Leeham News and Analysis
There's more to real news than a news release.
Airbus adds to information about A330/A350 “Lite”
Airbus provided some answers to some (but not all) of our additional questions posed in our post a week ago about the A330 and A350 “Lite” versions.
We noted that Airbus had provided Direct Operating Cost (DOC) comparisons for the A330-200/300 vs the Boeing 787-8/9 but only Cash Operating Cost (COC) comparisons for the A350-900 vs the 787-10.
Airbus provided a detailed explanation, which is below.
But we also asked Airbus what are its assumptions underlying the DOC and COC conclusions. We specifically asked about the following assumptions, since they are important elements of reaching the conclusions Airbus did:
- Number of seats on the Airbus and Boeing aircraft;
- Fuel price per gallon;
- The stage length used; and
- The Capital Cost of the aircraft in lease rates.
Airbus responded with the seat assumptions for its aircraft but not for the Boeings:
- A330-200: 246 pax;
- A330-300: 300 pax;
- A350-900: 315 pax
Airbus also provided the assumed lease rates for the A330 and 787-8/9 but not the A350 nor the 787-10:
- A330-200: 800K$/mo
- A330-300: 900k$/mo
- 787-8: 1.1M$/mo
- 787-9: 1.25M$/mo
The A333 and 789 lease assumptions have been used since Airbus first revealed them at Innovation Days in 2011, and we wrote about those at the time. The A332 and 788 lease rates are new information.
“We have not included figures for the A359 vs 787-10 because Boeing’s own figures are currently sketchy,” Airbus said in excluding this data.
“I do not have any more info to give you at this time, but I have been advised that we may have more visibility around October,” an Airbus spokesman wrote in an email.
Because of the “sketchy” information on the 781, the spokesman wrote that absent 781 list prices (which Boeing has yet to publish), Airbus can’t calculate a DOC with capital cost.
“The A350-900 has 4% lower trip cost (COC) than the 787-10 (comparable per seat),” the spokesman wrote. “The A350-900, in its regional variant, has been specifically optimised to offer the same payload range characteristics as the 787-10. The design weights of both aircraft are very similar. In fact, in operation, with its slightly larger number of lower-comfort seats and additional passengers and stretched fuselage the 787-10 is actually heavier than the A350-900.”
Airbus also said that the A350-900’s wing is optimized for this design while the 781 wing is the same used on the smaller and lighter 788, “resulting in compromised aerodynamics that penalise fuel burn in such a large aircraft.”
(Of course, the same principals could be applied to the smaller A350-800 and the larger A350-1000, which use the same wing at the A359.)
“The newer engines of the A350-900 burn less fuel than those of the 787 which are still struggling to deliver a fuel burn level close their specification,” the Airbus spokesman adds. He said initial test flights of the A359 show fuel burn results at spec level, which he says is lower than the 787.
“Operating at a lower rating of 75,000 lbs (vs 84,000 for basic spec) for regional applications, the engines of the A350-900 will also benefit from significant reduction in maintenance cost compared to the 787-10 engines that will be operating very close to their maximum thrust capability that was designed for the 787-9,” the spokesman wrote.
C919 program in trouble
COMAC’s bid to develop a 150-200 passenger jet is in trouble.
According to this report, CFM doesn’t plan to proceed with an assembly line within China for the LEAP-1C that will power the C919. Concerns over intellectual property and the business case for the airplane are cited.
According to this article, GKN of Europe, which was to build the horizontal tail assembly, isn’t going to.
The airplane was supposed to enter service in 2016 and we already figured a delay of at least two years. Given the regional ARJ21 is already around seven years late, and still not certified, we think the two years is probably going to move to the right substantially.
If we’re generous and look at a 2020 EIS, this means the C919–an Airbus A320 look-alike–would enter service five years after the A320neo and three years after the Boeing 737 MAX. The airplane is also going to trail in sophistication.
Boeing officials as recently as this year still believe China will develop viable, commercially competitive airliners within the next 25-50 years. The ARJ21 program has been a disaster and it we anticipated that the C919 would be better than the ARJ21 (a low bar, to be sure), not truly competitive with the A320 and 737 but COMAC’s “makee-learn” airliner. It’s looking like this will be a disastrous program, too.
Mid-size, Twin-Aisle forecasts: the changing numbers; more Odds and Ends
MId-Size, Twin-Aisle Forecasts: The Blog by Javier has an interesting post about the changing mix in twin-aisle, mid-size aircraft from the Boeing Current Market Outlook over the years.
The author works for Airbus, but his opinions and his alone and we find his stuff quite analytical and balanced.
Ryanair and MAX: Talks between the Irish discount carrier and Boeing for a 737 MAX order may go into next year.
Boeing workers hurt by outsourcing: The government agreed with the IAM 751, Boeing’s local Seattle union, that workers laid off by the company have been hurt by outsourcing.
