Premium #300 – Looking out to 2035

As the year-end approaches, we decided to see what an aircraft product forecast out to 2035 might look like for the key OEMs. While this is very long term, given the stage we are at in the current order/delivery cycle, with numerous new aircraft just entering or soon to enter service. It is a good time to peek out to the future, and determine when new programs are likely to enter the market. The chart below lists programs that we know of, and when they might firm up and enter the market as viable offerings. We’ve dotted the time frame when we believe significant changes are likely to occur. Ours is an industry in which you must think eight or more years ahead when it comes to programs – it takes a while to determine if a product is viable, then an increasing window of time to bring that product to market. When we consider new and lighter materials, potential designs made possible by additive manufacturing and even the potential for hybrid engine power, the potential for technology change is increasing at a rapid pace. These technologies are disruptive and may be rushed to ensure the current big OEMs stay ahead of growing competition. Consider also the tautness in the supply chain, with so many programs underway. The next 20 years will be a fascinating period in commercial aviation, possibly as disruptive as the jet age once was. Starting with Boeing, we can see the company’s known programs are front loaded through 2020. The focus here is obviously the 737 MAX, with an additional 787 variant plus the 777X program. As we have noted before, the missteps with the 787 has caused Boeing to stumble on what looked like a reasonable progression of products, particularly the 737NG replacement. While the MAX is a good solution, given the circumstances Boeing had to overcome, it is clearly not the success it needs to be to beat Airbus in the narrow-body marketplace. On the small side, the MAX7 is being tweaked in an attempt to bracket the A320neo, along with the MAX8. While the MAX8 has seen substantial market acceptance, its larger sibling, the MAX9, continues to struggle against the A321neo. Boeing is also seeing its 787-8 struggle. Both the MAX9 and 787-8 are programs that probably need something to eclipse them – and if Boeing had the available financial resources, this would happen. Which points to the 2024 era, when the 7M7, the new mid-sized aircraft, might accomplish this. But this is still about eight years off. With a single aisle program that is not firing on all cylinders and a soft low end on the 787 market, Boeing is under considerable market pressure – despite their public stance of bravery. Airbus has a very busy near-term schedule, with eight models coming out in the next four years. This is both good and bad. The good news is that customers have lots of options. The bad news is that the Airbus supply chain is taught and has no margin for error. The low tolerance of Qatar is not normal, but also highlights just how tight things are. The A320 family is coming along splendidly – the A321 offers performance that Boeing cannot get out of the MAX9. The combination of strength in the A321neo and A330neo programs is reinforced by the weakness in the same space at Boeing. Airbus, we think, will stretch the A350 one more time to the A350-2000 by 2020, partly because this will be an easier solution to combat the 777-9 and party to keep A380 customers using Airbus aircraft. We expect the market to catch up with the VLA demand by 2023 and foresee an A380neo in that era. For Bombardier, the decision to stretch the CS300 to a CS500 is an obvious outcome. Bombardier has stretched every aircraft it has made (excluding the CL415 which is no longer in house). Delta wanted a stretch back in 2011 when it first entertained the CSeries. Delta is the driver’s seat at Bombardier and will keep the company focused on providing this aircraft as a replacement for its 737-700s, A319s and MD88s. With one type from 100 to 150 seats, Delta will ensure it becomes the most important Bombardier customer. Bombardier must hope that others follow Delta’s lead quickly for the company to recover its pricing power, which Delta has cut to the bone. Bombardier desperately needs to come up with a solution to its aging CRJ. We suspect another tweak might be coming in the form of a re-engine using the PW800 which will drive down fuel burn as well as using lighter materials to further reduce weight. We understand a design is being considered as a CRJ replacement, but the company does not have the resources to launch it now. COMAC is a dark horse – few people have a clear view on the company’s thinking. But we do know that China is focused on taking each aircraft program to accelerate its way down the learning curve. The recent interest in the An-225 is no exception. The C929 will be the follow on to the C919 and attempt to replace A330s and 777s. If China can get its engine technologies to catch up, this may well happen. We are taking a “wait and see” view on COMAC. They have the resources and the patience to get there. But they don’t want to take 20 years like everyone else. Embraer faces political headwinds at home. But these will pass. Meanwhile the company cleverly added a FAL in Florida for its business jets. It also has a Jacksonville facility to build the Super Tucano. Meanwhile as orders for the E-jet program slow, Embraer has been competently moving its E2 program forward. The program is on time and on budget. The E2 is likely to be a success and build on the well accepted E-Jets. Embraer is, in some ways, better placed to exploit the 100-130 seat segment than Bombardier. This is because its E-175 has been a runaway success and provides the company with steady work as it transitions to the E2. Every E-175 success means a CRJ loss. Mitsubishi finally has its test flight program at Moses Lake active with two more aircraft to make their way from Japan. We still do not see the company being able to get weight out of the design and below US scope clauses. But if the company can start selling their aircraft outside the USA, then they should succeed. The aircraft has state of the art technology and should deliver the numbers airlines want. But whether Mitsubishi can get its production to scale fast enough is an open question. Each misstep helps Embraer and Bombardier. We see the company launching a stretch by 2021 as they realize that a stretch is easier than a shrink because of the weight issue. ATR is under new leadership and we need to see how this plays out. ATR has been on a roll in the market, with high order levels that have beaten the Bombardier Q400. But the ATR product does lack performance and has not taken off in the big USA market. An attempt to relaunch was started earlier this year. By the time there is any movement, the market may have moved. ATR needs to develop its own “neo” and we expect this to be around the 2019. This will also force resource challenged Bombardier to also make a move on its aging Q400. In Russia, we have UAC which should, as a combine with lots of talent, succeed. The Sukhoi SSJ is doing rather well. A stretch is planned for 2017 and will include winglets. Meanwhile the company’s MS-21 will soon be flying. This aircraft should prove to be a better competitor to the Airbus and Boeing competitive aircraft than the C919. The challenge for UAC, and COMAC, is that by the time they get their aircraft into the market, Airbus and Boeing will have further refined their offerings. UAC does have excellent skilled staff to provide designs that are state of the art. The problems to overcome are financial and production. Factories are spread out and money is hard to find. But UAC does have a natural customer base it can target and use to recover its momentum. Another dark horse is the South Korean interest in developing a turboprop. Knowing that ATR and Bombardier will give it no quarter makes this project risky. But it should be able to develop something by 2026. This another program to wait and see. Finally, another China program and another turboprop. Xian has delivered several models that all originate from an original Antonov design. Like COMAC, Xian is learning with each iteration. This puts pressure on ATR and Bombardier. While market acceptance has been weak outside China, it won’t always be that way. There are literally hundreds of old Antonov aircraft across Africa that XIAN can replace more cheaply than ATR or Bombardier.

No results