Posts Tagged “777-300ER”
This looks like a big week for Airbus. Early this morning in Toulouse, the first A330neo for Air Portugal was rolled out of the paint shop.
Air Portugal is the launch customer for this model. The A330neo is a substantial upgrade from the current generation A330. The A330neo is going to be focusing replacing the current A330s in service as they retire.
There were over 1,300 delivered, and of these only 49 are parked. Airbus has seen a slow order pace on the A330neo, perhaps in part, because the current A330 has been such a success. The average age of those in service is just under 12 years. However, Airbus is also aiming at the replacement market for the 777-200ER. There are 28 parked and 373 in service. Of those in service, they average about 13 years old.
The table shows how carefully Airbus calibrated the A330-900 against the A330-300 and 777-200ER. Airbus will see its A330-900 compete in this market with the 787-9.
Boeing has a far more efficient aircraft in the 787-9 compared to the 777-200ER. For about the same capacity and range, the 787-9 at about the same size, has about 15% lower MTOW, requires 24% less thrust flies a tad faster and is only about 100 NM shorter on range.
Airbus, comparing the current and new models, has a 4% higher MTOW, a 3% improved range, a 4% better capacity in about the same size aircraft. The A330-900 has a much better wing and a newer generation of engines.
Whereas Boeing took a big leap from the 777-200ER to the 787-9, Airbus took a more sedate step in its upgrade. The key difference here is range and price. Boeing wins on range for those airlines seeking that feature. Airbus will win on price. How many airlines are willing to pay for that extra 1,0000 NM? Or better yet, how much premium can Boeing get for that capability? American Airlines is doing this tradeoff. If, as Airbus argues, the A330-900 can reach most of the markets these aircraft serve, then the extra range of the 787-9 is doing to be discounted to more closely match the expected price of the A330-900. Airbus, we think, will be able to make the A330-900 profitable at far fewer deliveries than Boeing can with the 787-9.
Tomorrow, Airbus will deliver its first A350-1000 to Qatar Airways.
Airbus recently took an A350-1000 on a world tour to the Singapore air show and then across Asia and the Middle East. The tour took 24 flights, generated 87 flight hours, nearly 35,000 miles and the aircraft had over 10,000 visitors. This model of the A350XWB family aims squarely at the 777-300ER market.
The 777-300ER is an aircraft Airbus would dearly love to beat. Just as the A330 outclassed the 767, Boeing’s 777-200ER beat the first generation A340 and then 777-300ER outclassed the updated A340. The 777-300ER arguably even impacted the A380. With the 777-300ER, Boeing hit a sweet spot. There are close to 760 of these in service, and only three are parked. The fleet averages just over seven years old.
The A350-1000 has a tough fight ahead. Firstly, the 777-300ER is in many ways the benchmark long-haul airliner today. Airbus can’t match it and win. Airbus needs to beat it by a big margin to attract attention. Airbus also has to do this quickly because Boeing has the 777X coming in 2020.
The table compares the A350-1000 with the 777-300ER and the similarly proportioned 777-8. What we can see is that Airbus has a footprint that is very close to the Boeing models. But by using lighter materials, Airbus has an MTOW advantage of over 12%. Airbus also needs about 16% less thrust. Airbus offers over 8% more range. This appears to give Airbus a large enough margin over the 777-300ER to attract attention.
However, the market evolves and the 777-8 cannot be ignored. The newer Boeing will have nearly 1,000NM more range (longer range seems to be a Boeing thing) and much larger wing (folding). But the 777-8 does not offer more seating than the A350-1000.
When we look at the order book, Boeing has 53 777-8 sold compared to 169 for the A350-1000. Of some concern to Boeing, many of the A350-1000 orders came from airlines currently operating the 777-300ER. The 777-8 orders come from three airlines, Etihad, Qatar, and Emirates. These three airlines are attracted to the range feature so they can connect every spot through their hubs. While these three airlines have shown strong growth rates in the past, currently they are growing at a much slower rate. Moreover, among the A350-1000 customers are Etihad and Qatar. Also, Airbus has 20 orders from Cathay Pacific which has also ordered the 777-9 which is a much larger aircraft.
In summary, this is a big week for Airbus because two of its new widebodies are emerging. Airbus has been behind Boeing in the widebody race for some time. But it now will be able to field a lower cost option in the A330-900 to replace older A330s and 777-200ERs and also an excellent replacement for the 777-300ER in the A350-1000. Airbus has much stronger offerings in the widebody segment looking forward.
The A380 is somewhat of an enigma. While it is the solution to congested airports, and is well preferred by passengers in survey after survey, it has not sold particularly well. Only one carrier, Emirates, seems to understand how to make money with the A380, which is the mainstay of its Dubai connecting hub for long-haul international travel.
