications.

      • Well, colour me very disappointed. Since 2015 I see too.

        I can see why they’re doing it – densification is a way of scraping more profit from a flight, but it’s not worth it. I don’t know anyone who gets on 777s at 9 10 across, and I suspect I won’t come across anyone prepared to sit on an A350 with 10 across either.

        Still, at least it looks like it’s going to be very difficult to pull it off in any convincing way whatsoever. Perhaps the original engineers of the A350 made a deliberate choice of fuselage width that was fine for nine, but too tight for ten to stop later engineers ruining the quality of their original design.

    • There are A330 with 9 abreast seating and 767 with 8 seats in a row. There will be 10 abreast A350 for some customers but the 787 and 777-X need 9 and 10 abreast seating to be competitive with A330neo and A350.

      There are not so many 777 left with 9 abreast seating and only one operator with several 787 at 8 abreast.

      With a Boeing long range aircraft it seems to be sure to get a narrow seat in economy. We will also see how the thinner 777-X walls work – more space with more noise?

  5. The A220 most likley is under a redesign for a massive cost reduction and Airbus does not really want to produce too many of the present design at heavy losses until they make a ATR72-600 type of evolution to increase reliability, reduce cost and aim for good profit on each aircraft delivered.

  6. Very interesting walk through Airbus history.

    I see the Cseries as a tactical purchase with a strategic objective.

    For little money, Airbus gets a plane it can do things with: serious marketing, efficient industrialization. It can afford to improve the plane through investment. So it can achieve a nice profitability on a new program.

    The strategic objective, I suggest, is to get up to speed on a modern single aisle aircraft design, systems and manufacturing processes and leverage this knowledge for the A320 replacement starting in about five years time. This way it can substantially derisk that program.

  7. I flew on an A300 out in Asia (Japan to the Philippines)

    While it was eerie with two engines it was not mediocre. Flew well, heck of a lot better than the rattle trip of a DC-10. Nice solid feel to it like a 767. I was more than impressed as it was hard to get good info in those days.

    It did pretty well for Mediocre with good for the day pax sales and latter as a freighter.

    It also set the stage for the latter aircraft, quite a successfully legacy with the A320 series and the A330 (granted the success of the latter had a lot to do with Boeing screw ups on the 787)

    • “the A330 (granted the success of the latter had a lot to do with Boeing screw ups on the 787)”

      A very much Boeing perspective. Where do you think the sales had ended up, if there existed no 787? Even more of the proven A330s.. The A330 remained a success despite the 787. Looking at dimension, specifications and mission, the 787 is very close to the A330, not the other way around.

      We should watch out for smartly changing perceptions.

      • Keesje:

        Boeing would have run the A330 into the ground if it had managed the 787. It still is beating it, NEO or not.

        Thats a reality not speculation.

        A330 sales took off after the 787 was so grossly late.

        • Hardly meant they would suddenly buy A330 while waiting for the 787. Was much more likely because the A350XWB wasnt coming till 2015-16, which is when deliveries dropped.

        • The A330 has been holding itself very well, since the 787 came run it into the ground. Airbus sold 1000 A330’s since 787 launch, mostly to existing A330 / A340 operators. There are hundreds in the backlog & that will probably grow in a few weeks.

        • Virgin Atlantic is said to order 10 A330neo. Virgin Atlantic already operates 787 and A330.
          I doubt 787 still being late.

        • “787 on time” had zero probability.

          Beyond all the super fantastic gimmickery
          the 787 is an airframe better in proportion to the engine improvements.
          It sold on sexy pictures and PRICE.

          Leahy’s quip: “787 is Chinese copy of the A330” really hit home on the 787 :-)))

  8. Airbus is no where near 50 percent of the wide body markets.

    • I’m not sure how you define “no where near”

      In 2018 Airbus delivered 49 x A330 and 93 x A350 for a total of 142
      Boeing delivered 145 x 787

      Other wide bodies the difference is larger.

      In 2018 Airbus 12 x 380 versus 6 x 747, 27 x 767 and 48 x 777 – total of 81. That on its own qualifies for nowhere near.

      However Airbus has shown a relatively smooth increase in wide bodies every year, while Boeing, with its ability to hire and fire shows a much larger variation. In 2004, 2005, 2006, 2008, 2010 and 2011 Airbus delivered more total wide bodies than Boeing.

  9. And not a word about the massive subsidies, forgiven loans, and A380 debacle and loan non-repayment. A truly commercial company would not have been able to survive those errors… Has the A318 been profitable? The A340-500? The A340-600? Even the A310? Don’t even start me on the corruption investigation, which was essentially 3rd-party entities bribing airlines to buyAirbus….

    • I am always amused by US folk who see the misfires at Airbus but forget the 747-8, the fact that IFRS rules were ignored for 787, some gentlemen in prison for the first 767 tanker debacle and now the disaster of the 737MAX. We all get it wrong at times. BUT Airbus has got a lot right too. On their 50th time to give credit.

  10. Boeing delivers 223 wide bodies in 2018 and Airbus delivers 154. The source for this is Leehamnews Jan 10 2019.

      • So it’s the freighters.. 747-8F, 767s mostly? Competing with 20-30 year old, converted aircraft, must be printing money for sure.

        • 767F was sold at a fair price to keep the line running for the tanker deal. A lot of 777F were also sold to bridge over to the 777-X. Therefore a lot of Boeing freighters but no A330F. I guess Airbus does not discount A330F that much.

          • How long will 777F production continue after the 77W production comes to an end? Maybe a window of opportunity for an 339/K freighter?

          • According to number of sold 777X another 777 would be OK to fill the line.

          • Is that what Boeing needs , another low rate model to fill the halls at Everett?
            The 777F to join the 767F/KC46 and the 747F. They cant be anything like the price they charge for passenger versions ( even discounting the seating and fit-out costs) as freight revenue is substantially lower than from flying people.

  11. Last time I look all of Boeing freighters are derivatives of Boeing wide-bodies. I say this because a segment of this audience have a blinders on. I have a lot of EADSY stocks by the way.

    • The 747 freighter is not a derivative of the passenger model. It was designed to be a freighter, thus the position of the cockpit.

    • I thought the same. They have hired extra staff, trialling new wing designs etc. I wonder if the last hurrah for the A320 will be an A321XLR and a series of A322.
      Then use the time granted by a full order book to develop the next generation.

      • There is mention of a A350 like cockpit, maybe borrowing some A220 features. The big thing for airlines could be that an A321XLR could fly 4000Nm with ~30 (?) more pax than an LR and not necessarily a 4500Nm range.

  12. I think looking at the product portfolio & backlog, it seems Airbus is stronger than ever before. That means they might launch a new program(s) after working away some of the current huge backlog. Possibilities are IMO, a big helicopter, compound helicopter, 20t transport, A300/310 replacement, 6Gen fighterprogram partner, new shorthaul 80-120 seat platform, A320 rewing, ..

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