EXPECTATIONS FOR 2018 |

As we enter the new year, most people typically adopt a forward-thinking mode. In this spirit, this post will contain some of our fearless forecasts for 2018, and what we might expect as an industry. AIRBUS will exploit their strong position in the middle of the market, capitalizing on the strength of the A321 and introducing the A330-800, which will bracket Boeing’s NMA concept in the “middle of the market.” The A321neo will expand its market share lead over the Boeing 737MAX10. Airbus will make critical decisions regarding the future of the A380 in 2018, and increase A350 production to more than 10 per month, reaching 13 by 2020. Airbus is also expect to take over the C Series program by midyear. AIRLINE PROFITABILITY will remain strong, with the global economic resurgence led by the United States. However, with growing LCC competition across the Atlantic, we may see softening yields there. BOEING will decide to launch the 7M7 in 2018, with an innovative integrated services concept that will ensure profitability despite a questionable business case for the aircraft. Boeing’s 787 will continue to sell well, while the 737 MAX8 continues as a strong performer in the narrow-body range. With Southwest’s change from MAX7 to MAX8 models, the MAX7 may turn out to be a Military and BBJ platform. BOMBARDIER will invest in an Alabama assembly line for the C Series in order to fulfill the order to Delta Air Lines and should be successful with several C Series Campaigns. The Airbus alliance will prove pivotal in 2018 in our view. Bombardier’s Global 7000 business jet should be certified in 2018. CFM will continue to improve its LEAP, even as it runs into issues as the year progresses. The new engines are pushing material technology and hiccups are to be expected. CHINA, with major investments in general aviation, is now the leader at the low end of the market and will build upwards naturally, as they develop engineering talent and experience, over the next two decades. The long-term plan is being executed. Can Airbus persuade China to get involved with the A380? COMAC will continue to make progress on the C919, and take a long-term view regarding the industry. CONSOLIDATION will continue in both the supply chain and among OEMs, given Boeing-Embraer talks, as both groups position for control of the aftermarket and services, the next battleground. Innovative concepts will emerge that provide a win-win solution for both OEM and the supply chain in that regard, likely at the expense of third-party MROs. Rumors are building about Jetblue and Hawaiian getting together as well. DELTA will defer its C Series deliveries until Alabama-built aircraft can be ordered, and the Boeing trade action has been taken quite personally in Atlanta, pushing Delta to purchase additional aircraft from Airbus. Watch for additional orders in 2018. The ECONOMY will remain robust in 2018, with a downturn unlikely through 2020. The US tax reform will result in additional domestic capital investment in the US and boost economic growth. EMBRAER will introduce its first E2 model on time and under budget in 2018, and reach arrangements with Boeing for a closer working relationship if not an outright acquisition, given the Brazilian government’s “golden share.” We expect the final price to comfortably exceed $27/share or $5Bn. FALCON JET will replace the 5X with a re-designed 6X powered by the PW800 in early 2018 after SNECMA’s failure to deliver the SILVERCREST engine on time. GARMIN will continue to gain market share in general aviation and could be an acquisition candidate for one of the big avionics producers to keep them from disrupting the lucrative commercial airline avionics market. GE AIRCRAFT ENGINES will successfully introduce their game-changing ATP turboprop in 2018 that leverages both design and manufacturing technologies, particularly additive manufacturing that replaces 855 parts with 12. GULFSTREAM will introduce the G600 on time and on budget. INDIA’s government bureaucracy will interfere with the sale of Air India, which hosts too many political patronage jobs that would be eliminated under private ownership. IRKUT’s MC-21 program will continue to gain momentum towards certification and looks to be competitive with the neo and MAX models from Airbus and Boeing. Irkut will leverage the SSJ sales and support network to make its first major sale outside of Russia in 2018. JAPAN will need to rescue the stumbling Mitsubishi MRJ program, which is well behind schedule, above the Scope Clause limitations for its target market, and facing strong competition from Embraer. One wonders if Boeing will react negatively to this? The MIDDLE EAST THREE are facing difficult times, given the regional economic downturn in oil prices. With the vast majority of the 777-X orders scheduled for these three carriers, that program could be adversely impacted by delivery deferrals, as could the wide-body market in general, as these carriers are key customers for several programs. MITSUBISHI is in trouble with the MRJ program, which is well behind schedule and well over budget. The program remains troubled, despite multiple management changes, and may require a bailout or other face-saving move. They should be focusing on a larger model, not the MRJ70. PRATT & WHITNEY will solve the early problems with the GTF engine and return to full production schedules by mid-year. Pratt & Whitney Canada will start to release information on its PT6 successor. Pressure from the GE ATP is likely to make the turboprop a far more exciting market. QATAR AIRWAYS will survive the boycott by its neighbors and continue to be one of the world’s best airlines under the leadership of Akbar Al-Baker. Rolls-Royce has grown highly dependent on Airbus. Slow A380 sales are hurting and the OEM would like to see faster A350 and A330neo sales. Superjet will keep trying to break into the Iranian market. Iran is proving to be far more difficult than anyone expected. However, the new winglets should renew interest in the SSJ.

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