Airbus overbooking A320ceo slots

With Delta Air Lines today announcing the plan to purchase 30 A321ceo (along with 10 A330-300) it becomes clear that all the remaining A320ceo slots are booked now and that it is very likely that Airbus overbooks the slots.
As of July31 there were 1.787 open orders for the A320ceo family in the orderbook. Now let us consider the following orders to get cancelled:

• Kinfisher/Kingfisher Red 67 aircraft
• United Airlines                 30 aircraft
• Alphastream                     15 aircraft
• Northwest Airlines             7 aircraft
• Croatia                                4 aircraft
• Hamburg International       2 aircraft

There are now some announced orders which are not yet in the Airbus O&D table:

• Delta Airlines                       30 aircraft
• Vueling                                30 aircraft
• CASC                                   42 aircraft
• Air China / Shenzen             40 aircraft

This is a net of 17 orders, so we get 1804 open orders as of July 31st.
With a production rate of 42 and 11.5 months of production per year another 1092 aircraft will have been delivered until the end of October, when the A320neo will enter airline service, leaving .
A320ceo production will ramp down from that point in time. Assume Airbus can hold the rate of 42 aircraft per month steady.
I read somewhere that 12 A320neo should leave the factories in 2015 and 100 in 2016. So from the 564 aircraft produced from November 2015 until December 2016 464 will be ceo's, leaving the ceo backlog at 374. For 2017 I guess that around 60% of all produced A320 will be neo's (289 from 483), so the ceo number delivered in 2017 would be 194 and the remaining backlog at the beginning of 2018 would be 180. Airbus said before that the A320neo should reach 100% share in early 2018, so it is clear that the A320ceo are overbooked at the moment. Maybe this is not unwise as one of the two neo engine suppliers could be late - who knows...

UPDATE: I forgot to mention the American Airlines order: the order for a combined 130 A319ceo and A321ceo is not part of the orderbook. The first two aircraft were delivered in July, then three in August and another one in early September. Airbus leases these aircraft directly to American and then sells them with the lease attached. Not all deliveries will follow that procedure: ILFC ordered 15 A321 recently to lease to AA, so these 15 A321 are part of the orderbook and we do not know how many aircraft from the recent order for 3 A319 and 5 A321 from CIT are destined for AA and how many aircraft will come from other already existing orders fom leasing companies. But Airbus already said that around 30 aircraft will follow the procedure of the first four A319, which were sold to Avolon. So we have another expansion of the orderbook and further overbooking of the A320ceo slots.
             

Is Delta Air Lines competitive with the B737-900ER?

Yesterday came the press release confirming Delta's order for 100 B737-900ER.

These will delivered between 2013 and 2018 and there is no mentioning of a possibility to switch to the reengined variant.
In the press release Delta stresses a fuel burn advantage of 15-20% against the B757, B767 and the A320. If fuel is responsible for about 40% of your cash operating costs, this is big and results in 6-8% lower COC's. But to be competitive, Delta has to look what the competitors will do, especially the low cost carriers, which have lower COC's to begin with.
Virgin America and jetblue have ordered the A320neo

Delta's 737-900ER order

Yesterday came the news that Delta Air Lines will purchase 100 B737-900ER to begin the replacement cycle of it's narrowbody fleet. Until there is an official press release from the airline, it is rumours, but let us assume that the information is accurate.
Scott Hamilton is certain that Delta will have conversion rights to switch to the reengined version (the B737-9 as it stands now). If true, this little detail could hurt Boeing

B737RE!

So we have another reengining programme! American Airlines just announced to purchase up to 300 B737 aircraft (as well as up to 625(!) A320neo). The more inportant detail of this message is that 100 (+60 options) of the B737NG's will be powered by the LEAP-X, unofficially launching the reengining program of the B737NG, as this needs confirmation by the Boeing board.
What does that tell us?

CFM power

Scott Hamilton has a piece about how GE and CFM are able to win so many engine competitions and for that went deep into the Republic deal for 40 A319neo and 40 A320neo, to be equipped with the LEAP-1A.

After reading the story I went on and looked at a few public databases, where you can check out which airlines owns which aircraft, with which engines they are equipped and who is (eventually) the lessor of the aircraft.

I was interested in the airlines which already ordered the A320neo, but did not commit to an engine so far. Here are my findings and what they tell me:

1. GoAir: they have a firm order for 72 A320neo

Current fleet: 10 A320 powered by CFM56. They firmed up 10 options for the A320 (classic), no information which engine they choose for these, but I would guess CFM56.

