Premium #171 – The Upside and Downside of New Aircraft Announcements

New aircraft and upgrades to existing models are exciting to just about everyone in the industry – perhaps with the exception of the poor soul whose job it is to continue to sell the existing model.  Airbus, Boeing, and Embraer each have a situation in which a new aircraft have been announced offering significantly better economics than the existing model – the A330neo over the current A330, the 777X over the current 777, and the E2-Jets over the current E-Jets.

The upside for an aircraft manufacturer is building the backlog 4-5 years out when the new program will begin deliveries.  But the downside is being able to continue to sell the existing aircraft successfully while there is a gap between orders and production capacity in the near term.