Singapore Airshow 2014. CAPA view on the year's outlook for airframe manufacturers. Part 1: Airbus
After record ordering and deliveries in 2013 for commercial aircraft, 2014 is set to be another busy one for the world’s major aircraft manufacturers and their aircraft programmes. With the Singapore Airshow imminent, a new round of speculation is occurring, with much of it focussed on whether the array of new orders will lead to excess capacity, especially in the Southeast Asian market.
Boeing and Airbus are busy producing – and selling – next generation widebody programmes and re-engined narrowbodies. Bombardier is working to perfect and deliver its CSeries to customers. Embraer is starting the development of its second-generation E-Jets and ATR is trying to get its shareholders to agree to an all-new 90-seat turboprop. Elsewhere, major next generation regional jet, turboprop and narrowbody projects continue to mature in China and Russia, threatening an end to the set of not-so-cosy duopolies that have dominated the commercial aircraft manufacturing landscape for most of the past decade.
In this series of pre-Singapore articles, CAPA looks at what might be in store from each of the major manufacturers this year, along with some possibilities for the future; also, what’s happening outside the western airframe manufacturers.
Airbus, flying high from 2013
Airbus finished 2013 on a high. The company not only recorded both a record year for orders, with 1,503 net and 1,619 gross orders – a book to bill ratio of 2.5 to 1 – and managed to deliver an all-time record 626 aircraft.
It also finished the year with a record order book of more than 5,550 aircraft, of which more than 3,400 are for types that have yet to enter service. Success has flowed from Airbus’ two newest programmes, the A350 XWB and the A320neo, but the A380 and A330 also had a better than anticipated year in 2013.
Airbus orders and deliveries: 2013
Now operating under a unified branding of Airbus Group, the company’s commercial aircraft unit contributes around 70% of revenue and profit. It has consolidated its other activities into two divisions – Airbus Helicopters and Airbus Defense & Space – and will shed close to 6,000 positions over the next two years as part of that process, although some workers will be retrained for the commercial aircraft unit.
The company will also relocate its headquarters to a new site just outside Paris, consolidating another 500 positions in the process.
Airbus’ rebranding and restructuring is more than just an exercise in reducing the level of government control in the company. It is also seeking to change its culture to speed up decision making and innovation. The company believes that by fostering "a more entrepreneurial spirit" and de-structuring its operations, it can find simpler, less risky, less costly and faster methods to bring its aircraft to the market. Airbus plans to move its operating margins into double-digit territory by 2015, and delivering on its programmes; getting its aircraft to customers is the best way of doing this.
A320 family: Build up to A320neo first flight
Airbus’ stated intention is to continue to produce its bread-and-butter A320ceo at the record rate of 42 aircraft per month. With 1,027 A320ceo aircraft sold since the new A320neo programme was launched in Dec-2010, production slots are almost completely accounted for. Around 90% of A320ceo aircraft now being delivered are with the new ‘sharklets’ wing tip aerofoils, which Airbus is advertising as offering at least 4% fuel burn saving.
With more then 2,600 firm orders as of Jan-2014, the A320neo programme has been a dramatic success for Airbus. The A320neo has so far outsold the 737 MAX by around 1.5 to 1, with Airbus claiming around a 60% marketshare.
A320neo and 737 MAX sales
The first flight of the A320neo is scheduled for 4Q2014, building up to first delivery in 4Q2015. A320neo parts are to be test flown on A320ceo aircraft and final assembly of first aircraft is due to commence later this year. Airbus is confident the programme will meet its deadlines.
Airbus sees continuing upsizing in narrowbody aircraft orders and deliveries. 40% to 50% of A320neo production could be allocated for the A321neo, the largest version of the family. As of the end of 2013, Airbus had 131 outstanding orders for the A319, 3,067 A320s and 1,100 A321s, counting both the A320ceo and A320neo backlogs. Approximately 22% of the order book for the re-worked narrowbody is for the A321neo.
The new A320 Final Assembly Line at Mobile, Alabama will continue construction through 2014. Airbus started managerial hiring and some training in 2013, but is expected to start major workforce hiring for the new facility this year. Aircraft assembly at the new site, Airbus’ first facility in the US and its fourth A320 final assembly line, is due to commence in 2015 and deliveries from 2016. Initial production will be in the region of four to five aircraft per month. Airbus anticipates the facility will produce between 40 and 50 aircraft per year by 2018.
