Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: Air Transport’s route to 2050. Part 20. May 2, 2025
- Supplier Howmet exceeds expectations despite tariffs May 1, 2025
- Airbus 1Q2025 results: So far, so good, but US tariffs make future results unpredictable May 1, 2025
- Does an Airbus A220-500 need a new wing and engines? May 1, 2025
- Teamsters, Boeing have a new contract April 29, 2025
737 MAX vs A320 neo: The debate continues
Here’s the next round in the continuing debate.
Bernstein Research published this chart detailing how Airbus and Boeing differ on the performance improvements they predict.
There is, of course, no way to know who is correct until the airplanes enter service.
We hear the A320 sharklets are performing better than advertised (Aviation Week actually reported this a while back as well). If the figure we’re hearing proves correct, the neo and MAX should have parity.
Odds and Ends: 787 fuel savings at ANA; Airbus will benefit from Boeing
ANA 787s: Market Watch quotes an ANA official saying the Boeing 787-8 is saving 21% in fuel over eh previous airplanes. The article didn’t ID the previous planes, but they were the Boeing 767-300ER. Note, too, that the initial 787-8s are heavy and with Rolls-Royce engines that don’t initially meet specs.
Airbus to benefit from Boeing: The latter is closing its Wichita operations. The former will likely hire some of Boeing’s soon-to-be-out-of-work engineers. Here’s the article. Note that former Kansas Sen. Sam Brownback, who is now governor, was present garbed in Airbus colors. This is the same Brownback who couldn’t diss Airbus enough during the EADS-Boeing tanker competition. Now Airbus seems to be Brownback’s best friend.
China-EU showdown over ETS: China continues to refuse to comply with the European Union’s demand that carbon emissions information be provided. China, which already refused to firm up orders for 45 Airbus A330s, threatened to impound European airplanes if the EU retaliates against China’s refusal to comply.
Air Lease Corp to order MAX: Steve Udvar-Hazy, CEO of the lessor, plans to order the 737 MAX within the next few weeks. Boeing wants to firm up orders from ALC, CIT Aerospace, ILFC, GECAS and Aviation Capital Group by or at the Farnborough Air Show.
Odds and Ends: Price vs Price in Indian contest; China theat; 787 financial impact on Boeing
Price vs Price: More on the price war between Airbus and Boeing in the A320 v 737 contest. Dominic Gates of The Seattle Times has this analysis of hot contest to win an order from India’s Jet Airways, hitherto an exclusive Boeing customer. He takes a larger look at the troubled Indian airline industry.
Finalizing Orders: Norwegian Air Shuttle finalized its order for 100 Airbus A320neos, breaking Boeing’s monopoly here. NAS was also a launch customer of the 737 MAX.
China threat: Maybe, maybe not. Jim Albaugh, CEO of Boeing Commercial Airplanes, cites China as the biggest emerging threat to Boeing and Airbus. Reuters, in Beijing for the IATA AGM, has this article saying, not so fast. The article takes a close look at the ARJ-21, China’s first effort at a modern jet. Although this is a regional jet and not competitive with Airbus or Boeing, it’s a “makee-learn” effort that leads the way to the Comac C919, which is directly competitive with the A320 and 737 class. Implications of the ARJ-21 are also discussed in the article.
LionAir and the 787: Confirming news reports this week, LionAir announced it has committed to the Boeing 787, agreeing to buy five. We’re told these are from the so-called “terrible teens,” those early 787s that required an enormous amount of rework and which were rejected by the original customers. Transaero and Rwanda Air are said to also be taking some of these early aircraft.
EADS Bank: More information on the reports EADS is considering getting a banking license.
Boeing economics and the 787: Jon Ostrower at The Wall Street Journal has an excellent piece today talking about the milestone of 787 #66 and the implications for cost reduction. Unfortunately, the full article is available only for paid subscribers. Contained within the article is this key data:
The losses don’t show up on Boeing’s bottom line, because accounting rules let the company spread the Dreamliner’s costs over years—effectively booking earnings now from future Dreamliners that it expects to produce more profitably. With previous models, Boeing initially spread its costs over 400 planes, but with the Dreamliner it is distributing the costs over 1,100 planes—a number it says reflects unprecedented demand. Boeing already has 854 Dreamliner orders from 57 customers.
Boeing reported that first-quarter profit at its Commercial Airplanes division more than doubled to $1.08 billion from a year earlier. But the company acknowledges that accounting for the costs of each individual plane would have resulted in a first-quarter loss of $138 million—a drop UBS analyst David Strauss says is almost entirely attributable to the Dreamliner.
