Premium #131 – The Super Twin Line Up

As the dust settles from Farnborough, the two big OEMs continue to jostle for advantage in the twin-aisle market. For them the show never ends - campaigns continue until the next big event. We decided to take a look at where the Super Twin market is now. Assembling the data requires some creativity. For example, not all the 777X orders are yet defined by model, and the same applies to some of the A330neo orders. In putting the data together, we have placed the undefined orders with the larger models. The primary reason is because that's where the momentum seems to lie, with a trend towards larger aircraft with better seat-mile economics. We also dropped the A350-800 from the data, as this program is down to 26 orders that Airbus is trying to switch, and essentially now cancelled in favor of the A330-800neo. Here's what the Super Twin segment looks like today. The size of the balls indicates orders to date. The segment sweet spot is between 7,500-8,500 NM range and around 300-350 seats (averages at 316 seats and 7,785 NM range). The Super Twin segment has 2,117 orders. About 87% of these orders fall into the sweet spot. The segment has two interesting undercurrent competitions. The first one, now emerging, is between the A330neo (less technology, more mature, much cheaper) against the 787-8 and -10 (more technology, longer range, maturing fast). The second one is the A350 against the 787-9 and 777-9. Boeing has five models in the race. This provides an advantage because customers like choice. More options in terms of deciding what fits market expectations and plans is attractive. But one of the Boeing options, the 777-8 is clearly the odd man based on orders. This is somewhat a surprise, since the aircraft is the same size as today's best selling 777-300ER. Boeing has three models in the segment sweet spot. Airbus will continue to quietly transfer A350-800 orders to the A330neo program, as it recently did for Hawaiian and Transaero. The A330-900 is the shortest range of the Super Twins but is right in the sweet spot for capacity. Airbus is likely to garner a lot more sales for this model. The popularity of the A330-300 is the basis of this statement. Moreover, most long haul flights are at under 6,000NM and the aircraft's range fits well inside that. This aircraft is likely to battle mainly against the 787-10. The tradeoff airlines will face here is technology against price. Both OEMs will talk the tradeoff down, but in the end that's where the gap will be. Some airlines will prefer less technology and a mature airplane and others will prefer more technology and extra range. The A330-800 has a lot of range, probably more than many target customers need. It competes with the 787-8, which has a big order backlog. Likely to sell at 50% of the current price of the 787-8, the A330-800 has the potential to be highly disruptive. The view among senior Airbus management is that this exactly the goal of the A330-800. If an airline needs longer range with about 250 seats, the A330-800 is a compelling option with a relatively low price along with perceived less technology risk. Aircraft with more capacity at a lower capital cost and competitive economics makes the A330neo models potentially disruptive to competing 787s. The center of the sweet spot pitches the new technology aircraft against each other. We would argue the 777X is really a MAX. Therefore what works for the A330neo also works for the 777X. Also, the 787-9 seems to be headed for great success. Stretches work well, and the 787-9 economics are compelling. Airlines like Air New Zealand need long range with under 300 seats. The 787-10 and 777-8 look to be ideal replacements for the 777-300ER, which is today's benchmark. Airbus' A350-900 is clearly the most popular model of its family. The aircraft has sold well, and enabled Airbus to break into Japan Airlines. In the sweet spot Boeing's two families have 53% of the market compared to Airbus' one family with 33%. But when looking at specific models, the A350-900 has sold the best in the sweet spot, with 26% of the segment. The 777-9 has outsold the A350-1000, but only by 51 according to our estimate. The race between them to replace 747s as they retire will be brutal. An early 747 customer, United Airlines has selected the A350-1000. Lufthansa will be replacing its 747s with the 777-9. The 747 replacement market is flagship territory. This makes every competition very tough. Airbus, of course, also has the A380 available at an even greater seating capacity. In summary the state of play for now seems close. With arrival of the A330neo, the segment is once again in flux. It is too early to tell how the airlines are going to be won over. The OEMs are rolling out their best product offerings in this segment. Sales are not as prolific as in the single aisle market, so every sale counts even more in this segment. Each victory will be something to be savored.

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