Widebody Order Gap Update - B777 and A330

Leeham News and Comment has a story today that both Jet Airways and Kenya Airways want to get rid of their B777-300ER. Jet Airways has ten of the type while Kenya Airways has three. Scott Hamilton notes that this could build up to the pressure for Boeing to sell the last B777-300ER until the B777X will go into service in late 2019 the earliest. So let us have a look how many B777-300ER (and B777F) Boeing needs to sell to bridge production without any cut. Also, have a look how Airbus

A330ceo order gap update

Airbus last week announced to lower the A330 production to 6 units a month from the 1^st quarter of 2016 on. Today the rate is at 10 per month, coming down to 9 in the last quarter of this year.

Widebody Order Gaps

A lot has been written in the past about the orders that Airbus and Boeing need for the A330ceo and the B777 (non-X) to fill the production lines until the A330neo and the B777X will take over full production.
I started to collect the backlogs for both aircraft every month to see how the backlog will change over time. With the current or announced future production rates I can then calculate how many orders both aircraft will need.
Of course there are some open questions that will influence the number orders needed to fill the so-called gap:

• How will production rates change until the new aircraft will enter service

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...

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...

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.

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.