Pierre Beaudoin, Bombardier CEO, discusses the company’s $55 billion backlog and his take on the transportation business. Watch the video to see CNBC’s Mad Money full interview.
Earlier in the day Mr Beaudoin spoke at The Wings Club in NYC.
[UPDATE - The table and blog updated]
Besides seeing its neo sales continue to grow – perhaps not as fast this year as last – Airbus created a race for the two engine firms. The stakes are huge. Both CFM and P&W need to build and maintain momentum. 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.
Airline Business Editor Max Kingsley-Jones wrote an intruiging piece on the Bombardier CSeries in 2012. So we called Max and had a chat about the airplane and its prospects. The CS is seen as living in an awkward segment – bigger than regional jets but smaller than full size airliners. Bombardier is very confident of this segment and the success Embraer has seen in this segment seems to endorse this confidence. Trunk liners have a spotty record all the same. It is a tough space to work in. That said Bombardier needs a few more “big name” customers and these are likely to be forthcoming once the program has better visibility. 2012 is an important year for the program as it approaches the first flight in 2013. Since program delays are “new normal”, airlines are to be expected to hang back until they can more clearly see the program’s milestones being reached.
Today La Tribune reports that Airbus is going to increase the MTOW of the A330-300 by five tonnes to 240 tonnes. This should enable the A330-300 to increase its range by 400 miles. The additional weight will be offset by weight reduction from the design where A340 requirements are no longer needed. The A340 and A330 share a common fuselage.
The move is clearly not only to occupy the segment forgone by the elimination of the A340, it is also an attempt to close the perceived gap between the A330 as we know it and the Boeing 787, which offers longer range.
Airbus newest product, the A350, will be larger than the 787 and similar in size to the 777 series. Boeing has two models that bracket the A350; the 787 at the lower end and the 777 on the upper end. By adding more capabilities to the A330 Airbus closes what many have thought to be a key gap on the smaller side of the market.
According La Tribune Airbus should be able to offer this enhanced -300 between three and four years from now.
The A330 is proving to be a remarkably resilient and flexible design. John Leahy, Airbus COO Customers, points out that since the announcement of the 787, Airbus has sold 740 A330s. Clearly writing off the A330 is premature, and Airbus enhancements should provide additional life to an already successful program.
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.
Cathay announced it was adding to its existing A350XWB order by committing for six additional -900s. The airline now has 36 A350s on order plus two more committed via pre-arranged 12 years leases. These six aircraft are scheduled for delivery in 2016-17.
The selection of this airplane is important because Cathay Pacific is also a significant 777-300ER customer. The A350-900 falls between the 777-200 and 777-300 in size, with 314 seats, falling between the 301 and 365 capacities of the competing 777 models. The forthcoming A350XWB-1000, at 350 seats, will be closer to the 777-300ER, and could represent a potential replacement for that aircraft in the future.
This is certainly an interesting development, given that Boeing will be introducing its revised 777-8 and 777-9 shortly after that timeframe, although it is not expected that the re-engined version of the 777 will fully match the economics of the much lighter, heavily composite A350XWB.
Airlines that operate the 777 are typically very pleased with the airplane, which has been among Boeing’s best products. Cathay has been a particularly happy customer of the 777-300ER. Boeing’s revised 777-8 and -9 models will no doubt continue to build on the success of their -300ER, and we expect the 777-9 to be larger than the existing 777-300ER to improve seat-mile economics.
Cathay has ordered 71 777s so there is no doubting its current commitment to the airplane. But ordering the new technology A350XWB could mean a key conquest for Airbus in the large wide-body twin segment. It appears Cathay is planning on standardizing on the A350-900, and possibly the A350-1000 in the future, for the 300-350 seat segment.
Sending out this chart today, Airbus claims to be the winner in the annual orders race once again. When taking a more detailed look at the numbers, note that just over 85% of these sales are for the A320. The A330 is another bright spot at 6.3% of orders. The A380 accounted for 1.3% of annual sales – a number that understates the value of these sales.
Overall single aisle sales accounted for 91% of sales. The A321 saw a good jump in orders of 109 – but this is only 7.4% of single aisle orders. The A318 saw a net -3 while the A319 scored 19 orders. Clearly the big story here is the success of the neo. Without doubt 2011 was the year of the neo.
In the twin aisle segment (A330, A340 A350) the A340 had no orders, and while the A330 did well, the A350 had a net loss of 31. Among the A350 cancellations the A350-900 saw 61% of the cancellations. The increase in A380 orders should have been much better – there were 29 orders but ten cancellations.
Airbus has 12 new customers on its list. That’s a 19% growth in customer base.
When looking at deliveries Airbus provided the following chart.
Of the deliveries, 78.8% were single aisle – compare this to the 91% among the orders. The A320 accounted for 73% of deliveries compared to 85.9% of orders. Clearly the A320 is Airbus’ “bread and butter” program. The A330 generated 87 deliveries (16%) and the A380 26 (5%). We anticipate Airbus will at least match the A320 and A330 deliveries in 2012, but do better on A380 deliveries.
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.