Premium # 172 – Paris Preview

With the Paris Air Show only a couple of weeks away, the industry rumor mill has begun to anticipate what we’ll see. For each major player, here are some expectations: Airbus: There will be no new product announcements from Airbus, as it is premature for the A380neo. We expect the A321LR, A350, and A330neo to garner considerable attention, with the A321LR being touted as today’s 757 replacement. We expect Airbus to focus on the A321LR as the featured latest variant in its product line. With aging 757s in many US fleets, we expect to see a major order for the A321LR from a North American carrier. With both engine variants of the A320neo now in flight testing, we might expect to see one or both variants in the flying display or via a fly-by from Toulouse. In terms of major orders, an Airbus official last week mentioned to expect significant activity, so we could see a couple of major orders, as John Leahy and his crew tend to keep some orders for air show announcements. Boeing: We don’t expect any new product announcements from Boeing either, and while a 757 replacement is under study, an announcement is premature. We would expect additional emphasis on 787-10, which will enter service soon, as well as 777-X, a year more mature than Farnborough on its development path. In terms of major orders, we would expect a few, but Boeing typically doesn’t save as many orders for Paris as its competitor, and has the order lead so far this year. The key for Boeing is filling the backlog for the 777-300ER until the 777-X enters production, and we expect one or two orders for both existing and future models as Boeing bundles deals for both models. Bombardier: Much of the attention of the show will be on Bombardier, which will bring two CSeries models to the show - the -100 in Swiss livery, and a -300 from the test flight program. Participation in the flight display will showcase the low noise footprint of this aircraft, and demonstrate that the much-delayed program is on target for EIS early next year. With a change in the marketing and executive teams at Bombardier, it is difficult to project whether they will be able to achieve the kind of order volume the need to build additional confidence for the program. With the changes in the management team, we believe that some campaigns may need additional time to complete. Embraer: There will be no new product announcements from Embraer at Paris, and the E2 Jets will be the message at Embraer, building on the success of orders last year at Farnborough. With two LOIs firmed in the last week, Embraer will likely focus on continued sales for both the existing EJets and E2Jets at Paris. We would expect modest announcements of orders at Paris, including a potential order from a North American carrier. With the new models scheduled to enter service in 2018, 2019 and 2020, filling the backlog through introduction will clearly be a focus, but it appears Embraer’s order book is in more reasonable shape than its competitors in that regard. CFM International: With the LEAP in test flight on the A320 and the engines for the 737 flying on the testbed, we can expect to hear more positive results on performance than earlier rumors that were flying around the blogosphere. Our understanding is that current tests are much closer to specification and that the engine will be quite close to, if not meet, its performance goals by EIS. We’re hearing more positive performance numbers than previously reported, and expect CFM to confirm that it will meet its specifications on EIS. Engine Alliance: Despite losing additional orders from its largest customer, Emirates, EA tells us that they are neither down nor out. As a JV between fierce competitors, PW and GE, EA is in a difficult position with respect to convincing both partners for new investment. It will be interesting to hear their update. GE: The GE-9X for the 777-X will be featured by GE, which is making progress on the design for the new engine. The LEAP, which we mentioned under CFM International, will also be a highlight for GE at the show. With strong positions on 777 and 787, we expect to see GE to continue to build its backlog at Paris. Pratt & Whitney: The GTF will be flying at the show on the CSeries and A320, and PW will showcase their 2018 version of the GTF for the A320, which offers an additional 2% fuel burn reduction, bringing it to 18% when compared to today’s engines. PW will also likely tout its Health Management System that will be used not only for engines, but for the entire airframe on the CSeries. With applications on 13 models from five manufacturers, PW will be introducing multiple new engine application for the next six years, and will be focusing on getting its technology into play and multiple EIS entries, starting with A320 and CSeries later this year. PW Canada: PWC has been developing new turboprop technology for both the PT-6 and regional aircraft engine sizes, but we’re not expecting a major announcement at Paris this year. But this will be an area to watch in the near future. Rolls-Royce: With the Trent XWB in service, a major order from Emirates that entailed the airline switching vendors on the A380, and a new variant for the A330neo under development, we expect a quiet show from Rolls Royce as it focuses on implementation. We do expect to see orders for new wide body aircraft from Airbus, and Rolls Royce, which now appears to be Airbus preferred wide-body supplier, build its backlog. The Bottom Line: With no major new announcements expected, Paris will be about obtaining orders and confidence about OEMs being able to deliver on their promises for entry into service with products already available. While this should be a relatively quiet show in terms of innovation, it will tell us a lot about market confidence in key programs and which have a higher likelihood of market success. With multiple announcements in recent years, the game is changing to execution, filling production gaps between old and new models, and building momentum with new orders, and, as always, reading between the lines.

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