A320ceo and B737NG backlogs

As I wrote briefly last week, it looks like Airbus is increasingly overbooking the A320ceo. But what does "overbooking" mean? Well, I always compare the remaining backlog to what I think was the

Airbus A320ceo overbooking

Today the Airbus Order & Deliveries spreadsheet for November 2014 was published. There are 89 new orders for the A320ceo family (the most from unidentified customers and my feeling is that these are chinese airlines). There is also the cancellation of 10 A321ceo's from Jetblue - they are taking 10 more A321neo instead. So there are 79 more net orders for the A320ceo line, which was heavily overbooked even before these new orders. I will do a deeper analysis next week, also including the situation for the B737NG.

New competition in Large Cabin Bizjet Segment

Yesterday Gulfstream announced their two new aircraft offerings in the Large Cabin segment, the G500 and the G600, powered with PW800 engines from P&WC. A very good summary of what these look like and what they can may be found in a long article from Aviation Week.
These aircraft borrow a lot of technology from the top-of-the-line G650(ER). In some cases, they top the G650, for example in the cockpit design.
Although Gulfstream says that these two new aircraft are additions to their product line and are not intended to replace the G450 and G550, I believe at least the days of the G450 are counted. If you read that the G500 will carry less fuel than the G450, but the G500 will fly 5000nm at M0.85, whereas the G450 flies 4220nm at M0.8. Moreover, the G500 has a cabin that is 2.5ft longer and 7 inches wider, providing a higher pressure in flight, making traveling more comfortable. Also, noise will be less, both out- and inside.
So I would not be surprised to see a run on these models comparable to the G650 when this aircraft was first announced. Production slots were sold every minute back then.
What will be the reaction from Bombardier. The G500 and G600 are clearly aiming at the Global5000 and Global 6000. We get a few hints when we search the Internet for the term "BR700NG": for example take a look here: GE is not the only one going for high tech ceramics in a business jet engine (the Passport 20 in this case). RR will also incorporate parts from this material in their BR700NG. And I am sure that

• the BR700NG will be the engine for an update of the Global 5000/6000
• that this update will be announced at the NBAA in Orlando next week

So what is Airbus vs. Boeing in the commercial aircraft arena is Bombardier vs. Gulfstream in the bizjet arena (with more than a little bit of noise from Dassault although).

Boeing's B737 rate hike

I just read a very good comment from Richard Aboulafia regarding the rate hike for the B737MAX announced by Boeing last week.
I think he is right. The possibility that this rate hike will NOT be executed is higher than the possibility that we will really see the hike. Aboulafia points out several reasons why that is.
And there is another one (at least in my mind): and that is the fast pace that Boeing wants to transition from the B737NG to the B737MAX. The article by Dominic Gates points out that by 2018 when the rate hike would be kicking in the output of the B737MAX would reach 26 aircraft a month, thus 50% of the production. And another article at Flightglobal states that the last B737NG will be delivered to Ryanair in the second quarter of 2019. So the plan is to transition from the NG to the MAX in less than two years. This has two consequences:

1. I often wrote about how many B737NG orders Boeing would need to fill the B737NG production slots until the B737MAX will take over full production. I assumed that the transition will take place in a similar manner than Airbus plans it for the A320. The hast A320ceo will be delivered in 2018, almost three years after the first delivery of the A320neo. Now if Boeing cuts the transition time to under two years, a lot less open B737NG production slots have to be filled. In a first guess I would say about 250.
2. There is a big challenge for all B737MAX suppliers which have to produce parts that changed for the B737MAX compared to the B737NG design. The one supplier that will be most challenged is CFM (and CFM's suppliers as well). They have to handle the ramp up of the LEAP-1A for the A320neo and the LEAP-1B for the B737MAX almost simultaneously.

Airbus is in a little bit better situation as they have to engine suppliers, so the risk is not that big. The first engine (PW1100G) ís already flying on the first A320neo, the second one (LEAP-1A) is due to fly in late October/early November. Although the date for the first flight on GE's flying test bed for the LEAP-1A and the "sister engine" LEAP-1C (for the C919) seems to have already slipped more than one time. Originally the LEAP-1C should have had first flight in May, then later in the summer, the early September and then late September. It is now early October and I haven't seen a press release (and I fully expect one) nor have I seen N747GE (fitted with the LEAP-1C) flying on flightradar. Let's see if N747GF (with the LEAP-1A) will take to the skies in the next four weeks...

A330neo vs. B737MAX and A320neo first flight

As always, yesterdays "Large Aircraft Panel" at the ISTAT Europe conference was very amusing. Unfortunately I can not attend in person this year, but what you can read via twitter and in the press is almost as good as being there. Here you can read what Boeing's VP Marketing Randy Tinseth thinks about the A330neo:

"It is a 1970 fuselage which is heavy and was abandoned for the A350 family. The wing was built in the 1980s while the Boeing 787 engine is not optimised for the A330neo."

Well, maybe he should have had a chat with his own folks at Boeing - what is the B737MAX?
In Tinseth's words I would say:

A 1960s fuselage with a 1990s wing with an 2010s engine compromised by a 1960s engine fan diameter.