The Dreamliner’s drain on cash is balanced by strong sales of the profitable single-aisle 737 and long-range 777 models. And analysts estimate Boeing is reducing the losses per Dreamliner by about $10 million each quarter. But maintaining the pace of cost reduction gets harder as the simplest problems are solved. Meanwhile, Boeing aims to increase production of Dreamliners to 10 per month at the end of 2013, up from 3.5 per month today—meaning the losses per plane will be magnified, but will also be tempered by the decreasing cost of each jet.
Some analysts believe Boeing’s target for cost reduction on the Dreamliner could be too optimistic. Mr. Strauss of UBS says the company appears to be assuming it can reduce its cost 50% faster than it did with the 777. If instead the pace of cost reduction matches the 777, says one of UBS’s models, the estimated $20 billion hole could double.
Odds and Ends: A320 v 737 debate continues; Embraer on its future planes; ATR’s life story
A320 v 737 Debate: This continues over at AeroTurboPower, where an analysis of fuel burn cost per seat has been undertaken.
Embraer reiterates futures plans: No plane in the 130-160 market segment. EMB will continue to concentrate on its 70-125 seat market.
ATR 1000: This is a very clever video by ATR celebrating its 1000th ATR turbo-prop.
A320 build rate, Alabama presents proposal to Airbus
Airbus won’t increase the production rate on the A320 family until introduction of the NEO and it’s now become public that Alabama has presented a proposal to Airbus for an assembly plant there.
Airbus disclosed the plan to freeze the build rate at the previously announced 42/mo during the Airbus Innovation Days we attended last week. Aviation Week has this detailed story.
We alluded to the prospect of a decision by Airbus by year end for an assembly site in Alabama in one of our reports of the Innovation Days. Yesterday, it became public that Alabama has presented a proposal to EADS, parent of Airbus.
Accordingly, here is our take: we think Airbus (EADS) will eventually make the decision to open an A320neo assembly site in Mobile. Here’s why:
- Going beyond rate 42 probably means Hamburg, Toulouse and Tianjin are out of room;
- Airbus wants to increase its US dollar-based footprint to reduce exposure to the volatility of the Euro;
- A US site might help US sales but would make it easier to sell a “Made in America” campaign to the Defense Department for future contracts (expanding Mobile into DOD work); and
- Opening Mobile in connection with neo would open nearer-term delivery slots to compete with the 737 MAX and help worldwide sales availability.
We think the odds are better than 50-50 but it’s tough to handicap this.
The moving numbers, redux, in the A320-737 game
For two years, Boeing claimed the 737NG was 8% more economical (and here) than the Airbus A320. Boeing told media, analysts, everybody who would listen. Boeing illustrated the point before and after the MAX.
Here is a recent illustration; note the NG advantage over A320ceo is reduced to 6%:
And Randy Tinseth, in Randy’s Journal, writes:
Combining the seat count issue with all our latest improvements gets you to a 6 to 7 percent difference. So, if the aircraft are not at parity today, what does that say about the rest of the story? It’s always fun to have spirited debate with our competitors. But in this case, the numbers really do speak for themselves. I’d love to hear your thoughts.
Our thought was, What happened to 8%? Is this a change in the Boeing messaging? So we asked Tinseth, and through a spokeswoman, the response was, “The 8 percent is our current operating cost per seat advantage over our competition and the other is a measure of fuel burn per seat.”
Airbus, as we’ve noted before, disputes Boeing’s analysis and offers up its own, where numbers are again at the forefront. A key assumption on Airbus’ part is using 157 seats for the 737-800 vs the 162 used by Boeing. Tinseth recently has this to say about that: according to Seatguru.com, Tinseth argues Boeing is closer to right than Airbus–hence his comment above.
Airbus also disputes the 20%-25% maintenance advantage Boeing claims for the 738. Boeing explained here where that comes from.
Here is an Airbus slide from the Innovation Days. Note the seat assumptions in the fine print.
The bouncing around is enough to make one airsick. This is why we remain skeptical of data from both OEMs and prefer to listen to the airlines, who tell use the two airplanes are very close.
Update, 3:30pm PDT: A reader linked this Airbus slide, which was previously posted but forgot about. It addresses Tinseth’s seat issue in the print at the bottom, and was created last year by Airbus.
Odds and Ends: More from the Airbus Innovation Days
We have some follow-up to our trip last week to the Airbus Innovation Days:
A350 Program: Aviation Week has this article about the A350 program, noting that the A350-800 seems to be suffering from from benign neglect.
