Airbus raises order target

OK, John Leahy is a little bit late to acknowledge there are more orders to come this year (at least later than me) and he now expects more than 1000 orders, instead of more than 800 and the initial goal of more than 700. And as we know how John Leahy ticks, he never wants to under-deliver and we can be pretty sure that he already has the customers in mind which will make him reach that target.
At the end of June there were 758 orders. Then Easyjet got the OK from their shareholders to order 35 A320ceo and 100 A320neo. Then there is the MoU from Hong Kong Aviation for 60 A320neo and the MoU from Doric for 20 A380. Also there is an commitment for 2 more A380 from Lufthansa. The order from SAS for 8 A350-900 and 4 A330-300 needs to be firmed up also, as well as the order from Kuwait Airways for 25 aircraft. Here we are: 1012!
Then there are new orders still to be decided: Monarch, Vueling, Lufthansa (widebodies), flydubai, Air Canada and probably some others also.
Still room to lift the target once or twice...

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…

LEAP-X striking back?

CFM said over the weekend that they have four announcements on every of the first four days of this years Paris Airshow regarding LEAP-X customers. It is not clear, whether these are all for the A320neo or some of them will also be for the C919, but apparently CFM is strongly coming back from behind and it remains to be seen if the PurePower GTF engine can hold it's No.1 position on the A320neo.

According to a Bloomberg report, SAS will order the LEAP-X for their 30 A320neo. A few days ago I expected them they will go with the GTF - apparently I was wrong and I will speculate about the reasons a little bit later.
But let us look at the possible reasons of this comeback: if you read the blog entry behind the first link of this, article, there are two interesting things to note: CFM just lately changed the design of the LEAP-X engine:
1. The fan diameter got larger, from 75" before to 78" now.
2. The LPT got an additional stage - now it has seven, just as the GEnx-1B for the B787.

Both changes are good for about 1% in SFC - each. Additionally, I guess CFM changed to size of the core and made it smaller, what could yield in another 0.5% in SFC.
On the other hand, the engine gets larger, produces more drag, gets added weight and the added LPT stage produces extra maintenance costs.
Because of the added drag and added weight, the fuel burn benefit will end up in the range of 1.5-2%. Operating costs could end up being somewhere between 1-1.5% better.
If you study this site, CFM now claims a 1% better fuel burn against the GTF. Is this credible: a few weeks ago, before the design changes were made official, Bernstein, AirInsight and others said (with obviously good knowledge about the situation), that LEAP-X would trail the GTF by about 3%.
So if CFM now claims to be better by 1%, then they probably project their best possible SFC without regarding any development risk. This is not engineering practice, but as it seems, CFM can convince quite a number of customers with that strategy.

Now to the story about SAS and why they might have turned to CFM:
First, they are a flying a lot of  B737NG, thus having a number of CFM56 in their fleet and possibly a good relationship to CFM. A few weeks back they dedided to lease 2nd hand B737-700 and with that opting against the CSeries.
Easy question: who is most interested in CSeries failing in the marketplace:
1. Airbus
2. CFM
For that reason, I could see a campaign to fight all possible CSeries deals in a joint effort from Airbus und CFM. The litmus test for this thesis will be the CSeries' fate at Republic: if Republic now orders the A320neo with the LEAP-X and (sooner or later) cancels the CSeries, I would see this thesis is "proven". Also watch for Qatar...
The thriller just starts here!

Airbus A320neo order speculations

We are just days away from the Paris Air Show 2011 and every day there are more speculations about who will order how many aircraft at the show – and which ones.

The one thing that seems to be clear though is that the A320neo will get the bulk of orders.

So let me take part in the speculation game and start with the “Star” of the show:

Here is my guessing about who will order how many and the engine choice:

AirAsia	150-200	LEAP-X
Republic	40-80	PW1100G
Qatar	30-50	PW1100G
GECAS	50-100	LEAP-X
ALC	25-50	LEAP-X/PW1100G
CIT	20-30	LEAP-X/PW1100G
GoAir	50-70	PW1100G
SAS	30	PW1100G

In total we could see more than 600 orders/commitments for the A320neo family, with both engine makers getting their share of the market.

As for the LEAP-X it is crucial to get orders – GE seems to invest heavily in the AirAsia order, with GE becoming a sponsor of Tony Fernandes’ Formula 1 Lotus Team. Even if GE says that those two deals are complete separate…

As the CFM56 is AirAsia’s current engine choice, CFM was in the front runner position anyway. It remains to be seen, if Fernandes managed Leahy to convince him that a conversion of orders for the A320 ”Classic” can be transformed into A320neo orders and how many. And we will also see if this deal will be even larger than the yet-to-be-finalised order of 180 aircraft by Indigo.

