Klaus Roewe, SVP of the A320neo Family:
There are 2,700 A320neos in the backlog. Roewe provided a program update during the Airbus Innovation Days. Here is a paraphrased synopsis.
The 150 members of the media received an hour-long ride on A350-900 MSN002 (the “carbon fiber” liveried test plane in the Airbus fleet), a rare event.
Entry into the airplane gave a clean, spacious impression, though the Boeing 787 Sky Interior is more visually impressive. The A350, like the 787, has mood lighting.
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:
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.
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.
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.
PeoplExpress, a fast growing no-frills carrier of the 1980s, is returning in name only. A new company, wet-leasing planes from another airline, uses the old name and the most of the old business plan to start service soon from Newport News (VA).
But in an erroneous set of conclusions, some are calling the business plan a radical departure from today’s airlines. In fact, the bare-bones, no-frills service offered by the new PeoplExpress was used by its forerunner and is truly the model for today’s Ultra Low Cost Carrier (ULCC), long before Ireland’s Ryanair and the USA’s Spirit Air adopted the model.
You pay for everything: soft drinks, checked baggage, and so on. There have been refinements since then, expanding the fee-based formula of the original PE, but fundamentally the ULCCs of today are based on the PE of yesterday. The new PE simply follows the ULCC approach.
The new PE will wet-lease Boeing 737-400s from a Las Vegas airline, Vision. Jeff Erickson, former CEO of Midway Airlines, Reno Air, Atlas Air and TWA, is the CEO of PE. We’ve known Erickson for more than 20 years. If PE is well-funded (and we don’t know the finances), we believe Erickson can indeed find a niche for the carrier as legacy airlines continue to give short shrift to smaller markets. Newport News doesn’t strike us as an obvious place to headquarter or hub an airline, but this decision was made before Erickson came on board.