A330: Record production to continue, but no hurry on future of aircraft
Airbus plans to keep A330 production at its present record rate of 10 aircraft per month. Officially, the company is not rushing to make a decision on a re-engined ‘A330neo’, and has a range of options for the aircraft. With the latest enhanced range version and high-capacity regional variants due to enter service in 2015, and Airbus seeing plenty of sales interest, the company plans to continue A330 production past 2020.
Certification of the A330 ‘regional’ version – featuring a lower 199 tonne maximum take-off weight, lower thrust engines rated at 60,000 lbs and a new cabin tailored for shorter ranges – is due to start in 2014. Airbus estimates the A330-300 ‘regional’ aircraft can operate to 2,700 nm with 400 passengers, which it claims would give it the “lowest cost per seat of any regional aircraft”.
Airbus sees “strong market interest” according to executive VP programmes Tom Williams and the company is advertising the variant as a solution for high growth regions such as China and the rest of Asia, especially appropriate where airports are congested – a marketing campaign somewhat reminiscent of that for the A380.
Also undergoing certification in 2014 is the A330-200 242 tonne maximum take-off weight version. Increasing range by up to 500 nm and offering 2% fuel burn enhancement, Airbus is due to deliver the first of the aircraft to Delta Air Lines in 2015.
Airbus has confirmed it will study a re-work of A330 with new engines, as one of several options available to it. With A330 output now at around 110 aircraft p/a, A330 order backlog is at 267 aircraft, about two and a half years production. Airbus wants the A330 to remain in production beyond 2020, so at present unit rates, it will need to sell at least another 840 aircraft to ensure another decade of production.
The A330 has seen a resurgence in popularity – after the initial flurry of 787 orders, the A330 outsold the 787 between 2008 and 2013 by a factor of better than two to one. This was as much due to the lack of availability of the 787s and concerns about its reliability, as well as pressing needs to replace ageing aircraft like 767s and A340s, as it was to anything intrinsically appealing about the aircraft. As a known quantity and proven workhorse, airlines have been willing to buy or lease A330s to serve in the interval while they waited on deliveries of 787s.
Another practical reason is that Boeing’s highly successful new aircraft has few, if any, production slots available before 2017.
The three to four years of delays with the 787 entry into service have been to Airbus' advantage, but the European manufacturer has not been idle. Airbus still invests around EUR150 million p/a in enhancements in the A330 programme. It has progressively added range and improved efficiency, keeping it a competitive aircraft even as newer widebodies have entered in service.
The A330 also has the advantage of lower purchase costs and lower lease costs than the 787 – Airbus estimates 787-8 lease rates of USD1.15 million per month and 787-9 lease rates of USD1.25 million per month, compared to USD850,000 per month for the A330-200 242 tonne version and USD900,000 per month for the A330-300 regional version.
Airbus has already proposed an A330 re-engine in the form of the original proposal for the A350. This proposal was much more ambitious than a simple re-engine, and included a new wing and new systems, something akin to what Boeing is now doing with the 777X.
For airlines to be attracted to the A330neo, they would need a double-digit gain in fuel efficiency and reductions in maintenance and other operating costs of at least similar levels.
New types spell new life for the engine manufacturers
Engine makers are reportedly interested in supplying their new engines for a potential A330neo. GE Aviation has its GEnx engine technology, already serving on the 787 and 747-8, while Rolls-Royce Trent-1000 TEN, which was launched in Jan-2012, will be put into service by 2016 on the 787-8 and 787-9.
The technology of current and soon to be in production engines offers the necessary fuel-burn savings, but according to Airbus CEO Fabrice Bregier, the new engines are heavier and more expensive to purchase and maintain. The A330 would require modification to its wing/body attachment, engine pylons and changes to its landing gear arrangement to accommodate the larger diameter, heavier engines and airframe reinforcement. While this would be significantly less risky and cheaper than an all-new aircraft, it would still require a multi-billion euro investment.
A problem for Airbus is the potential for a re-worked A330 occupying the territory of the already less-than-successful A350-800. An A330-200neo with capacity for 255-295 seats and range closing in on 8,000 nm would result in an uncomfortable overlap in capabilities with the A350-800, with a typical two-class configuration of 276-312 seats and range of 8,300 nm.
