2017 Paris Air Show produces an unexpected flurry of ordering. Lessor purchasers were prominent

Most of the activity was for the large manufacturers

Compared to the large aircraft makers, the smaller regional manufacturers had a quiet air show. Bombardier, Embraer and ATR came away with combined deals for a bare 89 aircraft, with orders for just 30 next generation types. While regional aircraft generated less than 10% of total orders at the air show, ordering for smaller jets and turboprops was significantly up from Farnborough 2016.

Outside the five established Western manufacturers, the rest of the players in the commercial aircraft sector left Paris completely empty handed. Mitsubishi, ANTONOV, COMAC and UAC all have new or in-development aircraft, but were unable to announce a sale.

However, China's COMAC did arrive at Paris having just sealed a deal with EverBright Financial Leasing for 30 C919s, taking the total order and commitments total past 600 in the process.

Annual Paris & Farnborough air show orders and commitments

Source: CAPA - Centre for Aviation.

Narrowbodies dominated, and the 737 MAX 10 becomes an instant hit

Narrowbody ordering led the way at Paris in 2017, with firm orders, MoUs, and other commitments for more than 900 aircraft announced. Of these, 850 were for the new 737 MAX and A320neo, showing that despite a combined order book of better than nearly 8800 aircraft, the updated narrowbodies are as popular as ever.

Boeing formally launched the 737 MAX 10 on the first day of the air show, and the aircraft was instantly success. Boeing snagged orders and commitments for 361 MAX 10 aircraft, from a diverse mix of 16 customers.

Boeing 2017 Paris Air Show orders, commitments and conversions

Customer	737-800	737 MAX	MAX 7	MAX 8	MAX 10	787-8	787-9	777-300ER	777F
BOC Aviation					10
GECAS					20
CDB Aviation				42
CDB Aviation					10
CDB Aviation							8
TUI Group					18
Tibet Finance				10
Tibet Finance					10
SpiceJet					20
SpiceJet					20
AerCap							30
ALAFCO				20
Lion Air					20
Air Capital Group					20
Okay Airways							5
Okay Airways				8
Okay Airways					7
Avolon				75
Ryanair				10
Azerbaijan Airlines							4
CALC		35
CALC					15
United Continental					100
United Continental								4
Japan Investment				10
Ethiopian Airlines									2
Air Lease Corp			5
Air Lease Corp				7
El Al						1
Donghai Airlines					10
Malaysia Airlines					10
Xiamen Airlines					10
Copa Airlines					15
Unidentified airline				125
AerCap					15
Ruili				20
Tassili Airlines	3
Total	754

Source: CAPA - Centre for Aviation.

The newest and largest version of the MAX family is a reaction to Airbus' domination of the upper end of the narrowbody segment, with the 220- to 240-seat A321neo heavily outselling the 218-seat 737 MAX 9.

The 737 MAX 10 competitive response is a (not completely straightforward) stretch of the 737 MAX 9. It adds 1.7m in length, offering an extra two rows of seating and taking maximum capacity to 230 seats, at the expense of 300nm in range and some landing gear commonality with the rest of the MAX family. The design narrows some of the gap to the A321neo, but it still falls mildly short of its competitor in terms of seats, and there is a range issue.

Major air show orders for the MAX 10 included 100 from United Continental, 50 from Lion Air Group, 40 from SpiceJet, 20 from GECAS and 18 from TUI Group. However, some of the gloss comes off the headline order figure, since 208 of the 361 MAX 10 deals were conversions from other versions of the 737 MAX family already in Boeing's order book.

Will the MAX 10 undermine Boeing's other sales?

Airbus was quick to jump on this, claiming that the 737 MAX 10 will "cannibalise" the 737 MAX family, particularly the 737 MAX 9. Boeing maintains that the "heart" of the narrowbody market are the 737 MAX 8 and 737 MAX 9, while Airbus expects the A321 to take potentially up to half of future narrowbody sales. So far, the A321neo has accounted for just under 30% of all A320neo sales (up from 22% of A320ceo sales).

A320ceo/A320neo family sales breakdown by variant

Source: CAPA - Centre for Aviation.

For Airbus, narrowbody sales also dominated. The manufacturer announced deals for 331 A320 family aircraft, including a deal for 100 A320neos with GECAS, and 45 with CBD Leasing (which includes 15 conversions from A320neo to the larger A321neo).

The old A320ceo proved surprisingly popular, with orders placed for 49 aircraft.

Airbus 2017 Paris Air Show orders, commitments and conversions

Customer	A320ceo	A320neo	A321ceo	A321neo	A330-200	A330-900	A350-900
GECAS		100
Viva Air	15	35
Ethiopian Airlines							10
Wizz Air			10
AirAsia	14
Air Lease Corp				12
CDB Aviation Lease Finance		30		15
Delta Air Lines			10
Hi Fly					2
Zagros Airlines		20				8
Iran Air Tour		45
Tibet Finance Leasing				20
Total	346

Source: CAPA - Centre for Aviation.

The popularity of the older generation of widebodies was confirmed by GE Aviation CEO David Joyce, who reported at Paris that OEMs have requested that CFM International reduce the pace of the ramp down of production on the CFM56 engine, which powers both the A320ceo and the 737 NG. According to Mr Joyce, this will mean CFM will produce an extra 800 engines between 2018 and 2020.

Widebody ordering starts to show some positive developments

Large widebody orders have been slow in the past few years, but some developments at Paris indicated that a minor recovery may be under way.

