By Scott Hamilton
Nov. 16, 2021, © Leeham News: Air Lease Corp. added another 25 Airbus A220s to its backlog with Airbus. The letter of intent, announced at the Dubai Air Show, brings ALC’s A220 backlog to 75, the most of any lessor.
ALC also is the first customer to publicly order the new Airbus A350F.
ALC announced the LOI yesterday at the air show. It was part of a package of 111 aircraft. In addition to the A220s, ALC signed for 55 A321neos, 20 A321XLRs, four A330neos and seven A350Fs.
Airbus has 643 firm orders for the A220: 90 for the smaller A220-100 and 553 for the larger A220-300. The -300 competes directly with the Airbus A319neo and the Boeing 737-7.
With the Dubai Air Show underway, LNA learned that there are at least two big orders that might emerge before year end that boost the book to nearly 800. One deal is with an exclusive Boeing operator, who also is in talks for an A321neo order. The sub-type couldn’t be learned, but given the carrier’s route system, it almost certainly will include the LR and/or XLR.
Interest in the A220 continues to pick up under the Airbus ownership. With the pandemic slowing, additional orders appear to be in the offing sooner than later.
Airbus continues its cost-cutting efforts on the program. LNA reported detail in a Sept. 28 post. During the IATA AGM Oct. 3-5 in Boston, Airbus’ chief commercial officer, Christian Scherer, elaborated.
“Progress is being made on all fronts on design-to-cost and reducing lead times on renegotiating supplier agreements when the opportunity presents itself,” Scherer said. “I’m not going to tell you we’re 17.5 months away, or 4.5 minutes away, or I don’t know, but it’s converging. What I will say is that the 220 program has a program performance goal from a financial perspective and time and reliability, etc. It has an evolution curve that is known to us, that we’ve seen before on successful airplane programs. That’s very encouraging, so we’re on the up.”
Scherer, in an interview with Andreas Spaeth published in AirlineRatings.com, said it’s a matter of when, not if, the A220 will be stretched into the A220-500. The -500 is directly competitive to the A320neo and Boeing 737-8.
But Scherer, in LNA’s interview at IATA, was cagey about when.
“I won’t venture a date. What I will say is that we’re running by now a very comprehensive business with several programs and new development on the freighter, constant, with continuous improvement on all of our programs. If I’m not giving you a date today, it’s not because it’s confidential or anything like that. It’s because there isn’t a date,” he said.
Airbus has a healthy backlog of the A320. A 220-500 would compete with the 320. It’s been suggested to LNA that Airbus will launch the -500 when orders for the A320 largely dry up and the backlog is reduced. Scherer didn’t directly address these speculative points. But he did say the 220 program needs to achieve profitability first.
“When we see the program profitability performing as we anticipate it will, and we’re on trajectory to do that, then when we can no longer hold off market pressure because we are experiencing market pressure for the stretch of the 220, clearly,” he said.
Airbus doesn’t reveal profit or loss by program, but one London-based aerospace analyst estimates the 220 program currently loses about $400m per year on a production rate of 5/mo. Airbus wants to increase the rate to 14/mo by 2025, which, with cost-cutting, will further trim costs.
Resource allocation is also needed. Bombardier, which developed the A220 when it owned the program then known as the C Series, already designed the “CS500”. Preliminary analysis suggests the A220-500 will have significantly improved economics over the A320neo and the 737-8.
“Engineering resources are still very much focused on the cost reduction of the program, and on the ramp-up,” Scherer said. “Right now, we’re producing five airplanes a month. We want to go up to 14. There’s a lot of resource that needs to be deployed on that. Then we’ll most probably see the stretch.” Scherer said customers at the IATA AGM were asking Airbus to stretch the A220.
“Internally, we’re also making progress from the realization that this is not a matter of protecting the A320. We offer both A220s, A320s. The bulk of the A320neo operators will continue to add 320neos to their existing fleet. Then the nascent and growing population of A220 operators will continue to add to 220s and naturally will add to 220-500s. Then you have the population of those that operate both A220s and A320s,” Scherer said.