In other news, Airbus COO John Leahy told the audience that we will (weather permitting) see the first flight of the A320neo with PW1100G-JM engines on Thursday - a 1980s fuselage and wing (with 2010s "sharklets") and a 2010s engine by the way...

Airbus converting ceo to neo, Boeing looking for NG sales

This is an update to an entry I wrote earlier about Airbus overbooking A320ceo slots.

Apparently Airbus now can easily convert A320ceo orders to the A320neo, as previously Airbus overbooked the remaining A320ceo slots. At the end of July 1503 orders for the A320ceo were in the backlog (3251 for the A320neo).
I expect a few more cancellations and conversions from A320ceo to A320neo:

• Kingfisher     67 A/C
• Alphastream 15 A/C
• Sri Lankan      6 A/C
• Mexicana        4 A/C
• Croatia            4 A/C
• Hamburg Int.  2 A/C
• AirAsia           3 A/C (conversion to neo)
• Wizz             10 A/C (conversion to neo)

On the other hand, there are a few more announced orders which are not yet shown in the Airbus order book:

• Qingdao Airlines    5 A/C
• Zhejiang Loong    11 A/C
• Spring                   30 A/C
• Juneyao Airlines   20 A/C

This would lead us to net reduction of 48 orders, leaving 1455 orders for the A320ceo lines. I counted 1804 on July 31, 2013, so we have a reduction of 349 aircraft in the backlog with 494 build in these 12 months, thus having 145 net orders between July 31, 2013 and July 31, 2014 including the now-in-the-orderbook A319ceo/A321ceo for AA (and including some speculation about new orders, cancellations and conversions). Not bad for an aircraft that is going to be superseeded by a version that is 15% more fuel efficient...

With the same calculation I did last year (42 aircraft per month and 11.5 months of production per year) I get 638 deliveries until the end of October 2015, when the A320neo should go into airline service, leaving 817 A320ceo in the backlog.
At the end of December 2016 the backlog would be down by another 464 aircraft (I just saw that I made a mistake here last year), leaving 353 A320ceo in the backlog.
Building another 194 A320ceo in 2017 leaves Airbus with 159 A320ceo family aircraft in the backlog in 2018, where production of the A320ceo should end.

The situation is (still) very much different at Boeing - although Boeing always states that the B737NG is sold out.
There are 1755 open orders for the B737NG production line at the end of July 2014. I do not expect any cancellations (but there could be coming more conversions from the NG to the MAX). There are a few announced but not yet finalised NG sales:

• Xiamen      40 A/C
• Air China   20 A/C
• Ruili           14 A/C
• Yakutia      12 A/C
• Oman Air     5 A/C

This would sum up to 1846 open orders.Considering a rate of 42 aircraft per month there will be around 1500 deliveries until August 2017, which I choose as EIS for the B737MAX, leaving around 350 B737NG's in the backlog, around 280 less than Airbus will have at EIS of the A320neo. So there are still open slots for the B737NG. How many exactly is not clear, as Boeing will change to a build rate of 47 per months in 2017 and Boeing did not indicate if some of these "extra aircraft" will be NG's.

So while Airbus can now make (some) customers happy by letting them convert A320ceo's to A320neo's, Boeing has to look hard for some more B737NG customers, while Boeing did let customers convert from NG to MAX very much earlier.

UPDATE:
As I wrote this BOC Aviation ordered 30 B737NG (along with 50 B737MAX)...

Farnborough Preview

There are already some previews out there, for example from Leeham and airchive, so I won’t repeat all that is said there…but:

A330neo

Of course the BIG question is if Airbus will launch the A330neo at the show – and not, if they will launch it or not. Even if Airbus officials always state that  a final decision has not been made – that may be true from a formal perspective, but the decision has already been made by the potential customers who would otherwise turn to Boeing, at least some of them. This would not be an option for Airbus, of course.

My guess is that Airbus will at least make an “ATO launch”, but recent stories from reuters and Bloomberg suggest that Airbus is looking for last-minute commitments from the likes of AirAsia and ALC to make a launch like we have seen it from Boeing for the B777X at the Dubai Air Show last year.

Narrowbodies

Indigo will likely go ahead with an order for another 200 A320neo’s, Bloomberg reports today. This has to be seen in the context of the forthcoming IPO and a possible future shareholder stake from Qatar Airways. Indigo would then not only grow further in the indian domestic market, but also become the feeder from the whole indian subcontinent for the Qatar Airways longhaul fleet out of Doha.

Monarch reportedly switches to Boeing – a blow to Airbus of course, but this deal is probably driven by commercial terms which do not leave a big margin for both aircraft and engine manufacturers.

There could be a number of additional orders in the narrowbody market as usual, especially on the Airbus side. Boeing could announce a number of undisclosed customers for the B737MAX.

Not sure if Bombardier can announce something. Monarch adding the CSeries to the larger B737MAX (I expect only the -8 and -9 here) would make sense, but Scott Hamilton is not very optimistic on that one.

Widebodies

I refer to Leeham and airchive here…

Regionals

I expect Embraer to announce one or more orders for the E2 family, maybe a second lessor. Maybe also some E1 sales…

ATR will for sure have some sales for the ATR72-600. Bombardier always finds it hard to be able to announce during a show due to strict disclosure rules in Canada.