Introduced 10 years ago, some of the first A380s from SIA are coming off-lease are now being replaced with new models. With residual values yet to be set once the first retired A380s are traded. A used A380 could be quite attractive to carriers that favor early availability coupled with flexible financing. (perhaps those folks in Atlanta).
Plus the A380 remains very attractive as a slot consolidation aircraft. For carriers with multiple frequencies into congested airports like London’s Heathrow, the freeing of a slot enabling service to a new airport through frequency consolidation can be a financial windfall. The key question is to what degree frequency and time of service impact demand. Heathrow also provides a special attraction for the A380. The airport’s landing charges now have a noise component. Because the A380 is so quiet, it is cheaper to land at Heathrow than a 777.
Another airport that uses noise levels in its landing fees is Narita, where the A380 shows the same benefit over the 777. Today it’s clear that airports have to deal with more than just terminal limitations or runway slot constraints to maintain or expand operations. Local community noise tolerance is becoming increasingly important. Being a quiet neighbour is now a key requirement to getting the political allies for the future development.
Emirates has taken 100 A380s over the last decade, an average of 10 per year. If we assume they will be replaced after 12-15 years, and replaced with newer A380s, the only aircraft with the same capacity, then Airbus could expect orders for 10 aircraft annually from 2020-2030. That is certainly adequate to keep the production line humming.
The industry expected Emirates and Airbus to announce agreement on a new order for 36 A380s at Dubai that did not materialize. Publicly, Emirates has stated that it wants a commitment from Airbus to keep the A380 line open for another 10-15 years. In addition, Emirates has rejected the A380Plus concept from Airbus, which is detailed here.
Is there something more going on behind the scenes? We believe so. Emirates would like an A380neo, as more modern engines would restore the once-significant seat-mile costs advantage for the aircraft that is now evaporating as new technology aircraft enter the market. Airbus is finding it difficult to justify, even though they, as we, believe increasing airport traffic will make A380 sized aircraft essential at major hubs. However, in Airbus’ defence, they o not have the same step change in engine technologies that allowed for its other neo programs. Both the Trent and GP7200 on the A380 today are relatively new engines. Moreover both engines have seen upgrades to offer better economics. Then there are airframe improvements that need to be considered – and the A380plus is a step in that direction. Airbus is waiting for the right critical mass of technologies to emerge that will enable the 15%+ improvements that a neo require. Emirates may be pushing, but they have to acknowledge that there are no engines ready. Rolls-Royce might have a solution with fan engine but that is going to be ready by 2025.
Airbus knows that airlines don’t like risk and behave in risk averse ways. The two recent C Series orders, coming soon after the Airbus interest in the program, illustrate that. With Airbus now behind the program, several risks, including long-term customer support, have been eliminated, clearing the way for purchases that likely would not have happened as quickly without that assurance.
Airlines don’t like to take the risk of filling large airplanes. Every week has a Tuesday, and every year has a February in which demand will not be as robust as other periods. Many airlines prefer an aircraft they can fill every day, even if they cannot accommodate some traffic, so if slots are available, they would prefer to fly aircraft they know they can fill rather than one that introduces uncertainty. Since Airbus hasn’t been successful at selling the A380 in large numbers, what market conditions would change to enable larger sales of the A380neo? Amedeo has some ideas it is working on that address this challenge.
Another answer is constraints. While megacities are growing, and traffic is growing faster than airport capacity, route dispersion is fragmenting the “hub and spoke” models in Europe and the US. In the early 1960s, flying to Europe meant transferring at Idlewild in NY. Today, many major cities have non-stop service across the pond to multiple destinations. In Europe, even Lufthansa splits its connecting traffic and intercontinental routes between Frankfurt and Munich, which helps eliminate congestion at Frankfurt, but also the need for an A380, since A350s from Munich take some of the traffic.
However the fragmentation thesis is still developing. Among the A380 operators only one airline has two hubs in their home markets. This means those A380 operators are able to exploit and focus the aircraft’s particular capabilities. Which means that connecting megacities will invaribly require VLA aircraft because, as we see across the globe, airport growth is protested. Does congestion impact? The answer is yes, because traffic growth is outstripping airport growth and capacity.
Consequently the absence of a deal at the Dubai show between Airbus and Emirates is not the end of the story. Emirates does not want to drive Airbus into a sub-optimal decision regarding the future of the program. Both firms are tied to each other around the A380. Besides the reason that the likes of BA, Lufthansa and Air France are slowing down their A380 interest is because Emirates has been taking more traffic from them, especially between Asia and Europe. That alone suggests that Emirates will keep acquiring A380s, especially as its older models are retired. Just like Singapore Airlines.