Leeham News and Analysis
There's more to real news than a news release.
Growth Frontiers 2015 conference: Fuel prices and the order bubble
By Bjorn Fehrm
18 Jan 2015: The subject of the first day at the Growth Frontiers 2015 in Dublin has been very much “what will happen with lower fuel prices”. The conference is the yearly gathering of the aircraft financing community with investors, banks and lessors gathering to learn how key factors in the market affect their industry. With the first day behind us, it is clear the top subject is the low fuel prices and how these will affect aircraft orders and prices going forward.
Interview with Airbus CEO Fabrice Brégier: Airbus and innovation
Subscription required
By Bjorn Fehrm
Introduction
18 Jan 2015: When visiting Toulouse last week we got the opportunity to talk to Airbus CEO, Fabrice Bregiér, on one of his pet subjects: the need for Airbus to be more innovative.
Background to the discussion was that we had observed that Airbus, after decades of a high innovation level, higher than its main competitor Boeing, had slipped behind in the last decade. We wanted to discuss this with Brégier, who has during his tenure, elevated the innovation theme to one of his top priorities. We wanted to see if we had consensus on the past and understood Airbus way forward.
Summary
- A380 problems undercut subsequent innovation; but
- Airbus still maintains innovative lead, Bregier says;
- A350, A320neo, A330neo examples of innovation; and
- Don’t need to overreach when benefits aren’t there.
A321neo configurations and A320 production
By Bjorn Fehrm
18 Jan 2015: As part of the preparations for the Airbus A321LR article 15 Jan. we saw a need to clarify with Airbus the production configurations for A321neo. There had been several iterations of what will be produced come mid-2018 when the A321neo variant is scheduled to roll off the FALs at Airbus in an enhanced Airbus Cabin-Flex (ACF) variant.
This variant features a three-door pairs layout that allows a raised max passenger limit by virtue of displaced door three and an addition of a second overwing exit. Recent media articles have suggested that both the initial four-door variant as well as the three-door variant would be available.
Airbus formally launches A321LR; we look behind the “LR” to see what’s there
15 Jan 2015: Airbus officially launched what to date has been called A321neoLR as the A321LR at their annual press conference Tuesday. The former A321neoLR name was formed by Leeham News on 21 Ocober 2014 when we could reveal the existence of a A321neo variant which Airbus had started to present to airlines at the time. The final name kept the LR attribute used in the article to distinguish the longer range variant from the standard A321neo.
The A319 has used the LR designation but its use has been limited. The suffix is more commonly identified with Boeing, used as it is with the 777-200LR. Boeing has also commonly used the ER for extended range like 777-200ER, 737-900ER and 777-300ER.
Interview with John Leahy: A380 sales strategy going forward
Subscription required
Now open to all readers (Fe. 15, 2015)
By Bjorn Fehrm
Introduction
Jan 14 2015: In our deep analysis of the Airbus A380, we concluded that there is nothing wrong with the basic economics of the giant airplane. In fact, with today’s fuel prices, the aircraft’s Direct Operating Costs (DOC) are 20% below its alternatives in the market. Yet the aircraft is experiencing its worst sales drought since its launch, despite adding a leasing alternative during 2014 and efforts by Airbus.
To understand why and what Airbus plans to do about it we arranged for an exclusive interview with Airbus Chief Operating Officer-Customers, John Leahy, at the sidelines of Airbus annual press conference.
Summary
- Our assessment of A380’s cost of operation
- Operating airlines experience with the A380
- Airbus sales strategy to date and changes going forward
Market potential for A321LR
Here’s how Airbus sees the market potential for the A321LR, going well beyond the 50-60 Boeing 757s flying the Atlantic and some limited operations on other routes.
Airbus believes the A321LR will expand the market considerably over the Boeing 757 long-range routes today. Source: Airbus.
Customer Quality counts as much as orders, says Boeing
Subscription Required
Introduction
Jan. 14, 2015: Customer quality counts as much as the raw number of orders, a top Boeing official said yesterday during a bit of counter-programming on the day Airbus held its annual press conference recapping the previous year’s orders and deliveries.
In a tele-press conference, John Wojick, Boeing SVP of Global Sales & Marketing, said, “It’s not just orders, it’s also about the quality. We work very hard to do business that will actually get to deliveries. We have a much stronger history of orders-to-deliveries than our competitor.”
Summary
- Wojick has a point: Boeing’s customer quality orders historically have been better than Airbus; but
- This is changing. Our Storm Warning Flag assessment shows an improved Airbus customer quality base among the top orders.
- Both companies overbook in anticipation of cancellations and deferrals; Airbus is more aggressive in this practice.
- Airbus had three times the cancellations in 2014 as Boeing.
Odds and Ends: More from Airbus annual press conference; IAM focuses on wages
Jan. 13, 2015: More from Airbus: Airbus held its annual press conference today in Toulouse, reporting its full year 2014 orders and deliveries results. Our Bjorn Fehrm was there and filed a report from the event. He will have more this week. Here are some stories from other media.
Reuters: Airbus to juggle production, defense A380. Airbus says it will likely take A320 production about 50/mo. We reported months ago the supply chain has been notified to prepare for rate 54 in 2018. Airbus also said it will bring A330ceo production down after 2015. We predict 5-6. Decisions are to be made in the coming months.
Bloomberg: Airbus to add 20 passengers to A350-1000.
Aviation Week: Airbus formally launches the A321neoLR. You read this plan here first last October.
Seattle Times: Boeing is No. 1 by some metrics. Dominic Gates takes his usual thorough look at the bragging rights of Airbus and Boeing.
IAM on wages: Boeing’s touch-labor union, the IAM 751, says a Washington State study about aerospace jobs shows 58% of non-Boeing aerospace jobs in the state are paying less than $15 per hour.