Lessor worries about Airbus, Boeing production rates

Here is an expanded version of a story we did last week for Flight Global Pro.

The refrain that Airbus and Boeing are over-producing the core-A320 and 737 programmes resurfaced with lessor AerCap in an interview with The Wall Street Journal.

Aengus Kelly, CEO, chastised the Big Two OEMs for production plans announced so far. Airbus will go to a rate of 42 per month by the end of this year and is considering 44. Boeing plans to hit rate 42 by 2014. Both companies are considering rates as high as 60 per month.

Airbus produces airplanes only 11 months of the year while Boeing is on a 12 month production schedule.

In its 2011 20-year forecast, Boeing predicts there is a need for 23,370 single aisle aircraft in the 90-210 seat category. Airbus predicts 19,165 in the 100-210 seat market.

Based on the announced production rates, and assuming no changes through the 2030 forecast period in production—or for adjustments in the forecasts—Airbus and Boeing will produce 18,551 single-aisle airplanes.

If both OEMs go to rate 60 by 2016, their combined production exceeds their own single-aisle forecasts.

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More Odds and Ends: Aircraft list prices, airline break-even

Aircraft List Prices: It took some doing, but we’ve collected the list prices of all the major commercial airplanes. The comparisons are interesting. We’ve tabulated these into seat categories.

List prices, of course, have no relationship to what customers actually pay. Discounts of 25%-30% are common and really good customers–like Southwest Airlines for Boeing–have been known to get discounts of up to 60%.

There are several notables in this list:

  • Compare the pricing of the C919 and the MS-21 to the Airbus and Boeing products;
  • Compare the Q400NG to the ATR-72-600;
  • Compare Airbus to Boeing; and
  • Compare CSeries to 737-600/700 and there isn’t that much difference; the gap is wider compared with Airbus.

Is there any particular point to this? Not really–it’s just one of those facts that intrigue us and a host of aviation geeks.

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Malev, Spanair shutdowns add to parked aircraft

Today’s shutdown of Hungary’s Malev Airlines and the recent cessation by Spain’s Spanair adds to the number of parked aircraft and will make it just a little bit more challenging to remarket Boeing 737s and Airbus A320s.

As we noted in a recent post, India’s Kingfisher Airlines is teetering as well.

Malev operated six 737-600s, seven -700s and five -800s. It has operated four Bombardier Q400s and two Embraer 120s.

There is virtually no demand for the -600s and even the -700s have been falling out of favor as fuel prices climb. The EMB-120s have little demand.

Spanair’s failure puts 10 Airbus A320s and five A321s on the market. These are equipped with V2500 engines. As we wrote last month, A320s with V2500s are a bit more challenging to remarket than those equipped with CFM56s.

 

PNAA conference in Seattle Feb. 6-8

The Pacific Northwest Aerospace Alliance is hosting two conferences in the Seattle area in February and March.

PNAA’s 11th annual conference is Feb. 6-7-8 at the Lynnwood (WA) Convention Center, north of Seattle and south of Everett. Information may be found here. This 2 1/2 day conference is comprised of a Defense Focus Day on the afternoon of Feb. 6; a day-and-a-half of commercial aviation presentations and a Suppliers’ Fair on the afternoon of the 8th.

Airbus, Boeing, Bombardier, CFM, Pratt & Whitney, the Teal Group’s Richard Aboulafia, G2 Global Solutions’ Michel Merluzeau, Alcoa and Electroimpact are among the presenters on the commercial side.

Tayloe Washburn of Project Pegasus and the Washington Aerospace Partnership will discuss the issues surrounding the assembly site of the 737 MAX.

Boeing’s Insitu  EADS North America and Lockheed Martin are among the defense industry presenters.

More than 300 people attended the 2011 conference, which is now the largest in the Pacific Northwest and one of the largest on the West Coast. PNAA serves Washington, Oregon, Idaho, Montana, Alberta and British Columbia. It has arranged trade missions from Europe, Asia and Latin America visiting here to meet with Washington State suppliers. PNAA was also asked by the White House and the US Commerce Department to arrange a meeting of key CEOs in Seattle to discuss economic issues affecting aerospace.

The March event PNAA is organizing is a Suppliers Forecasting Symposium. This one day event on March 12 precedes the first USA-based Aerospace & Defense Supplier Summit organized by BCI Aerospace.

