A380 Sales: Orders for the Airbus A380 have been dismal, but Tom Enders, CEO of Airbus parent EADS, sees a turn-around in sales. With the forthcoming Boeing 777-9X, which at 400 seats is considerably smaller than the 525-seat A380, Airbus sees the need to undertake Performance Improvement Packages (PIPs) to improve the economics of the A380. Tim Clark, President of Emirates Airlines and the largest customer by for the A380, has publicly said he wants to see the A380’s engine makers (Engine Alliance in his case) incorporate newer technology from the GEnx and the 777X’s GE9X and Pratt & Whitney’s GTF into the GP7200. The GP7200 is a JV of GE and Pratt & Whitney.
Airbus is also offering an 11-abreast coach seating in the A380, which would add 40 more seats and lower the cost per available seat mile (CASM) accordingly.
The A380 has proved more economical than Airbus expected, but needs a large load factor of at least 75% (393 passengers at the 525 seat configuration) to be profitably, Enders said. In today’s environment, this is achievable but it also demonstrates the risk inherent to Very Large Aircraft (VLA). According to our airline sourcing that has analyzed the airplanes, smaller aircraft, such as the 777X, Airbus A350-1000 and Boeing 787-10 have similar seat mile economics but lower plane-mile costs without the capacity risk. One airline tells us that “if you can fill the A380 and 747-8,” the airplanes have their place. The four-engine VLAs also are better in the hot-and-hgih environment for engine-out and field performance. But clearly these high capacity and hot-and-high markets are limited.
Enders also commented on the progress of the A350 flight test program. This story has detail.
A350 Flight Testing: The second Airbus A350 flight test vehicle has joined the test program.
CSeries Factory: Airchive has a long look at the program in building the new factory for the Bombardier CSeries.
Posted on October 14, 2013 by Scott Hamilton
If some industry observers are concerned about the prospect of over-production now, the current state of affairs may only be the tip of the iceberg.
Airbus CEO Fabrice Bergier says he expects to boost production of the A320 and A350 families over the next few years, overtaking Boeing by 2018.
Airbus currently produces the A320 at a rate of 42 per month. The A330 rate is 10/mo and the A380 at 3/mo. Production of the first customer-destined A350 is to begin by the end of this year, with a targeted delivery in the second half of next year. Ramp-up to an initial production target of 10/mo is planned over a four year period, but the wing factory in Broughton, Wales, has a capacity for 13/mo, inferring a greater rate is already planned. Airbus is considering a second A350 production line, largely focused on the A350-1000.
Boeing currently produces the 737 at 38/mo, going to 42/mo next year. The 777 rate is 8.3/mo and the 747-8F/I rate is 1.75/mo. The 767, driven by the USAF tanker, is 1.5/mo. The 787 is ramping up to 10.mo, with a target by year end, but we believe this will be more likely in Q12014.
Boeing has notified the supply chain to consider higher rates for the 737, 767 and 787. We posted the chart below last June, reflecting the higher planning rates.
ANA to stay with Boeing? After losing Japan Airlines to Airbus, analysts are split over whether ANA will also defect. Some say JAL’s order will give ANA cover to defect. Others say JAL’s order will increase the pressure on ANA to stay with Boeing. The Seattle Times this story. Our take: compare this with what happened following American Airlines’ order with Airbus. The Delta Air Lines competition was next, and Boeing was determined not to lose that competition–and it didn’t. Market talk says Boeing’s price to Delta was 10%-15% below Airbus’ offer, though this has never been confirmed. We understand there were other considerations besides costs. Regardless, both sides are going to go all-out to win.
SuperJumbo Era: The Financial Times has a story about whether the era of the super-jumbo (the Airbus A380 and the Boeing 747-8) is over (free registration required). Bloomberg has a story about the Boeing 777X being a jumbo killer.
Repo Wars: Here’s an departure from our usual coverage–tactics used to repossess an airplane from a delinquent airline. A decade ago, we were involved in a similar situation, planning the repossession of a Boeing 767-300ER from a South American airline. The lessor obtained a court order while we did some behind-the-scenes plotting to “arrest” the airplane at Miami. It was at the gate, full of passengers when the sheriff served the pilot with the court papers. Secrecy was imperative, as the story linked above references. Once the airplane was seized, the airline rescheduled a second 767 to stay on domestic service so the lessor couldn’t seize that airplane, too.
Posted on October 11, 2013 by Scott Hamilton
Low Cost Carriers (LCCs) dominate the backlog of the Top 10 single-aisle customers for Airbus and Boeing, data from the two OEMs show through August.
The importance of LCCs to the OEM backlogs has been increasing during the past decade, as has been the shift over the past 20 years from a dominance by US airlines to non-US carriers.
