It’s over and here are the Airbus and Boeing press releases, followed by some Odds and Ends:
Airbus books almost US$70 billion at Paris Air Show 2013
· 466 Airbus aircraft orders & commitments across all product families;
· A320neo Family retains 60 percent market share;
· A350 XWB, A330 and A380 all continue to outsell the competition.
At the 2013 Paris Air Show, Airbus won US$68.7 billion worth of business for a total of 466 aircraft, which shows the resilience of the commercial aviation industry. The deals comprise Memoranda of Understanding (MoU) for 225 aircraft worth US$29.4 billion and firm purchase orders for 241 aircraft worth US$39.3 billion.
The A320 Family, spearheaded by the A320neo, continues its trailblazing success in the single-aisle market with 371 orders and commitments from six customers announced at the show, worth approximately $37.8 billion. Of these, 88 were for the A320ceo – showing that today’s in-production aircraft is still the most sought-after industry workhorse. A stand-out commitment during the show for the A320 Family was the announcement from easyJet for 100 A320neos plus 35 A320ceos – the winning result of a very intense competition. Another major endorsement for the A320 Family came from Lufthansa with the firming-up of 100 more aircraft. Additional A320 Family orders and commitments came from: Hong Kong Aviation Capital for 60; ILFC for 50; Spirit for 20; and Tunisia’s Syphax Airlines for three – significantly the first A320neo commitment from Africa.
Another star at Paris was the A350 XWB which flew for the first time on Friday 14th June 2013 and successfully completed its second flight on Wednesday 19th June. At the show this aircraft gained 69 more orders & commitments worth $21.4 billion from four customers on different continents. Air France-KLM placed a firm order for 25 A350-900s. Meanwhile, Singapore Airlines, already a large customer for the type, returned to order 30 more A350-900s; United Airlines also placed an additional A350 order for 10 A350-1000s — not only bringing its total A350 orders to 35, but also upgrading its previous order for 25 A350-900s to the larger A350-1000 model to replace its Boeing 777s. In addition, Sri Lankan signed a commitment for four A350-900s to complement an order for six A330-300s at the show.
At the top end of the product range, the flagship A380 received a commitment for 20 aircraft from the world’s third largest wide-body lessor, Doric Lease Corp, in a deal worth more than $8 billion. The contract with Doric is significant as it opens up a new, additional route to market for the A380, which is now available to airlines who wish to acquire the aircraft under the flexibility of an operating lease agreement.
John Leahy, Airbus’s Chief Operating Officer, Customers said: “The dramatic rainfall and thunder storms at Le Bourget this year didn’t dampen our order intake.” He added: “Our A350 XWB has been out-selling the 787 by better than 2- to-1 over the last five years. In addition our A320neo Family retains a 60 percent market share lead. That’s a ‘corner’ I want to stay boxed into.”
Boeing Launches New Commercial Airplane; Highlights Innovation, Efficiency and Partnerships at 2013 Paris Air Show
LE BOURGET, France, June 20, 2013 –Boeing (NYSE:BA) enjoyed a strong and productive Paris Air Show launching its newest model, the 787-10 Dreamliner, announcing important commercial airplane orders and strengthening alliances and relationships with customers and partners around the world.
“The 50th Paris Air Show has been important for Boeing with a number of historic milestones,” said Charlie Miller, Vice President of International Communications. “Our airline customers have strongly endorsed Boeing’s innovative family of commercial airplanes with outstanding orders and the launch of our latest 787 Dreamliner model.”
“The excitement and enthusiasm among customers, partners and suppliers for the products and technologies Boeing showcased across the commercial and defense businesses validated our commitment to innovation and customer focus,” said Miller.
Boeing highlighted its family of efficient commercial airplanes in both the single and twin-aisle market segments. The 787-10 Dreamliner was launched with 102 orders and commitments from five customers, including Air Lease Corporation (30), GE Capital Aviation Services (10), International Airlines Group / British Airways (12), Singapore Airlines (30) and United Airlines (20).
