Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: New engine development. Part 5. Turbofan design problems April 26, 2024
- Airbus 1Q2024 results: Airbus CEO: “A350 in-service experience drives positive reputation and orders” April 25, 2024
- A350-1000 or 777-9? Part 3 April 25, 2024
- Boeing CEO promises company is turning around…again April 24, 2024
- Solid start for stand-alone GE Aerospace despite cuts to LEAP output April 23, 2024
Next new, clean sheet airplane around 2030, says Airbus
Airbus currently is planning for the next new, clean sheet airplane around 2030 and now are focusing on incremental improvements to the existing product lines, officials said at the Innovations Days annual media briefing last week in Toulouse.
Fabrice Bregier, CEO of the Airbus commercial aircraft unit, said that “innovation is on a case3-by-case basis,” with a successor to the A320 family requiring an engine “with great benefit.” He did not define this, but previously Airbus indicated a successor needs a combined 30% airframe/engine improvement to make an entirely new airplane design worthwhile.
Airbus Innovation Days, Part 5: wide body twin development
Kiran Rao, executive vice president, strategy and marketing.
Rao discussed the wide-body strategy for Airbus at Innovation Days on Wednesday. The following paraphrasing synopsizes his remarks.
- More than 3,500 wide bodies have been sold by Airbus, starting with the A300B2, the first wide0body twin.
- 1,200 wide-bodies are in backlog. A330: 250-300 seats; A350: 280-370 seats; A380 more than 500 seats (two-class, long range layout).
- Airbus officials, including Rao, continued to promote the company’s 18-inch seat campaign, comparing the A-Series against the Boeing 777/787 17-inch 10 abreast and nine abreast respectively.
- Boeing has to go 10 abreast with the 777 “because the economics don’t work at nine abreast.” Boeing had to go with nine abreast on the 787 rather than eight abreast because the “economics don’t work” compared with the A330 otherwise.
- Economics is the “most important criteria” and the “Airbus aircraft come out ahead.”
- Rao claims the A330 has lower maintenance costs, lower airport, lower navigation and lower capital costs. The A330 has simpler systems so costs less to maintain, particularly on the engines. The A330-300 is slightly lighter than the 787-9.
- For the first time we’ve heard, an Airbus official referred to the “A330ceo.”
- Each seat for a long-haul operator is worth $2m per year, so an A350-900 vs a 787-9 with 35 more seats can generate $70m more revenue per year.
- The A350-1000 has a 15% COC per trip and a 5% COC per seat advantage, Rao says. Assumptions: 4,000nm, $3/gal, 2 class configuration, 369 seats for A350, 405 seats for 777-9.
- 777-9X is inefficient without the stretch and a longer wing. It has inferior comfort, Rao says.
Airbus Innovation Days, Part 2: No order bubble and a lot more
Airbus lifted the embargo on John Leahy’s presentation, allowing immediate publication.
There is no aircraft order bubble, says John Leahy, COO-Customers of Airbus. Emerging markets and passenger traffic doubling every 15 years, bolstered by GDP growth, means orders will hold up, he said, leading off the Airbus Innovation Days Tuesday.
Highlights of Leahy’s address:
- There are 42 mega cities accounting for 99% of the long-haul traffic. Aircraft size is moving up and in 15 years, Leahy says RPKs will double, requiring aircraft like the A380.
- Leahy predicted the A320neo will maintain a greater market share than the Boeing 737 MAX of about 60%-40%.
- He claims the A320neo is 1.6 tons lighter than the 737 MAX.
- Leahy said the A320neo and A321neo now seat 189 and 240 seats respectively (in maximum capacity configuration). The former matches the 737 MAX and the latter has 25 more seats than the 737-9.
- He predicts China will become a competitor in 25 years.
- The competitor to the 787-10 is the A350-900 at 331 pax vs 315 pax with more range and cargo capability or derating the A359 gives a lighter aircraft at the same range.
- The 35 more seats of the 777X means the larger airplane than the A350-1000 is 35t heavier than the latter aircraft.
- The A380 hasn’t been fully optimized by many airlines; it could easily take 50 more seats.
- The A330neo is an interesting idea; we have to look at the money we have to spend and cannibalizing our A350 program. It will be the same size as the 787-9, which will have 1,000 mi more range. We could cover 92% of the routes with a wider seat and much lower capital cost. We have to look at the resources. It may not happen by Farnborough.
- No A350 slots are available until 2019-2020. Effectively sold out through 2019 though could move some positions around.
- In a walking press “scrum,” we asked Leahy, “if there is a potential market for 1,100-1,200 A330neos, why wouldn’t you do the airplane?” Leahy replied that the answer may be self-evident but once more noted that cost and resources will be important considerations. Talks with the engine makers, Rolls-Royce and GE, continue to determine the potential cost split between Airbus and them.
Airbus Innovation Days, Part 1: Leahy speaks about Emirates A350 order cancellation
We’re at the Airbus Innovation Days Wednesday-Thursday, with most of the information embargoed until Thursday evening. However, the following was not embargoed.
John Leahy, COO-Customers of Airbus, called the Emirates Airlines cancellation “not good news commercially,” but noted that there have been fewer cancellations of the A350 than the Boeing 787 program.
He noted that the deliveries were scheduled from 2019, so there is time to place new orders.
Leahy declined to comment on any connection between last year’s EK order for the A380 and this cancellation. He noted that EK is ordering more A380s and has been urging Airbus to re-engine the airplane, which Airbus is studying.
