In reviewing Airbus’ O&D numbers, it helps to have perspective. We examined Airbus O&D data from 2000-2017 to provide a longer-term viewpoint. The results are quite interesting. Let’s begin with single-aisle orders, as shown in the chart below:
The order levels from 2014 onward are remarkable. Airbus‘ sales team continued to build on record backlogs in 2017. As we noted in our earlier review of Boeing’s year-end results, we expected 2017 to be a “down” year – but it certainly wasn’t. Perhaps one of the most significant aspect is the substantial rise in A321 sales activity over the last seven years. The chart shows this to good effect. While neither the Boeing MAX10 nor A321neo provide a true Boeing 757 replacement, the A321 comes much closer to the mark than its competitor and is dominating the high end of the narrow-body market.
The big story in 2014 was the A320neo and the success of this aircraft has continued since then. While Boeing has seen its MAX orders dominated by the MAX8, Airbus has seen a more balanced interest in the A320neo and A321neo. Airbus simply has a more effective narrow-body family on offer.
From another perspective, the following chart shows the explosive order tsunami for the neo family of aircraft from Airbus. Even as the A319ceo and A320ceo slipped in orders, the A321ceo remained a strong player as the neo program gained momentum and production volume.
Airbus has been weaker than Boeing in the twin-aisle market. The next chart illustrates how this has played out. For Airbus, its primary twin-aisle tool has been the A330. Airbus tried to work with the A340, but even with a revised generation, a four-engined model was unsuccessful in our two-engine world. The A380 has not been as successful as Airbus would have liked, and represents only a small factor in their order numbers. With their flagship being most expensive aircraft on the market and the seat-mile costs of competing aircraft close to its numbers, the aircraft has not sold well. It appears that this aircraft was a decade before its time, which will occur as airport congestion increases over the next decade. But by them, it will likely be too late.
Airbus twin-aisle orders slowed markedly after 2013. It was in 2013 that Boeing had its first blowout sales year on the 787 after the earlier stumbles. While the A330 soldiered on doing well as the 787 stumbled, by 2013 Boeing had stabilized the 787 program and found a strong market one the program matured. Airbus had been working on a response in the A350XWB, but itself stumbled in bringing the aircraft to market on time.
This lack of clarity may be why Airbus twin-aisle orders softened after 2013. Airbus offered the market a clear vision of what the A320neo program was going to be and the response speaks for itself. There was a lack of clarity about the A350 which hurt orders. However, 2013 was also a good year for Airbus as it was the period with the highest order rates for A350 (239). Prior to 2013, the A350-800 had already lost momentum and the A350-1000 was getting spotty interest. The A380 remained a niche aircraft despite herculean efforts to win orders. Airbus’ sales team had the A330-300 which was their best seller and had to wait for the A330neo to see a jump in interest. In the four years that A330-900 has been offered, it has already won 38% as many orders as the A330-300 which has been on sale for 12 years. Still, Airbus cannot be pleased that the A330neo program hasn’t been a better seller. The A330neo program flight test has been going well and perhaps this will rekindle interest from the many A330 customers wanting to update their aircraft. EIS is expected in mid-year and this might bring in fresh orders.
The following chart provides a different perspective on Airbus twin-aisle order history. Since the recent peak in 2013, sales have been less than what Airbus had hoped.
Where is Airbus seeing its orders come from? Asia is the fastest growing market, as one would expect. Airbus has been doing well in Asia for several years. But Airbus also does well in North America. Despite all the focus on the Middle East, we can see that it is not a high volume market for Airbus, focusing on twin-aisle aircraft. However, Emirates is critical to the A380 program as it is the aircraft’s largest operator and one that will essentially dictate the future of the program.
Single-aisle deliveries have not grown as rapidly as orders, as Airbus has been adding incremental capacity in several steps in recent years, and plans additional growth in the monthly production rate to continue through 2020. The A320 continues to be the key program in single aisles, as the A319 fell out of favor some time ago. The A321 is proving to be increasingly popular, resulting in steady upsizing in capacity. The case for potentially stretching the A321 on the table and could capture much of the market Boeing is planning to attack with its new middle-market small twin-aisle aircraft.
Looking at twin-aisle deliveries, several items stand out. The first is Airbus dependence on the A330 is apparent. The A350 is surging in deliveries as production is slowly being increased. Airbus got the A350 right, especially the -900. Larger capacity will be provided by A350-1000. The A330neo, especially the -900 provide coverage for the smaller end of the market, and will compete with 787 models, trading capital cost against efficiency.
The A380 is on watch as its future is, in our view, subject to a battle of wills between Emirates and Airbus. The idea of offering China part of the program has not yet elicited a positive response. Even should Emirates order additional aircraft, the volume of A380s will likely remain small, and the Airbus twin-aisle segment will be dominated by the A350 program, with support from the A330neo.
If Airbus is able to increase interest in the A330-800neo and also stretch the A321, they will effectively bracket the Boeing NMA. Such a strategic move by Airbus could make the NMA business case considerably tougher at Boeing.
Next looking at where Airbus twin-aisle deliveries go, the chart shows how important Asia is. Airbus has three primary markets, North America, the EU and Asia. Note the Middle East is a rather small part of the business, despite the attention it attracts.
Looking at deliveries,the following chart shows that Airbus is more concentrated in Asian deliveries than Boeing. Airbus has nearly half its deliveries in Asia compared to 27% for Boeing.
Airbus has its single-aisle programs humming both in terms of orders and deliveries. It was first mover with the neo, and has moved ahead of Boeing and also managed to acquire the Bombardier C Series program. With the C Series to become part of the Airbus arsenal, Airbus will be very strong from 100 to 250 seats, with multiple offerings. The potential for a larger A322neo would all but lock up the high end of the narrow-body market.
In the twin-aisle segment, Airbus has two offerings in the A350 and A330neo. But this combination is not optimal to fend off the Boeing 787 and 777X. The gap between the A350-1000 and A380 is quite large, and Airbus lacks a direct competitor to the 777-X models in the 400 seat range. The future of the A380 remains uncertain and dependent on Emirates.
Airbus is strong at the low end of the market, and has effectively bracketed Boeing’s 787-8 and potential 797/NMA in the mid-range with the A321, potential A322, and A330-800. But it is unclear if the A350-900 and -1000 will become the favored solution for airlines wanting to replace their existing 777s. vis-a-vis the 787-9, 787-10, and 777-X models from Boeing, which has the lead in the twin-aisle segment.
With more orders than Boeing for the last several years, Airbus is slowly increasing production and should pass Boeing for leadership in deliveries by 2020. Airbus appears well positioned for the future, and has the capital to launch one or two new programs quickly. Boeing, with the 787 overhang, 777-X, and potential 797, is not in a position to launch another new program in the near future. As customers tend to gravitate to newer and more efficient models, the question is where and when Airbus plays “leapfrog” with a new program. Stay tuned.