Insight: When is the Optimal Time to launch the Airbus A220-500? |

When asked about launching the A220-500, Airbus Chief Commercial Officer Christian Scherer has publicly stated "it's not if, but when". Considering the "when" is therefore rather important. After all, the A220-500 as currently understood would be ~160-seater with a range of ~2,500 nautical miles. This is essentially what the A320ceo and 737-800 are today. Both models have been replaced by successors, with about the same capacity and more range. When is the optimal time to launch the A220-500? Since Airbus gets to make the call, it is not as concerned with the A220-500 impact on the A320neo. As a senior Airbus manager once shared with us, "We don't care if it's an Airbus that replaces an Airbus - as long as it's Airbus". Consequently, when the trigger gets pulled the target will be the 737. The 737NG has been highly successful - so successful that Boeing's first response to the A320neo (in 2011 American was working on its huge order) was to offer the NG. American balked and Boeing responded with the MAX and won half the order. Boeing at the time was confident the NG could compete with the neo. But the customer wanted something newer. The MAX went on to become Boeing's fastest-selling model. From there, things should have moved along with the single-aisle market hovering around 50/50 market share. But then there were two MAX crashes and a tectonic market shift occurred. Now we have Airbus/Boeing at more like 60/40 overall in single-aisles. But there have been other market shifts within the single-aisle market - upsizing is where the market has moved. The larger MAX models are outsold by the A321neo variants. So much so that the forthcoming A321XLR, we understand, is priced close to the A330neo. How does Airbus get away with this? Two related reasons: lack of delivery slots and the A321neo sub-family facing less competition from the larger MAX models. The tectonic shift in market share puts Airbus and Mr. Scherer's team in a rare position - they get to call the next shot. Airbus will decide when to offer the A220-500 because they know there is demand - customers have vocalized their desire already. Moreover, a lot of development has already been undertaken when the A220 was still Bombardier's CSeries CS500. Almost certainly the basic definitions have been shared with target customers. Discussing "paper planes" (John Leahy) is common as OEMs conduct ongoing conversations with customers. When replacement of the 737NG looms For Airbus, the optimal timing for the launch of the putative A220-500 should be when the 737NG fleet ages and replacement looms. Boeing will try to keep customers "on-side" with deals on the MAX. This has already happened and customers are quite open about Boeing's aggressive pricing. For example, Maurice Gallagher, Allegiant CEO recently commented on the MAX order: “Our approach to the fleet has always been opportunistic, and this exciting transaction with Boeing is no exception”. This week IAG confirmed a MAX order announced as a Letter of Intent in 2019 and noted: "The order is worth $6.25 billion at list prices, though the company said it had negotiated a substantial discount, as is typical in the industry." The IAG deal is fifty aircraft short of the original deal, so either more are coming or IAG is limiting its MAX exposure. Ishka Advisory notes: "As recent deals from IAG for the 737 MAX and Lufthansa for B777Fs/B787s show, it's time to sweep up opportunities presented by the market to acquire assets at attractive prices, from OEMs motivated to fill production slots and clear inventory. With markets improving and inflation rearing its head, opportunity is time-bound." There is also some frustration about the MAX. Southwest Airlines, arguably the most influential 737 customer, fears the MAX 7 might be delayed because Boeing is focusing so much on the MAX 10. Boeing has to get the MAX 10 certified before year-end or face a massive cost increase as changes may be needed to the aircraft. The second most influential 737 customer is Ryanair and its loquacious CEO Michael O'Leary hammered Boeing. In Boeing's defense, he does this frequently, but it still has to hurt. Ryanair wants the MAX 10, the need to get the MAX 10 certification done and A321neo sales are forcing Boeing's hand. The factors combine to ensure Boeing's focus is on resolving several MAX crises. The longer Airbus waits, and says nothing more about the A220-500, the tougher it gets to move NG customers to the MAX. The reason is time: Boeing needs time to fix MAX certification, deliver parked older production, ramp current production, and keep the supply chain stable. There are a lot of balls to juggle. The more time gets eaten the tougher MAX deals will become - Boeing doesn't