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 4. Propulsive efficiency April 19, 2024
- Boeing unlikely to meet FAA’s 90-day deadline for new safety program April 18, 2024
- Focus on quality not slowing innovation, says GKN April 18, 2024
- Boeing defends 787, 777 against whistleblower charges April 17, 2024
- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
A380neo becoming a reality
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Introduction
We last looked at the Airbus A380 economics in February, when the airframer was promoting the giant airplane as a 525 seater. Since then, Airbus recast the airplane as a 555 seater. This changes the economics somewhat. Further, Airbus is floating an 11-abreast coach configuration vs the out-of-the-box 10 abreast.
Tim Clark, president of Emirates Airlines, continues to press for a re-engined A380. In our companion Assessment of the Very Large Aircraft market, consultant Michel Merluzeau believes Airbus will re-engine the airplane.
So do we.
It has been pretty clear to us that Airbus will do an A380neo. The question is when. Emirates’ Clark last month predicted the decision would be taken within six month. Our latest Market Intelligence says he will be right; we understand that Airbus is right now preparing for an A380neo project.
Summary
We thereby see the time ripe for looking into the A380neo again. When we last covered the subject (Updating the A380: the prospect of a neo version and what’s involved, Feb. 3, 2014) we concluded:
• The present configurations for the A380 of 525 seats fills the A380 to a much lower density than is the norm today.
• A cabin configuration of 555 seats would be a realistic three-class configuration with the economy section on the lower deck still in a spacious 10 abreast with seat width at 19 in.
• The efficiency of the A380 filled to that low density was on par with the best per seat benchmarks in the industry, the Boeing 777-300ER with the economy section in a tight 10- abreast, 17- inch configuration.
• The best in market benchmark would move considerably when the Boeing 777-9X enters service 2020. The per fuel seat cost would then we almost 20% lower than today’s A380.
Today our article shows:
• A re-engined A380neo, with other improvements typical in such an endeavor, reclaims the per-seat advantage for the A380.
When re-running the data in our proprietary model, we have more and better data around the likely engine variant, the Rolls Royce Advance, which was announced by Rolls Royce in March. It will be available for an A380neo rolling off the production line 2020. We have also put in more work into our standardized cabins, adjusting the relationship between premium and economy seating to a ratio closer to the one airlines use today. Airbus has also been active on the A380 cabin side. It has had several studies how to better utilize the cabin space in the A380. The results are now presented to the market.
In a recent A380 update, Airbus showed an 11-abreast main economy cabin with 18 in seats, now without raising the cabin floor to fit the seats. By adjusting how the seats interfaces the cabin’s sloping walls, Airbus avoids changing the floor height in part of the cabin.
We will now use this latest data to check where an A380neo would stand in terms of efficiency against the Boeing 777-9X, its most difficult competitor when it comes to the cost of transporting passenger from A to B. In later articles we will look at a more complete cost picture and also look at the A380’s strong side, the revenue and yield when one can fill the aircraft. Read more
Assessing the VLA market
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Introduction
The business model for the Airbus A380 and its future has long been subjects of sharp debate.
Airbus launched the giant airplane in 2000, with a maximum capacity of 850 passengers and a typical airline configuration of 500-555 (though some carriers have fewer than 500). The airplane would compete with the Boeing 747, then holding a monopoly in the Very Large Aircraft (VLA) category. Airbus concluded there was a 20-year market demand of about 1,300 VLAs, of which it expected to sell 650. Boeing already was beginning to move away from the VLA sector with a hub-bypass strategy evolving from the Boeing 777 and Boeing 767 medium-twins.
While many analysts, consultants and Boeing criticized and even ridiculed the decision by Airbus to proceed with the A380, officials have stubbornly clung to the forecast of a demand requiring 1,200-1,300 VLA passenger aircraft each year for the next 20 years. Sales have remained disappointing every year, with net orders of just 318 14 years after program launch. There should have been sales of 910 VLAs by this point to meet the 20 year demand suggested by Airbus in 2000.
