Leeham News and Analysis
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Leeham News and Analysis
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Paris Air Show Day 3: Eyes focus on Boeing for more MAX commitments
June 18, 2019, © Leeham News: As the Paris Air Show prepares for Day 3 (June 19, Paris time), eyes will be on Boeing to see whether another commitment for the 737 MAX will be forthcoming.
Headlines the first day were split between Boeing’s early morning briefing in which 
executives apologized for the fatalities on the Lion Air and Ethiopian crashes, sympathies to their families and disruptions to the airlines for the groundings and the Airbus launch of the A321XLR.
Tuesday’s headlines belonged to Airbus until 4:30pm when International Airlines Group, the parent of British Airways, Iberia, Aer Lingus, Vueling and LEVEL, announced a commitment for 200 MAX 8s and MAX 10s.
If any such order was to come at the air show, observers expected it to be from Ryanair, whose CEO Michael O’Leary already had publicly endorsed the MAX and said he could order more.
First order since grounding
But it was IAG, whose global stature as a Blue Chip company and one that relies upon Airbus for its single-aisle lift, that moved first with a deal for the MAX, which has been grounded since March 13.
The Letter of Intent reflects not a firm order but an intent to make one. Final terms and conditions have to be concluded before a firm contract will be signed, but this should be before year end.
Deliveries are slated for 2023 to 2027, with a hope expressed by IAG that 2022 slots could be found.
Although the 737 is sold out completely to 2023 and slots thereafter were available, India’s Jet Airways ordered some 200 MAXes. It’s ceased operations and bankruptcy proceedings have been initiated against it.
Lion Air, with nearly 200 orders for the MAX, vowed to cancel the order after the first MAX crash. It hasn’t so far and remains to be seen whether it will, but if it doesn’t, adjusting this skyline is possible.
Airbus has few A320 family slots available through most of the next decade at current production rates.
Baffled by IAG’s move on the MAX. Seriously? Can’t wrap my head around that one. What an insult to their European counterparts. Perhaps tied to a heavy discount to the BA order of the 777-9?
In the Seattle Times story, IAG CEO Willie Walsh said he wants two providers for price competition.
I certainly don’t know the numbers but I have always heard that the argument for keeping to a single provider reduced all of the adjacent costs (training, maintenance, spares etc.). Supposedly only the big carriers could afford a fleet comprised of aircraft from two or even three different OEMs.
Can the price that Boeing sells the 737s to IAG for realistically make up the difference of all of those other expenses?
Bob Crandall used to say that once you got to 50 airplanes, commonality benefits were mitigated. The number is probably higher today, but from another perspective: with sole source airplanes, if your fleet is grounded, you’re out of business. Dual source makes sense for this reason.
Hmmm, so why does the argument not work for Southwest where we are continuously being told that a single fleet of 737s is the basis of lower operating costs?
As long as Gary Kelly is there, WN will not buy the A320 family.
This is exactly the lesson of the MAX crashes.
Imagine the MCAS issue only happening a few years from now when Ryanair had a fleet of mostly MAX aircraft ?
It’s an existential threat to an airline, to be taken very seriously.
If AB had slots available, I wouldn’t be that surprised to see an order for A320NEO from Michael O’Leary. He’s a smart guy, I don’t think the lesson is lost on him.
Southwest, Easyjet are you paying attention ?
IAG probably got the MAX’s for $45 Million each, so it’s not that surprising an order.
The huge error South West made was being launch customer. Perhaps they thought that they could get away with it because the MAX is derivative and has the same type certificate,historically there is always a spike in accidents when a new generation of airliners .Pure luck they didn’t discover the shortcomings themselves.A220 isnt really mature enough for Ryanair and South West otherwise it would be a no brainer to order at least some.
@ Scott
What odds would you give for Airbus placing A220s at WN?
Zero
From what I’ve read, Southwest holds some responsibility for the development of the 737 MAX. They had a great deal of input and did not want to spend money on new simulators. Penny wise and pound foolish…
Southwest already got burnt with their 737-300s showing fuselage fatigue cracks at mid life point- 2 flights had loss of cabin pressure from breaks. End result meant it wasnt economic to do structural repairs as rest of fleet came up to those cycles, so led to a frantic search for used 737 -700 NGs to fill fleet.