A380 has “Lite” versions, too
The announcement by Airbus that it will offer Lite versions of the A330 and A350 families caused a much larger stir than we would have thought.
As we previously noted, Boeing will offer a Lite version of the 777-8, and this news was greeted with a yawn.
Airbus offers the A380 in Lite versions. So we still are perplexed about all the questions raised by some, and the high-profile media attention, the A330/350 announcement garnered.
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Dropping EADS for Airbus Group
The move to drop the acronym EADS for Airbus Group is being made out by some media to be a major step that better positions Airbus to compete with Boeing. This is a stretch.
The name change simply reflects reality: Airbus is the dominate member of the company. It also does away with the acronym, which many people mispronounced as “eeeds” rather than how it was supposed to be said (E-A-D-S, like I-B-M) that reflects an awkward name, European Aeronautic Defense and Space, a name so awkward it doesn’t readily appear on the EADS website.
A name change has really been thought about for years. On one trip to Toulouse, in 2009, we had a discussion then with Airbus personnel and the topic came up. We favored the Airbus name for the enterprise then–not that our opinion had anything to do with the action four years later :-).
More significant is the continued direction by CEO Tom Enders to move away from the government influence that first was instrumental in the growth of the enterprise but then became an albatross with jobs and prestige programs trumping business decisions (think A400M engine, the A380 [the product of 747 envy] and assembly locations). The volatile topic of government subsidies, necessary in the beginning and conceptually little different than the early days of US defense and commercial aviation, evolved into “reimbursable launch aid” that is unnecessary for a company like Airbus and which remains a target of international controversy when politics arise.
We welcome the change and the continued evolution of Airbus into a true commercial enterprise. Tom Enders will leave a legacy that will make him one of the most significant figures in global aerospace.
Meantime, EADS today announced its first half financial results.
Analyzing the Airbus plan to offer A350, A330 “Regional” aircraft
Note: The Blog by Javier takes an analytical look at the 20 year forecasts for the twin-engine, twin-aisle aircraft here.
Airbus will offer “Regional” versions of the A330-200/300 and the A350-900 that will reduced the Maximum Take Off Weight (MTOW), engine thrust ratings and range to better match most routes flown by airlines that don’t need the 8,500nm range and weights.
We revealed earlier that Boeing is planning a lighter weight 777-8, reducing the planned 9,400nm range to 8,500nm to more closely match the A350-900’s weight and specification. While the 777-8 “Lite” has substantially longer range and weight than the “A350-900R,” the concepts bring airplanes to the market that are more closely aligned with airline realities than with maximum performance.
The A330 originally was designed as a “regional” airliner, with ranges in the area of 4,000-5,000 miles. Since the airplanes entered service in the early 1990s, Airbus has undertaken a number of Performance Improvement Packages, bringing the A330-200 to a range of 7,200 miles and the A330-300 to around 6,000 miles. But Airbus also says that a majority of the flights of the aircraft are 2,000nm or less—“regional” service within Asia, Europe and the Middle East.
We live in Seattle and most of our international travel is to Europe. Most of this service was operated with the A330/340 and the Boeing 747-400; no Boeing 777s are used to Europe. Over the years, as Airbus improved the A330-300, carriers began using this sub-type for the first time on the routes, reflecting the range improvements in the aircraft. The A330 series is also now used across the Pacific from Seattle as range improved.
But the PIPs made the A330s “more” airplane than most airlines needed, and this is what is driving Airbus to return to the aircraft’s roots, so-to-speak.
The A350-900’s 8,500nm range is far more than is needed for many routes, as is the similar range of the Boeing 787-8 and 787-9, and is one reason Boeing settled on 7,000nm for the 787-10. At one time, Boeing planned a larger wing for the 787-10 to maintain the 8,500nm range of the smaller sisters, but more than a year ago said that airliners didn’t need or want the range. Initially Boeing planned a 6,750nm range but at the urging of Steven Udvar-Hazy, CEO of Air Lease Corp, and some key Middle East carriers, the range crept up slightly.
John Leahy, COO-Customers of Airbus, is quoted extensively in this Aviation Week article. An Airbus spokesman told us, “We have the A330 workhorse today. We’re looking at A330 as a regional optimized spec[ification] today and its part of a larger strategy. [The A350 and A330] aircraft will be the same physical hardware.
“In both cases there is a slight engine derate, optimizing capacity and payloads for regional routes. We aren’t permanently changing hardware. There will be a software change.”
The spokesman said “Airbus has products that will be at least as cost effective as anything Boeing puts out.”