The new 787-10 covers more than 90 percent of the world’s twin-aisle routes with seating for 300-330 passengers. Design of the 787-10 has already started at Boeing and international partners will be involved in detailed design in the months ahead, with first delivery targeted for 2018.
The innovative 787-8 Dreamliner in Air India livery flew for the first time at the Paris Air Show, and the Qatar Airways 787 on static display attracted hundreds of customers, partners, government officials and news media. The ScanEagle unmanned aircraft system, produced by Boeing subsidiary Insitu, was part of the U.S. Corral display throughout the show.
Over the past week, customers have demonstrated their strong confidence in the full family of Boeing commercial products – the Next-Generation 737, 737 MAX, 787, 777 and 747-8, announcing orders and commitments for 442 Boeing airplanes, valued at more than $66 billion. Additional orders for 20 Next-Generation 737s and 20 737 MAX airplanes from unidentified customer(s) were posted on the Orders & Deliveries website today. The number of Boeing net orders for 2013 currently stands at 692.
Boeing announced during the show key partnerships with Embraer on the sales and marketing of Embraer’s KC-390 medium-size transport, and with Sikorsky on a joint venture to compete for sustainment services in support of the Kingdom of Saudi Arabia’ s rotorcraft fleet. The U.S. Marine Corps V-22 Program Manager reported that operational success of the Bell-Boeing tilt-rotor played a key role in the recent award of a $6.5 billion multi-year contract for 99 aircraft. Boeing also announced that work has begun at Le Bourget on a $354 million Mid-Life Upgrade contract with Air France Industries to upgrade four French E-3F Airborne Warning and Control System (AWACS) aircraft.
Customer announcements this week
(Note that Boeing is including a May 31 announcement from TUI in this tally–Editor)
Customer |
Quantity and Model |
Approx. List Price Value |
Status |
(60) 737 MAX |
$6.1 billion |
Commitment |
|
(4) 737 MAX |
$400 million |
Commitment |
|
(10) 787-10 |
$2.9 billion |
Commitment |
|
(2) 777-300ER (7) 777-300ER |
$2.8 billion |
Firm order (2) Commitment (7) |
|
(30) 787-10 (3) 787-9 |
$9.4 billion |
Commitment |
|
(12) 787-10 |
$3.5 billion |
Commitment |
|
(30) 787-10 |
$8.7 billion |
Firm order |
|
(20) 787-10 |
$5.8 billion |
Firm order |
|
(5) 747-8 Intercontinental (6) 777-300ER |
$3.6 billion |
Commitment |
|
(30) 737 MAX 8 |
$3.0 billion |
Firm order |
|
(175) 737-800 |
$15.6 billion |
Firm order |
|
(5) 737-900ER |
$473 million |
Firm order |
|
(3) 737 MAX 8 |
$301 million |
Commitment |
|
(20) 737 (20) 737 MAX |
$3.8 billion |
Firm order |
* First announced by customer on May 31
Odds and Ends
Embarer has good show: Embraer launched its E-Jet E2 with 375 orders and commitments, most for the E-175-E2 75 seat model.
Aerodynamics of the goose in flight: The video is a hoot (or should we say honk); you will enjoy this a lot.
By your finger tips: If you thought the video was a hoot, get a “load” of this story.
787-9F: Boeing plans to make a freighter, some day, of the 787-9.
Yesterday we opined that the Boeing “exodus” from Washington State is a tad overblown so far. Here’s why we think so.
Source: Leeham Co. Market Intelligence. 777 and 747 rates not included.
Will Boeing continue to shift jobs from unionized Washington to non-union states? You betcha. But if these production rates come to pass (and the supply chain will have to gear up to meet these rates), not only will Boeing be adding jobs but so will the suppliers.
Airbus is talking to suppliers about similar rate hikes. For Washington, this means more jobs, to0, because our state is the No. 2 US supplier to Airbus by company count.
The Seattle Times reports that Airbus may consider opening an engineering center in Washington.
Note the comment about the USAF tanker in the story. We asked Gov. Jay Inslee about his relationship with Airbus during a conference call Wednesday, the final one held by the State to recap its daily activities at the Paris Air Show. Inslee bowed out of the trip to deal with Washington’s lack of a budget.