Republic already placed a deposit in Toulouse, so we can expect an announcement about a fleet rollover for Frontier soon. As they already ordered the CSeries, they probably lean towards the GTF. But it remains to be seen, if the CSeries order stays intact. The financial troubles at Republic could mean that Airbus buys Republic out of the CSeries deal.

If Qatar finally decides to order the CSeries, they should decide for the GTF on their up to 50 neo's, too. But who knows what U-Turn Al will decide when he wakes up on the day of the planned signing ceremony. If he had a bad dream, all hid plans can change in a minute...

GECAS of course is the most natural LEAP-X customer. Nothing to add here...

After opposing the A320neo from the start, even Steven Udvar-Hazy seems to jump on the bandwagon now, as was reported earlier. I expect a split between LEAP-X and the PW1100G here, as well as from CIT.

GoAir obviously is in the market also for at least 50 A320neo. That seems a lot for an airline that has just 10 aircraft by now, but the fast growing Indian market is hungry for aircraft. The V2500 has a large customer base in India today and the PW1100G made the race at IndiGo, so PW might have the upper hand here.

SAS is looking for the A320neo, too, and I think this is the airline that is speculated to be the first neo-customer currently flying the B737NG. They have looked into the CSeries also, but decided to preserve cash by leasing 2^nd hand B737-700. SAS did not rule out to order the CSeries later, so they could lean towards the PW1100G on the A320neo to have engine commonality (sort of), if they ever decide to order the CSeries.

There might be others to come forward and order more A320neo – who know. John Leahy understands how to do good marketing and always pull out a rabbit out of the hat…

Boeing creating a new market?

Air Transport World today reports that Buckingham Research expects Boeing to forego reengining the 737NG, a move still anticipated by a "meaningful number of investors" in the case that a Boeing customer would defect to Airbus.
But Buckingham noted that Boeing might be so capacity constrained in terms of orders that it might not have the possibility to reengine.
Instead of reengining Boeing would move to an all new aircraft, probably a new light twin-aisle. As I laid out before, such an aircraft would not make sense starting in the current lower capacity end of the 737, so I would guess (if true) that this aircraft would start where the 737-800 is today. The upper end then could be where the  757-300 is, just below the 787-8. That would then fill a niche, because today there are no new aircraft build in this segment - well, one could consider the Tu-204, but this aircraft is almost dead and even not competitive with the 757.
Buckingham says that Boeing would continue to improve the 737NG and is internally convinced that the 2016 737NG is competitive with the A320neo. Boeing earlier stated that the 737NG line could be open until 2026.
A move described by Buckingham would be both smart and risky:

• Risky as it is not clear if customers really will think that a more than 40 year old design will be competitive. Until then the CSeries is in the market, a similar Embraer aircraft could be on the way to the market, making the 737-700 obsolete - the backlog of the -700 is shrinking anyway (as well as the A319). The cabin diameter will still be the 737's problem, as people tend to get larger - vertically, but even worse: horizontally.
• Smart as it opens a new market field for Boeing and by that getting out of the competition with Bombardier, Embraer, the Chinese, the Russians and, to some extent, Airbus. Although for now it remains unclear if the new aircraft will have transcontinental or transatlantic range, the aircraft could be (with the right level of technology) better than the A321neo even if it is designed for more range to enable all 757 missions flown today.

But is there a huge market for these aircraft? At the lower end for sure, as the 737-800 shows - but there would be the problem. If I have two aircraft in my shop, which one should I sell the customer. The same problem appeared when Boeing bought McDonnell Douglas and the MD-95 became the B717. The B717 had to die, as it was a stand-alone aircraft, not part of a family - Boeing sold the 737-600 to SAS although the B717 would have been much better in costs for the SAS missions.
And what about Southwest, by far the largest Boeing customer today? They just ordered the 737-800, but all of their other (500+) aircraft have less than 150 seats and they also like the B717 as an addition with even lower capacity. I cannot imagine Southwest going to an all 180+ seater fleet in the future just to keep being a Boeing customer. And I cannot imagine that incremental improvements to the 737-700 are enough to keep them from defecting to Bombardier (they might one day decide to build a CS500, although saying differently, Embraer or even Airbus.
There were "just" about 757's build - for sure Boeing counts on creating a new big market segment when they really build that small twin-aisle. The question is, if that market segment will be there when the aircraft appears...