A key part of this will be the lower capital cost/lease rate than the 787 family. Our assessment is that if capital costs were the same, the 787 would have a significant economic advantage. We further believe that the price-point difference has to be significantly lower for Airbus to have an economic advantage. With the A330 family, which has been amortized in the production system for years, there is considerable pricing flexibility but as fuel prices rise, Airbus will have greater challenges to offset the economic disadvantage with capital costs. The new A350’s economics are, according to our analysis, competitive but the lighter-weight 787s make the economic advantages of the larger-capacity A350-900 (to the 787-9) challenging.
|
Aircraft |
Today’s MTOW (Tonnes) |
Regional MTOW (Tonnes) |
Today’s Thrust (Lbs) |
Regional’s Thrust (Lbs) |
|
A330-200 |
242 |
205 |
64,000-68,000 |
|
|
A330-300 |
240 |
205 |
70,000 |
64,000-68,000 |
|
A350-900 |
268 |
250 |
84,000 |
75,000 |
Flights for the A330 will be up to six hours and up to eight for the A350-900. The lower MTOW will reduce landing fees.
“Operating flexibility full range can easily be restored with software and paperwork back to full range, so can go back to maximum flexibility if customer wants it,” Airbus says.
The changes for the Regional are all done via software and FADEC (the engine software) changes, or as Boeing’s Mike Bair said with respect to the 777-8 “Lite,” it amounts to “papering” the weight.
This permits the operator the flexibility of re-papering the weight to return to a long-range, maximum weight/payload aircraft.
Airbus views the competitive line up thusly:
- A330-200 vs 787-8
- A330-300 vs 787-9
- A350-900 vs 787-10
Because Airbus is focused on the A350-900 at this point, the spokesman said he has no information about offering a Regional aircraft for the A350-800 and -1000 sub-types.
The spokesman says the economics shape up this way:
- The economics of the A330-200 at standard max MTOW is 4% lower than 788 per trip;
- The A330-300 has 6.5% DOC vs 789; and
- The A350-900 has 4% COC per trip vs 781.
Note the distinction between Direct Operating Costs (DOC) and Cash Operating Costs (COC) Airbus claims.
We’ve asked Airbus for the assumptions that go into these figures; if we get them, we will update this post. Key to the assumptions are the fuel cost and lease rates. In 2011, Airbus used a fuel assumption of $2.50 per gallon, a range of 2,000nm and lease rates of $900,000/mo and $1.2m/mo for the A330-300 and the 787-9 in arguing the A333 contributed a net $113,000/mo to revenue more than the 789. We challenged the assumption of $2.50 fuel as unrealistic, unaware as we were of anywhere fuel could be purchased for this price. We also know that lessors were charging $1m/mo for the A333, which essentially made the calculation advanced by Airbus at $2.50 fuel a break-even proposition and a net negative to the 789 at $3.50 fuel.
Thus the assumptions used in reaching the above calculations are critical to know.
Airbus is emphasizing the greater passenger seat comfort in coach in its airplanes vs the narrower 787: 18 inches vs 17 inches in nine abreast.
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Boeing 787-9. Boeing photo
Odds and Ends: More on the A380; KC-30 boom still a problem
More on the A380: Bloomberg News has this story on Airbus’ efforts to increase sales of the A380, focusing on selling it with increased seating.
KC-30 Boom: Airbus Military still has problems with the refueling boom on its KC-30, some two years after delivery to Australia. Long-time Readers will recall that Airbus’ inexperience with designing the book was one key criticism by Boeing in the interminable KC-X tanker competition.
Airbus exec outlines goals for Washington State supply chain effort
Washington State suppliers who want to do business with Airbus don’t have to open new shops in Alabama or elsewhere globally to support the European company, its top supply official in the US said last week.
We sat down with David L. Williams, vice president of procurement for Airbus Americas, following presentations of the first Airbus Suppliers Fair in this state, in a conversation in which he outlined Airbus’ goals to increase the State’s supplier business with Airbus. The fair was the culmination of more than three years of efforts by the Pacific Northwest Aerospace Alliance (PNAA), the Washington State Department of Commerce and this writer to arrange a fair.
This is part of a Beyond Boeing aerospace strategy we outlined in October 2009 before the Governor’s Aerospace Summit in Spokane (WA), a plan adopted by Gov. Christine Gregoire and the Commerce Department. Spurred by Boeing’s pending decision to put the second 787 assembly line in South Carolina and a clear strategy by Boeing to compete future airplane programs and supporting work outside Washington, it was obvious the State had to move Beyond Boeing in order to maintain a healthy and growing aerospace industry.
It’s been gratifying to see Commerce, Gregoire and her successor Gov. Jay Inslee ramp up efforts to broaden Washington’s aerospace reliance on Boeing to a more global view.
Washington is Airbus’ No. 2 US supplier by companies count and No. 6 by dollar volume, and it’s within a few hundred thousand dollars of becoming #5. Williams told us that Airbus uses around 25 Tier 1 suppliers in Washington and many more Tier 2 and 3 suppliers.