When he was in Congress, Inslee was one of the most vociferous opponents of the Airbus/EADS bid for the USAF tanker in competition with the Boeing KC-767. Inslee introduced legislation to require the Air Force to take into account WTO findings that Airbus received illegal subsidies for the A330, the plane on which its tanker design was based. Even the US Trade Representative’s office said such legislation violated WTO rules and the effort went nowhere.
Inslee’s efforts at the time offended Airbus officials, who were considering holding a suppliers fair in Washington, which is the No. 2 US supplier to Airbus. Because of the vitriolic opposition by Inslee and other members of the Washington delegation, Airbus shelved consideration of the fair.
We asked Inslee Wednesday how he might mend fences now that he is governor, seeking to expand our supply chain business with Airbus. Inslee was beginning to answer when US Rep. Rick Larson, who was leading the State’s Paris Air Show delegation in Inslee’s absence, interrupted to say he had talked with McArtor, who said the tanker wars were over.
Airbus has a suppliers event scheduled here next month.
Boeing has been eliminating thousands of jobs–union jobs–in Washington State and moving them to other states–non-union states.
Boeing won’t say where it will assemble the 777X. Nor will it say where it will assemble the 787-10.
So, predictably, new hand-wringing has begun among local officials and state politicians that Boeing is leaving the state. An “exodus,” in the headline over an OpEd piece in The Seattle Times by State Sen. Mike Hewitt, a Republican.
There is much in Hewitt’s piece with which we agree. Just yesterday we commented that Washington leaves a lot to be desired in its competitive stance against the Southern States. In May we offered specific ideas of what needs to be done.
The State’s new Aerospace Strategy, unveiled in May, reads more like a history than a forward-looking document. And as a state aerospace strategy, it’s woefully lacking in innovation or looking beyond Boeing to the rest of the aerospace industry. Washington’s supply chain is the No. 2 supplier by company count to Airbus and No. 6 by dollar volume. Yet the Aerospace Strategy doesn’t detail how to increase this business with Airbus, nor does it address the rest of the global business opportunities except in the most general way.
Hewitt is right that there is little to really point to in Washington’s strategy. But Hewitt omits the biggest sin of his own party: the Republican budget proposal eliminates funding for the Governor’s Office on Aerospace, which was created less than a year before.
That was a dumb move, and it hardly supports Hewitt’s decrying the shortcomings of the Democratic governors he is so keen to criticize (with justification, we repeat).
Washington’s Legislature, like Congress, is divided, and we’re at a budget impasse. The Office of Aerospace funding is in the Democratic budget, and the contrasts haven’t been resolved. Hewitt needs to buck his party and put this funding back. (Maybe he’s done so, but he certainly didn’t mention it in his OpEd piece.)
But there’s more in the flaw of Washington’s aerospace strategy.
Highlights from the show, as we see it:
To us the biggest news coming out of Day 2 was not the launch of the Boeing 787-10–this was widely expected–but the suggestion by Boeing CEO Jim McNerney that he might seek a waiver to the mandatory age 65 retirement to hang around a bit more.
We comment on this in another post.
Otherwise, today was pretty anti-climactic: Airbus won easyJet–this had been reported as likely. Boeing launched the 787-10 with the expected launch customers. Boeing added five sales to the largely dormant 747-8I program. The Wall Street Journal has a somewhat cheeky view of Airbus’ sales targets, with Boeing’s Randy Tinseth predictably churlish.
And it rained and rained and rained. We’re glad we’re in Seattle.
Boeing’s Jim McNerney may seek a waiver to the mandatory retirement age of 65–he’s 64 this year–to continue as chairman and CEO.
As soon as the news was out, we got a call from one Wall Street analyst who opened the call by saying, “Short the stock.” We initially thought this was some solicitation call.