I do not expect anything from Mitsubishi for the MRJ…

Narrowbody engines

This is where we can expect large deals to be announced. American Airlines choosing the LEAP-1A already leaked. A logical choice as GE, CFM and GECAS have great leverage to sweeten the deal with non-neo issues.

Also we can expect that easyjet announced their choice of engines for the A320neo fleet. Any other choice than CFM would be a surprise, for the same reasons as for the AA decision. The same could be said for Lion Air, although there were rumours earlier they would opt for the PW1100G-JM. There are a number of other open A320neo decisions where the direction is not so clear (VivaAerobus, Philippine Airlines, Interjet, Transaero, China Eastern, China Southern, …)

Widebody Engines

The RR Trent1000 to be the choice for the A330neo  now seems to be a given. GE could make some deals with the GE9X of course, RR with the A350 if orders materialize for the respective aircraft. Other than that nothing to exciting here.

 

The devil is in the detail - it does not look too boring neither too exciting as yet. But there could be "unknown unknowns"...

B757 successor discussion - again!

Again, there is an interesting story about the much-talked-about B757 successor in the press. Now, as I wrote earlier I do not see a business case for that aircraft. As Addison Schonland from airinsight pointed out here, just about 50 B757 are currently flying routes the A321neo and B737MAX-9 will not be able to serve.

So what could be behind the story? I see two possible scenarios:

1.    Absolutely nothing! Maybe Mr. Foster, President of Air Astana, just wants to test the waters and hopes that other airline CEO’s and influential people join the discussion, raising the pressure for Boeing – and for Airbus, which would have to react once Boeing would announce to do something.

2.    Boeing sees that the B737MAX-9 is inferior to the A321neo and uses Mr. Foster to tell airlines around the world not to buy anymore A321neo as a better aircraft could be “just around the corner”.

I think it is more likely that it it something like scenario 1. Investing billions of dollars in such a small niche and, as Air Astana’s CEO suggested, to announce the development now with an EIS that could not be before the middle of the next decade (see Scott Hamiltons comments here) just would not make sense. Sales for the B737MAX-9 would probably suffer more than for the A321neo, as Boeing’s customer base will be more willing to wait as the customer base of Airbus, which is easier for Airbus to keep in their camp.

Also, as Scott pointed out, it would be a family of aircraft, replacing the B737MAX-8, -9 and the B757-200 (for sure not the B737MAX-7). With the 2000+ sales of the B737MAX one can calculate that the production horizon reaches until almost 2023 now. So why prevent further sales of the B737MAX now by announcing a successor too soon? It just won’t happen! Not now!

Transition times...

The next years it is all about transitioning! Well, I could divagate into what "transitioning" means for every one of us and if the whole world and the whole universe is transitioning from one state into the next every second...
No, it's only about aircraft programs this time. But there will be so much transitioning that one has to keep the real overview about what is happening.
First, there is the transition from the A320ceo to the A320neo. Aside from a recent hiccup in engine testing with an engine (PW1500G) very similar to the launch engine (PW1100G) for the A320neo there is no real threat for a smooth transition in production. The A320ceo is effectively sold out. At the end of April there were 1555 A320ceo family aircraft in the backlog. That should be enough to cover the outgoing production until 2018.
It is a little bit different for the B737NG and the transition to the B737MAX. Although officials from Boeing keep saying that the B737NG is sold out as well. But at the end of April there were 1791 copies in the books and Boeing's B737MAX comes almost two years later than the A320neo. But the difference of 240 aircraft in the backlog does not provide almost two additional years of production. So Boeing must have sold an additional 650 or so B737NG to cover production until full transition to the B737MAX.
Next is the B777: there were 286 open orders in the books at the end of April, covering 35 months of production at the current rate of 8.3 aircraft/month. This gets Being into 2017, but the B777X has an EIS of late 2019. A two year gap, so a rate cut is very likely, as Scott Hamilton reported.
Then there is the widely expected launch of the A330neo. There were 260 A330 series aircraft in the backlog at the end of April, lasting 26 months at the current rate of 10/month until mid 2016. The A330neo is expected to enter airline service in late 2017 or early 2018, so a rate cut is also almost a given here.
To be clear: both the B777 and the A330 will have a few further sales, but it won't be enough to bridge production with the current output rates.
Did I forget something? Yes - Embraer!
At the end of Q1 2014 there were 264 EJets in the backlog. Subtract 24 from Jetblue which will not be taken (at least not in the E1 version) and 7 for Nasair (they recently got rid of all their EJets and "transition" to an all Airbus fleet), so that is 233. Production is about 90 aircraft per year - that gets Embraer into the last quarter of 2016. I expect some options drawn for additional E175's for the three big american airlines (AA, DL and UA). But will these get them to a smooth transition to the E2 series jets, which should have an EIS in 2018 (E190E2), 2019 (E195) and 2020 (E175). I doubt that - Embraer should hurry up...

No clean sheet B757 / B767 succussor!

I refer to the story in herald.net reporting from the Boeing Investor Day on May, 21^st 2014. Reading the article we must come to the conclusion that a clean sheet design B757/767 successor will not happen for some time.

