Airbus A321neoLR orders: Jetstar the ninth airline, third LCC, to order the new long haul narrowbody

Summary

• Jetstar Airways has converted 18 A321neo orders to the A321neoLR.
• There are now nine airlines, including three LCCs, that have announced commitments for the A321neoLR since the programme was launched three years ago.
• There are likely several other airlines that have acquired the A321neoLR but have not yet been disclosed, because Airbus does not distinguish between the A321neoLR and A321neo in its order book.
• Most of the A321neoLRs will be used in the trans-Atlantic market.
• There are also opportunities for the aircraft to penetrate thin long haul markets within Asia Pacific, and from the Middle East.

Nine airlines have so far announced commitments for A321neoLRs

Airbus launched the A321neoLR programme in Jan-2015 with a commitment from Air Lease. The aircraft is essentially identical to the A321neo, which was launched in late 2010, with the exception of an extra fuel tank and a higher maximum takeoff weight. This enables the A321neoLR to fly approximately 1,000km further than an A321neo, for a range of over 7,000km.

Nine airlines have announced commitments since 2015. These include the three LCCs (Air Arabia, Jetstar Airways and Norwegian Air) and six full service airlines - Aer Lingus, Kazakhstan's Air Astana, Canada's Air Transat, Denmark's Primera Air, Portugal's SATA and TAP Air Portugal.

Air Astana was the first airline to make a commitment, signing a deal with Air Lease in Jun-2015. Air Astana plans to take delivery of its first A321neo in early 2019. Primera is currently in line to become the first operator, with deliveries starting in 4Q2018, according to the CAPA Fleet Database.

Air Transat, Primera and SATA are all considered FSCs, although they follow leisure airline models. Aer Lingus, Air Astana and TAP are flag carriers but not in the traditional sense; they follow somewhat hybrid models, particularly Aer Lingus, and have low unit costs - which likely attracted them to the A321neoLR.

Only three airlines have announced A321neoLR orders directly with Airbus

Aer Lingus, Air Arabia, Air Astana and SATA are taking their A321neoLRs from Air Lease, while the aircraft for Air Transat and Primera Air are from AerCap. Air Lease and AerCap are the only two leasing companies to announce A321neoLR orders.

TAP Portugal, Norwegian and Jetstar are the only airlines to announce A321neoLR orders directly with Airbus.

The five announced orders are for a combined 129 aircraft, according to the CAPA Fleet Database. They consist of 59 aircraft from launch customer Air Lease, 30 for Norwegian, 18 for Jetstar, 12 for AerCap, and 10 for TAP.

Of the 59 orders from Air Lease, 22 have been placed (eight to Aer Lingus, six to Air Arabia, four to Air Astana and four to SATA), but placements for the remaining 37 have not yet been announced. All 12 of the AerCap aircraft orders have been placed, including two for Primera Air and 10 for Air Transat.

A321neoLR disclosed commitments: as of 22-Feb-2018

Airline	Number of orders	Source	First delivery
Norwegian Air	30	Airbus	2019
Jetstar Airways	18	Airbus	2020
Air Transat	10	AerCap	2019
TAP Portugal	10	Airbus	2019
Air Lingus	8	Air Lease	2019
Air Arabia	6	Air Lease	2019
Air Astana	4	Air Lease	2019
SATA	4	Air Lease	2019
Primera Air	2	AerCap	2018
Unassigned	37	Air Lease	N/A

Source: CAPA Fleet Database.

Several other airlines may have undisclosed commitments to the A321neoLR

Several other airlines likely have committed to A321neoLRs but have not formally announced their intention to operate the new type. It is likely that other leasing companies have also committed to A321neoLRs on behalf of their customers.

Airbus does not provide a breakdown between the A321neoLR and the standard A321neo in its order book. Therefore, several customers (airlines and leasing companies) that have ordered the A321neo may have specified A321neoLRs but these are not being reflected in the Airbus order book (and never will be).

Airbus currently has orders for nearly 2,000 A321neos. The 129 disclosed commitments for the A321neoLR represent only 7% of the total A321neo order book.

Batik potentially one of several undisclosed A321neoLR operators

The A321neoLR will ultimately account for a much larger share of total A321neo deliveries. There could be more than 20 A321neoLR operators by the end of 2020.

For example, Batik Air CEO Achmad Luthfie told CAPA on 5-Feb-2018 that the airline was planning to take delivery of A321neoLR aircraft from 2019. Batik parent Lion Group currently has orders for 65 A321neos and 113 A320neos. Mr Achmad said all of Batik's A321neos will be A321neoLRs.

Airbus discloses when an airline converts an A320neo order to larger A321neos but does not make an announcement if an airline converts an A321neo order to the A321neoLR. It is therefore entirely up to the airline to announce the acquisition of A321neoLRs.

For privately owned airlines such as Batik an announcement is not likely. The Jetstar announcement on 22-Feb-2018 was part of Qantas Group's fiscal first half earnings announcement; Airbus did not make its own announcement.

Jetstar's A321neoLRs to replace 787-8s on Australia-Bali routes

Jetstar plans to use A321neoLRs on six-hour Australia-Bali routes now served with 787-8s and on slightly shorter (domestic and international) routes now served with A320ceos.

Jetstar plans to configure the A321neoLRs with 232 seats, compared to 180 seats on its A320ceos and 335 seats on its 787-8s. Jetstar also has a small A321ceo fleet, which is used on domestic trunk routes, and those aircraft have 220 seats.