Summary
- Residual values and secondary market worry some.
- Emirates Airlines, the largest A380 customer, isn’t worried about RVs and resales, plans to store and scrap its aircraft when time comes.
- Re-engining and/or operating the A380 at much higher capacity is necessary to lower CASM.
- Boeing 777X threatens A380 despite its own limited market demand.
- One consultant sees A380 coming into its own in five years.
Airbus, Boeing production gaps for the A330, 777
Airbus last week announced it will reduce production on the A330ceo from 10 per month to nine per month, beginning in 4Q2015. We predicted in 1Q2014 that the rate would have to come down, due to the sharp decline in the backlog beginning in 2016.
Buckingham Research Group included this chart in its note Friday about the Airbus A330 production rate cut announcement from 10/mo to 9/mo in 4Q2015. BRG predicts a 777 cut from 8.3/mo to 4.3/mo in 2017. We think the rate will step down, first to seven and then to five, before production of the 777X begins. Click image to enlarge.
We also predicted then that Boeing will have to reduce the production rate on the 777 Classic due to its sharp decline beginning in 2017.
Boeing so far continues to claim that it can maintain its production rate at 8.3/mo right through the introduction of the 777X into service in 2020. We don’t believe it can. We’ve illustrated why we believe a rate cut is inevitable. Buckingham Research Group, in a note issued Friday following the Airbus announcement, neatly encapsulates the data in a single chart.
Odds and Ends: Airbus to lower A330 rate; Mitsubishi MRJ rollout Saturday; Delta retiring 747s; Enders slams German government; MC-21
MC-21 will claim 10% of world market: So Irkut claims. Here’s a 10 minute video.
Update, 7am PDT Oct. 17: Airbus announced it will lower production rates on the A330ceo from 10 to nine a month in 4Q2015. We believe this is a first-step. The backlog drops sharply in 2016. The first A330neo isn’t planned for delivery until December 2017 and we believe rates will come down once more in advance. At the Farnborough Air Show, John Leahy, COO Customers, said he believes rates for the neo will settle in around 7-8 a month/ we think ceo rates will come down to reflect this.
Mitsubishi rolls out MRJ Saturday: You can watch it live, at 2pm Japan time.
The MRJ 90 is Japan’s first home-grown commercial airliner since the YS-11 turbo-prop, which entered service in 1961. As we noted Wednesday, the MRJ has collected a good number of orders, but the customer base in small.
The MRJ is 3 1/2 years late.
Aviation Week has this feature.
Here is a link to a brochure.
Delta retiring 747s: Delta Air Lines said during its earnings call Thursday that it will retire its Boeing 747-400s in 2017. These airplanes were acquired in the merger of Northwest Airlines, which was the launch customer of the 747-400. Delta is replacing the 747s with twin-aisle, medium-sized airplanes.
Enders slams German government: Tom Enders, CEO of Airbus Group, slammed the German government over its position on defense exports.
Enders, a German, has long been critical of German government policies, and has been moving operations into France as a result.
We find Enders’ candor to be refreshingly frank. Most CEOs tend to hedge their opinions.
Odds and Ends: Interior options; A350 first delivery; Airbus’ Indigo order; AirAsiaX; LGA’s 75th
Interior options: “The seat market for Airbus and Boeing aircraft will require over 3.4 million seats from 2014 to 2020, “it’s an unprecedented situation for the supply chain, and challenges remain as to its ability to fulfill such high volumes over the next 5-7 years,” says Michel Merluzeau, managing partner of G2 Solutions of Kirkland (WA).
In a new report, “Aircraft Interiors Market Analysis. Part: 1 Major Airlines Seats Forward Fit and Selected Retrofit Markets,” G2 Solutions says that “incorporation of composite materials into seat structures will enable a greater range of configurations, and complement an 18-24-month In-Flight Entertainment (IFE) renewal cycle. “The proliferation of personal tablet devices has IFE becoming a complement to passenger entertainment and no longer the sole option. This will ease the pressures on IFE innovation cycles with increasing focus on software and connectivity elements displacing hardware issues over time,”
G2 reports that there will be 3.4m seats required just for Airbus and Boeing aircraft through 2020-a mere six years from now.