Boeing might have been more open to Max updates that involved more training , but when your biggest customer has 9000 pilots, Southwest’s symbol on its 737s should be an ‘Anchor’
Or maybe the 300 was not worth wasting any more money on regardless as it was the end of the Classic life and line?
757 had similar issues and they still serve both in Pax and freight because there is nothing like them.
Why is it “insult to their European counterparts”?
When Delta orders 50 widebody Airbus planes and hundreds of Airbus single-isle jets, is it an “insult to their US counterparts” too?
Maybe BA got a great deal from Boeing and Boeing can sell it to BA at a profit? I wonder if that makes sense..hmmm..
Some of the comments here and on a.net are simply mind-boggling.
It seems quite consistent with IAGs recent buying policy, there seems to be an aim to operate almost all aircraft available from both OEMs. In fact the only major model that hasn’t been ordered in recent years is the B748. A’s over the past 10 years and the near future IAG have taken
A320
A330
A350
A380
B737 MAX
B787
B777x
And probably more I have forgotten. Presumably once a fleet goes beyond a certain size the economies of scale fall away and two large fleets of aircraft have similar economics, especially if it gives you more leverage in buying negotiations.
I agree about the political angle to this order, I think it is nonsense. However the example of the A330s being bought by DL has no parallels with the IAG order, it makes complete sense!
The avalanche of the A320neo family orders at PAS, where A321neo/LR/XLR is a star, makes a mockery of whatever thinking IAG did there. Airbus even achieved a flip at Qantas that has forever been a 737 operator. Qantas said it was a straight fight between the NMA and the 321XLR…
In my view this is one of the dumbest decisions to order in living memory…
Qantas has around 100 A320s already flying with its low cost offshoot Jetstar, and thats what the XLR conversions are for. No flip .
It is because we are talking about the 737 MAX ….. no need to litigate further.
They were cheap, really cheap.
Air France buys Boeing all the time, especially in wide-bodies. The French do insults so much better.
The 737 has certain advantages over the A320, surely you are aware its lighter and longer range( in standard model without extra hold tanks.)
2 class seating is greater too ( 178 to 165) for the Max8.
Nobody is revolting about AF or BA buying the 777X or 787 in addition to or along with the A350. Its about selecting the MAX right now at this time. Why do they feel they need to endorse the MAX right now when the whole world is watching what is going to happen with this plane? Why not just wait until the issue are resolved?
The lowest price ever. And there is zero risk involved. Should the MAX not make it back to the skies, the deal falls through. Even in the case of substantial rework need, no problem as that’s all up to Boeing. And if those reworks cost performance, I guess there will be a clause that will allow IAG to exit free of charge.
Yes, Boeing needed to swap airline code on some 200 737MAX orders already in the planning phase, BA got a very good price most likely better than Ryanairs 737MAX200’s, making BA a bit more competetive agianst Ryanair. Ryanairs 737 purchase prices has made the other airlines of Europe a bit upset and moved to A320-series. Boeing understands it now and will probably not sell 737’s to the same price as before to Ryanair tyo have a chance getting orders from airlines competing with Ryanair.
Doesn’t Ryanair have something like a most favoured costomer or best price garantee (within Europe) from Boeing?
Willie Walsh has been kicking Airbus about prices for years. Now he has got something to kick them with. Will he risk the business? No.
Not worried about it. The 737 MAX will need to stand up to scrutiny. Not looking good at present. We will see!
The only problem with the Airbus A32Xneo at that time is that Airbus cannot deliver them fast enough. Airbus could open new production lines but there is a limit of the supply chain. The neos are sold out well into next decade and the launch of the A321XLR will tighten it.
It is a strategic move of IAG, they can replace older aircraft faster and they also have a feet into the door when it comes to the 737 successor RSA. A smart move!
Expect a similar one by the Lufthansa Group as LH CEO Spohr said similar things about the 737 MAX just like Walsh did.
Maybe IAG’s decision goes deeper than that, e.g., perhaps some political muscle in action. Ockham’s Razor and all that.