want to be offering aggressive pricing. It needs to get better pricing, but as time moves on, pricing power slips to the customer. The situation is something of a slippery slope. Besides MAX challenges, Boeing has several others like the 787 and 777X. This is, arguably, the toughest time ever faced by Boeing. What do we know about the 737NG fleet? Using ch-Aviation's data here is active, in maintenance or conversion fleet. The fleet's average get is shown by the orange line and each column lists the number 737NGs delivered in that year. There are 5.803 aircraft listed. It is a huge market and slowly ripens for replacement. Bear in mind this is the heart of the commercial aviation market and is almost matched by the Airbus A320 family. But we are looking only at the NG in this post. Next, let's focus on the 737-800 specifically as that is where the A220-500 is aimed. This chart lists 4.059 or seventy percent of the NG fleet. The sheer weight of the -800 in the fleet explains the MAX 8 being the most successful MAX model. Boeing got the size of this aircraft exactly right. The following table shows (active, in conversion, or maintenance) 737-800s by delivery year and average age. The fleet is substantial and can be described as one of commercial aviation's workhorses. In use with airlines across the globe, it is the basic people mover at network airlines, LCCs, and even ULCCs. In the US the 737-800 started as a 162-seater competing with the 150-seat A320ceo. The extra seats provided Boeing with a substantial advantage and forced Airbus to react by matching seat count by clever cabin redesign. As Airbus matched the 162 seats, Boeing was able to also tweak its cabin design to allow American Airlines to go to 172 seats. Boeing also offers the MAX 8 LCC version known as MAX 8-200. Ryanair selected this model and it seats 197. This model has been selected by Allegiant and now also by IAG. All of this goes to show how compelling the 737-800 was as the base upon which to build. This is why so many NG customers opted for the MAX 8. It is simply the aircraft they know. Or thought they knew until some of the MAX's flight deck changes emerged. From an operator standpoint, the MAX8 should be a winner. Unfortunately, events conspired against that. Two years lost with MAX grounding Boeing lost over two years with the MAX grounding. Then came the pandemic to cause further interruptions. Boeing had its hand full and canceled its deal with Embraer. More lost time. Time used by Airbus to secure the greatest deal in the history of commercial aviation, buying the CSeries for $1 and building its A321neo family. As Boeing works its way through the various MAX issues, operators have to extend NG aircraft lives. For Southwest, for example, this means aging -700s maintenance becomes much more onerous as the fuselage fatigue program starts hitting the 50,000 FC mark and this repeats frequently after the initial inspection. Hence this airline's concern over potential delays with MAX 7 deliveries. Looking at the table above, the first third of the fleet takes us to 2012 deliveries. These aircraft are now a decade old and more. They are approaching replacement. As we can see from the concern at Southwest, workhorses age faster because they do more cycles. The first third represents 2,156 aircraft. This is easily a sufficient amount to launch a competitor. But now isn't the optimal moment. We think Airbus will wait. Two years from now, probably at the 2024 Farnborough show, the -800 replacement market will be at close to 3.000 aircraft at replacement age. By then Boeing should have sorted out the MAX issues and should be pushing MAX 10 deals hard to undercut the A321neo advantage. Boeing should also have been able, by then, to firm pricing with its MAX program should be more settled. This could be the optimal moment for the A220-500 to be publicly offered. Airbus would likely do this with hundreds of orders at the show. And that would hit the MAX program hard, and the punch will be aimed at the heart of the MAX program, the MAX 8. By this time we may also see A320neo orders top out as focus shifts to the A321neo family. The A220-500 economics are expected to be significantly better than the MAX8 and. in all likelihood, the A320neo. Airbus won't be concerned because customers will still be buying Airbus. But if Boeing's MAX8 stumbles the impact would be potentially severe. Boeing will not have had the time to recover its costs for the MAX program. The risk to Boeing is understood by many in the industry, even its anchor customer at the Pentagon.

US Flight Planner - US DoT On-Time Data	Airbus vs Boeing - Official OEM Data
US Airline Schedule Performance - US DoT Data	Daily OEM Production & Deliveries -

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