After the Airbus year end press conference there was the announcement that Virgin America would purchase - and already signed a firm order - for 30 A320NEO's along with 30 "classic" A320's.
Although this order seems insignificant in size compared to the IndiGo deal last week for 150 A320NEO's, it is indeed significant as it is a firm order, in contrast to the MoU signed by IndiGo.
Virgin America made no engine choice so far, but hopes to decide on the engine by May. This could be the first order for a NEO engine then and could give us some hints. Virgin now operates CFM56 on their A320's.
Expect more orders to flow in for the A320NEO in the next weeks!
1/17/2011
The "order battle"
Today Airbus did their yearly press conference to review the past year. The media does get over-hyped days before it and writes about the "order battle" between Airbus and Boeing and speculates about who won the "order race" - as if it would matter if one or the other got a few more orders than the other. For years now the number of orders are close at the end of the year, showing that there is some kind of natural balance in the civil aircraft duopoly. If there were not a balance, there would not be a duopoly.
That brings us to the future, there were will be no more a duopoly: Bombardier will be the first to break into the territory with the CSeries - I still believe we will see one or two orders until the BBD financial year ends at January 31.
Then the next one could be Embraer, if they decide to build an aircraft similar in size to the CSeries - or probably a little bit larger to undercut seat mile costs.
The chinese will take a little bit longer to make a difference, I think. Even if they would be able to bring their C919 to market in 2016 - and I doubt that - it would be limited either in numbers, as initial production numbers will be low in comparison to the A320(NEO) and B737 and geographically as I do not think that western operators will take that aircraft until reliability is proven and an acceptable maintenance network is in place.
The russian MS-21 will face the same problems - EIS in 2016 is an amitious goal and Irkut will have to work hard to sell aircraft outside the russian area of influence. I wonder to whom the first firm customer, Crecom Burj, a new leasing company in Indonesia, will lease their 50 aircraft. Reportedly they want to serve the whole southeast asia market...
So at least in the narrowbody segment there is an end of the duopoly in sight. For the widebody sector the end is far further out. One day the chinese will do a C929 or C939 or whatever it will be called, but I would expect they will go through a second round with their C919 first, trying to make it really competitive to the (then) established products from Airbus, Boeing, Bombardier and Embraer.
That brings us to the future, there were will be no more a duopoly: Bombardier will be the first to break into the territory with the CSeries - I still believe we will see one or two orders until the BBD financial year ends at January 31.
Then the next one could be Embraer, if they decide to build an aircraft similar in size to the CSeries - or probably a little bit larger to undercut seat mile costs.
The chinese will take a little bit longer to make a difference, I think. Even if they would be able to bring their C919 to market in 2016 - and I doubt that - it would be limited either in numbers, as initial production numbers will be low in comparison to the A320(NEO) and B737 and geographically as I do not think that western operators will take that aircraft until reliability is proven and an acceptable maintenance network is in place.
The russian MS-21 will face the same problems - EIS in 2016 is an amitious goal and Irkut will have to work hard to sell aircraft outside the russian area of influence. I wonder to whom the first firm customer, Crecom Burj, a new leasing company in Indonesia, will lease their 50 aircraft. Reportedly they want to serve the whole southeast asia market...
So at least in the narrowbody segment there is an end of the duopoly in sight. For the widebody sector the end is far further out. One day the chinese will do a C929 or C939 or whatever it will be called, but I would expect they will go through a second round with their C919 first, trying to make it really competitive to the (then) established products from Airbus, Boeing, Bombardier and Embraer.
1/12/2011
IndiGo launches the A320NEO
Well, here he is: IndiGo, the first customer for the A320NEO. A massive 150 aircraft order means a good start for the programme. Expect more big orders to come soon...
Coincidentally, Scott Hamilton talked about the prediction by Buckingham Research that Boeing will come out with two new models to replace the B717, B737 and B757 by 2018 and will launch this effort officially by late 2011 or 2012.
While Scott (or Buckingham) does not go into details, I guess this would be a single aisle aircraft for the reüplacement of the B717 and the lower end of the B737 and the "New Light Twin", which was briefly mentioned by Scott at the end of last year for the upper end of the B737 and the B757.