Wow, IAG ordered complete replacement for all it’s SA with that.
They already have a few NEO, and will be one of the few Airlines switching form A320 to B737 Max.
Boeing must have offered a decent deal, the A320neo with no B737 left in the actual fleets must have been such a good fit.
No they haven’t. They ordered over 100 A320 neo 5 or 6 years ago.
The neo has been on the market for some time
IAG have seemingly been pursuing a pile em high and make it cheap policy for some time now, wanting to become an international version of Ryanair. If an aircraft manufacturer is offering you very cheap aircraft and you don’t care what passengers actually think, then of course you’ll buy them. Especially if one has been late in doing the fleet planning, and missed out on Airbus’s sold out production run. I wouldn’t mind betting Airbus couldn’t offer then anything for 10 years…
I’ve avoided IAG and Ryanair for years now, and I’m seeing nothing happening to entice me back.
Call me a cynic, but there is a reason why 10 across 777 classics are horrid. No doubt Boeing have been talking up the comfort improvements of the 777x that’ll make 10 across bearable, but if that turns out to have been too ambitious, and that 10 across a fuselage of the same diameter is still rubbish, then ordering a whole lot of them will turn out to be a massive mistake. Everyone else will be on A350s.
And it is a gamble. I suspect that the airlines have been shown representative cabin mock ups, which may indeed show that the space is marginally improved, but I bet that those mock ups don’t convey a representative impression of the noise, or the cold. Those are the things that have to be sacrificed to get more internal cabin space. There’s only so much you can do with magic materials to improve sound and heat insulation. Just how reassuring has Boeing been on *that* front, and is there any reason to trust them?
**Spot the Trend**
The launch customer for the 787 is now converting over to A350. Now, why on earth would they do that? That’s very expensive to do. So, for how long will the launch customer of the 777x be flying them?
Essentially this is a long rant that could be summarised as follows. Me, just one example of self loading freight, I voted with my wallet a long time ago and I’m not getting on a Boeing anytime soon.
What A350 order by 787 launch customers ANA?
yes Japan Airlines -JAL, is putting the A350-900 into service , but on its domestic routes with 370 seats and a low gross weight of 214t. They replace the domestic 777’s.
They are still using 787s on long range routes. There seems to be around 10 airlines that use both 787 and A350 in their fleet, including British Airways. So doesnt seem the 787 is being ‘replaced’
JAL.
Can I suggest to everybody that Willie Walsh hasn’t put IAG’s future in the hands of the 737 MAX.
IAG ordered/optioned 220 A320 in 2013. They are in the process od delivery. They have now got over 250 A320s in service. They have also added the A321XLR. He also knows Airbus will accommodate him, somehow.
Willie Walsh is known for keeping airplanes in service a long, long time. The 747 is testomony to that.
In other words, Willie Walsh knows he doesn’t have to buy the 737 MAX. He’s taking a punt. He was offered a price that he couldn’t refuse. Same happened with the 777X.
Some airline CEOs will take a punt. Boeing are on their knees. No better time than now. Will they bet their business? No.
With regard to the 777X. Will it be safe? Yes. As many have said, Boeing are doing it properly. Will it be more efficient than the A350? No. But I don’t question the safety of the 777X. It will be safe.
Meanwhile as a back drop for the airshow, APA’s president, Daniel Carey and other aviation luminaries are testifying in The House of Reps. today. Can be read and watched on AV Web’s site.
This is the real issue at this point
https://www.wsj.com/articles/physical-strength-of-pilots-emerges-as-issue-in-returning-737-max-to-flight-11560937879
And its NG and Classic plus a few originals.
While women pilots are an aspect, most people are right handed.
So both Men and Women in the right seat will have less left arm strength with it more so for women proportionally.
MCAS was nothing more than a beyond gross stupid software issue, this is a real issue in a backup system inherent to the 737 (and 707 ala KC135/727 still flying never was addressed and was allowed quietly to go away.
All the doom and gloom on hte MAX is not the issue and the doom sayers should pay attention to what is.
If an average strength pilot — including female pilots — can’t effectively turn the emergency crank on the 737NG/737MAX, then the NG should be grounded along with the MAX.
Problem is its certified and approved.
