DBEA55AED16C0C92252A6554BC1553B2 Clicky DBEA55AED16C0C92252A6554BC1553B2 Clicky
June 20, 2024
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The bucolic scenery outside the event belies the cerebral goings on inside.  The caliber of speakers today have been simply outstanding.  Attendees unquestionably are now as briefed as anyone can be on the state of play at the big four OEMs, each of which had a chance to present today.

Before we got to the OEMs, Dr Adam Pilarski from Avitas provided an excellent summary of what the OEMs are facing.  Dr Pilarski was at his usual best when he produced this image – which used to explain that in the competition between strategists/marketers and analysts, the former always win. With one particular image Dr Pilarski illustrated why at Airbus there was really no choice on developing the A3XX into the A380 and by the same thinking the NEO was simply something they had to do.

There was nothing to discuss – the strategy overwhelms whatever apparent logic may be at play. There somethings you have to do if you’re in this business.  It was a great way of explaining what for Airbus was an imperative.  The point here is also that this business will be driven by vision as much as engineering.  In the end the engineers may not be the ones making the big picture decisions – their task is to create in a physical sense what the visionaries conceive.  Dr Pilarski also made it clear – he thinks Boeing will announce a re-engine program for the 737 by year’s end.  He made another point that was fascinating as it was counter-intuitive.  Oil producing states may be political upheaval. If Saudi Arabia goes next we might see oil at ~$250.  But in the next ten years it will be back at ~$40 because OPEC wants to sell oil, regardless of who is in charge.  And may of the fleet decisions being made now only matter in ten year’s time when new airplanes get to EIS.

Airbus kicked off with its market review. As expected the presentation spent a lot of time talking about NEO.  Airbus makes a compelling case for its airplane.  They state that much of the advantage the Bombardier CSeries has is eclipsed by NEO. At the same time Airbus does not see how Boeing can do much more than what they have already – for example they cannot benefit from winglets because they already have these and new engines present as much of a challenge as an opportunity.  The gauntlet was thrown so to speak.  And the reason that Airbus feels this is the case is quite simple – oil prices will drive fleet decisions.  This view juxtaposes interestingly with that of Pilarksi.  Take a look at this next image to see how crucial oil is when viewed through an airline’s glasses. Oil prices have become a huge driver in airline costs.  The longer the current oil spike continues the greater the pain for airline planners.

What Airbus is saying is that looking at something like their NEO is a way to ameliorate this impact. Of course it will take some time (2016 at earliest) to benefit – but Airbus is offering “sharklets” (winglets) to customers now.  There was also quite a bit of time spent demonstrating how Airbus’ A380 trumps the 747-8i in cost terms – along with suitable customer testimonials.  It was a tour de force and quite a compelling case that the A380 is the new standard to beat in the VLA segment.

Boeing was up next with a presentation by Jim Albuagh.  The sentiment seemed to be they have learned lessons from the 787 program – tough lessons.  Consequently they are being cautious though he said they are in the midst of a most exciting time.  They will bring the 787 and 747i to market in a deliberate way.  Yes he spoke about the 787-10.  He believes the primary goal at Boeing to build the best airplanes in each segment they are in. He said customers want reduced complexity and protected residual values.  They will keep building the 737NG and focus on what the customer wants.  Boeing thinks the Airbus NEO merely catches up to the 737NG.  On the re-engine issue – no decision yet but does not look like it will happen.  Customers tell Boeing they want a big improvement but Mr Albuagh sees them building the 737 for many years yet. It seemed a steady as she goes presentation.  There was a flashy (and loud) video in the middle which stressed the people of Boeing on the shop floor speaking with pride and confidence.  Obviously there was some pleasure in mentioning the tanker win, too.

The Boeing presentation stressed the firm’s focus is on what customers want.   In that light Mr Albuagh stated they don’t see as much pressure as others allude to on the 777.  Similarly he pointed to the robust 737 backlog as support the company is doing things right.

Then it was Bombardier’s turn and Commercial Aerospace President Gary Scott did a presentation that was rather novel – he spent a lot of time telling the audience that Airbus and Boeing produce great planes, but just not planes optimized for the <150 seat segment.  he pointed out that for example an A319neo weighs in some 12,000 LBS more than the CS300 for the equivalent seat capacity.  This is broadly equal to 50 seats and one has to wonder how Airbus thinks their A319neo can compete – as Mr Scott said, you can argue with physics.  We have a video of a chat we had with him that reinforces his key points.

Then came Embraer, Paulo Cesar de Souza e Silva, EVP Arline Market explained his company has two more e-145s to deliver, after which that program will close down.  The focus for the company will therefore focus on the larger E-Jets family (E-170/5 & E-190/5).  Mr de Souza made a compelling  case for this company’s airplanes being the best for the replacement market. He pointed out that Flybe in the UK was using E-170s to replace Q-400s.  This is a source of pride as turning over a customer is always a good thing.  Indeed Embraer put up some good customer quotes saying their E-Jets offered mainline type comfort at regional jet costs.

In conclusion the caliber of the presentations was top class.  Attendees clearly have an excellent update on the four OEMs and their current thinking.  It is no wonder this event is held in such high regard and attracts the industry’s top managers and thought leaders.

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