GECAS leases 4 of these aircraft to GoAir.

So both CFM and GECAS have leverage for a deal to sell the LEAP-1A to GoAir. CFM could reduce spare parts pricing for the existing CFM56 and GECAS could lower lease rates.

Now GoAir is reportedly also interested in the CSeries and could announce a deal in July or August.

That gives P&W a leverage to struck a combined deal here, as the PW1524G is the sole engine for the CSeries.

Conclusion: Tie! Everything is possible!

2. Jetblue: Jetblue has a MoU for 40 A320neo

Current fleet: 118 A320 with V2500, 49 E190 with CF34-10E

GECAS leases 13 A320 as well as 35 E190 to Jetblue

At first glance, P&W should have better cards, if one just looks at the A320 engines, but GECAS tries to get a hold here with more leases.

MTU does the MRO for the engines on a power-by-the-hour basis, so they could be involved in a deal for placing the PW1133G on the A320neo's for Jetblue.

Conclusion: It's P&W's to loose - and that's the chance of CFM!

3. Avianca TACA: they have a MoU for 33 A320neo

Current fleet: 42 A320 powered by CFM (mostly Avianca), 30 A320 powered by V2500 (+20 on order)

GECAS leases 14 aircraft to Avianca TACA.

GE has a dedicated MRO shop for the CFM56-5 in Brasil.

Conclusion: CFM's to loose. They have clearly more to throw into that deal.

4. LAN/TAM: 20 firm oders (LAN) + MoU for 22 (TAM)

The airlines are in a merger process.

Current fleet: Large A320 family fleet, powered both by the V2500 and the CFM56 - LAN selected the CFM56 last year for a further 50 A320.

GECAS leases 23 aircraft, mostly to TAM.

MTU is providing MRO for the V2500 at TAM.

Conclusion: Close call! CFM and GECAS have slightly more leverage...

5. Garuda Indonesia/Citilink: MoU for 10 A320neo + 25 Options

Current fleet: 78 B737 (Classics and NG) with CFM56

GECAS leases 40 B737 to Garuda.

Conclusion: CFM can hardly loose this one!

6. Transasia: 6 A321neo on firm order

Current fleet: 2 A320 and 5 A321 powered by V2500, 7 ATR powered by PW127

Conclusion: P&W can hardly loose here!

And now look at some prospective customers:

1. Delta Air Lines

Current fleet:

• GE engines are on 105 aircraft
• CFM engines are on 209 aircraft
• GECAS leases14 aircraft to Delta
• PW engines are on 355 aircraft
• IAE engines are on 27 aircraft with 13 more to come (MD-90)

Most PW engines will go away with the replacement (the last DC-9's and the MD-80's), so the P&W leverage is not that big as it looks.

Conclusion: a deciding factor could be the engine commonality with a possible CSeries order!

2. American Airlines

Current fleet:

• GE engines are on 73 aircraft and will be on the 6 ordered B777-300ER
• CFM engines are on 154 aircraft and 54 more ordered B737-800
• GECAS leases 61 aircraft to AA
• PW engines are on the 229 MD-80's, which will then disappear

Conclusion: never heard so far that AA is interested in the CSeries, so this is CFM's to loose.

3. Air France/KLM

Current fleet:

• GE engines are on 146 aircraft
• CFM engine are on 210 aircraft
• GECAS leases just one aircraft to AF/KLM (is that right?)

Conclusion: hopeless for P&W, M. Sarkozy will never let AirFrance order an engine without french content if there is one available.

Paris Air Show 2011

That was quite an event! I will focus on just some of the most important topics here, the most important of course being

A320NEO

1029 order and commitments! (plus a few more options) - Never ever in history there was an aircraft selling so fast. Of course, a comparison to the B737NG is unfair, as 15 years ago we did not have such big and emerging markets in China, India and all over Asia (more than 460 A320neos are ordered by Asian airlines so far). Also I am sure that a reengined B737NG or a NSA/B797 would sell as good as the A320NEO (or in the case of the – hypothetical – B797 even better). But let us roll back one year: there were many skeptics of the A320neo, saying that demand for such a “warmed-up” aircraft would just not be there. Others said that Airbus might be forced to convert many of the orders for the current A320 to the –neo model. Both are proved wrong today. Even Air Asia boss Tony Fernandes did not manage to convince John Leahy to convert some of the old orders to the –neo.