So can they gear it better, put the yo yo back in etc.
And how did it quietly get left out in the fidelity of the Sims and stopped being taught as needed?
All the AHJs knew about it, how did they let this occur?
Why was it not looked at with the NG let alone the MAX?
Of all the airliners certificated over the years by the FAA, the DC-10 stands out. None of the certification rules existing at the time were broken but that’s more an indictment of the way the rules were written then a pat on the OEMs back.
Apparently, there were several areas of the DC-10’s design that were sufficiently deficient to result in a catastrophic hull loss. However, it was the design shortcomings of the aft bulk cargo compartment door that was most troubling, because clear warnings showed up both in testing and during the nearly fatal incident on AA DC-10 Flight 96, over Ontario, Canada. To make matters worse, the FAA failed to act after the AA incident — reportedly due to a conversation between the CEO of Douglas Aircraft and the Administrator of the FAA. Due the inaction by the FAA, Turkish Airlines flight 981 ended in tragedy.
Likewise, none of the certification rules existing at the time the 737NG was certified, may have been broken. It doesn’t mean, though, that there weren’t significant lapses in oversight by the FAA — i.e. the FAA seemingly being unaware (incompetent?) that the smaller manual trim wheels on the 737 NG make it more difficult to trim a runaway stabilizer back into a regular position.
–
https://www.moonofalabama.org/2019/05/boeing-737-max-crash-reveals-a-severe-problem-with-older-boeing-737-ngs.html
Read an article a few weeks ago which claimed, and I honestly don`t know myself, that the cut off switches on the NG were different, one allowed the pilot to cut off autotrim, the other cut off the electric motor. As the proceedure always said cut them both, they were modified to both do the same thing, shut both the whole autotrim and motor. IF TRUE that would have allowed pilots to trim without having autotrim running, on an NG. I would love to know it it is true, doing that would solve the issue, and explain how the aircraft got certified in the first place.
Meanwhile, the Wall Street Journal is reporting that:
https://www.wsj.com/articles/physical-strength-of-pilots-emerges-as-issue-in-returning-737-max-to-flight-11560937879
–
Now, the Moon of Alabama blog reported on the issue a month ago:
https://www.moonofalabama.org/2019/05/boeing-737-max-crash-reveals-a-severe-problem-with-older-boeing-737-ngs.html
AA reporting on why they’ve converted 30 A321neo orders to 30 A321XLR orders and exercised 20 A321neo options to 20 A321XLR orders.
– 8 deliveries in 2023
– 22 deliveries in 2024
– 20 deliveries in 2025
http://news.aa.com/news/news-details/2019/Tell-Me-Why-A-lighter-aircraft-and-the-capability-to-fly-farther–Robert-Isom/default.aspx
Not sure why people are so surprised by the IaG order, whilsts im not a big fan of the MAX (mostly due to cabin size and comfort). It makes great sense for IAG, as many have stated, price will have been a great incentive, availability is a key one, with deliveries being slated for 2023, something Airbus would not have been able manage.
As far as Airbus is concerned, yes they have had one of their customers ordering a competitive aircraft (albeit for their budget lines), but they know Boeing have had to release 200 slots for a Bargain basement price. That closes those slots out for future competitions, removing a competitive advanatage Boeing might have had,
Or conversely, those 200 slots get 2500 more sales
Old song about the guy stumbling in from the desert and there is a jug of water to prime the pump.
You can use this jut to prime the pump and have all the water you can hold or you can drink it and die, thank you kindly desert Pete.
Boeing will eventually report that the MAX grounding cost x-billion dollars, but this order won`t be included in that number. How much difference is there between the Lionair price and the IAG price? If it is ten million each that is a two billion loss. How many future deals will involve BA dropping its price to recover confidence? I imagine Ryanair is smelling blood here as well, a MAX-200 order before the end of the show wouldn’t surprise anybody. I expect BA’s cash flow in the period 2022-202? will take a hit.
I don’t think I would feel safe on a 737 Max until the whole story comes out about the how decisions made and how this happen. Also the USA was the last country to ground the 737 MAX. Having worked as a QC test engineer on two flight control systems, I know that they are to be fail safe.