While it would be a good strategy in principle to replace three aircraft (families) with two new ones, I doubt that it will be that fast. How good can these aircraft be - or, in other words, how much better than the NEO? Engines for a 2018 EIS can only be slightly better than for the NEO with EIS 2016. And both CFM and PW have their hands full with developing the engines for the C919 and NEO (CFM) as well as the MRJ, CSeries, MS21 and NEO (PW). So one should not expect a completely new engine by the two manufacturers by 2018 but just minor improvements, which could also be sold to Airbus. And I do not expect RR to catch up in the 30k engine market by then - they lost the NEO competition and they have their hands full with their Trent programmes.
So the advantage has to come from the airframe. As of today, it is not clear if the A320/B737 successors will be build from carbonfibres. Bombardier opted for AlLi, apparently for good reasons.
To be clear, a new aircraft frame by Boeing by 2018 would of course be better than the A320 frame, there would be 30 years between them. But would it be enough? - I doubt it!
The other question of course: does Boeing have the money to do it and the backing from their shareholders? Developing two aircraft takes a lot of ressources - manpower and money. If they do it, I expect the japanese to take over large parts of the responsibility for the smaller aircraft.
Another fascinating year in aviation just started!
Coincidentally, Scott Hamilton talked about the prediction by Buckingham Research that Boeing will come out with two new models to replace the B717, B737 and B757 by 2018 and will launch this effort officially by late 2011 or 2012.
While Scott (or Buckingham) does not go into details, I guess this would be a single aisle aircraft for the reüplacement of the B717 and the lower end of the B737 and the "New Light Twin", which was briefly mentioned by Scott at the end of last year for the upper end of the B737 and the B757.
While it would be a good strategy in principle to replace three aircraft (families) with two new ones, I doubt that it will be that fast. How good can these aircraft be - or, in other words, how much better than the NEO? Engines for a 2018 EIS can only be slightly better than for the NEO with EIS 2016. And both CFM and PW have their hands full with developing the engines for the C919 and NEO (CFM) as well as the MRJ, CSeries, MS21 and NEO (PW). So one should not expect a completely new engine by the two manufacturers by 2018 but just minor improvements, which could also be sold to Airbus. And I do not expect RR to catch up in the 30k engine market by then - they lost the NEO competition and they have their hands full with their Trent programmes.
So the advantage has to come from the airframe. As of today, it is not clear if the A320/B737 successors will be build from carbonfibres. Bombardier opted for AlLi, apparently for good reasons.
To be clear, a new aircraft frame by Boeing by 2018 would of course be better than the A320 frame, there would be 30 years between them. But would it be enough? - I doubt it!
The other question of course: does Boeing have the money to do it and the backing from their shareholders? Developing two aircraft takes a lot of ressources - manpower and money. If they do it, I expect the japanese to take over large parts of the responsibility for the smaller aircraft.
Another fascinating year in aviation just started!
12/27/2010
The next year
The next year is ahead of us and after 2010 ended on a high note with the launch of the A320NEO, 2011 can be expected to be once again a very interesting year for aviation.
With oil prices again rising towards $100 a barrel, one could expect orders to be shifted to aircraft with lower fuelburn, especially the Bombardier CSeries and the A320NEO. Maybe the first orders for the -NEO will be announced in January, as Scott Hamilton predicts.
Maybe we see some orders for the CSeries complete until the end of January, when the financial year of Bombardier ends.
If there is indeed a flush of orders for those aircraft, we should hear something out of Seattle (aka Chicago) regarding the future of the B737 soon. Southwest seems to prefer a reengining as they do not believe that Boeing will be able to pull out a successor around 2020.
Embraer is also about to decide what to do with their EJets and whether they should develop an aircraft that is larger and can compete with the CS300 (at least).
My personal winner of the last two years, regardless of a lack of big orders, is the CSeries:
1. The CS100 and the CS300 will be the most efficient aircraft in their categories.
2. The A319NEO cannot really compete with the CS300 and is only of interest for airlines that operate the whole A320 today.
3. A reengined B737-700 could not compete with the CS300 as well.
4. If Embraer decides to develop a larger aircraft to compete with the CS300, it will be years out.
5. The successor families of the A320n and the B737 will probably start at today's A320 and B737-800 size - there won't be equivalents to the A319 and the B737-700 in my view.
Have a nice 2011!
With oil prices again rising towards $100 a barrel, one could expect orders to be shifted to aircraft with lower fuelburn, especially the Bombardier CSeries and the A320NEO. Maybe the first orders for the -NEO will be announced in January, as Scott Hamilton predicts.
Maybe we see some orders for the CSeries complete until the end of January, when the financial year of Bombardier ends.
