More narrowbody orders

As forecasted, we have already seen quite impressive narrowbody orders this year, although the Paris Air Show is still ahead of us.
For example, there are already orders for 461 more A320neo family aircraft – remarkably most of the for the A321neo – this year. In 2012 we saw 478 firm orders, some of which had already been announced at the Paris Air Show in 2011.
The B737MAX had it’s big year in 2012, so we cannot expect that we see more than the 949 orders from 2012 in 2013 again. So far the B737MAX got 121 orders this year.
But I expect more big orders for both narrowbodies in 2013. I already wrote about China and the needs of the airlines there, but now it becomes clearer.  According to CAPA (Centre for Aviation) , the China Times writes that chinese airlines will order about 500 narrowbodies from both Airbus and Boeing in 2013. About half of these orders would be for the neo and MAX models. This would not only be a(nother) boost for both reengining programs, it would also fill further the remaining delivery slots for the current models.
Adam Pilarski from AVITAS still thinks that we see a bubble with all these narrowbody orders. He could be right – if we would see an economic crisis hitting South East Asia and China, a lot of these orders would quickly disappear. But as long as these economies are thriving, Airbus and Boeing (and in the long run probably also Bombardier and Embraer) have nothing to fear but not being able to quickly enough deliver the ordered aircraft.


The Boeing - Ryanair deal

It looks like Ryanair and Boeing will today announce their deal for (according to the latest information) 170 B737-800NG’s.
This deal will help both parties:
  • Ryanair can grow further. They currently do not have any aircraft on order after the last was delivered in December 2012
  • Boeing can fill a lot of open slots for the B737NG until the B737MAX arrives. I wrote about that earlier…
Rynair’s outspoken boss Michael O’Leary is (until today) not positive about the B737MAX, naming the aircraft a “dog’s dinner of a design”. Ordering new-built NG’s now means that Ryanair faces (for example) Norwegian as a competitor who then flies the B737MAX. The B737MAX is advertised by Boeing as burning 13% less fuel than the B737NG.
What does that mean? Knowing how Michael O’Leary likes to do deals one could imagine that he demands a purchasing price for the NG’s that is lower by the amount the NG’s are costing more in operating cost as they burn more fuel.
From the latest company presentation (Q3 2013) I got the following information:
-          Fuel is hedged at approx. $1000/ton
-          The $ is hedged at 1.32€
-          The cost per pax ex fuel is 27€
-          Revenue per pax is 51€
-          Load factor is 81%
For the average sector length I found several information (not directly from Ryanair) indicating it should be something like 1165km or 629nm.
Now  I calculated the fuel burn for a 629nm sector with 153pax (81%*189 seats). Fuel burn was calculated at 8,951lbs or 4,060kg. Fuel costs are then $4,060 or 3,075€ per flight. Per passenger this is $26.53 or 20.10€.
Total costs per passenger and flight is then (27€+20.10€)=47.10€. Ryanair therefore makes a profit of 3.90€ per passenger – not bad!
Now what would happen if Ryanair would switch to the B737MAX? Fuel burn would be 13% less, about 17.50€ per passenger in other words:  profit per passenger would be 2.60€ or nearly 53% higher! Here you have the answer why both the A320neo and the B737MAX are (and will be) so popular with Low Cost Carriers in particular.
If MOL wants to have the fuel burn difference as a lower purchase price upfront we simply multiply the number of passengers one aircraft carries over a year, multiply that with 2.60€ and with the number of years the aircraft stays in service with Ryanair typically. You can get answers here and I found out that seven years is a good number.
The summary of the Q3 2013 presentation says that with the current fleet of 305 B737-800NG Ryanair will carry about 79million passengers this year. Per aircraft this is 259,000 passengers. For seven years this is 4.713m.€ or $6.13m. worth of fuel costs versus a B737MAX. We can expect that this is the “extra discount” that MOL demanded from Boeing compared to the deal that Norwegian got for their B737MAX order last year – and we can expect that Norwegian already got a good deal as they have been the European launch customer for the B737MAX.


Good days for the A320!

What a week for Airbus! John Leahy predicted at the beginning of last week during his presentation at the ISTAT conference that until the end of March Airbus will have more than 2000 orders for the A320neo. While the number itself is technically just as good as 1900 or 2100, it justifies once more the decision to go ahead with the neo program in December 2010. Boeing, as it seems, was really caught by surprise, despite Airbus was talking about the possible launch for months before deciding to launch the neo program.

The Lufthansa order was not a big surprise. I wrote about that in an earlier post. Nico Buchholz, VP


A new chance for the A330neo?

Qatar Airways ever communicating Akbar Al Baker yesterday told the press that Airbus would drop the A350-800. Airbus instantly denied, so nobody can tell for sure what is the fate of the smallest model of the A350 family.


Norwegian leases A340-300 to bridge the B787 gap

Norwegian will wet-lease two A340-300 from HiFly to bridge the gap until the B787-8 will arrive after the battery problem is solved. How will that impact their operations? Interestingly, the two A340 are from a batch originally flown by Singapore Airlines, then given back to Boeing in exchange for B777’s. Boeing sold them to BBAM and they leased the aircraft to Emirates. The two A340-300 are now due to arrive at HiFly. So in the end Boeing has to lease Airbus aircraft to airline customers to make up the problems with the B787.


Pricing pressure on the B737NG

Boeing for the first time acknowledged pricing pressure for the B737NG yesterday, when Ray Conner, CEO of Boeing Commercial Airplanes spoke at the JP Morgan Aerospace Conference. A synopsis can be found here at Leeham News and Comment. Read also the comment to get an insight of what readers think about how Boeing handles the battery problem of the B787.
Conner also said that there was (and is, I suppose) pricing pressure on the B737MAX, but this is normal for new aircraft entering the market.
Where the pricing pressure comes from gets clear when we look at the number of open orders and the orders Boeing has to fill until the B737MAX enters service in late 2017 and until the B737MAX