The Symposium is the first of its kind: a day-long event focused on forecasting the requirements in the supply chain that services Boeing, other OEMs and the Tier 1 suppliers. Boeing Commercial Airplanes and Boeing Defense, Space & Security will be presenters as well as two noted aerospace analysts from Wall Street, David Strauss of UBS and Robert Spingarn of Credit Suisse. They follow Boeing and the supply chain and have their views on forecasting the needs of the suppliers.

These are two important events sponsored by PNAA and the A&DSS summit by BCI Aerospace is equally important to the Washington aerospace supply chain. PNAA members get a discount to the A&DSS event.

Odds and Ends: Starting 2012

Outlook for 2012: We’ve historically provided our outlook for the coming year by taking a look at the major airframe and engine OEMs. This year, our outlook is combined with that of Ernie Arvai and Addison Schonland over at AirInsight, which also looks at the Highs and Lows of 2011.

Boeing: The Seattle Times has a good year-end wrap up/2012 Outlook.

Boeing 787: Boeing did not make its target of delivering 5-7 787s in 2011. It only delivered two. Update, 9:45am: Blogger Airline Reporter says Boeing and ANA signed the paperwork on Dec. 30 for a third 787, arguably making this a third “delivery” but ANA won’t actually take possession until Jan. 4. We had asked Boeing Jan. 1 if any more deliveries had taken place in 2011 and a Boeing spokeswoman said Boeing would not confirm deliveries until the Jan. 5 update.

Bombardier: In part 3 of its look at 2012, AirInsight has a podcast with Bombardier talking about the CSeries.

Cathay Pacific: Aspire Aviation has an in-depth look at Cathay Pacific, including future fleet acquisition prospects. Daniel Tsang believes CX favors the Boeing 747-8I over the Airbus A380 at this point in evaluation, largely on great cargo capacity and a preference for frequency over passenger capacity.

Wichita (KS): December was a bad month for the aviation center in Wichita (KS). First came the news that Boeing may not finish the KC-46A tanker there and that the entire Boeing Wichita center may close. Then Hawker Beechcraft lost a USAF contract to Brazil’s Embraer. In fact, Hawker was excluded from bidding and is suing.

Leeham News: Our readership was up 62% in 2011 over 2010. Thanks to you all.

Boeing aims to help airlines reduce fuel burn in flight

Here is a story we did for FlightGlobal Pro 20 Dec.

A little known programme offered by Boeing since October 2010 called InFlight Optimization Services offers airlines the ability to get up-to-date, en route weather and wind information that is more detailed than that offered by one’s own airline in order to reduce fuel consumption.

The programme is so new that only five airlines have subscribed to the service so far. Only two, Alaska Airlines and KLM, have authorised disclosure. Three are for Winds Updates and two for Direct Routes services.

The services are not limited to airlines operating exclusively Boeing aircraft. Alaska flies only Boeing 737s but KLM operates a mixed fleet of Airbuses and Boeings. While Direct Routes is available to any aircraft equipment with ACARS, the Winds Update currently is offered only to Airbus and Boeing aircraft, said Derek Gefroh, programme manager of InFlight. Emrbaer and Bombardier aircraft could come later.

Part of the emphasis on Airbus and Boeing aircraft revolves around the stage length operated. The longer the length, the more the benefit. Short block times typically have recent wind forecasts while the longer the block time, the older the forecast, particularly on overseas flights.

Airlines also want total fleet solutions, hence Boeing’s offering the service on Airbus and Boeing aircraft.

InFlight is designed to maximise fuel and flight efficiency through continuous real-time air, traffic, weather and aircraft data to find post-departure opportunities to reduce flight time and fuel costs. Boeing monitors the flight and sends real-time updates to the flight deck or the airline’s operations centre.

According to Boeing, citing studies, operations generally use about 10% more fuel than necessary. While KLM said the savings is as little as 0.1% per flight, cumulatively over a fleet and the course of a year, the savings can be significant.

The wind updates are, for now, focused on descent operations rather than en route winds. The wind updates combine with continuous descent and RNP (Required Navigation Procedure) to shave the time off the descents.

Gefroh said that wind data could be as much as 12 hours old when pilots prepare their flight plans. Real-time, en route information permits real-time adjustments as pilots prepare to descend from cruising altitude, typically about 20 minutes from landing.