“Washington State is a huge aerospace hub, so for us as we look at the opportunities, as we look at the suppliers, the technologies of interest and the R&T (research and technology) office, clearly Washington State is going to be one of those strong focuses,” Williams told us. “We’ve come here every year, six or seven times, at the annual PNAA conference. We were at the Aerospace Defense and Suppliers Summit last year and we’re here today.
“I think I’ve been a bit more to Washington State than to any other part of the country.”
Airbus has a goal of doubling its US dollar-based cost structure to mitigate against the Euro-Dollar exchange rate.
“[We] have the plan to increase the spend to $20bn. When I first came here, it was $10bn,” Williams says. The creation of the A320 family final assembly line in Mobile (AL) is part of this plan, but it hardly stops there. And while Mobile will become an aerospace cluster supporting the FAL, suppliers don’t have to locate there.
“There is a need for certain supplier requirements around the FAL…but there isn’t a need for the machine shop to be 50 yards away, there isn’t a need for the composites to be on site. The vision is there will be an aerospace park providing the needs of the final assembly line, and if suppliers are looking to open up a shop in Alabama, it is an option but it certainly isn’t a necessity,” Williams told us. “We wouldn’t expect to, and we’re not telling suppliers, that if you want to do business with Airbus you have to be in Alabama. We’re looking for suppliers in Washington State who can support the business globally.”
What kind of suppliers is Airbus looking for on its sojourn to Washington?
“Areas of interest changes over time,” Williams says. “Areas of opportunities could be a whole new program, it could be a neo program, it could be the end of a contract, it could be the natural end of a contract or it could be brought to a halt because of poor performance. So far we have been focusing on machining very strongly. We can look at composite. We’ve been doing some work around super-plastic forming. More recently we’ve been looking at…aerostructures supplies. Maybe not the huge aerostructures assemblies like Spirit Aerosystems on the A350, but significant aerostructures suppliers who could add value to the supply chain. We looked for commodities.”
Dual sourcing—a topic of some sensitivity to Boeing’s labor unions and to Washington State, who want all the jobs and companies that go with production—is an emerging goal of Airbus.
“As the [production] rates go up, we’ve come to the realization that, No. 1, the single source policy we’ve had maybe needs to be re-thinked, particularly on the single-aisle, obviously. No. 2, the dollarization drive is still huge,” Williams says. “We’ve still got some room to go globally to get to where we want to be. No. 3 is a final assembly line that brings in the opportunity for more local suppliers to support that final assembly line. Why not, if they are going to support rate four into Alabama, or a rate four into China or 10 into Europe? You get your dual sourcing and there is a geographic logic to it as well. You take the risk out of it and you get the dollarization as well. You get the three legs of the strategy.”
Airbus Americas Chairman Allan McArtor raised the prospect of opening an engineering center in Washington State within 10 years. This is good news for Boeing engineers and IT personnel who have been laid off by Boeing as the Chicago-based company moves some of these jobs out of Washington to non-union locations. Airbus has taken advantage of Boeing’s similar actions in Wichita (KS), and has a growing engineer center there. But the bad news is, don’t expect an Airbus engineering center here any time in the immediate future.
“There aren’t any plans I’m aware of to move in sooner than later,” Williams said.
A380 struggles despite Doric order at Paris Air Show
The surprise MOU announced at the Paris Air Show by specialty firm Doric Leasing for 20 Airbus A380s does little to build confidence in the aircraft’s long-term sales prospects.
Doric finances A380s for the airlines already operating them, such as Emirates and Singapore. There are several other special purpose companies that have also financed the behemoth, but no legacy operating lessor has ordered the airplane since International Lease Finance Corp. was a launch customer-and ILFC swapped these in favor of the more marketable A320 family.
The backlog, through June, of firm orders looks like this:
| Emirates | 55 |
| British | 12 |
| Etihad | 10 |
| Hong Kong Airways | 10 |
| Qatar | 10 |
| Qantas | 8 |
| Lufthansa | 7 |
| Asiana | 6 |
| Skymark | 6 |
| Virgin Atlantic | 6 |
| Kingfisher | 5 |
| Singapore | 5 |
| Air France | 4 |
| Korean Air | 4 |
| Transaero | 4 |
| Air Austral | 2 |
| Thai | 2 |
| VIP | 1 |
| 157 |
Source: Airbus, June 30, 2013
Virgin Atlantic continues to push out its A380 order, with entry-into-service now scheduled for 2018, and according to the Bloomberg article even this future date seems iffy.
Kingfisher’s order, of course, is as good as gone. So, probably, is the Hong Kong Airways order unless the Chinese government for some reason steps in and reassigns them to other carriers within China mainland. The government, as Readers will recall, previously curbed HKA’s growth.
One could argue about the quality of a couple of the other customers as well.