Jetstar Airways fleet summary: as of 22-Feb-2018

Aircraft	In service	On order
Airbus A320-200	53	0
Airbus A320-200neo	0	54
Airbus A321-200	8	0
Airbus A321-200neo	0	27
Airbus A321-200neoLR	0	18
Boeing 787-8	11	0
Total:	72	99

Source: CAPA Fleet Database.

The A321neoLR will have significantly lower unit costs compared to the 787-8, enabling Jetstar to compete more effectively against Batik and other airlines in the Australia-Bali market. The new A321neoLR will also free up 787-8s for longer routes to Asia.

Jetstar currently operates 15 long haul routes, including three to Bali, with a fleet of 11 787-8s. The three Bali routes are its thickest long haul routes and account for more than one third of its total long haul seat capacity. As the Bali flights transition to A321neoLRs, the equivalent of approximately four 787s will be freed up for new long haul routes and/or more frequencies on existing long haul routes.

Jetstar was a pioneer with the long haul low cost model but has not expanded its long haul operation for several years, due to fleet limitations. Its 11 787-8s were used primarily to replace its original fleet of A330-300s, which were used to launch long haul operations in 2006. Long haul narrowbody aircraft should be able to drive a new phase of growth.

At least six of the 18 A321neoLRs will be required to replace the four 787-8s now used on Bali routes as Jetstar will need to boost frequencies in order to maintain capacity in the Bali market. Jetstar will also use A321neoLRs to replace A320ceos on some of its longer existing narrowbody routes, such as Perth-Bali. While the A320ceo is capable of operating routes of up to five hours, the A321neoLR is more efficient, and the fuel savings are more pronounced on longer routes.

Jetstar to have the densest configuration among A321neoLR operators

Jetstar could also use some of the A321neoLRs to launch new routes to Asia. However, the decision to squeeze 232 seats onto the aircraft may limit its options somewhat. Of the nine airlines to have announced A321neoLR commitments so far, Jetstar has the densest configuration.

Norwegian plans to configure its A321neoLRs with 220 seats. The only other LCC with A321neoLR commitments, Air Arabia, has selected a 215-seat single class configuration.

Air Arabia has always offered a relatively generous 32in pitch on its A320s, which generally seat 168 passengers compared to the normal LCC configuration of 180. The 32in pitch will be maintained on the A321neoLRs, whereas Jetstar will go with a tighter pitch.

The six full service operators plan two-class configurations with between 166 and 200 seats. Air Astana has the least dense configuration, opting for 16 lie-flat business and 150 economy seats. This matches the configuration Air Astana has on its 757s.

Air Astana plans to use its fleet of A321neoLRs to replace 757s on long thin routes from Kazakhstan (in Central Asia) to Western Europe and East Asia. It currently operates 757s to Bangkok, Frankfurt, Ho Chi Minh, Kuala Lumpur, London and Seoul (routes of six to eight hours).

Air Astana, along with Air Arabia and Jetstar, are so far the only announced operators intending to operate A321neoLRs to Asia.

Air Arabia is expected to use A321neoLRs to launch routes of six to seven hours to Asia, to Africa and potentially to Western Europe. Air Arabia's longest current routes, Sharjah to Nairobi and Urumqi, are approximately five hours. Air Arabia does not yet serve Western Europe from its Sharjah base.

Trans-Atlantic market will account for bulk of A321neoLR operations

Aer Lingus, Air Transat, Norwegian, Primera, TAP and SATA plan to use their A321neoLRs on trans-Atlantic routes.

Aer Lingus now uses A330s and wet-leased 757s on trans-Atlantic routes. Air Transat operates A310s and A330s and plans to phase out the former as it takes A321neoLRs.

TAP and SATA, which is also known as Azores Airlines, both operate A330s. SATA also recently began deploying A321neos from its Azores base to Boston, a route of less than six hours. SATA plans to use A321neoLRs for longer trans-Atlantic routes.

Norwegian launched long haul narrowbody trans-Atlantic flights with 737 MAX 8s in summer 2017, and plans to add longer narrowbody trans-Atlantic routes in 2019 after it takes delivery of A321neoLRs. Norwegian is already a large long haul low cost operator, having operated 787s since 2013.

Primera currently only operates short haul routes within Europe but plans to begin serving North America with A321neos in summer 2018, and to launch longer trans-Atlantic routes after it takes A321neoLRs.

The trans-Atlantic is an ideal market for the A321neoLRs, particularly for thinner secondary routes. The aircraft has the range to connect the northeast US or eastern Canada with a large portion of Northern and Western Europe.

See related report: North Atlantic narrowbody aircraft routes: a dynamic niche segment undergoing transformation

There will inevitably be more than three LCC A321neoLR operators

The 757 has been used for years to serve thinner trans-Atlantic routes but the type is starting to reduce in number as the fleet ages. The A321neoLRs offer similar range and size but are much more efficient, making them attractive to both LCCs and FSCs.

LCCs never acquired 757s, although they were often favoured by European "charter" companies. A321neoLRs and the 737 MAX 8, which has slightly less range and capacity, are opening up long haul narrowbody opportunities to LCCs for the first time.

There will inevitably be a lot more than three LCC operators for the A321neoLR. The aircraft has the potential to open up hundreds of new LCC city pairs that are now too small for widebody aircraft but are too long to be economically served with other narrowbody aircraft.

The biggest impact will clearly be in the trans-Atlantic market. However, over time the A321neoLR will also penetrate long haul routes within the vast Asia Pacific region, along with the Middle East-Africa and Middle East-East Asia markets.

The difference they make will be large - and transformative in network terms.