As for direct routes, airlines for years have worked with Air Traffic Control to bypass waypoints under what is called a “Direct to” system. But Gefroh said that sometimes adverse winds could actually add time to a direct routing.

“For medium size operator, like an Alaska or one a bit larger, direct routes can provide them 40,000 minutes of annual flight time saved,” said Gefroh. This equates to 300 fuel-free flights per year. “The question is, how valuable is a minute?” Boeing estimates this at $25 for regional, $125 for a very large carrier or cargo airline, $50 minute for a carrier like Southwest Airlines and $100 for a US legacy airline.

These efforts are an outgrowth of a five-year research-and-development programme by Boeing to find efficiencies in the Air Traffic Management system. But improving ATM is a federal and international effort. The US plan, NextGen, could be as much as 20 years to fully implement. Airlines need savings now.

Odds and Ends: MAX prices, Albaugh on MAX, BBD on CSeries

737 MAX: Boeing has ann0unced the prices for the MAX and Reuters has this story comparing the competition with NEO:

Airplane Families 2011 $ in Millions Average
737 Family
737-600 59.4
737-700 70.9
737-800 84.4
737-900ER 89.6
737 MAX 7 77.7 (+6.8)
737 MAX 8 95.2 (+10.8)
737 MAX 9 101.7 (+12.1)
747 Family
747-8 332.9
747-8 Freighter 333.5
767 Family
767-200ER 151.5
767-300ER 173.1
767-300 Freighter 175.4
767-400ER 190.2
777 Family
777-200ER 244.7
777-200LR 275.8
777-300ER 298.3
777 Freighter 280.1
787 Family
787-8 193.5
787-9 227.8

What’s interesting of the MAX prices vs NG is the price premium of up to $12m, nearly twice that announced by Airbus for the NEO. Recall, too, that Boeing dissed the Airbus plans to charge a premium for the NEO; Boeing used the NEO premium as a talking point to promote the value proposition of the 737NG.

Boeing: Jim Albaugh, appearing at a Reuters event, says Boeing expects to begin converting the 948 commitments to firm orders very soon. Who are the commitments? Only four are announced out of 13 customers.

We’ve listed most of them before. We now understand that there are five top lessors who have committed (only one has announced). We’ve previously identified GECAS (no surprise here). We knew of another but did not have the name. ILFC, ALC and CIT are obvious candidates but we don’t have definitive information that these are the others.

Announced firm order

  • Southwest Airlines

Announced commitments

  • American
  • Lionair*
  • Aviation Capital Group

Lionair says theirs is more than a commitment while at the same time saying it won’t be “firmed” until January. The announcement was in November and it is not on the Boeing order list yet.

Unannounced but we’re comfortable these have committed:

  • GECAS
  • Three other lessors
  • COPA
  • GOL
  • Norwegian Air Shuttle

That’s 11 of the 13. We have heard the names of the other two but aren’t sure enough of them to publish them.

Bombardier: Pierre Beaudoin, president of the Canadian manufacturer, gave an interview to the Montreal Gazette on the challenges facing the company on the new CSeries. Hints of a six month delay are becoming more frequent.

Southwest Airlines: For those still wondering, it’s now official: Boeing and Southwest agreed to transfer AirTran’s outstanding order for 53 737s to Southwest, according to an SEC filing. Southwest also canceled purchase rights of its own for 20 737s as part of the order for 58 737-800s announced at the same time the MAX order was announced.

Softening Freighter Market: In another worrying sign about the global economy, Cathy Pacific has deferred to Boeing 747-8Fs to 2013 from 2012, according to AirWise. Global cargo demand is often a leading indicator of passenger demand.

Embraer forecasts a “crisis” in the Brazilian economy next year but an increase in commercial aircraft sales nonetheless.

Odds and Ends: TSA, 787 endurance and Frontier, again

This just in:

Busted. We’re a big fan of the Discovery Channel’s Mythbusters. In the warped sense of humor department, we found this to be pretty amusing, since nobody got hurt.

Original Post:

TSA: Anyone who has flown in the US knows that the airport experience is probably the worst part of traveling. It’s worse than the abominable on-board service now provided by most US airlines. It’s worse than the crowded airplanes and the cramped legroom. TSA’s use of body x-ray machines is invasive. The 3-1-1 rule about liquids is absurd and the requirement to remove shoes before going through magnometers is silly.