After the financial B787 debacle, which is now between $23 and $25 billion in the reds and with a costly B777X program ahead nobody in the Boeing upper management will have the will to try to sell another technical and financial adventure to the shareholders.

One could say that Boeing now has all the learning about how to develop and produce a fiber carbon aircraft and the development of the B777X wing would give further experience and would lower the risk. But this aircraft – a B757/767 successor – would have different competitors, coming partly from Boeing itself. The B737MAX-9 and the A321neo from the lower side, the B787-8 and a A330neo from the upper side. Of course, the B737MAX-9 and the A321neo would not be able to do the critical B757 missions and the A330neo and the B787-8 are optimized for longer ranges and thus would not offer optimized costs for, say, a 4000nm mission. But this market segment alone, which can not be served by the B737MAX-9 and the A321neo, would be too small  to present a business case with another $10-$15 billion investment upfront.

Sales prices would also be a problem with a A330neo, which, with a 2018 EIS by 2025 could have written down development costs and could be given to customers for prices we see today for the baseline A330 (escalated by inflation, of course).

Boeing yesterday made clear (as Airbus did before) that future aircraft will (for the foreseeable future) only see incremental developments rather than revolutionary designs. The plans from Airbus for an electric regional aircraft might be the only exception, but we have to wait another few years to see if this concept will really become reality.

Is there a demand for a B757/B767 successor? Yes, of course! Will Boeing sell one aircraft less if they (and Airbus) don’t do it? No! And this is what counts for the shareholder. Period!

Another hint for the A330neo launch

I just found the Earnings Call Transcript from ALC for the first quarter, There is an interesting part there (fair quote from Seeking Alpha):

John D. Godyn - Morgan Stanley, Research Division
That's very helpful. And Steve, you mentioned the A330 NEO. I was wondering if you had any sort of initial thoughts that you'd care to share?
Steven F. Udvar-Hazy - Founder, Chairman and Chief Executive Officer
Yes, we've had a lot of going back and forth with Airbus, with the engine manufacturers, with a number of airlines that have sort of raised their hand as potential launch or co-launch customers for the airplane. Basically, I think what Airbus is evaluating is a new generation of A330-200s and 300s with engines that are of more current technology and are being currently devised or in operation, derivatives of engines already in operation that would offer a double-digit increase in efficiency and fuel savings. And I think Airbus is looking at that very carefully as a possible alternative to the A350-800.

What do we learn from that:

1. The A330neo will be launched at the Farnborough Airshow!
2. ALC will be one of the launch customers.
3. There will (probably) be a A330-200neo, not just a A330-300neo.

What do we not know (yet)? Who will be the engine provider?

Anybody wants to bet against that?`

Not that I think that everything that SUH says and wants is becoming reality: SUH was one of the vocal opponents of the A320neo before it was getting launched. I remember him argueing against the A320neo at the european ISTAT meeting in October 2010, telling the audience that the benefits in fuelburn and noise were not much more than a PR gag. Reality told us otherwise meanwhile and ALC is a large customer for the A320neo as well as the Boeing counterpart, the B737MAX.

Now, in the case of the A330neo, he does not see the fuelburn (and noise as well) benefit as a PR benefit only. Life is everlasting learning...

B757 replacement - NSA or NST?

Two different concepts for a B757 successor emerged over the last few weeks.
First, there was an article by "The Motley Fool" (not exactly an aviation expert website) speculating about a B757MAX (and  Scott Hamilton from Leeham Co. confirming these rumours), with composite wings and a new engine. Although this rumour was quickly dismissed by Steve Wilhelm from the Puget Sound Business Journal and another "Fool" and Boeing itself assured that they are not planning any B757MAX, it would be a relatively straigthforward and easy way to fight against the A321neo, as the numbers and the market already showed that the B737MAX-9 will be an inferior aircraft (I expect some announcements in the not too distant future that will further show that Boeing has a problem here). A new wing, new wingbox and new engines (which would be a few percentage points better in SFC than the PW1100G and the LEAP-1A) would provide enough improvement to be a very good aircraft for thin transatlantic routes. But then what? Airbus would not stand by and could develop a A322 with a similar fuselage length, also a new wing and wingbox and the same engines. And with successors for both of the narrowbody families planned for 2030+ that will likely start at today's B737-800 size, an EIS around 2022 would provide a production run of 10 years at best. So that concept does not really make sense.
Meanwhile also Scott Hamilton wrote another article about the subject, making clear that the "757 replacement" can only be part of a new family of aircraft, starting at the B737-800NG/B737MAX-8 size and topping at about 240 passengers, set by the aspirations from Airbus regarding the A321neo and that an EIS would be not anytime soon, i.e. not 2022.

The other concept emerged from an article by Aspire Aviation and this is completely different. Daniel Tsang proposes a small twin aisle family with a 2-3-2 seating configuration, comprising of two models between 200 and 240 seats. This of course would be a clean sheet design with the associated high development costs. The B737MAX family would still sell, he thinks, for shorter routes, as the "NSA" (New Small Airplane, not the other one...) would be optimised for routes around 4000nm in a 200-220 seat 2-class layout (where a B737MAX-9 and a A321neo would have to trade range versus payload).

