The most brutal area of commercial aerospace is the single aisle market. Competition between Airbus and Boeing is fierce. So fierce that new entrants rightly fear the news these giants are going to increase production. The pool may be growing bigger, but it is also getting tougher to enter as the two OEMs swamp the market with aircraft. Between them, Airbus and Boeing are heading into a situation that sees them delivering over 100 single aisle aircraft every month.
Take a look at the situation from another angle. Airbus and Boeing are doing very well selling single aisle aircraft. The chart illustrates the state of play. Even at ~100 aircraft deliveries per month, with no new orders, the two OEMs have over five years of production in backlog. (Note how much better Airbus is doing in the largest size. )
Now consider this. The smallest models in the chart account for 2% of orders. We saw what Airbus did when the A350-800 wasn’t getting traction. In addition, Airbus has dropped the A318 and Boeing has done the same with the 737-600. The smallest models in the line up above account for 104 aircraft. There is a bit of a game in the business: airlines order the smallest model and pay a small deposit, only to up-gauge when the aircraft is about to be assembled. Therefore we think these 104 orders are very likely to go up at least one size.
Does this mean the market for the smaller aircraft doesn’t exist? Absolutely not – Bombardier and Embraer make a living in this space. So will Mitsubishi and Superjet. The big OEM are better off going upmarket and allowing the smaller OEMs fight it out. Unlike the big OEMs, which have broad product ranges to offset some of the bleeding from single aisle campaigns, the smaller OEMs have smaller families (and the business jet market is even smaller).
So as the pool is getting bigger, its growth is at the deeper end. This should create space for the smaller OEMs.