2023: record sales, metal powder issues, and more

Counting down the days of the year that’s almost past, what have been the most significant events and trends in commercial aviation in 2023? What news stories marked the year? We compiled a few topics. The trend is up 2023 will likely be the last year when the airline industry took the last pre-Covid year 2019 as a reference for how it is performing. As IATA pointed out during its Media Day in early December, global air traffic is within 2 to 2.5 percent of pre-pandemic levels. Domestic traffic is at +4.8 percent, International at -5.6 percent, but the industry’s revenues per seat kilometer (RPK) are at -1.8 percent and cargo tonne-kilometers at -2.4 percent. Yes, there are concerns of a mild to medium economic crisis, but the average GDP seems to continue to grow at 3 percent per year, with advanced economies (the US and Europe) likely to feel the pain more than emerging economies (Sub-Saharan Africa, the Middle East, and Central Asia). China has still not fully recovered from the pandemic, reporting ups and downs in traffic numbers over the year, but it should continue the upward trend in 2024. Passenger load factors also almost returned to 2019 levels and exceeded those in the Middle East, Latin America, and Africa. Airlines are writing black numbers again this year, with IATA predicting a $23.3 billion net profit after tax for the global airline industry. For 2024, this should grow to $25.7 billion, with the number of passengers carried growing from 4.3 this year to 4.7 billion. Order, more orders The past year has been a huge commercial success for airframers when it comes to selling planes. Before December began, Airbus and Boeing signed orders for a combined 2.340 airliners. This number excludes more orders in December for 100 A321neo’s from Avolon, 80 firm A220s, and MAX 8s from Lufthansa Group plus 120 purchase rights, 220 firm orders plus 125 options for Airbus from Turkish Airlines, 157 A320neo family from easyJet, and confirmation of the 90 777X from Emirates that was announced at the Dubai Airshow. The trend this year seemed to buy in big numbers and well ahead on time to secure long-term delivery slots. United Airlines kind of started the trend with big orders for the A321neo, MAX, and 787 in 2021 and 2022, but the US carrier got good company in the triple-digit order league in 2023. The biggest order of 2023 came from IndiGo: 500 Airbus A320neo family aircraft. Airbus CEO Guillaume Faury and IndiGo's Pieter Elbers. (Richard Schuurman) Indigo Partner’s record order for 430 Airbus aircraft at the 2017 Dubai Airshow was broken by IndiGo, when CEO Pieter Elbers put pen to paper for 500 A320neo family aircraft at the Paris Airshow. Air India confirmed and signed its order for 470 Airbus and Boeing products that same show. easyJet placed a follow-on order for 157 A320neo family aircraft this month, and lessor Avolon announced the purchase of 100 A320neo family and 40 MAX aircraft, on top of 40 MAX ordered earlier in the year. Southwest added 108 MAX 7s and 8s to the backlog. Back in May, Ryanair was finally happy to place an order for 150 MAX 10s plus 150 options, which it intends to take up all. In November, Emirates’ order for 90 777X and five more 787s almost gave its access to this year’s 100-club, with SunExpress hitting 90 if orders, options, and purchase rights for more MAX aircraft are put together. Wizz Air’s order for 75 A321neo’s and SMBC Aviation Capital’s order for 60 A320neo family almost look modest, as do United’s follow-on order for 60 A321neo’s and 50 787s, and the firm orders for 39 787s each from Saudia and start-up Riyadh Air. Apart from the big numbers, the orders also confirm that widebodies are hot again. Last year, analysts already predicted the same narrowbody delivery issues for widebodies in the medium term and it seems they have been right. Widebodies are selling out quickly, especially the Boeing 787 and to a lesser extent the A350 too. Supply issues, drilling holes, and powder woes Yes, the supply chain stabilized somewhat during 2023, but not a single earnings call went by without CEOs expressing continued concerns about how their tier 1, 2, and 3 suppliers were still struggling to keep up. And it’s not just engines, remember. Raw materials, seats, and suites were also in high demand and short supply. Airbus stopped sharing quarterly numbers for production rates this summer and only offered medium-term targets like rate 75 per month for the A320neo family in 2026. Boeing had been eager to step up to rate 38 for the MAX in August and 42 by December, but the Americans continued to struggle to stabilize their production rates. Last spring, it was a tailfin fitting issue that required additional rework, followed by mis-drilled holes in the aft pressure bulkhead after the summer break. That’s just on the MAX, remember, as rework on the 787 continued after previous quality issues. Certification of the Boeing MAX 10 should be coming up in late 2024. (Richard Schuurman) Boeing’s permanent headache was called Spirit