Both Airbus and Boeing have publicly stated they don't expect a recovery in widebody ordering until 2020 to 2022, when a wave of replacement demand arrives, so the total of 66 widebody orders is encouraging for some programmes that are under pressure.

Boeing took the lion's share of these, leading with a deal for 30 787-9s from AerCap. CDB Aviation Lease Finance placed orders for a further eight. Boeing also made some progress in closing its 777X production gap, grabbing order for four 777-300ERs from United, and for two 777Fs from Ethiopian Airlines.

Airbus managed 12 orders, 10 coming from Ethiopian Airlines for 10 A350-900s. A Portuguese wet-lease specialist chipped in with an order for two A330-200s, its first direct acquisition from an OEM.

Boeing teases with the New Midsized Aircraft and Airbus puts winglets on the A380

At Paris Boeing fed speculation that it will go ahead with its 'New Midsized Aircraft', designed to service medium haul markets and acting as a spiritual successor to the 757. Boeing Commercial Airplanes VP and GM of airplane development Mike Delaney stated that a firm design for the aircraft could be settled by 2020, with testing to start by 2024.

Boeing believes an aircraft of 220 to 270 seats, with range of up to 5,000nm, could do for new medium haul routes what the 787 did for long haul flights - allowing carriers to connect direct to secondary cities, ignoring overcrowded major hubs. The key for Boeing will be to ensure the aircraft doesn't eat into the market space occupied by the 737 MAX 10 at the lower end of the capacity/range spectrum, and the 787-8 at the upper end.

While Boeing teased about a new design, Airbus came to the air show spruiking a refined version of the A380, dubbed the A380plus. The upgrade would add large winglets, 80 extra seats, more range and better MRO cost control, but will only go ahead with a large order underneath it.

Apart from another order from the A380 stalwart, Emirates, the prospects for the aircraft look sparse. It has been better than 12 months since the last order, and Airbus is reportedly close to placing the programme on life support, potentially lowering output to less than one aircraft per month in 2019. The A380's backlog sits at just over 100 aircraft, and parts of the order book look decidedly shaky.

Reports of the death of very large category passenger aircraft were reinforced by Boeing, which omitted the four engine very large aircraft category from sales projections under its latest 20 year outlook. Boeing still has confidence in a home for very large aircraft as freighters, but according to Boeing Commercial Airplanes VP marketing Randy Tinseth, the 350- to 415-seat 777X family will be the "biggest airplane in the market moving forward".

Regional aircraft makers enjoy a new run of orders

Turboprops enjoyed a steady air show, with SpiceJet committing to 25 Q400s, Philippine Airlines adding seven more Q400s, and ATR winning a collection of small orders for a total of 17 aircraft.

Regional jet sales were all collected by Embraer, which won orders/commitments for 30 of its new E-Jets E2 family, as well as orders for eight of the current generation E-Jets. This was a much needed boost for the Brazilian company, after securing just seven other orders in the first six months of the year.

Bombardier failed to win any regional jet orders, with the C Series again notably absent from the air show order list. Even so, confidence in the programme remains high at Bombardier, with praise for operation aircraft coming from launch customers SWISS and airBaltic. Bombardier has enjoyed a better year for the CRJ, collecting 27 orders/commitments prior to the air show.

Regional aircraft manufacturers 2017 Paris Air Show orders and commitments

Bombardier	Q400
Customer:
CemAir	2
SpiceJet	25
Philippine Airlines	7
Total	34				34
ATR	ATR 42-600	ATR 72-600
Customer:
Braathens Regional Airlines		1
Air Tahiti		1
Shaanxi Tianju Investment Group	10
Xuzhou Hantong Aviation	3
Air Senegal		2
Total	17				17
Embraer	E175	E190	E195	E190-E2	E195-E2
Customer:
Fuji Dream Airlines	3
Undisclosed customer					10
Undisclosed customer				20
KLM Cityhopper		2
Japan Airlines		1
Belavia Belarusian Airlines	1
Belavia Belarusian Airlines			1
Total	38				38

Source: CAPA - Centre for Aviation

Lessors come back to the fore

Leasing companies had a very quiet 2017 until the air show, announcing orders for just 14 Airbus aircraft, three Boeing aircraft, and none with the regional aircraft makers. However, lessors made up for lost time at Paris, placing orders for 449 aircraft, including 182 aircraft with Airbus (53% of deals) and 267 aircraft with Boeing (35%).

The standout was GECAS, which ordered 100 A320neo aircraft and then followed this up with orders for 20 737 MAX 10. CDB Aviation Lease Finance also ordered a mix of 105 aircraft, including 52 737 MAX and 8 787s, as well as 45 A320neo family aircraft. A new lessor, Tibet Finance Leasing, made orders for 45 aircraft from the A320neo and 737 MAX families.

Renewed ordering by lessors follows a period of intense consolidation in the industry. HNA Group acquired Avolon, which in turn purchased CIT Leasing Group earlier in 2017, creating the world's third largest leasing group. DAE has also announced it will acquire AWAS, creating a new leasing powerhouse with a fleet of close to 400 aircraft. In addition, there has been rapid portfolio turnover and a slowdown in sale and leaseback activity, prompting lessors to start making orders again.

Strong air show underlines industry health and strong traffic outlook

The stronger than expected ordering at Paris 2017 underlines the robust health of the airline industry, and the aircraft manufacturing industry along with it.

Regional ups and downs and one off events mean the airline industry is not uniformly well off, but the industry's underlying fundamentals remain strong.

Paris 2017 is a reminder that demand for air travel remains strong, industry profits continue at near record levels, and orders for commercial airliners are only going to continue to grow.