A350: Testing building to 4Q2014 EIS, -800 question to be answered
Airbus continues to describe the A350 programme as “very challenging” but “on track”, variations of phrases which the company’s management has used almost since the inception of the programme. However, with entry into service scheduled for late this year, Airbus has little wiggle room left for the aircraft. Its only other option is another delay, which will disappoint customers, damage its reputation and hurt its bottom line.
Since the A350 XWB’s first flight in Jun-2013, over 900 flight hours have been performed in close to 200 test flights by the test aircraft. In total the A350 XWB flight test campaign will accumulate around 2,500 flight hours with the fleet of five aircraft. Airbus plans to introduce the fourth and fifth aircraft to the test flight programme during 1Q2014. Completion of certification is targeted for 3Q2014.
The first serial production aircraft, MSN6, started final assembly in Jan-2014. The aircraft, due to go to Qatar Airways by 4Q2014, is the first of 80 the carrier has on order.
Airbus faces a major decision this year as to what to do with the A350-800. The aircraft, which has not has a firm order since 2009, could disappear from Airbus plans altogether, much like when Boeing cancelled the 787-3, the short-haul, high-capacity version of the Dreamliner.
As of early Jan-2014, the variant had a backlog of just 56 firm orders, compared to 516 for the -900 and 186 for the -1000. Airbus has been lobbying carriers to switch -800 orders for the larger -900 and even the -1000, with some success. American Airlines recently switched an order for 18 -800s (originally made by merger partner US Airways) into -900s.
Airbus chief operating officer customers John Leahy has publicly stated the company could push back delivery of the -800 to after entry into service of the -1000 in 2017, to allow time to perform a redesign. Mr Leahy raised the possibility of Airbus revising the design of the A350-800 to include another one to two rows of seats at minor cost in range, bringing it closer to the A350-900 and making it less of a specialty mission aircraft.
Also under consideration will be the A350-1100 a double stretch of the basic A350. The aircraft may be necessary to compete with Boeing’s newly announced and immediately successful 777X programme, the largest of which will be capable of handling around 405 passengers on a journey of better than 8,200 nm. A super-stretched version of the aircraft wouldn’t appear until around 2020, matching the projected service entry of the Boeing 777X.
Emirates made another record breaking order late in 2013, purchasing 50 aircraft, and Doric Lease Finance is expected to firm up its MoU for 20 aircraft in the next few months. However, Airbus also saw cancellations for eight A380s, including five from the now defunct Kingfisher Airlines.
A380 sales by year
Airbus is targeting programme operational break-even by 2015, with production of 30 aircraft p/a continuing. The manufacturer had been considering slowing production due to the empty production slots, however the Emirates order and the Doric MoU have apparently settled the issue and production will remain at 25-30 aircraft p/a.
The first A380, with the new production standard permanent modification to fix the wing bracket cracking issue, is to be delivered in 1Q2014. The final 11 aircraft without the fix will complete the necessary modifications by Jun-2014, hopefully putting the issue, which will have cost the manufacturer in excess of EUR500 million, finally to rest.
There will be four new A380 operators in 2014: Qatar Airways, Skymark Airlines, Etihad Airways and Asiana Airlines – reinforcing the trend for the aircraft to go to Middle East and Asia-Pacific operators. As of the end of 2013, 46% of A380s were in service with Asia-Pacific airlines, 36% with Middle East airlines and the remainder with three European carriers – Lufthansa, Air France and British Airways.
2014: A320neo and A350 priorities, steadying the ship with orders and deliveries
With global economies recovering and commercial aircraft demand still strong in both developing and developed markets, Airbus looks set for another solid year of ordering. Although a repeat of its spectacular success of the past few years is unlikely, the company still expects to log a book-to-bill ratio of better than one. With delivery levels forecast to either be maintained or improve slightly on 2013, this would translate into somewhere around 620 to 640 aircraft.
Airbus' key priority for the year must be developing on the A350 XWB and A320neo programmes. The second half of 2014 will be a crucial period for the manufacturer, with the A350 XWB to enter service in 4Q2014, the A350-1000 design to be frozen and the first flight of the A320neo due sometime during the northern hemisphere autumn. Airbus will also attempt to deliver on the development of its new A330 variants.
With the airline industry profitable and in “growth mode”, Airbus is confident it has the right product mix. Its 2014 priorities will be to execute on its eight-plus year order book and bring its new programmes to market, but enhancing its global competitiveness, restructuring its business and changing its culture to deliver better aircraft, lower costs and higher profits will all be processes ongoing in the background.