A350 Engineers: There is a lot of buzz “out there” that the A350-900 program is sucking up engineers from the A350-1000. We asked Airbus about this at the Innovation Days. There is no question that the -900 timeline is challenging (see chart) but Didier Evard, EVP of the program, says engineers will be released soon for the 1000.
“This year we have to ramp up the 1000 team,” Evard said. “We have internal plan and to increase the workforce from the outside to start the detail design this year.”
We asked what was the level of engineers assigned to the 900, using the example that if 100% were the norm, was the program at 100% or 125%, for example. Evard didn’t directly address that but said:
“The 900 this year will go down from 100% to around 60% or 70% and be stable.”
A380 Wing Rib Fix: Airbus showed this illustration:
Although the slide shows 60 ribs per wing, in practice, Airbus says only 20 have needed repair.
A320neo affecting A320ceo demand: JP Morgan issued this observation following the Innovation Days:
A320neo EIS is affecting demand for the current version. The imminent introduction of the a more efficient version of the A320, the neo is scheduled to enter service in 4Q2015, should make it more difficult to drum up demand for current generation A320s in 2014/2015. The years immediately preceding the changeover have always seemed like a potential rough patch, both for the A320 and the 737, which will transition from the NG to the MAX, in 2017. According to Ascend, A320 slots are filled for 2014 with 484 aircraft scheduled for delivery, 42/month implies ~480 deliveries, but 2015 is not yet full at 362 A320s. As some customers could walk away ahead of the neo introduction or for other reasons and new orders should be hard to come by, holding the rate at 42/month looks reasonable. Lease rates on current generation A320 family aircraft have been the weakest among major Airbus and Boeing platforms, an indication that the market is not as hungry for more of them as it is for other models.
We heard long ago that Airbus was worried about demand for the ceo, but we also heard the same is quite true for Boeing on the 737NG with respect to MAX sales. This is why we are seeing many Airbus and Boeing deals include the current generation of airplanes with the re-engined models. It’s also why, we believe, we’re seeing pricing on the current generation of airplanes dropping precipitously, which will of course affect residual values and lease rates.
Airbus Innovation Days: synopsis of a lot of stuff
We’ve been at the Airbus Innovation Days in Toulouse, with about 200 others from around the globe. Here are some highlights:
A380 wing rib issues: As reported previously in various media, Tom Williams, EVP-programs, outlined the issues with the wing rib cracks. A new metal alloy was used, intended to save weight, that cracked in operations despite fatigue testing failing to discover the issue on a test airplane. Williams attributed the failure to detect the cracks to inadequate instrumentation on the test plane. The new alloy saved about 300kg. There are 60 L-brackets out of 4,000 that require inspection and only 20 are affected. The issue does not affect flight safety and the ribs can be replaced either during a C Check or during a nose-to-tail maintenance check. The “Type 2” cracks, the most serious of two types found, have to be replaced by 1,300 cycles.
A350-800/1000 sales: Boeing has been aggressively casting doubts on these two sub-types, pointing out that there have been no sales since 2008. John Leahy, COO Customers, said there haven’t been sales because he doesn’t have any delivery slots available until the end of the decade. He’s been switching some customers from the 800 to the 900, which is more profitable to Airbus. Where did he get the slots? He won’t say but in a press gaggle after his presentation, he acknowledged to an Indian journalist that Kingfisher Airlines—an A350, A320 and A380 customer—deferred all its deliveries to relieve the need for pre-delivery payments. We asked Leahy if he was re-selling the Kingfisher slots and he demurred, saying that was “confidential.”
(We note that Boeing had a long dry spell in sales of the 787 during the depths of the problems with the airplane and the backlog stretching to late this decade.)
Leahy also said Boeing’s claims that he, Leahy, doesn’t know what the -1000 “is” are false.
A320 v 737: If the war of words over the A350 wasn’t enough, Leahy—and to a lesser extent, Williams, whose focus was principally the A380—repeated the Airbus messaging begun last November at the Credit Suisse conference in New York that fan size does matter and the 737 MAX comes up short. Airbus figures the MAX at best (pre-dating the recent Boeing changes) will gain 8% over the 737NG. We asked Leahy later about the move by Boeing to take the CFM LEAP-1B fan size to 69.4 inches and to add the “Boeing Advanced Technology Winglets” (BATW) to the MAX. Boeing now claims the MAX will be a 13% improvement over the NG. Leahy, who compared the BATW with the MD-11 winglets, said Boeing will get only about one-half percent improvement from this. The 69.4 inch fan still falls short, he said.
Williams, a former engine engineer, said the hotter temperatures and ceramics technology required of the LEAP-1B, will present maintenance challenges.