The backlog of LCCs today demonstrates the shift toward this sector as well as the shift toward non-US airlines.
|
Boeing 737 (All Models) |
|
|
|
Airbus A320 (All Models) |
|
||
1 |
Southwest |
317 |
18% |
|
1 |
Air Asia |
351 |
21% |
2 |
Lion Air |
313 |
17% |
|
2 |
Lion Air |
234 |
14% |
3 |
American |
187 |
10% |
|
3 |
Indigo |
196 |
11% |
4 |
Ryanair |
175 |
10% |
|
4 |
ILFC |
165 |
10% |
5 |
United |
172 |
10% |
|
5 |
Lufthansa |
146 |
9% |
6 |
Norwegian |
162 |
9% |
|
6 |
easyJet |
145 |
8% |
7 |
Air Lease |
151 |
8% |
|
7 |
American |
130 |
8% |
8 |
GECAS |
120 |
7% |
|
8 |
Qantas |
129 |
8% |
9 |
Delta |
100 |
6% |
|
9 |
Spirit |
115 |
7% |
10 |
GOL |
99 |
6% |
|
10 |
Norwegian |
100 |
6% |
|
August 2013 |
1,796 |
|
|
|
August 2013 |
1,711 |
|
|
LCC Total |
1,066 |
59% |
|
|
LCC Total |
1,141 |
67% |
Sources: Airbus, Boeing
For Boeing, 59% of the Top 10 single-aisle order backlog is with LCCs–more than 1,000 737NGs and MAXes. Over at Airbus, the dominance of LCCs is even greater: 67% for all A320 family members, including ceos and neos.
As we reported last week, Asia’s LCC, Lion Air has more firm orders for single-aisle aircraft than any other customer: 547. Lion Air is said to be planning to place an order as early as year end for a “double-digit” number of Bombardier CSeries. The next closest: the USA’s Southwest Airlines, at 317 737s, and American Airlines, with a combined 317 from Airbus and Boeing.
Europe‘s Norwegian has a combined 262 single-aisles on order from the two OEMs.
The dominance of LCCs in the backlogs reflect the changing nature of the airline industry, both in terms of service demand but also with the increasing growth in developing nations, with major growth coming out of Asia–the domain of Lion Air and AirAsia.
It also reflects the strategy of flipping aircraft around the end of the maintenance holidays in six or seven years after delivery, which may be a decent strategy for the airline but one which hazards lease rates and residual values and a potential imbalance of supply-and-demand at that sixth or seventh year. With a much greater reliance on LCCs than Boeing, Airbus’ A320s are most at risk on the RVs and lease rates.
Posted on October 10, 2013 by Scott Hamilton
Washington State is ramping up its all-out effort to land the assembly site of the Boeing 777X.
Gov. Jay Inslee appointed a bi-partisan panel from the Legislature to come up with an incentive package to present to Boeing. He’s already proposed extending the Boeing 787 tax incentives adopted in 2003 another 16 years, to 2040, though these incentives were ruled illegal by the World Trade Organization.
Predictably, Airbus pounced on Inslee’s proposal, though mistakenly assuming Boeing asked for the incentives. According to The Everett Herald, the initiative is entirely Inslee’s. Said Airbus:
This is another example of Boeing’s refusal to accept to play by the rules by continuing to solicit and receive subsidies which are especially potent in distorting trade. The 787 tax credits were ruled illegal subsidies by the WTO in the final verdict of March 2012. After breaking the WTO rules on the 787, with a repeat of measures for the 777X Boeing continues to show total disrespect for WTO obligations and the compliance process.
These are the quotes from the reports on
adverse effects:
– The WTO Panel found that “the availability of … the B&O tax subsidies, enabled Boeing to lower its prices beyond the level that would otherwise have been economically justifiable” (7.1818) giving Boeing a “pervasive and consistent pricing advantage” (7.1819) that is “felt most acutely in particular sales campaigns of strategic importance” (7.1822) and results in illegal adverse effects to EU LCA interests (7.1823)
– The WTO Appellate Body generally upheld that finding (para. 1273), emphasizing the importance of the subsidy given the price-sensitive nature of many sales, and Boeing’s market power in a duopoly context (para. 1260)
The analysis of the B&O tax rate reduction “subsidies” do not provide any great quotable statements by the Panel, which isn’t surprising given that the dollar value of those subsidies was quite low during the period of review, when the subsidy programs were just starting to take effect. The numbers now are much larger!!
The quote on the subsidy side is in 7.302 of the panel report:
“For the foregoing reasons, the Panel finds that the Washington B&O tax reduction; the B&O tax credits for preproduction development, for computer software and hardware and for property taxes; and the sales and use tax exemption for computer hardware, peripherals and software are specific subsidies to Boeing within the meaning of Articles 1 and 2 of the SCM Agreement. The Panel estimates that the amounts of the subsidies to Boeing’s LCA division are $13.8 million; $21.3 million; $20 million; $1.1 million; and $8.3 million respectively”
Inslee’s office said that the WTO ruling is under appeal and until that’s settled, the tax breaks are legal.
Washington has been often criticized, including by its own politicians, as having a worse tax structure than competing states. But Washington has the sixth best tax climate in the country, according to the Tax Foundation. A low number on the map is good.
Posted on October 10, 2013 by Scott Hamilton
Airbus will likely shift the sequence of the entry-into-service of the A350, a customer tells us. Other sources report the same, with another customer calling the prospect of a shift “inevitable.”
A tantalizing clue may have come from Airbus CEO Fabrice Bregier. In Airbus’ own video of Bregier talking about his first ride on the A350, he remarks at 3:10 into the video that the next effort is for “the development of the next member of the family, the -1000.” The subtitles alter this to the next “challenge,” but Bregier’s words can clearly be heard. The Youtube post is below, which is the same as the video on the Airbus website.
[youtube=http://www.youtube.com/watch?v=J6yX-1ESX88&w=420&h=315]
Right now, only one A350-800 is scheduled for delivery in September 2016 (to lessor ILFC), according to one data base, with several more following in 2017–when the more popular A350-1000 is scheduled to enter service.
But Airbus’ media relations department says no re-sequence has been made.
“No change in sequence A350-900 EIS H2 2014, A350-800 EIS mid-2016 and A350-1000 mid-2017,” says a spokesperson.
“The video you refer to was intended first and foremost for internal audiences, and Fabrice was referring to the development effort for the -1000 being the next priority as the -800 is a shrink so less effort than the -1000.”
The -800 is a straight-forward derivative of the -900, with several frames removed from the fuselage. The -1000 has some changes to the wing and a slightly different engine fan diameter than the baseline -900.
Posted on October 10, 2013 by Scott Hamilton
Special to Leeham News and Comment:
Vinay Bhaskara of Aspire Aviation has provided the following analysis of the A350 XWB sales, on a variety of metrics, exclusively to us.
Analyzing the A350 Backlog
With the recent order for 31 A350s from Japan Airlines, we thought it would be instructive to take a look at the A350’s backlog. To date, the A350 has won 759 orders from 39 different customers (we are excluding Kingfisher Airlines in India and its order for five A350-800s – Kingfisher has been shut down for more than a year now, and it’s chances of re-starting appear bleak).
After slow sales in 2011 and 2012, 2013 has been an excellent rebound year for the A350, its second best behind 2007, with 182 orders to date. We expect South African Airways to place its delayed order for the A350s by the end of the year, and there are several upcoming fleet replacement decisions, most notably at ANA and Qantas, in which the A350 is a major player. The chart below shows A350 orders by year since it launched:
Digging further into the backlog, the following two charts discuss the geographic breakdown of the A350’s orders. Asia and the Middle East currently account for more than 55% of the program’s orders, and it has made limited inroads in the Americas relative to the 787.
.
Posted on October 9, 2013 by Scott Hamilton
All Nippon Airways Wide-Body Battle: Having lost a bombshell order to Airbus at Japan Airlines, the focus in Japan now turns to ANA, reports Reuters. Will Boeing shift work from Japan? Reuters has this story.
Boeing’s Top Salesman: Jon Ostrower has a very interesting and candid story about Boeing’s top airplane salesman, John Wojick, and the 787 program. Via Google News in a new Wall Street Journal format, it looks like it’s not behind the paywall.
Delta and the A380: Delta Air Lines flies the Boeing 747-400 but it doesn’t look like it will fly the Airbus A380. See this story by Motley Fool.
Posted on October 9, 2013 by Scott Hamilton
Japan Airlines deal: Two items of note came across our desk concerning the Japan Airlines’ order from Airbus for the A350-900/1000. The first is from Bloomberg, which has an interview with Airbus CEO Fabrice Bregier. Lots of speculation exists that JAL ordered the A350 because of the problems with the Boeing 787. While this may have played a role at some level, Bloomberg reports that Bregier began his efforts prior to the JAL 787 fire in January.
The other is the October newsletter from Richard Aboulafia of The Teal Group that takes Boeing to task for essentially blowing the opportunity to retain JAL’s business for the 787-10 and/or the 777X. At this writing, Aboulafia hasn’t uploaded his newsletter to his website (so keep checking). In a nutshell, Aboulafia raps Boeing management for dithering on both airplanes. Had Boeing authorized the 777X six months ago, Aboulafia writes, Boeing could have kept IAG (British Airways) and if launched in 2012, Cathay Pacific could have been kept.
Aboulafia also predicts JAL’s rival, ANA, will buy the A350. Otherwise it will be at a competitive disadvantage, he writes. The newsletter is quite harsh.
Posted on October 8, 2013 by Scott Hamilton
The flurry of orders in September and this month from Lufthansa Airlines and Japan Air Lines tightens the wide body race between Airbus and Boeing.
Airbus and JAL on Monday announced a firm order for 31 A350s and options for 25 more. Last month, Lufthansa announced a firm order for 34 777-9Xs and 25 A350-900s.
Airbus traditionally has significantly trailed Boeing in the twin-aisle sector, but so far this year the race is running about even through September. The Lufthansa orders for the Boeing 777-9X and the Airbus A350-900, announced in September, are not reflected yet, nor is the Japan Air Lines order for A350-900s and -1000s. None of these orders has been booked yet by either OEM. Airbus would take the lead.
Posted on October 8, 2013 by Scott Hamilton