We’re not that pessimistic but we do have these observations:
We were pretty happy with McNerney’s ascension to chairman and CEO after the disastrous rule of Phil Condit and Harry Stonecipher. But McNerney’s performance throughout the 787 and 747-8 debacles was wanting, we (and many others) concluded. We think McNerney was slow to make changes in these programs, and he was on the Board of Directors who signed off on the McDonnell-Stonecipher-driven outsourcing approach on 787 that proved so disastrous. McNerney has been at war with the unions, who saved Boeing’s bacon during these programs. We certainly understand the need to control costs and we opined a lot on the medical and pension cost issues, generally coming down on the side of the company. But we can’t help but sense ingratitude from Chicago for all the hard and dedicated work performed here in Puget Sound.
Most significant, perhaps, is the thin bench there is to succeed McNerney. Shortly after he became CEO, McNerney said one thing that was his priority personally and professionally was to create a good succession plan. Who is there from within to possibly succeed McNerney in a year or 18 months? The answer is, at this point, nobody.
Ray Conner is well regarded, but he probably needs a couple of more years than a McNerney retirement timeline suggests. Pat Shanahan hasn’t any commercial sales experience. Dennis Muilenburg has no BCA experience.
McNerney may well have to get a waiver because so far he has utterly failed to have a succession path.
Long time readers know that we don’t think much of the veracity of data filed with the US Department of Transportation under Form 41, detailing maintenance and fuel costs. We know from a consultant who helped an airline create its methodology for filing the data that the airline “fudges” the methodology to distort the data for competitive reasons.
Boeing has cited Form 41 data for years in making its comparisons between the 737 and the Airbus A320. A key piece of information Boeing uses is the maintenance cost data, in which Boeing claims the 737 was up to 29% less costly to maintain than the A320. This comparison in particular drives Airbus crazy, and officials say the Form 41 data is “garbage.”
Boeing also previously used a study from IATA from 2006-2009, but dropped that in this year’s comparisons at the pre-Paris Air Show briefings.
Boeing also relies on DOT 41 data for fuel comparisons.
Beverly Wyse, VP and general manager of the 737 NG program, emphasized the reliance on DOT data in the comparisons.
“You don’t just have to believe us,” she said during the briefings. “We know that out there in the market ‘Airbus says,’ ‘Boeing says,’ and it’s hard to find the truth, so wherever we can we’re trying to use independent sources to substantiate the information that we are providing you. This data actually comes from the US department of Transportation Form 41. Depending on the model, and the configuration of the aircraft, the Dash 800 compared to an A320 or the A321 compared to the 900ER, you’ll see between 5% and 8% better fuel efficiency for the 737.”
Wyse credited the 737’s rival with good dispatch reliability, a rare Boeing compliment of the A320. But she claimed the 737 was nonetheless better.
“The A320 and 737 both have incredible reliability. Anything with 99 point something reliability is something to be proud of. The simpler design of the 737 contributes to 20% lower maintenance costs resulting in 67 fewer days out of service,” she says.
Given the reliance on DOT Form 41 data and our open doubts about using this data, we followed up with a series of questions to Boeing. Here is the exchange.
Boeing cites DOT 41 data in claiming the 737NG costs 20%-24% less on maintenance than the A320. First, DOT 41 data is crap. The airlines manipulate the data to mask what their true costs are from competitors. So how does Boeing purport to un-crap it?
DOT F41 data is a good source because it has rigorous reporting processes, contains constant costs in U.S. dollars, and includes reported data by operators who maintain both aircraft fleets, insuring consistent accounting practices. But it is not the only source of data for our claims. That goes toward your second question…
Secondly, Bev in one-on-one said, well, Boeing compares maintenance schedules between the 737 and the A320. Which is it? DOT 41 or company manuals?
The Maintenance Schedules or Check Intervals (that is the interval between performing various levels of Checks, typically classifieds as A, C and D-Checks) are obtained from our company manuals and for the A320, from industry publications and conferences. Specific A320 check intervals are periodically announced in Airbus press releases, journals and conference papers. It may be noted that F41 data provides a look at historic data while the Maintenance Planning Document (MPD) provides the check intervals for the future occurrence of check events. The continuous improvements that occur in the Boeing MPD usually result in even lower maintenance costs to airlines than being currently reported in F41 data. Our focus is to enable the airlines to continuously reduce their operating costs including maintenance costs through better product and services.