AeroSystems, its major parts supplier which spun out of control by the quarter. Its Q2 earnings call was one of the most embarrassing of the year when CEO Tom Gentile was grilled by analysts for the lack of progress his company had been making. Not long after, Gentile was ousted and Boeing maneuvered in a successor, together with a bag full of cash and loans to stabilize the ship. In a way, it is surprising that RTX’s top management survived yet another Pratt & Whitney Geared Turbofan issue. While stressing that the GTF is working perfectly, Greg Hayes and Chris Calio had to explain to their customers, analysts, and the media in July that a powder metal contamination issue will require accelerated inspections and replacements of crucial engine parts. The issue will cost some $7.0 billion to solve and will hurt airlines in the months to come, as hundreds of Airbus A320neo family aircraft will have to be grounded. GE Aerospace and Safran have had similar contamination issues on the CFM LEAP, but they have been able to keep airlines mostly happy with a steady supply of spare engines. When it comes to durability, Rolls-Royce may have some work to do to convince Sir Tim Clark that the XWB-97 is fit for purpose for Emirates in the harsh Gulf region after all. Clark used the media at the Dubai Airshow to negotiate his position, hitting a nerve with Rolls-Royce. He must have found out by now that the OEM’s new CEO Tufan Erginbilgic is no slouch and is someone who will go to lengths to convince Clark that the XWB-97 on the A350-1000 is the right engine. Embraer and ATR Reflecting on 2023, we can’t help but think that Embraer and ATR might have had higher expectations. The Brazilians won several orders for the E2 family, notably from Porter Airlines, lessor Azorra, Luxair, and Scoot, but not in the high numbers that it was aiming for. President and CEO of Commercial Aviation, Arjen Meijer, admitted in November that a big-name customer for the E2 is still missing. There might be another opportunity at Lufthansa Group, but the airline’s preference for the A220 over the E2 for City Airlines must have been hard to swallow. ATR was busy stabilizing production this year and is targeting higher rates for 2024 to 2026, but it must hope that it will have a backlog to secure those rates. An order from lessor Abelo for 10 aircraft plus 10 options was one of the biggest, although the French-Italian airframer left the Paris Airshow in June with orders for a combined 22 aircraft plus two options. Both Embraer and ATR were expected to make decisive steps with their new turboprops, but the anxiety of 2022 that surrounded the Embraer TP and ATR EVO has disappeared. The TP is put on hold while the EVO also requires more time to come to fruition. In both cases, finding the right engine for a hybrid-electric configuration seems to be harder than the airframers dared to think a year ago. What’s next in 2024? If IATA’s projections are right and air travel fully recovers from the Covid years, 2024 could be even better than 2023. But that’s without taking geopolitical and economic uncertainties into account. As long as people have jobs and can spend money, they are willing to spend it on travel, says IATA. If airlines will continue to spend money on new aircraft remains to be seen. With the backlogs pretty well filled up, you would think that most airlines have completed their fleet plans by now. Riyadh Air’s narrowbody order, expected in November but not announced yet, could be an interesting and big one. Turkish Airlines still has to reveal a huge Boeing order to complement the Airbus one as it prepares for the 2033 strategy. Thai Airways is also sitting on a big widebody order. As GTF repairs evolve, lessors and airlines that offer wet-lease capacity can look ahead to a good new year as they place older-generation narrowbodies with airlines at higher rates. This is also influenced by new aircraft deliveries, which should be up from 2023. Boeing hopes to deliver the first MAX 7s anytime soon, followed by the MAX 10 later in the year. That’s up to the FAA and other regulators. 2024 should see the entry into service of the A321XLR. Can it meet its projected 8.700-kilometer range, even with additional safety measures around the Rear Center Tank? The Airbus A321XLR is expected to enter commercial service in Q2 next year. (Richard Schuurman) And 2024 should produce clarity on airline consolidation in the US and Europe. The jetBlue-Spirit transaction is set to be approved or denied early in the year, while Alaska Airlines and Hawaiian will need more time for regulatory approval. In Europe, the European Commission will have to decide on three consolidations: the acquisition of ITA Airways by Lufthansa, that of Air Europa by International Airlines Group, and the investment of Air France-KLM in SAS Scandinavian Airlines. You see, there will be plenty to cover for AirInsight in the new year. Stay tuned and consider a subscription to support our work. Make 2024 a good and safe year.

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