But would the market be large enough for such an aircraft to justify a completely new aircraft, built from (today) very expensive carbon fibres? I think: yes and no! No, as I think the seat count of 200-240 would not cover a market potential large enough. And yes, if this NSA (albeit then not so "small") would occupy a larger part of the market, ranging from the B757-200 all the way up to the B767-300, say, from 220-280 passengers and a range around 4,500nm, to cover transatlantic flights between the US East Coast and Europe. This aircraft would have the potential to replace all the B757-200W,  B767-300ER, A330-200/300 and maybe also some B787-8 that are used on these routes today (and more then).

Now: could this aircraft be the first Boeing to be powered by a geared engine?
A few weeks ago Rolls Royce very openly committed themselves to the geared technology and pursues such an engine for 2025. As I do not believe we would see the "NSA" (I would call it "NST", for "New Small Twin") before 2025, that could fit in Boeing's time planning.
Now with two of the big engine companies in the "geared camp" what will GE do? My bet: the next generation of narrowbody engines (beyond the A320neo/B737MAX generation) will be "geared only" - including GE! Of course nobody from GE (or Safran) will say so openly today, because that would mean to admit concede against the "gear". But I am sure that behind the scenes GE is working closely with their new affiliate Avio Aero in Italy (providing  the Fan Drive Gear System for the PW1100G) to have a an engine architecture ready for the mid 2020's. And Snecma is working on a geared open rotor in the Clean Sky project.

Everyone's a winner, baby...

Boeing‘s Randy Tinseth can’t resist to screw every statistics in his (i.e. Boeing’s ) favour. This makes him of course no different from John Leahy, head of sales at Airbus. Now, after Air Canada firmed up their order for 61 B737MAX yesterday, Tinseth claimed that the B737MAX gained more than 50% of the market since it’s first order. Granted – Boeing has now 1908 firm orders for the B737MAX in the books and Airbus sold “just” 1521 A320neo since the first order for the B737MAX from Southwest Airlines. But does that really matter? Boeing’s first firm order for the B737MAX from Southwest Airlines in December 2011 came more than one year after the launch of the A320neo on Dec. 1^st, 2010 and Airbus booked the first order for the A320eo from Virgin America in late December that year. By the time of the first B737MAX order Airbus already had 1,176 firm orders for the A320neo family and so they had 89.55% of the market (“Neo vs. MAX”).

In 2012, the first full year where the B737MAX was available, Boeing had the upper hand: 949 firm order for the B737MAX meant a 66.5% market share for that year with Airbus being in the overall lead with 61.6% (1,764 vs. 1,099 orders).

In 2013 the picture reversed in favor of Airbus –they sold another 937 A320neo aircraft where Boeing gained “only” 703. Overall Airbus held a market share of 59.7%.

Until today in 2014 Boeing sold 117 B737MAX – Airbus sold 57 A320neo. So one could conclude that the market lead for Airbus dwindles away. But there are a few large already won campaigns for Airbus  to be firmed up: Tigerair (37 A/C), China Eastern (70 A/C), ANA (30 A/C) and a few others – like Monarch – are waiting for their winner. So I guess Airbus’s John Leahy will soon have an answer for Tinseth’s anaylsis with his own statistics.

The better choice than throwing  with statistics would maybe be that both gentlemen would unite to sing the Hot Chocolate song "Everyone's a winner" - although I cannot imagine them singing together the line "Making love to you is such a thrill..."...

In retrospective, the decision by Airbus to launch the A320neo brought record full order books for both and helped both to fend off Bombardier's CSeries. And there is some truth of course in the claim that SVP Andy Shankland from Airbus made at the ISTAT America this year, that it would be fair to say that the B737MAX was launched in Toulouse. So Randy could bring a bottle of wine to the party to celebrate their appearance in front of the aviation audience. I would give a fortune to see and hear them...

Three in a row, two in a week..

There is some movement in the A320neo engine market right now, it seems. P&W scored three "wins" in a row recently. After BOCA announced an order for 15 A320neo to be powered with the PW1100G-JM, this week both Tigerair and ANA selected the Geared Turbo Fan for 37 and 30 aircraft.
I would expect that we will see more decisions about A320neo engine options being taken this year as EIS is now less than 20 months away. The PW1100G-JM should gain certification this summer so that it will maybe have an advantage in customer confidence (and this is badly needed by P&W after the PW6000 disaster).
Right now the GTF has a slightly larger market share with 896 aircraft (866 shown here by pdxlight plus 30 by ANA) to be powered versus 827 to be powered by the LEAP-1A. But there are large campaigns waiting for a winner, like Lion Air (174 aircraft), American Airlines (130 aircraft) and easyjet (100 aircraft), so the picture can turn by any of these campaigns decided.

Who needs Qantas?

Sorry for this rhethorical question!  And of course it would be bad if another iconic name in aviation history would disappear. But reading the news from "down under" today, I am coming to the conclusion that the best solution would be to drop the Qantas brand altogether and just to continue with Jetstar. To "save" the Qantas brand name Jetstar could then be renamed Qantas and join oneworld (again).
At least with the alliance with Emirates the international operations of Qantas itself became irrelevant. It looks more like a feeder for Emirates. And now that Emirates will start codesharing with the Qantas LCC offshoot Jetstar, there is no real need for a domestic Qantas. Concentrate all domestic efforts on Jetstar and act as a feeder for Emirates in markets like Singapore, Ho Chi Minh and elsewhere in south east and north asia.