Third, I know from my own sourcing from within Boeing that to get to 24%, Boeing has compared new 737s to the oldest A320s using the earliest engines. When new-to-new is compared, the delta is 4% in favor of Boeing. Bev responds to this that this is a fleet-wide analysis.
Bev is absolutely correct; we use fleet-wide data in our comparison. There are many differences in the fleets of different airlines, like airplane age and the average stage length (Fhrs/Trip). Both affect maintenance costs. To enable true comparison, maintenance cost is normalized for a common airplane age. Since A320 is usually an older airplane the normalization process actually reduces the A320 costs to bring it to say a level of 737NG airplane age (say 8 years). Without normalization for age, the cost difference would be an additional 4 to 5% to the advantage of 737NG, but we diligently apply our processes while showing the relative cost and remove this fleet age based difference . Similarly, costs are normalized for stage length and some other factors. All these normalizing processes are approved by the IATA Maintenance Cost Task Force of which both Boeing and Airbus are also members and uniformly used by most of the industry. We compare costs and do modeling in our tools on basis of the normalized costs.
In summary: All maintenance costs are compared on basis of like airplane age. Our multi level data analysis is for “as reported data”, normalized data and data from airlines operating both airplane types. In each case, the airframe costs for the 737NG are lower and on an average 20 percent lower.
Fourth point: If this is a fleet-wide analysis, how is this possibly fair? The NG didn’t enter service until 10 years after the A320, so maintenance on aging aircraft skews everything.
Maintenance cost data is normalized to the same age level for instances where the airplane ages are different. This is done for each airline and then grouped together. The analysis ensured we were comparing like-aged aircraft not the entire fleet. By that comparison, the 737 has about 20% (+/-) lower airframe maintenance cost than the A320. But consider that there also are a number of other factors …
Five facts that drive lower maintenance cost for the 737:
1. Newer simple value added design
2. Lighter weight, smaller size;
3. Fewer systems
4. Fewer installed components
5. Longer intervals; fewer maintenance visits
Airlines believe and give us credit for our maintenance story.
If there were truly a 20%-24% maintenance delta, why would anyone buy the A320? It doesn’t all come down to price, you know. The A320ceo evenly splits the market with the 738 but the A321ceo outsells the 739 by a wide margin and the neo widely outsells the MAX.
Maintenance and its cost is only one of the criteria by which airlines judge airplanes, and a relatively small one at that. Airframe Maintenance is usually 4 to 5 percent of cash operating cost. However, maintenance and reliability plays an important role in the operational experience for an airline. Price is an important factor in airline decisions, but you are correct that it doesn’t all come down to that. As you’re aware, for example, there can be political issues, or even funding issues. As for the division of the single-aisle market, we are very aware of the inroads Airbus has made in its relatively short existence and are very much motivated by that. Arguably, that’s another reason some airlines opt for one plane or another. So, too, is the ability to deliver an airplane when an airline wants or needs it. The on-time reliability of one model or the other can be a factor (while both companies produce reliable airplanes, Boeing’s 737s have better on-time statistics). Too, some airlines prefer to stick with airplanes compatible with their installed fleet to reduce maintenance, training and scheduling costs. The choice is very complex.
I note, too, that this year Bev dropped citing the 2006-2009 IATA maintenance data. How come?
IATA data is used extensively within our own internal analysis. However, we acknowledge that there are some issues with IATA data. IATA airlines do not report data consistently over a long period. They may drop out entirely, miss reporting in some years and new airlines may join for a period. The Form 41 (US DoT) data is mandatory to report and usually aligns with the airline’s Annual Reports reported costs. In addition, variation in currency exchange rates becomes come into the picture. Airlines report in their own currency and that is converted to U.S. dollars. Inconsistency of reporting and the additional currency variable frequently clouds the data.
Bev says, though, that what tipped its use in the end in these slides, however, was that the data we had at the time was old.
We asked Airbus for a response to some of these questions. Engaged in the Air Show this week, we have yet to hear back.