A320 vs B737
The two most successful commercial jet aircraft in history, Boeing’s B737 family and Airbus’ A320 family are not only the lynchpins of each manufacturer’s commercial performance, but the backbone of the commercial aviation industry. Between them, the two aircraft families account for more than 10,000 aircraft built over the past 40 years, with more than half of those manufactured in the last decade. The two families of medium-range, narrowbody aircraft can accommodate anywhere from 110 passengers in low density configurations to 220 passengers in high density, single-class layout. Each are currently produced in four variants (A318/A319/A320/A321 from Airbus and B737-600/700/800/900ER from Boeing). Production backlogs for both types stretch back more than five years.
With the A320 family in its third decade of service and the B737 Next Generation entering its second (with the original B737 debuting in 1968), pressure is mounting on Airbus and Boeing to offer all-new replacement aircraft or enhanced versions with next generation engines. Direct threats to the dominance of the two aircraft in the narrowbody market have emerged over the past five years, with Bombardier offering its two member CSeries family of 110-130 seat aircraft and Irkut and COMAC launching development of their three member MS-21 and C919 narrobody families, all of which will feature next generation engines. Airbus and Boeing are now faced with the decision of refitting their existing airframes with new engines, or the more expensive and risky option of moving the development of new narrobodies forward from their preferred 2020-2025 timeframe.
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EASA issues airworthiness directive for outer wing refuelling aperture of A319, A320 & A321 aircraft
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JetBlue continued the trend of most US carriers turning strong financial performances during 3Q2013 as its profits grew 57% year-on-year to USD71 million driven by a demand environment the carrier deemed as healthy.
The carrier is still battling some cost inflation as FY2013 unit costs excluding fuel and profit sharing are projected to rise between 2.5% and 4.5%. JetBlue stresses it is taking measures to battle the unit cost inflation, noting its sharklet programme for its Airbus A320 fleet to lower fuel burn and fleet changes that include the deferral of 24 100-seat Embraer 190s to support a fleet of 60 of the smaller jets.
Even as JetBlue is taking steps to whittle away at unit cost pressure it has experienced for the last year, the carrier is fielding questions about how it intends to proceed with margin expansion and if it will hit its return on invested capital targets.
VivaAerobus joins Volaris and Interjet in placing large A320neo order. Can Mexico sustain all three?
Competition in Mexico’s dynamic market is set to intensify as the country’s smallest low-cost carrier is poised to at least triple in size over the next eight years following a landmark aircraft order with Airbus.
VivaAerobus has ordered 52 A320s, allowing for a rapid replacement of its current fleet of 19 737-300s and significant growth. VivaAerobus is currently a relatively small player in the Mexican market with only a 13% share in the domestic market and is a non-factor internationally as it has just one trans-border route.
VivaAerobus is now seeking to follow its closest competitor, Volaris, with an initial public offering which should provide the funds to support accelerated fleet and network growth. Market conditions in Mexico have improved significantly in recent years but there is a risk of a return to over-capacity and irrational competition given the fleet expansion plans at the country’s four main carriers.
Kuwait Airways is saddled with one of the oldest and least efficient fleets in the Middle East, but the carrier is reportedly considering postponing its long awaited fleet order with Airbus, in favour of a deal involving short-term aircraft leases. The option to postpone the long-term solution may be the best avenue for the debt-laden carrier to accelerate replacement of its badly ageing aircraft, while sidestepping the political interference that has dogged previous acquisition plans.
Meanwhile, neighbouring Middle East airlines will add more than 50 widebody aircraft this year and another 50 in 2014, as carriers in the region continue to expand their fleets with high-capacity, long-range aircraft to fill out their globe-spanning networks. At the same time, they are dictating the options for other airlines in the region.
More than half of the aircraft scheduled to be delivered to the region over the next five years are widebody aircraft, including large numbers of next generation aircraft types such as the 787 and A350.
The tremendous growth of the domestic Chinese aviation market over the last decade is strongly tied to the increasing use of widebody aircraft. The country's largest route, Beijing Capital to Shanghai Hongqiao, has grown 53% in frequencies from 2003 to 2013. And widebody aircraft have grown disproportionately higher: in 2003 widebodies flew 47% of Beijing-Shanghai frequencies; in 2013 they fly 76% of frequencies between the country's two main cities.
While carriers operate a number of widebodies on domestic routes, it is the A330 that captures attention. The twin-engined aircraft was not even in service in China in 2003 but in 2013 the A330 flies 53% of all Beijing-Shanghai frequencies. So it is not surprising Airbus chose a Chinese event to announce its lower-weight A330, pitched for regional and domestic operations. Widebody aircraft on trunk routes deliver not just cost efficiencies but permit capacity growth in restricted airspace. Widebodies are so key that some domestic Chinese route authorities are awarded only if an airline plans to use a widebody.
Vietnam’s VietJet Air has become the latest Asian low-cost carrier group to announce a major aircraft order in support of an ambition to build a portfolio of LCC affiliates.
VietJet’s commitment to buy 62 A320 family aircraft may be small in comparison to the massive orders placed by AirAsia and Lion in recent years. But it is significant in that it shows VietJet is serious in becoming a pan-Asia player, following the model of AirAsia, Jetstar, Lion and Tigerair.
AirAsia, Lion, Tigerair and Jetstar operate across Asia-Pacific and dominate the Southeast Asian LCC market, accounting for about 77% of LCC seat capacity and 75% of the ASEAN-based LCC fleet. While Southeast Asia is a large and fast-growing market, five is a potentially unsustainable number of LCC groups, particularly when taking into account some of the countries also have very strong independent LCCs.
On 26-Sep-2013, shareholders in IAG will be treated to a rare event: the opportunity to approve a major aircraft order for the first time in several years. In fact, rather like the proverbial buses after a long wait, there are three of them at the same time. British Airways is getting 787s and A350s and Vueling is getting A320s (including A320neo), while Iberia is getting used to being the poor relation and must prove it can return to profit before any new orders.
After many years of very few new aircraft deliveries (including the years prior to the creation of IAG in 2010), IAG will take around 20 every year until the start of the next decade. This will require it to sustain levels of capital expenditure not seen by the combination of BA and Iberia since the 1990s. A sustained rise in profits will also be needed.