Rolls Royce looking ahead...

Yesterday Rolls Royce surprised the aero engine world at a briefing about it's strategic roadmap by looking ten and more years ahead and revealing, what the company plans as their next steps in engine development.

In the 2020 timeframe we could see a further evolution of the Trent 3-spool engine family for now called "Advance" (I am sure the name will change once it should evolve from being a technology project and becomes a real program). This engine should deliver an SFC that is 5% better than the Trent XWB. As aspire aviation pointed out, the GE9X for the B777X should be about 5% better than the Trent XWB, so it is clear who is the "enemy" here.
The time frame and the SFC goal puts this engine concept  in the position to be a good candidate to power the A380neo, if the project goes ahead. But Airbus could also ask for a version with more thrust than the roughly 70klbf needed for a re-engined A380 to power a A350-1100 and then have a formidable competitor to the Boeing B777-9.
A first test engine based on the Trent XWB, but with a new core with a higher OPR - up to 60 and thus being on the same level as the GE9X - should run as early as next year.

The second engine does not necessarily build on the Trent 3-spool architecture as it - potentially - could use a gear as we currently have on the PW1000G family from Pratt&Whitney. Of course also a 3-spool GTF is possible, but I doubt that makes real sense, so I would guess it would have 2 spools. This engine should then be another 5% better than the "Advance" engine.
This engine concept should not only target the widebody market but also future narrowbodies. In the light of recent discussions about a possible B757 replacement and a successor to the B737MAX family with an EIS around 2025 this is an interesting move of course. After selling their stake in the IAE to P&W, both companies announced  a partnership for future narrowbody programs. This partnership was later canceled. But for any future narrowbody we should expect a choice of two engines, not three. And CFM seems to be the frontrunner in any case (unless the LEAP engines will fail completely, what I doubt), so either RR or P&W would be out of the game. So is this move aimed at P&W begging for a new try of the partnership? Who knows...
Anyway, the above SFC comparisons are true for widebody engines in the GE9X class - for narrowbody engines we have to scale the SFC values, as for example the tip clearances are not scaling with the physical smaller components of the engines. Relative clearances are larger and so are aerodynamic and parasitic losses. Therefore all engine components have lower efficiency levels. And as the core components (high pressure compressor and turbine) get smaller and smaller with increasing bypass ratio (BPR) and overall pressure ratio (OPR) for a given thrust, it gets harder and harder to maintain a decent efficiency level. Also surge capability of the compressor might not be easy to control. In the end, to achieve an OPR of 70(!) for this engine I predict this will only be achievable with a radial compressor stage at the back and of the compressor. And at temperatures that will be reached at such a high OPR this wheel has  to be out of a material that can only be found in turbines today. Maybe CMC? Then good luck producing such a complex piece out of that material? The other possibility would be to have an intercooler between the low and high pressure compressors. But that would add weight and complexity, counterproductive for a narrowbody engine. This is why I see that concept better suited for a long range application, where (engine) weight does not have such an immediate effect on fuel burn, The same argument could be, but must not be necessarily true for the envisioned variable pitch fan system. This idea goes back to the ADP concept from P&W from the 1980's. The variable pitch system has two great advantages versus non-pitch fans: there is no need for a thrust reverser (which save weight) and the whole nacelle can be shortened, also saving weight. On the other hand, the pitch system itself is complex and needs additional maintenance. As these maintenance cost are mainly cycle driven, I also see this technology better suited for long-range, low cycle operations.
But who knows what "white rabbits" Rolls Royce will pull out of their hat by then - it is a great company and I would not be surprised if they find ways to handle all these challenges.

„Premature“ engine upgrades

In the context of my last post I wondered why MTU now starts talking about an upgraded GTF to be delivered in 2019. We are one and a half years away from EIS of the PW1100G on the A320neo and the engine is  - well – not selling bad. Why announcing an upgrade now? To enhance SFC by 3% does not sound cheap - GE and RR needed two improvement packages to bring the engines for the B787 to SFC spevc level.
Furthermore MTU COO Rainer Martens told the press that these enhancements could also be implemented into the other PW1000G family members (PW1200G/PW1700G for MRJ/E175E2 and PW1500G/PW1900G for CSeries/E190E2&E195E2). So we can be sure that all aircraft OEM’s will sooner or later ask for the upgrades, just a couple of years after EIS of their respective aircraft – remember that the E175E2 should have an EIS in 2020, AFTER the PW1100G is available with the upgrade. Sounds like all the development engineers will have secure jobs at P&W, MTU, JAEC and the other PW1000G partners for the years to come. Good for them, bad for the "bean counters" in the companies and the financial breakeven of the engine programs.
For Airbus, the revelation has probably a good and a bad side. The good side is that the A320neo will enhance the competitive position against the B737MAX (and maybe later a CS500), but also the A319neo could be in a better position against the CS300. On the other side, remaining delivery positions for the A320neo in 2018 will be not that easy to fill without giving another discount for not getting the upgrade.