In Europe, the body x-ray machines we’ve been through (and we had no choice for an alternative method) are less objectionable. The particular machine at Delta’s Amsterdam connecting gate was a stick figure, not an x-ray of the body itself. The stick figure shows dots where “something” appears and the security person did a quick pat-down of these locations. Much less invasive than the TSA. And the shoes stayed on. This actually was the first body scanner we went through since they were introduced and because it was a stick figure, we had no objection.

Business Week has this article talking about the TSA and its silly policies.

Boeing spent billions designing the 787 (we’re thinking only of the standard expense here, not the overruns) to dramatically improve the passenger experience, and it did a very good job. And Boeing is spending lots of money to aid airlines in training, to reduce in-flight fuel expenses and to improve the air traffic management systems.

Too bad it can’t control what the airlines do with the interior, but even that isn’t the real challenge: it’s the airport experience.

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Odds and Ends: Frontier Airlines, first 737 at rate 35, Embraer

Frontier Airlines: At the Paris Air Show, Republic Airways Holdings ordered 80 A319/320neos with CFM LEAP engines, and the order was touted as the death knell by some for the Bombardier CSeries–also ordered by Republic for Frontier (40+40). As we wrote at the time, the Airbus/CFM deal was clearly a financial bail out for Frontier, which leased Airbuses from GECAS and had maintenance agreements with CFM. The leases and maintenance agreements were restructured for the ailing airline, and Airbus agreed to contribute a modest amount of cash to the airline.

We were of the opinion then–and are more convinced now–that Frontier won’t survive t0 take delivery of either the Airbus or Bombardier orders. It’s squeezed between United and Southwest airlines at Denver and between Southwest and Delta at Milwaukee. This article in the Denver Post neatly summarizes the current situation.

Will Frontier’s likely demise kill off the CSeries? Not hardly. We would be willing to bet BBD is double-booking these order positions. Doing so against weak airline orders is common practice among the OEMs.

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Odds and Ends: A350, 737MAX, 787; ACG is #10; and more

Guessing Game: The mysterious nine customers for the 737 MAX continues to confound observers. Actually, there were nine before Aviation Capital Group signed up, so ACG was #10.

  • American Airlines
  • Lion Air
  • Aviation Capital Group
  • GECAS
  • COPA
  • GOL
  • Norwegian Air

Three more; we have three of the names but not confirmed.

Airbus A350 delay: Airbus announced a delay of six months; we think it prudent to add 3-6 more.

Aviation Week has a comprehensive table of neo vs MAX orders.

Boeing 787 Deliveries: All Things 787 reports there will be only two more deliveries this year and why.

Boeing 737 MAX: Note the wording in the Boeing press release about Aviation Capital Group’s commitment for the MAX: “ACG first leasing company to announce commitment for 737 MAX.” Not that ACG is the first lessor to commit; it is the first leasing company to announce its commitment. We understand two other lessors have committed. One is GECAS (no surprise, given the family-engine connection). We haven’t identified the other one with enough confidence to publish its name yet.

Bombardier: There remain three unidentified orders announced by BBD: one in Europe, two in the Middle East. The Middle Eastern ones should be revealed at the Bahrain Air Show. (This probably gives you a hint who they are and why they weren’t revealed at the rival Dubai show.)

Also, with some aerospace analysts increasingly speculating the CSeries entry-into-service will slip to 2014 (and, for the moment, BBD says ’tain’t so), we’ll remind everyone that the AirInsight CSeries Business Case report of December 2010 assumed a 2014 EIS.

Embraer: EMB has teamed with Alcoa to offerer advanced metals on the E-Jet RE, to lighten weights and reduce maintenance. EMB isn’t using composites (BBD’s CSeries has an aluminum-lithium fuselage and composite wings), but the E-Jets at 2×2 seating and 2,000 mile range are lighter than the CS-100 with which they will compete. Ninety percent of the US domestic flying is less than 2,000 miles (other areas of the world are likewise), so the operating costs vs the 2×3 seating, heavier CS100 will be interesting to watch.

YouTube: We’ve added a YouTube category in the right hand column, with links to OEM You Tube channels. So far we have Airbus, Boeing, Bombardier Aerospace, CFM and Embraer. As we find more, we’ll add them.