If there is indeed a flush of orders for those aircraft, we should hear something out of Seattle (aka Chicago) regarding the future of the B737 soon. Southwest seems to prefer a reengining as they do not believe that Boeing will be able to pull out a successor around 2020.
Embraer is also about to decide what to do with their EJets and whether they should develop an aircraft that is larger and can compete with the CS300 (at least).
My personal winner of the last two years, regardless of a lack of big orders, is the CSeries:
1. The CS100 and the CS300 will be the most efficient aircraft in their categories.
2. The A319NEO cannot really compete with the CS300 and is only of interest for airlines that operate the whole A320 today.
3. A reengined B737-700 could not compete with the CS300 as well.
4. If Embraer decides to develop a larger aircraft to compete with the CS300, it will be years out.
5. The successor families of the A320n and the B737 will probably start at today's A320 and B737-800 size - there won't be equivalents to the A319 and the B737-700 in my view.
Have a nice 2011!
12/08/2010
Is the NEO a threat for the CSeries?
AirInsight published a very detailed report about the CSeries this week. The main question to be answered was, if, after Airbus announced the A320NEO, there would be still a business case for the Bombardier CSeries. Not to my surprise (because of own studies), the answer was: Yes!
The only really big threat for the CSeries, according to the report, would be pricing-power from Airbus and Boeing, which could choose to give away A319NEO and 737-700W (or maybe also a 737-700NEO???) with losses just to protect their market.
There is an additional short piece at AirInsight detailing that threat here.
So how deep has a discount to be to be attractive?
Let's start with the price of the aircraft: let's start with the 41% that Airbus has to give according to the AirInsight article to match a 25% discount by Bombardier.
The AirInsight report comes to the conclusion that for a 500nm mission the CS300 will be $716 lower in costs and $444 lower than a A319NEO. I do not fully agree with the number of seats the report puts down for the various aircraft, so I will not discuss the differences in seat-costs here. Just assume a given flight with a given number of passengers (at or below the maximum of the smallest of the three aircraft), no matter what aircraft you fly.
For an airline, to get a better deal over the full life of the aircraft one should not only take into account the purchase price of the aircraft but the overall costs including operation and maintenance of the aircraft.
Assume there a seven flights per day on 320 days per year (allowing for maintenance) for 10 years - that makes 22,400 flights.
So the difference in operating costs between a CS300 and a 737-700W for these 10 years would be about $16 million, about $9.5 million against the A319NEO.
A big portion of the difference in operating costs is fuel burn - and if the price of fuel goes up ($2.25/gallon was assumed in the study), the operating cost difference goes up as well.
So there would be another big discount needed to make up for those difference in operating costs. If Airbus and Boeing are willing to make these discounts remains to be seen, but I doubt it - although Airbus once made such discounts for the A340-600 to sell it against the B777-300ER.
The only really big threat for the CSeries, according to the report, would be pricing-power from Airbus and Boeing, which could choose to give away A319NEO and 737-700W (or maybe also a 737-700NEO???) with losses just to protect their market.
There is an additional short piece at AirInsight detailing that threat here.
So how deep has a discount to be to be attractive?
Let's start with the price of the aircraft: let's start with the 41% that Airbus has to give according to the AirInsight article to match a 25% discount by Bombardier.
The AirInsight report comes to the conclusion that for a 500nm mission the CS300 will be $716 lower in costs and $444 lower than a A319NEO. I do not fully agree with the number of seats the report puts down for the various aircraft, so I will not discuss the differences in seat-costs here. Just assume a given flight with a given number of passengers (at or below the maximum of the smallest of the three aircraft), no matter what aircraft you fly.
For an airline, to get a better deal over the full life of the aircraft one should not only take into account the purchase price of the aircraft but the overall costs including operation and maintenance of the aircraft.
Assume there a seven flights per day on 320 days per year (allowing for maintenance) for 10 years - that makes 22,400 flights.
So the difference in operating costs between a CS300 and a 737-700W for these 10 years would be about $16 million, about $9.5 million against the A319NEO.
A big portion of the difference in operating costs is fuel burn - and if the price of fuel goes up ($2.25/gallon was assumed in the study), the operating cost difference goes up as well.
So there would be another big discount needed to make up for those difference in operating costs. If Airbus and Boeing are willing to make these discounts remains to be seen, but I doubt it - although Airbus once made such discounts for the A340-600 to sell it against the B777-300ER.
Subscribe to:
Posts (Atom)