Part 2 of the study will address regional aircraft market opportunities for seat manufacturers and suppliers.
G2 Solutions announced the results of the study at the Passenger Experience conference in Seattle.
A350 first delivery: We believe the first deliveries of the Airbus A350 will be in December for two to launch customer Qatar Airways. Given that it’s Qatar and U-Turn Al Baker has a history of making life miserable for Airbus (and Boeing), we’re not betting the farm on this one.
Airbus’ Indigo order: Airbus yesterday announced an order from Indigo from India for 250 A320neos. We’re pretty stingy in reporting orders, but this one is noteworthy for a couple of reasons. In one fell swoop, Airbus catches up, or nearly so, to Boeing’s YTD net orders (and we didn’t even have to wait for the “5th Quarter” Airbus is famous for).
Secondly, Indigo now has more than 500 A320s on order. Indigo is one of those carriers that we have on our watch list as way over-ordering.
- Boeing’s rep in India reacts to the Airbus order in this interview.
AirAsiaX: The low cost, long haul carrier says it might defer Airbus A350s on order, according to Reuters. The carrier also orders 50 A330neos. This is another airline from the region we have on our watch list.
LaGuardia’s 75: NYC Aviation has a nice tribute to the 75th anniversary of New York LaGuardia Airport, complete with photos.
Part 1–Boeing 757: An analysis of facts and myths
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By Bjorn Fehrm
Part 1 of 3
Introduction
The Boeing 757 was developed in the late 1970s as a replacement for Boeing’s popular 727 mid-range single aisle aircraft. Starting from the smaller 727, it ultimately grew to 180 to 230 seat capacity and US transcontinental range. With initial orders from Eastern Airlines and British Airways, the aircraft nonetheless had poor sales through most of the 1980s, picking up with a surge of orders in 1988-1990 when major deals were announced from American, Delta and United airlines.
Figure 1. Boeing 757-200 of launch customer Eastern Airlines.
Following the 1991 Persian Gulf War and recession, orders plunged until the mid-decade with a respectable resurgence. After 9/11, sales dried up and Boeing terminated the program.
Summary
- The 757 program had slow sales in its first decade, robust sales for a few years then declining sales through most of the 1990s.
- Sales were respectable in the late 1990s but dried up after 9/11.
- Boeing efforts to boost sales with the 757-300 were a failure–only 55 were sold. 757F sales were a moderate success.
- The 757-200 had strong engines for its time (especially the Rolls Royce equipped models), we dissect if this is still true.
- With the 757 being the only narrow-body with trans-Atlantic range, what is missing from today’s Airbus A321 and Boeing 737 MAX9 to make the cut? What can be done with small changes will be answered in part 2.
- How will a future clean sheet NSA perform compared to these three? How much of a game-changer will a clean sheet design be if it enters service 2025? We look at the answers in part 3.
Boeing cargo forecast: 540 new 777F, 747-8F category deliveries over 20 years
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Introduction
Boeing forecasts a requirement for 540 new cargo aircraft of 80 tonnes and up over the next 20 years. This is for airplanes in the Boeing 777F and 747-8F category.
Another 250 new-build cargo airplanes in the 40-80 tonne sector are also forecast in the latest Boeing Cargo forecast for 2014-2033, issued this month. Boeing also forecasts 1,330 P2F conversions.
The forecast is premised on an expectation that cargo traffic will grow at an annual rate of 4.7%.
The forecast appears to fly in the face of conventional wisdom.
Summary
- New-build freighter deliveries lag at Airbus and Boeing.
- Freight is increasingly being carried in the bellies of passenger aircraft.
- Airbus, Boeing orders for new-build freighters stalled.
- Cargo load factors dismal.
- IATA data points to continued challenges.