Now if American Airlines would really decide to order 100 A320neo (probably they are most interested in the A321neo) this summer, there would be lots of activities starting in Chicago and Seattle.

The A320neo brings us right away to the next big topic at this year’s Airshow.

LEAP-1A vs. PW1100G

Before I get started, please read what Addison Schonland wrote in his piece on AirInsight. As I laid out before I have my doubts about the performance claims of the LEAP-1A. And as I heard, CFM did more PW1100G-bashing at his media briefing just ahead of the Airshow than talking about their own product and it’s merits. A rock solid confidence looks different…

Nevertheless, CFM managed to get large deals at the Airshow. The largest, of course, was the order for 400+ engines for the 200 aircraft deal of AirAsia. But this was CFM’s to loose, as they are providing the CFM56 for the current 175 aircraft order from AirAsia, GE won with the CF6-80 for AirAsia’s A330-200 just recently and GE became a sponsor of Tony Fernandes F1 Lotus Team.

I did a prediction about A320neo orders and the respective engine choices just a week before the Airshow opened. I was wrong at SAS and Republic – both choose the LEAP-1A over the PW1100G. As it appears, I underestimated the market power of CFM, GE and GECAS.

I also expressed before that I think there could be an alliance between Airbus and CFM to keep potential CSeries customers away from ordering the Bombardier aircraft by giving them deals they cannot deny. This strategy can work with airlines which have business with CFM, GE and/or GECAS today.

Look at Republic: the whole Frontier fleet is powered by the CFM56 today - about half of the A319 fleet from Frontier is leased through GECAS.

Republic has the largest Embraer EJet fleet in the world, all powered by the CF34-8/-10. Most of the E170 in the fleet of Republic Airlines, one of Republics subsidiaries, is leased from GECAS.

So GECAS, CFM and GE have all possibilities to sweeten the LEAP-1A deal with discounts on spare parts and leasing rates – one thing that Pratt&Whitney can not do.

SAS on the other hand is a large B737NG customer and they also have a CRJ900 fleet powered by the CF34-8. They choose 2^nd hand B737-700 over the CSeries earlier this year. This decision was probably more cash driven, as leasing rates for used aircraft are of course cheaper than for new ones and SAS is going through a tough time right now. SAS has also A319 and A321’s in their fleet, powered by the IAE V2500. But firstly the V2500 powered fleet is much smaller than the B737NG fleet, and secondly, PW always has to deal with Rolls Royce on the V2500 business. And as RR has no stakes at all in the –neo business, they have no interest in building a bridge for PW at all.

One A320neo deal that did not materialize in Paris was the anticipated order for 50 aircraft from Qatar (as well as the “deferred” CSeries order). The A320neo will come one day of the other, just as U-Turn Al’s mood allows, but I guess the chances for the PW1100G are better here.  Although GE can throw their GGE90-115B business on the B777-300ER/-200LR fleet here (Qatar just ordered 6 more of them in Paris) and CFM powers 4 A340-300 in Qatar’s fleet, the A320 fleet is powered by the V2500 and PW might to persuade Qatar by making good deals on both the CSeries and the A320neo.

CSeries

John Leahy still thinks that Bombardier should scrap the CSeries program. As an Airbus employee he has to say that, regardless of what he thinks.

But as in the weeks before and at the Airshow there were five new customers announced (three of them unnamed so far), I think it became clear  that a growing number of airlines got convinced that in this market segment an optimized aircraft is better suited than, say an A319neo. Surprisingly, the CS100 got the biggest chunk of the new orders – maybe something to think about at Embraer…

I guess we will see a few other orders for the CSeries until the end of the year:

- Delta Air Lines

- Qatar (finally)

- GoAir, which just ordered 72 A320neo, hinted for a “raft” of CSeries soon to order

Boeing

Boeing did not raise the bar very high in the run-up of the Airshow, but did extremely well with orders, especially on the widebody front. It remains to be seen, if the revised A350-1000 can break the monopoly the B777-300ER enjoys in their segment. A stretched A350-1100X was denied by Airbus officials, but we will see…if the Rolls Royce managers are wise, they build in another 5% thrust margin above the 97klbf in their revised Trent XWB nacelle lines to cover for growth.

Scott Hamilton further explains Boeing’s success – I suggest to read his entry for more.

Other stuff

There was lots of other stuff to talk about – but I won’t, at least for today…