Deferrals grow as airlines fight to keep bottom line

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Introduction

Jan. 09, 2017, © Leeham Co.: Airlines have deferred or are thinking about deferring more than 400 airplanes in the near term, a review of decisions and deliberations  that have been made during the last 12 months.

LNC tracked announcements last year of deferrals and statements by airlines that they are thinking about doing so.

We began identifying macro-level issues last week in our posts about emerging concerns for the 787 and LNC’s Outlook for 2017.

Reasons vary widely for the deferrals, these reports indicated. Low oil prices. Slowing economies. Declining financial results. Worries about two of the three top Middle Eastern carriers. A capital squeeze in China. Pressure on long-haul carriers from the emerging sector of low cost, long-haul airlines. Preserving capital expenditures to keep the bottom line in the black.

Today we detail the deferrals we tracked.

Summary
  • Deferrals of single aisle aircraft are less worrying than for wide-body aircraft
  • For wide-bodies, it depends on the program. For the Airbus A380, deferrals turns the program back into the red. For the A350, deferrals can help with delivery commitments.
  • For the Boeing 777, deferrals spells trouble, especially for the present generation.
  • The 787 is more resilient but the slow sales make the program sensitive longer term.

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Analyzing the Top Customers for Airbus and Boeing

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Introduction

Jan. 4, 2017, © Leeham Co.: The top 25 Airbus customers that are identified account for 63% for the current backlog, an analysis of the company’s order list shows.

For Boeing, its Top 25 customers account for 69% of its identified backlog.

Both companies have hundreds of Unidentified orders for which no customer is disclosed.

Summary
  • “China Inc.” is Boeing’s #1 identified customer and #3 for Airbus.
  • Two low cost carriers are the first and second top customer for Airbus.
  • Three low cost carriers follow “China Inc.” as Boeing’s Top Customers.
  • Boeing’s Top 3 wide-body customers are in the Middle East, where financial and traffic results are beginning to soften.
  • Three of Airbus’ Top 5 customers are also from the Middle East. The other two are from Asia.
  • Boeing has 54% of the market share among the Top wide-body customers. Airbus has a 54% market share in the narrow-body sector.

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Comparing A350s, 787s and A380s

Editor’s note: We don’t typically do “trip reports;” this isn’t the scope of LNC. But occasionally one crosses our desk that we find of interest. One of our readers, William Bain, provided the following to us and we thought it interesting to share.

By William Bain

Singapore Airlines Airbus A350 business class. Photo by William Bain.

I flew Singapore Airlines’ Airbus A350 service from Singapore to Amsterdam.  The outbound flight was operated by 9V SMD and the inbound flight by 9V SME.  I was seated in the premium economy cabin.

By way of starting, I think people spend too much time say this or that model is better, as such, than that model.  There’s been a fair bit of that in relation to the A350 and Boeing 787.  But in my view much, if not most, of the comfort factor is down to the configuration used by specific airlines.  For example, I was underwhelmed by the Qatar Airways 787 but very much liked the ANA 787.

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Emirates feels low-cost, long-haul competition

Note: Nov. 24 and 25 are Thanksgiving Holidays in the US. Our next post will be Monday.

By Bjorn Fehrm

23 November 2016, ©. Leeham Co: Emirates Airline president Tim Clark says the carrier “has to change its approach to long-haul pricing to combat increasing competition” after presenting a half year 2016 profit which plunged 64% on 9 November.

The reason is that traditional mainline carriers are entering the low-cost, long-haul market in addition to the established LCC entrants: Norwegian Air Shuttle, AirAsiaX and Wow Air.

emirates-a380

Figure 1. Emirates long-haul A380. Source: Emirates.

Emirates will add new low-cost fares to keep its growing fleet of Airbus A380 and Boeing 777 filled. Clark states this is necessary and that the airline will not back down on its plans for additional aircraft. It will be a period “of fierce competition as more and more international network carriers are entering low-cost, long-haul,” declares the COO.

What has changed? Isn’t Emirates the Kings of competitive long-haul travel? Read more

How Boeing is working to convert Qatar’s MAX LOI into a firm order

Boeing 737-8. Boeing photo.

Boeing 737-8. Boeing photo.

Oct. 18, 2016, © Leeham Co.: It’s only a Letter of Intent, the agreement between Boeing and Qatar Airways for up to 60 737-8s.

Qatar announced the LOI two weeks ago because its CEO, the notoriously fickle Akbar Al-Baker, is royally pissed at Airbus over delays for the A320neo. Qatar was the launch customer for the airplane, ordering 50. Citing issues and delays with the Pratt & Whitney GTF engines, and other unspecified problems, Al-Baker refused to take delivery of four of the first aircraft.

He repeatedly threatened to drop the A320 order altogether, but then at the press conference announcing the LOI (along with other Boeing orders), he said he doesn’t walk from contracts.

Forget for the moment the contradiction.

Here’s how Boeing is working to convert the LOI into a firm order.

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Looking under the hood at the Qatar order

Oct. 10, 2016, © Leeham Co.: Qatar Airways announced an expected order Friday for Boeing 777s and 787s, but surprised with the addition of a Letter of Intent for up to 60 Boeing 737-8s.

The latter was characterized as a “blow” to Airbus, which has been the target of high profile, public attacks by Qatar’s CEO, Akbar Al-Baker, over issues related to the

Akbar Al-Baker, CEO of Qatar Airways. Photo via Google images.

Akbar Al-Baker, CEO of Qatar Airways. Photo via Google images.

A320neo and A350-900. Qatar is a launch customer for each, and each has been delayed due to supplier issues from Pratt & Whitney and Zodiac, respectively.

What Al-Baker expects Airbus to do about PW and Zodiac has never been made clear, but it’s the Airbus name on the airplane, so it’s Airbus that is the target of Al-Baker’s well-known wrath.

Al-Baker refused delivery of the first couple of A320neos due to the engine issues and threatened to turn to the Boeing 737 MAX in retaliation.

The announcement Friday was viewed by some media and aerospace analysts as following through on that threat and delivering a “blow” to Airbus.

But an LOI is the lowest form of a “commitment” to an airplane and one that doesn’t typically even involve deposits.

Let’s look at Friday’s announcement in detail.

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Pontifications: Airbus, Boeing and Qatar; and more on the WTO

Hamilton ATR

By Scott Hamilton

Oct. 10, 2016, © Leeham Co.: Last week ended with an order from Qatar Airways for 30 Boeing 787-9s and 10 777-300ERs. Qatar also signed a letter of intent (LOI) for 60 737-8 MAXes.

But that wasn’t the only news in what turned out to be a busy week.

The British American Business Council Pacific Northwest chapter’s annual conference was Tuesday. Airbus Americas president Barry Eccleston discussed the company’s reorganization and recent WTO loss in an exclusive interview with LNC. This was initially behind our paywall; we’ve now opened it to all readers.

He also discussed product development. This post is coming later this week.

Consultant Michel Merluzeau provided his forecast for the next 15 years at the same event.

The Aerospace Futures Alliance held its annual conference two days later. Boeing’s Mike Sinnett, VP of Product Development, gave a rare look into Boeing’s future product thinking. This post is also coming later this week.

Also on Friday, I toured the Boeing 737 factory in Renton with a group of suppliers. I’ll shortly be writing about this as well.

Let’s visit the Qatar order and the WTO issue.

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What’s happened to the VLA sector?

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Introduction

Aug. 15, 2016, © Leeham Co.: Boeing says it may discontinue the 747 program.

Airbus put the A380neo on indefinite hold. Qantas Airways says it doesn’t want its last eight orders. The OEM will reduce the production to 12/yr in 2018.

There haven’t been any Boeing 777X sales since June 2015. There are only six identified customers and there has been a new, identified customer added since July

Boeing is considering a larger 777-10, which will carry 50 more passengers than the 777-9. But is there a market? Boeing photo via Google images.

2014, when ANA ordered the X.

Sales have dried up for the 365 passenger Boeing 777-300ER and only a smattering of orders have come in for its competitor, the Airbus A350-1000.

What’s happened to the Very Large Aircraft sector? What’s happened to the large, medium twin aircraft sector?

Summary
  • The VLA market pioneered by Boeing and pursued by Airbus is virtually nonexistent.
  • Yet there are those in Boeing who want to launch a 450-passenger 777-10 into a dubious market demand.
  • 777 Classic sales dried up, but A350-1000 isn’t doing great, either. Are these too big, too?

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The A380 investors day jinx

 

  • July 15, 2016, © Leeham Co., Farnborough Air Show: At an event like this, we pick up all sorts of snippets that don’t fit into any given story. So here’s a compilation of our Odds and Ends to wrap up our dedicated coverage of the 2016 Farnborough Air Show.

A380 and investors meeting: The Airbus A380 has been a sensitive topic for investors. Historically stock prices took a major hit when negative news about the A380 emerged. During an investors day in December 2014, one of the executives slipped that the program could be terminated. The stock took an immediate dive and other executives had to clean up the first one’s comments.

Airbus also holds an investors day during the Paris and Farnborough air shows. The latter’s was scheduled on Wednesday. The night before, the French newspaper La Tribune broke news that the production rate of the A380 will be reduced from 20/yr in 2017 to just 12/yr in 2018. Airbus scrambled to catch up to the story Tuesday night in advance of the Wednesday investors day.

The production breaks even at 20 but not at 12. Yet the stock opened down slightly and remained flat during the rest of the day before closing up slightly.

The jinx may be over, but perhaps Airbus either has to fix the A380 program or cancel its investors days.

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Don’t look for defections to Boeing over Airbus delays

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Introduction

June 20, 2016, © Leeham Co.: Recent suggestions and threats that delays at Airbus for the A320neo and A350 means angry customers will flock to Boeing are naïve and grandstanding under the circumstances existing today.

The delays are measured in months, not years. For this reason, Boeing has no ability to fill the immediate needs of any competing airplane to the A320neo and A350.

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