Emirates cancels A350 order, could be boost for slow-selling 777 Classic
Airbus announced Wednesday morning French time that Emirates Airlines canceled its firm order for 70 A350 XWBs.
In a statement, Airbus said:
Airbus confirms that Emirates Airline has decided to cancel its order of 70 A350 XWB aircraft. The decision follows on-going discussions with the airline in light of their fleet requirement review, as demonstrated by their order of 50 additional A380 at the last Dubai Airshow and their continuous interest in the program
Airbus and Emirates Airline benefit from a long-standing relationship and the airline recently reiterated its confidence in Airbus products particularly by praising the A380 and the benefits the aircraft brings to their operations.
The order of 50 A350-900 and 20 A350-1000 was originally placed by Emirates Airline in 2007 with first delivery slots scheduled from 2019.
This cancellation could open a hole in Emirates’ fleet plan. The so-called middle market for wide body twins is the heart of the market. This cancellation could open an opportunity for Boeing to step in with the slow-selling 777-300ER, which has a major production gap beginning in 2017. Rather than introduce a new fleet type, Emirates could opt to stay with the 777-300ER for commonality, or perhaps its huge order for 150 Boeing 777-8/9s may supply fleet needs.
Airbus has more than 800 orders, options and LOIs for the A350 even after cancellation.
Appraisal firm sees little impact on Classic values from A330neo
With apparent momentum building for the launch of the Airbus A330neo, widely expected at the Farnborough Air Show, the appraisal firm Collateral Verification Tuesday issued a note expressing the likely affect on values of the A330 Classic.
Impacts to values on the in-production Airbus A320 and Boeing 737 families was a widespread concern when the Big Two moved to re-engine these aircraft types.
Airbus and Boeing each defended the values of the in-production models, saying that until the re-engined aircraft in service reach about half of the installed base of the current models, values of the latter shouldn’t be negatively impacted. We’ll see if this is the case, with the A320neo entering service next year and the 737 MAX in mid-2017. But if this theory holds, then the same should be true for the A330 Classic.
The values of the Classics have emerged as a worry going forward. Market forces believe Airbus will have to hold the line on pricing the A330neo, foregoing much if any of a premium for the new airplane. Airbus has promoted the Classic as the less expensive alternative to the higher priced, newer technology Boeing 787, and from the IATA AGM earlier this month in Doha, John Leahy, COO-customers for Airbus, called a low-cost A330neo “unbeatable” in economics.
Collateral Verifications doesn’t believe there will be much of an impact on Classic residual values. The company writes:
Over the last several months, the A330NEO has been a big part of the industry discussions. Although not yet launched, it seems more and more apparent that this may be announced in the near future. Due to this, many of our clients have approached us to find out how this may impact residual values of the existing A330 fleet. Based on the historical data we have collected on the A330-300 and Boeing 767-300ER, we have compared the impact of the A330-200 when it first entered service. Although not 100% similar to the introduction of an A330NEO, it does provide some guidance as to the potential impact of newly introduced aircraft to other in-production aircraft. The value impact on the A330-300 and the Boeing 767-300ER was about ~5-7% over their normal rate of depreciation which was not that much different from the impact on the 737 classics when the 737NG was introduced. As with any other older generation aircraft, the real value impact will be during a downturn. A330s and B767s dropped in value by 15-25% after 9/11 and dropped in value by 15-35% after the financial crisis. Overall, the initial impact of the A330NEO should not be greatly significant, unless the aircraft enters service during the next downturn.
War of Words between Airbus and Boeing over A330neo, 787
By Leeham Co EU
We’ve seen it for decades: the War of Words between Airbus and Boeing around their competing aircraft. It hasn’t taken long for the WOW to emerge over the prospective A330neo. Only a few months ago, Boeing was muted in its assessment about the NEO and its response. No longer.
.
For the 200- to 300-seat segment the WOW warning was raised Sunday at Doha, Qatar, in advance of the IATA Annual General Meeting, and no doubt it will stay aloft until this year’s Farnborough Air Show, where the formal launch of the A330neo is expected (as if anyone is doubting after Sunday).
.
The start
As Aviation Week reports from the eve of the IATA AGM, John Leahy, Airbus’ chief operating office-customers, threw down the gauntlet by claiming an A330neo economics would be “unbeatable” and its “cash operating cost would equal 787-9.” Boeings counterpart John Wojick countered “at no price can it compete with the 787-10”.
.
Of course, that’s not what Leahy claimed. Comparisons have been between the A330-300 and 787-9, not the 787-10.
.
What it is all about
After our New Year’s analysis showed that there was a real case for an A330neo (A330neo prospect gains traction) we spent a further four months on the case, digging deeper and deeper. The result was put in our report The Business Case about the A330neo, a 60-page study which took a deep dive into the economics of the A330neo vs the A330 Classic and the Boeing 787-8/9. We did not examine the neo vs the 787-10 because these are different category airplanes, as Boeing’s Wojick should know full well.
.
In an apples-to-apples comparison, we found the A330neo significantly narrows, but does not entirely close, the operating cost gap between the A330 Classic and Boeing’s new airplane. Airbus can close the gap and achieve an advantage, however, if it lowers the price of the A330neo to a level the 787 can‘t give. This is central to Leahy’s argument, which is used for the A330 Classic but achieved only with the most favorable assumptions for the Airbus airplane
To summarize: