Although Airbus and Boeing came off a record year for orders in 2011 and Boeing is expected to have a record year this year as nearly 1,000 commitments for the 737 MAX are converted to orders, there are plenty of worrisome signs across commercial aviation and throughout the world that this year and next could be worse than appears on the surface. Continue reading
The framework agreement from a year ago has made huge progress. Yesterday’s announcement is remarkable. Never before have two aircraft companies decided to combine their interests quite like this. It is more than ground breaking. For an airline looking at new technologies the combined offering could be very interesting. COMAC has some catching up to do, but with Bombardier’s help that process will likely accelerate. For Bombardier this friendship is pregnant with potential – China is a huge market. Bombardier has been doing business in China a long time and understands the unique challenges that brings to the table. Having COMAC as an ally is only good news for the Canadians.
Talking about the new arrangement being put in place between the companies is Bombardier’s Ben Boehm. Play
The industry rumor mill has been rumbling about this for months. Today it is official. Further to the framework agreement signed on March 24, 2011, Jin Zhuanglong, Chairman, Commercial Aircraft Corporation of China Ltd (COMAC) and Pierre Beaudoin, President and Chief Executive Officer, Bombardier Inc. today signed a definitive agreement covering program commonalities between the C919 and CSeries. More specifically, the two aircraft manufacturers agreed to cooperate on four distinctive projects to be executed as part of the first phase of COMAC and Bombardier’s long-term collaboration on the C919 aircraft and the CSeries families of commercial airliners. Continue reading
This show follows the usual pattern – orders get announced for maximum media coverage. And the orders are big. Boeing started with a massive order – it’s biggest ever – Lion Air of Indonesia finalized a firm order for 201 737 MAXs and 29 Next-Generation 737-900ERs. The agreement, first announced last November, includes options for an additional 150 airplanes. Lion is launch customer for the MAX-9. With orders for 230 airplanes valued at $22.4 billion (list prices), the deal is the largest commercial airplane order ever in Boeing’s history by both dollar value and total number of airplanes.
Not to be outdone, Airbus also made an order announcement. ALAFCO Aviation Lease And Finance Company, a Kuwait-based international aircraft leasing company, finalized a purchase order for 35 A320neo Family aircraft bringing its total backlog for the type to 85. The firm contract is an increase from the previous agreement signed at the 2011 Dubai Airshow for 50 A320neo aircraft.The 2011 neo order included P&W GTF engines so we assume the same applies to the new order as well.
Then another unexpected order popped up. BOC Aviation said it has ordered 20 C919s. There has been little news from COMAC and the C9191 for a while. And keeping the order game going, Bombardier announced and order for five Q400s. This follows news last week of an order for up to 24 CRJ1000s. Interestingly the customers have not been announced though the assumption is that the CRJs are going to Garuda.
The NEO and MAX have taken the market by storm. Customers seem to be willing to stand in line – even though the 787 and A380 programs taught that sometimes one can order too early. Yet the desire for fuel efficient workhorses appears inelastic. Continue reading
This morning CFM provided the following PR: “CFM International (CFM) had a record year in 2011, logging orders for 1,500 commercial, military and spare CFM56 engines and commitments for 3,056 LEAP engines for a combined value of $51.7 billion at list price.
As the company logs record commitments, CFM is also achieving record production rates for the CFM56 product line. The company has built more than 1,000 engines per year since 2006, and the rate has grown steadily. In 2011, CFM delivered more than 1,300 engines, the highest rate in the industry, compared to 1,250 engines built in 2010. Current plans are to reach more than 1,600 engines per year by 2014.”
This is what a great year looks like.
It is the time of year for prognostication. In that tradition, AirInsight will boldly go where all pundits have gone before – but with better accuracy. With our psychic powers in full swing, here are our fearless predictions for 2012:
1. The world will not end – the Mayan calendar was carved on a stone of a certain size, and they ran out of space. Period.
2. Yes, we will see increasing amplitude in climate, natural disasters, and even the location of limited wars and revolutions, with Syria and Iran currently the most likely candidates. But political change will limit the impact of the powers that be today.
3. We will see interim solutions to the Eurozone crisis, as well as the US dollar, as governments and central banks join forces to salvage the financial system and limit future derivatives and risky behavior. We may go back to investing in whole aircraft again, rather than A,B, and C tranches of bundled EETCs and derivatives, if regulators have the intestinal fortitude to increasingly limit derivative instruments. We believe they will, especially with housing assets.
4. Aircraft manufacturers will increasingly become financiers of last resort – constraining capital for important R&D initiatives and new product development.
5. The business aviation recovery will begin, albeit quite slowly, but business jets and turboprops will increase sales in 2012.
6. The new generation of fuel efficient aircraft engines and high fuel prices fueled by political instability will force Boeing, Airbus, Bombardier and Embraer to increase production capacity to meet new demand. New NB aircraft will be sold out thru 2022 by YE 2012.
7. Just as when jets replaced turboprops, some relatively young narrow bodies with older engines will become economically obsolete at a young age, causing some residual value issues for leasing companies and financial institutions. One can’t assume a 25 year economic life any longer for a new A320 or 737NG delivered in 2012.
8. With American in Chapter 11 bankruptcy, expect the America West management team of USAirways to make a run at American, further consolidating the US legacy carriers.
9. The EU emissions trading scheme will continue to be controversial for the foreseeable future, and will likely impact some Airbus orders for China in retaliation, as well as provoke retaliatory actions by the US Congress in the US — which could negatively impact the Eurozone recovery. Brussels hasn’t awakened to reality yet, and likely won’t until the Euro collapses, and the British celebration haunts the continent.
OVERVIEW
2011 was a boffo year, with record orders at Airbus and outstanding orders for Boeing’s 777-300ER. Had Boeing’s 737 MAX commitments become orders by year end, Boeing would have had a boffo year, too. With the expectation that these commitments will become converted to orders this year, Boeing should easily become more even with Airbus. Having been bolstered by some 1,500 neo orders last year, sales can be expected to slow this year because delivery positions are now well out to the end of the decade.
With cargo statistics beginning to soften dramatically toward the end of last year, this usually is a leading indicator of softening passenger traffic. Might this also depress orders? We’ll see.
But in the USA, the New United Airlines is expected to place an order for 150-200 single-aisle aircraft. Proposals from Airbus and Boeing were due in December. The Old United has a large aging fleet of A319s/A320s and Boeing 757s and a smaller fleet of launch-customer 767-200s. This is going to be a big catch, and it will be interesting to see if Airbus can convince United’s new Boeing-centric Continental Airlines management that it should win at least some of the order. Now that Boeing has the MAX to compete with the neo, the competition is much more even than had it been neo vs 737NG.
This will be an important year to watch for Airbus and the A350 development and for Bombardier and the scheduled first flight of the CSeries. This will be an important year for Boeing and whether it can efficiently ramp up production of the 787 and if it can complete on a timely basis all the rework on those nearly three dozen 787s sitting around Paine Field in Everett.
Here is a company-by-company rundown.
AirInsight looks back on the highs and lows in commercial aviation in 2011, all in no particular order.
HIGHS
1. Airbus has runaway success with the A320neo, exceeding its own expectations.
2. After a late start, Boeing clearly shifts into high gear for the re-engined 737 and ends the year with an impressive number of orders and commitments.
3. Pratt & Whitney is back in the small engine game with a series of successes for the Geared Turbo Fan.
4. CFM revamps its LEAP-X after losing key competition to Lufthansa and others and returns with a better design that is more fuel efficient than the first iteration.
5. Boeing has a tremendous year for the 777-300ER order book.
6. Boeing wins the USAF tanker competition, based on the commercial 767, not without controversey
7. Boeing finally delivers the first 787 and 747-8F.
8. Airbus’ success with the A320neo and the monopoly-breaking American Airlines order maneuvers Boeing into abandoning the New Small Airplane replacement for the 737.
SO-SO
1. Bombardier announces new orders for the CSeries but still fails to meet market expectations that are waiting for the “big score.” Broadening the customer base doesn’t satisfy analysts.
2. Embraer plays it safe and foregoes a new, small airplane, opting instead for a re-engine and rewing of the E-190/195.
3. Airbus announces increased payload and a larger engine for the A350-1000, touting improvements—but market reception is decidedly cool.
LOWS
1. “U-Turn” Akbar Al-Baker, CEO of Qatar Airways, stands up Airbus at the Paris Air Show at a press conference where he is to announce orders for the A320neo and A380.
2. U-Turn Al takes his complaints about the A350-1000 public at the Paris Air Show.
3. U-Turn Al stands up Airbus at the Dubai Air Show where he is to announce the order that was to come at the Paris Air Show.
4. U-Turn Al throws a hissy-fit at the Dubai Air Show, claiming Airbus doesn’t know how to make airplanes.
5. U-Turn Al u-turns three hours later and announces the Airbus orders at the Dubai Air Show.
6. U-Turn Al embarrasses Boeing by forcing Cargolux, in which Qatar has a one-third ownership, to cancel delivery of the first
747-8F two days before a media extravaganza/delivery ceremony that includes a rock band. Delivery occurs a couple of weeks later.
7. Atlas Air cancels three 747-8Fs awaiting delivery due to performance shortfalls.
8. IATA elects U-Turn Al to its board of directors.
9. Airbus pushes back EIS for the A350-800/1000 by two years and announces a dix month delay for the A350-900.
10. Boeing is forced to shelve the 737 replacement and proceed with a re-engined 737 MAX after American Airlines defects to Airbus. A clearly uncomfortable Jim Albaugh, CEO of Boeing Commercial Airplanes, has to share the podium with a bubbly John Leahy and Tom Enders as Airbus announces its A320/A320neo order with American.
11. American Airlines finally succumbs and files for Chapter 11 protection under the bankruptcy code.
(Photo – Virginia Mayo/AP)
Earlier this week Ryanair’s CEO was his usual loquacious self. Mr O’Leary has been at this growth phase for a long time and has a successful track record to show for it. But every bubble must burst and we suspect that Mr O’Leary’s growth bubble is about to do just that. Continue reading
There has been talk about this for some time. Today Boeing announced it is going to accelerate 737 production from 31.5 planes per month to 35 per month. It may not sound like much, but that is over 11% faster and consider Boeing delivered 376 737s in 2010. Increase that by 11% and Boeing could deliver 417 737s per year. Consider also that such an increase in deliveries drives a lot of extra cash to the bottom line. Boeing needs that cash because of program delays for the 747-8 and 787. There’s the updated 777 coming too, which will need R&D cash. Continue reading