Reports from ISTAT

We were at the ISTAT conference Monday and Tuesday, where 1,250 industry officials attended.

We wrote several stories for Commercial Aviation Online. These are below:

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Odds and Ends: Boeing basks in 777 orders as A350 falters

Odds and Ends this week:

  1. Boeing had a good week with 777 orders from a variety of customers, though some were previously unidentified ones that had already been booked. Back in January we predicted that Boeing will see a stream of orders that will justify increased production. Boeing has announced a rate of 8.3 per month and we can reveal it is considering going to 10 per month.
  2. Meanwhile, Airbus confirmed that it faces mounting challenges with the production timeline for the A350. For the moment it is still sticking with the EIS of 2H2013. We fully expect this to slip into 2014. At the moment, our conclusion is that the A350 will be a year late. This may change.
  3. Dominic Gates has this interesting story about Boeing proceeding with a 787-10.
  4. The Air Force Times has an interesting article analyzing the tanker competition.
  5. Airbus and Boeing are engaged in their usual public bickering over the strategies in the A320/737 class. Airbus launched the NEO and claims this provides enough fuel burn reductions to make the program worthwhile. (We think the boost in range to the A320 and A321 have as much to do with the program as anything else.) Airbus is right. Boeing claims re-engining doesn’t provide enough fuel burn benefit to make re-engining worthwhile on a net, all-in cash-on-cash basis to be worthwhile. Boeing makes a good argument on this narrow basis, but this ignores the environmental benefits to re-engining and other factors. Airbus says there isn’t going to be a real convergence of technology until 2025-27 to justify a new airplane. Boeing believes there is enough new technology available to justify a new airplane by 2019. We think they are both right–and both are wrong.
  6. EADS CEO Louis Gallois said the KC-X tanker effort boosted EADS’ standing with the Department of Defense despite losing.
  7. The new PW GTF and CFM LEAP-X engines aren’t in service yet and PW is already working on its next generation GTF and CFM is working on the open rotor. Flight Global has a lengthy story about it.
  8. Aspire Aviation takes a look at Cathay Pacific’s financial results.

2011 Outlook for Aerospace

Note: this is unusually long, 11 pages when printed.

The new year is here and it is time for our annual look-ahead for the big OEMs.

On a macro level, 2011 should be a good year. Airline passenger and cargo traffic recovery should continue. The global economy also is recovering, but it is almost painfully slow to do so. Still, this is better than some of the alternatives.

Airlines and lessors are likely to continue their order stream that resumed in mid-2010 at the Farnborough Air Show. There could be some key orders that will influence the OEMs and their strategies going forward.

On the military front, we are much more limited in our tracking. We follow the KC-X tanker program because the offerings are based on commercial airliners. We slightly follow the P-8A Poseidon for the same reason, but Boeing pretty much has the monopoly for this type airplane, so there isn’t much to follow.

We do closely follow cybersecurity issues, if for no other reason than it is so important but also because key aerospace companies, including Boeing, have major efforts in this arena.

But by and large, we focus on the OEMs, the emerging competitors and the new engines.

So let’s get to it.

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737NG vs A320neo: an interesting chess game

Update, Dec. 13: FlightGlobal has this interview with Ryanair and its critique of the NEO.

Original Post:

The (London) Financial Times has this interview with Boeing Commercial Airplanes CEO Jim Albaugh in which he says there is no compelling reason now to re-engine the 737.

Boeing believes the newly announced Airbus A320neo family merely brings the legacy A320 family to parity with the 737 or at most provides only a 3%-4% direct operating cost advantage to the NEO which can be matched by yet more refinements to the 737.

Airbus refutes Boeing’s conclusions but won’t release its own numbers, regarding them as proprietary. But in a new study, The Business Case for the Bombardier CSeries, by AirInsight,  with which we are affiliated, AirInsight’s independent analysis concludes the NEO generally has at best a slight advantage over the 737-700 and 737-800–but nothing to shout about.

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Lessors, banks in blistering critique of Airbus NEO

Our colleagues at Commercial Aviation Online put together the story below on lessor and banker reaction to the Airbus A320neo announcement December 1.

We knew–and previously referenced here–reluctance on the part of these groups to the NEO concept, but even we were stunned by the blistering response toward Airbus.

This is reprinted with permission.

Lessor and banks react to Airbus neo programme

Date: 06/12/2010 11:35
Source: Commercial Aviation Online
Location: London

The launch of the Airbus neo programme on 1 December with plans for a 2016 entry into service for the initial model has generated a lot of talk in the aviation finance community, particularly concerning the impact on residual values.

CAO spoke to lessors and bankers about the move and here’s what they had to say:

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Airbus NEO won’t kill CSeries: New study

Airbus’ A320 NEO won’t kill the Bombardier CSeries, a new study concludes, issued today by AirInsight.

The study, “The Business Case for the Bombardier CSeries,” which we co-authored, is discussed on the AirInsight blog.

The study began as an update to AirInsight’s report in December 2009 on the prospect of re-engining the Airbus A320 and Boeing 737 families. As Airbus COO-Customers John Leahy repeatedly asserted that to re-engine the A320 would kill the business case for the CSeries, AirInsight broadened its update into a full, in-depth study. AirInsight concluded that the business case for the CSeries is sound.

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A320neo EIS 2016-17

Airbus has confirmed to us the planned EIS of the A320neo family. The company initially announced only that the A320neo would enter service in the Spring of 2016. A spokesman confirmed our estimates of the family’s EIS:

A320 EIS: Spring 2016

A321 EIS: 4Q2016

A319 EIS: Spring 2017

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Expectations for the Zhuhai Air Show: C919 yes, CSeries No

The Zhuhai Air Show in China is Nov. 16-21 and there are a number of expectations for it.

First is the expectation in the West that Bombardier will announce the long-awaited Chinese order for the CSeries from China Development Bank (CDB), which earlier this year pledged more than $3bn in airline financing to Bombardier for the Q400, CRJ and CSeries. The Chinese order had widely been expected at the Farnborough Air Show and when it didn’t appear, Bombardier took a huge PR hit and disappointed aerospace analysts.

In fact, we predicted a full week before the Air Show that no CSeries orders would be announced there. We’re going to go out on a limb and predict there won’t be any announced at the Zhuhai show, either.

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Boeing skeptical of CSeries, C919, MS-21 EIS

We wrote the following article for Commercial Aviation Online, which appeared yesterday. In case anyone wonders, there is no relation between John Hamilton and us.


The chief engineer of the 737 program is skeptical of the emerging competitors’ airplanes and the announced entry-into-service (EIS) dates, and this has a clear influence on what Boeing will do to enhance, re-engine or replace the 737 in the coming years.

John Hamilton, in a media briefing on the roll-out 26 October of the 737’s Boeing Sky Interior and a refresher course on the technical enhancements that will be in place next year, said Bombardier is facing new technologies it hasn’t worked with before that places in doubt the promised 2013 EIS of the 110-130 seat CS100. This is a potential replacement for the Boeing 737-500 Classic and the 737-600 Next Generation aircraft.

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Boeing’s 737 ramp up shows confidence in economy, ‘skyline’ and the unions

The announcement last week that Boeing once again is planning to ramp up production of its venerable 737 line show confidence on a number of levels:

  • The global economy continues to recover;
  • The strength of the backlog, aka “skyline,’ is strong;
  • The efficiency of the Lean production line only gets better; and
  • The confidence in the labor unions (notably IAM 751) appears to be gaining strength compared with the depths of anger following the 2008 57-day strike and the October 2009 decision to put the second assembly line for the 787 in Charleston (SC).

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