Premium #334 – A320neo Progress

One of the most important commercial aircraft programs is the A320neo family. In the narrow-body segment, it is currently the best seller. That segment accounts for about 70% of all commercial aircraft sales, so being the leader is sufficient reason to pay close attention to the status of the program. The A320neo program made its first delivery late last year. Airbus has had to overcome engine supply-chain challenges that slowed deliveries. As the following image shows, there are several A320neo “gliders” in Toulouse that appear complete but are waiting for engines. Airlines are schedule driven and anything that disrupts schedule is more than an annoyance - it is a threat to success. We were informed by reliable sources that Airbus had harsh words for Pratt & Whitney in Paris. But that frustration is well hidden from the media and outside world. But the pressure is on and patience is stretched quite thin. How are the aircraft already in operation doing? To find out, we utilized the data from Flightradar24 to track operations. The first table below lists the airlines and the number of flights hours to date. There have been numerous reports the fleet has seen operational disruptions, especially among the aircraft using the Pratt & Whitney engine. The fleet has grown rapidly as Airbus pushed deliveries as quickly as they can. Speed to market is a crucial advantage, as Boeing has started to deliver its first competing MAX. Since both OEMs are pushing for faster production rates, delivery rates become an important competitive tool. Boeing only has one engine supplier, so it has all its eggs in one basket. This engine has already met its own challenges, with some engines needing to be fixed because of a vendor problem. Both engine OEMs have tightly stretched supply chains and face a combination of supply chain issues that are negatively impacting aircraft OEMs and anxious airlines. This is a combination of factors that has no margin of error. Every stumble is a real threat to the long-term competitive balance. The table above suggests steady growth in flight hours. But from underlying the data we can see that there are odd things going on. Some aircraft are not flying regularly – no doubt because there are fixes being implemented. The Pratt powered aircraft were required to replace parts that wore out faster than expected. The engines on the A320neo fleet are the latest and greatest in terms of technology. They push the frontiers in materials and technology. Given the high reliability of the prior generation of engines on the A320 family, the new engines are still working their way down the learning curve and cannot as yet match the performance of their predecessors with respect to time on wing and reliability – although they are expected to be better than the last generation once the programs mature. In the follwing table is an example of what has happened, using the largest A320neo operator. In the table below, we list the IndiGo fleet by tail number. These aircraft all Pratt & Whitney PW1100G-JM (GTF) powered. If any airline with a Pratt engine would have complaints, it would be this one. It is clear that the fleet is not accumulating the 300 hours per month level we would expect in narrow-body operations. There are gaps in hours on a month-to-month basis that make it quite apparent when aircraft are taken out of service for engine updates. Even though the Pratt & Whitney fixes are disruptive, the aircraft are still accumulating between 170 to 200 hours per aircraft per month, with a couple of aircraft closer to 300 hours. Once the fixes are complete, it appears that the aircraft perform as expected. Service interruptions are to be expected. We defined an interruption as a flight cancellation. The following table shows that overall, the fleet averages 3.4% of flights being cancelled. That remains an unacceptable level to airlines, which typically enjoy 99.5%+ plus completion factors for their schedules. So the number is close but not quite there yet. There are other data sources that could provide more color on the reasons for interruptions – but these are not public. For example, any of the airlines and probably Airbus, know the stories behind these interruptions. However, based on the public data, we do not see any difference between engines as a sufficient cause factor in flight disruptions. So even with the Pratt work, it perfoms as well as the CFM. That said, certainly removing an engine and replacing it does take an aircraft out of service. Pratt has had to do this several times. Certainly, this explains many of the Pratt powered aircraft interruptions. But overall, the latest data comports with earlier operational tracking. We see the A320neo having a dispatch rate of 97%+. The Bottom Line The A320neo is still undergoing its operational shakedown, with both engine manufacturers experiencing difficulties, and flight completion rates about 2%-2.5% lower than where airlines need them to be. As the problems with engines are resolved this year, we expect to see both dispatch reliability and completion factors rise for A320neo operators. The question is how long it will take for these engines to reach mature operational levels. Neither appears to be there at this writing.

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