The B757 successor discussion

Yesterday MTU’s COO Rainer Martens revealed during the annual results presentation that there is a plan to upgrade the PW1100G engine for the A320neo with another 3% SFC jump by 2019. On a side note, as the turbo machinery of the PW1100G and the PW1400G are identical,  the MS-21 will also benefit from that as I think that P&W and their partners will not start building  two different engines.

But what does that mean in a broader context?

Firstly, we can be very sure that a similar PIP (Performance Improvement Package) will also be worked out for the LEAP-1A (and the LEAP-1C destined for the COMAC C919, as this engine has the same turbo machinery as well). Another report on a german website cites MTU’s Martens that the 3% improvement are agreed with Airbus so we expect that there is a corresponding  agreement between Airbus and CFM to lower SFC around 2019/20. As the GE9X goes into service by that time frame we can expect a lot of technology transfer from the GE9X to the LEAP-1A – and subsequently to the LEAP-1B for the B737MAX.

Secondly, this makes the business case for any A320neo and B737MAX successor harder. This is why I do not believe in a B757 successor in the time frame that was discussed by Scott Hamilton and others lately. At least not in the sense of a purpose build aircraft. Here is why:

·         The 3% lower SFC for the A321neo (and probably sooner or later also for the B737MAX-9) leads to 100+nm more range, bringing these two aircraft even closer to the capabilities of the B757 today.

·         As of today the A321ceo can do about 95% of all routes flown by the B757 today. And the A321neo can only NOT do five city pairs flown by the B757 today (I go that verbally from Airbus). 

Add the 100 extra miles coming out of the engine improvement and what is left? Maybe three routes, maybe four routes, maybe still all five. Add some improvements to the airframe and what is left then…?

I am  sure there is no business case left then for building a standalone aircraft with the capabilities of the B757. But also as part of a new family of narrowbodies, aka the A30X and the B797, there is no real need to compromise the efficiency of the whole family with a wing that is large enough to cover distances more than what the A320neo/B737MAX families will do. Otherwise Airbus and Boeing could lose market share against a Bombardier CS500 and a forthcoming Embraer small narrowbody  which are designed for ranges less than 3000nm.

But I do not see these new breeds coming a of 2025 as James N. Krebs postulated in this very interesting guest column at Leeham News. But if we see a further 3% improvement from the engines at the end of the decade, how should there be another jump of 20% in fuel burn in 2025? The technology for an aircraft with an EIS must be defined by 2018/19. With a regular tube-and-wing aircraft I cannot see a jump more than 10% from the airframe - if designed for the same range (more range: less efficiency gain for shorter routes). If we take 1% efficiency gain for every year from improved engine design (and that seems optimistic as it gets harder and harder), we get a maximum of 15% versus neo/MAX. Not taken into account that there can still be something done to the existing aircraft as well like building the fuselage from AlLi or enhancing the wing. The business case for an all new aircraft then disappears in my eyes. But I am not a bean counter…err… accountant.

Another question is if someone will do something in the sector left by the likes of the A300-600R and the B767-300(non ER): 250-300 seats, 4000nm max range. Being hinted to think about that, as can be read in the Pudget Sound article. I do not count that as a B757 successor and  I do not know if there is a business case for that but Lufthansa always cried for “people mover” like that.

Embraer bridging between E1 and E2

Much hype there was during and after the Paris Air Show last year, when Embraer launched their EJet E2 family. 365 orders, MoU and LoI from Skywest, ILFC and five unannounced customers sounded like a good start and some media was quick to compare it to the current backlog of the CSeries, which had a similar amount of orders at this time – but 5 years the “launch” LoI from Lufthansa/Swiss.

Now, a few months later, there are “just” two the two orders that were announced at PAS13: 100 aircraft for Skywest (E175E2) with 100 further options and both 25 E190E2 and E195E2 for ILFC also with an equal number of options. None of the five unannounced customers came forward since June 2013 and no other customer was added.

Last week Embraer announced their numbers for orders and deliveries in 2013. Deliveries for the EJets were exactly at plan with 88 for the year. Orders looked great with American, United, Skywest ordering large numbers of E175 and taking even more options.

But let’s have a deeper look in the orderbook: Open Orders at the beginning of the year was at 279:

    1 E170

188 E175

  73 E190

  17 E195

The E170 is obviously one delivery away from dead. It is too small for the North American regional market, where the new sweet spot if 76 seats in two classes and this is where the E175 fits in ideally. The backlog of 73 for the E190 does not look too bad at first glance, but in fact you have to subtract the 24 E190 for Jetblue as they are deferred until after 2020, when the E2 version of the E190 is available and Jetblue made it already clear that they are aiming for a switch to the E2. It could also be that they will abandon the 100 seater altogether by that time and finally cancel the order.

The 7 E190 in the orderbook from flynas (or Nasair) are also questionable, as the airlines is phasing out their EJets they already have. Another shaky part of the order book are the 24 open orders for E175 from flybe. The carrier is deep in a restructuring phase and has to become profitable soon. But let’s keep them in for that following exercise:

Without the 24 E190 for Jetblue the backlog at Jan. 1^st, 2014 was 255 aircraft. With a constant delivery rate of 88 aircraft per year the backlog will be at zero in Q4 2017 2016. But the EIS for the E190E2 is slated for the middle of 2018, the E195E2 should come in 2019 and the E175E2 finally in 2020. So Embraer has

-          to find more customers for the current EJets

or

-          to speed up the development of the E2 family

Well, in essence, they have to do both, I would say!

Embraer first announced the EJet E2 with in January 2013 when they said that they will be powered by PW1700G and PW1900G engines by P&W. These engines are essentially the engines for the Mitsubishi MRJ (PW1200G) and the Bombardier CSeries (PW1500G). These engines are already existing, tested and, in the case of the PW15000G, certificated. This is the big difference between the EJet E2 reengine program and the A320neo and B737MAX program, where the engines are the pacing item.

The EJet E2 aircraft are getting new wings, new undercarriages, a new flight deck and a full fly-by-wire system: sure, these things take their time, but Embraer took a lot of time already to decide how to react to the MRJ, CSeries and the A320neo/B737MAX. So there should have been more than just a concept at the beginning of last year and Embraer is currently testing a full fly-by-wire system with their Legacy 500 Business Jet. In fact, they “learned” so much that they switched to Moog as a supplier for the FBW system for the E2 Jets, as the Parker system contributed a lot to the delay of the Legacy 500/450 program (there could also be another reason behind that switch, as Parker is part of the “GE World” and GE lost the engine contract…).

In short, I think Embraer has to bring forward the E2 program as much as they can – otherwise they would face a production hole – but wait: there is hope: if the Mitsubishi MRJ would be delayed even further, the two big customers (Trans States and Skywest) for the MRJ would be forced to look at alternatives. The only logical aircraft that could replace the MRJ90 deliveries in the 2016/2017 time frame with the same cabin comfort would be the E175E1. This might be the reason why Skywest took options for 100 E175E1 last year when placing the order for 40 E175E1. Also United, American Airlines and Republic took further options for the E175E1. It looks like there is a considerable “hedging” against a further MRJ delay and this might help Embraer to bridge to gap between the current E1 and the forthcoming E2.

Airbus Order and Deliveries 2013

The final numbers for orders and deliveries from Airbus came out yesterday. There were no big surprises - just a few things to clarify...
The "mystery buyer" of 100 A320 appears to be Air China and Shenzen. Compare the numbers that Airbus reports to the numbers when the upcoming order was announced back in May.
I have no clue however who is the unidentified customer for the 20 A320neo. Loong was reported to have ordered 20 A320 at the end of December, but this should be a mix of 11 A320ceo and 9 A320neo and this order is missing in the 2013 table.
There are quite a few A320ceo&neo orders to be firmed up in 2014:

• VietJet for 20 ceo and 42 neo
• Qingdao for 5 ceo and 18 neo
• Spring for 30 ceo
• Lybian Wings for 4 neo
• Hong Kong Aviation for 60 neo
• CASC for 42 ceo (but that could disappear now that individual chinese airlines place orders themselves)

as well as

• Doric for 20 A380
• Chinese airlines for some more A330

So the offical goal of  book-to-bill just simply greater than 1 does not seem overambitious. Chinese airlines are still behind in the race for reengined narrowbodies, despite the 100 A320 order and probably some of the unidentified orders for the B737MAX coming from China. So I guess we will see some more A320neo and B737MAX (maybe also CSeries) orders from China this year.
An announcement to increase production for the A320ceo before production ends and for the A320neo to a range of about 50 per month seems to be inevitable and we should expect it soon.

The possibility of a A330neo was downplayed by Airbus officials yesterday. It would be just one option and not the main one...of course they have to downplay the possibility as long as possible as they have to protect sales of the existing model. But I would not be surprised if we would see a move in the first half of the year.

Strong 5th season at Boeing

As expected not only Airbus had a "fifth season" in 2013 but also Boeing.

And these are the final numbers:

Gross:
1208 B737 (699 -MAX, 509 -NG)
    17 B747-8
      2 B767
   121 B777
   183 B787
 1531

Net:
1046 B737 (699 -MAX,  347 -NG)
    12 B747-8
      2 B767
  113 B777
  182 B787
1355

Especially the B737NG and the B737MAX had very strong order intakes in December 2013.
All in all 124 B737MAX and 143 B737NG orders were recorded. All but the order for 75 B737MAX and 11 B737-800 were from unidentified customers. Chinese airlines and jet Airways (for 50 B737MAX) are hot suspects for these.
The situation for the B737NG as I described here is a little better now but still Boeing has to sell about 690 B737NG's to fill all productio slots until the B737MAX takes over full B737 production.

One thing that is clear even before the Airbus numbers will be published next Monday is that despite the large December order intakes Airbus outsold Boeing with the A320neo against the B737MAX as Airbus sold 759 A320neo until the end of November. But the recent win at Air Canada (which is not reflected in the 2013 numbers) and flydubai could hint that that could change in 2014 as with the recent announcement of production increases to 47/month for the B737 line Boeing can offer fresh delivery slots. We will see how soon Airbus will hit back...