Page 30 - World Airnews Magazine May 2020 Edition

MANUFACTURER MANUFACTURER

SMALLER MAY BE BETTER year, roughly in line with 2019, but pro- summer, it would be cleared to go at the worst lapse of the stock markets and some major
corporations in bankruptcy, while Italy and

possible moment. Boeing would have to pay

duction will fall to just 319 in 2021 and not

recover to pre-crisis levels until 2025.
(US) $4.6 billion for the commercial part of a
other countries will be in crisis.”

The situation is even worse for Embraer,
He said one result will be that a fear of fly-

By Guy Norris and Jens Flottau which delivered only six commercial jets in company that the stock exchange currently ing, along with economic issues, will reduce
values at (US) $1.5 billion including its defence

January – March - one E175 for American and business aviation segments. The low valu- the number of passengers significantly.

Airlines, one 190-E2 each for Air Kiribati and ation may be temporary. But Boeing is asking “Airlines will have to compete more

Helvetic Airways and one E195-E2 for Azul. for a government bailout on the order of (US) intensely for passengers,” he said. “This
While the E2 is generally accepted as a very $60 billion for itself and the supply chain, and may imply higher frequencies and smaller

efficient, well-designed aircraft with good may face political opposition to spending a average aircraft sizes. With low fuel cost,

seat-mile cost and even better trip-cost per- significant amount on an acquisition in Brazil. the less favourable fuel burn per seat-mile

formance, its sales have been disappointing, “Strategically, it is still a great partner- for smaller planes won’t be that much of

with too few key orders from AerCap, Azul ship, and we have to get through the regu- an issue for the airlines. Ultimately, A321s

and KLM Royal Dutch Airlines, the type of latory hurdles,” said Boeing chief financial or 737-900s may even be parted out to

orders that meet Embraer’s hopes of moving officer Greg Smith. support A319 or 737-700 fleets, as airlines

the E2 more into the mainline market. “We will see how long that takes, but it won’t be in buying mode for new planes.”
For Embraer, timing and the market envi- still remains a priority for us.” Without the Leeuwen said, “Another element to con-

ronment were horrible. In the years of high deal, Boeing will struggle to come up with sider could be that passengers will strongly

growth, business was too good for airlines an offering to compete with the A220, and prefer smaller aircraft and point-to-point

to buy in to Embraer’s rightsizing argument Embraer would be left to compete on its services rather than connecting through

in a meaningful way. It was still OK to fly an own against Airbus and Boeing, a situation busy mega hubs, to reduce the risk of con-

A320 or 737-800, even if that one midday it has tried to avoid from the initial design tagion and crowded boarding areas.”

flight was not generating profits. In the of the latest E-Jet generation. The second, equally gloomy, scenario

overall scheme of things, it did not matter. “My feeling is that this new climate will builds on the premise of the first. “Now,

Then Airbus bought the former C series favour smaller aircraft, as long as they have let’s assume there will be more airline

Boeing Next-Generation 737-900ER programme from Bombardier, forcing Boe- necessary range and equivalent econom- defaults or consolidation,” he said.

ing and Embraer to react. ics,” says Richard Aboulafia, vice president “The few surviving airlines may compete

The resulting joint venture, Boeing Bra- of analysis for the Teal Group. “For sin- on price, mainly to stimulate demand, less

flow, forcing it to consume a (US) $13.8 For now, deliveries - and even less so, sil-Commercial, in which Boeing plans to own gle-aisles, the A220 will be more relevant so to gain market share. This would imply

billion drawdown loan much faster than the orders - do not indicate that small aircraft an 80% stake, has not yet received regulatory than ever, particularly now that Airbus is that airlines will not increase frequencies

s fleets of widebodies fly into financial markets expected. are doing better. In fact, the Aviation approval from the European Commission. getting its costs in line with the rest of its but will focus on lowering seat-mile costs.

Astorage around the world, many of Wall Street’s subsequent reaction to Week Intelligence Network Fleet Discovery While most observers agree it will ultimately product line.” Whether the same positive They can achieve this by consolidating

them never to leave, the corona virus crisis Boeing’s increased debt and lowered credit database shows such aircraft were worse get the green light even in Europe, the pre- push also applies to the Embraer E-Jet family flights and deploying larger aircraft, like the

poses equally challenging questions about rating, exacerbated by the onset of the off going into the COVID-19 crisis than the COVID-19 deadline for the decision was the is still to be determined. “Much depends MAX 9/10, A321. On long-haul [transatlan-

the future of the smaller single-aisle aircraft COVID-19 pandemic and its impact on air larger narrowbodies, although the numbers end of June, and Boeing and Embraer had on Embraer being able to get its production tic] routes this may imply the A321neo XLR

reflect previous market trends more than
at the other end of the capacity scale. travel, triggered a collapse in the compa- the impact of the crisis. But those numbers hoped to close the deal at the end of 2019. economics in line with Airbus’. If they aren’t, will replace even more twin-aisles.”
this is a 75% Airbus market,” he adds.
ny’s share price in March. Later the same

But what will that impact be? While it month, Boeing also appealed for state aid. cannot be ignored either. There has been much speculation as to This sentiment is shared by Aboulafia.

According to Bert van Leeuwen, manag-

is virtually impossible to predict with any From January to March, Boeing delivered whether the transaction was being held ing director and head of aviation research “The A321neo will continue to be hugely
hostage in the wider trade dispute between

certainty, there appears to be a growing Not surprisingly, the signs of an acceler- just two narrowbodies (both 737-800s); Airbus Europe and the US, which led to tariffs on for MUFG Bank’s global aviation finance relevant as a widebody replacement. The

consensus that smaller is better - particu- ating erosion of the impressive MAX order handed over 104 single-aisles in the period, 787, too, but if you don’t need its range and

larly as operators struggle over the more backlog have begun to show. Following or- already well below its targeted average output Airbus aircraft imported into the US. division, the industry may well be facing capacity, the A321neo will win,” he said.
two possible scenarios, both of which point
der losses in 2019 largely connected to the

near-term recovery period forecast for the of 63 aircraft per month. But they included no But people with close knowledge of the to significant downsizing across both single- “Initially, we will see increased utilisation

next two years. collapse of India’s Jet Airways, the latest A319s or A319neos and only eight A220s. matter say the issue has more to do with and twin-aisle sectors. of smaller airplanes,” Leeuwen said. “But
figures show that by the end of February,

To further complicate matters, some before the full impact of the pandemic was The A220 could be a winner in relative internal commission matters and how to by 2023 we may slowly return to normality.

“After the COVID-19 crisis, the world will

observers believe not all small airliners are felt outside of Asia, Boeing had already had terms, as its combination of relatively small exit an investigation that has gone too far experience a major economic recession. As it stands right now, I don’t expect air-

in a face-saving way.
created equal and that the recovery scenar- a net loss of 43 orders for the year. size, low unit costs and long range not only With high unemployment, pensions and so lines to go out on a shopping spree to buy

io may favour the fortunes of some models enables it to fly in secondary markets but But even if Boeing Brasil-Commercial were additional [smaller] aircraft. Leasing may be

In early April, Avolon offered a strong indica-

and families over others. tion of what may come from the global leasing also to replace larger narrowbodies on to receive the last missing approval this on will be under pressure due to the col- an option.” Q

In this context and given the relative community in the next few years. Avolon can- primary, longer-haul routes on which de-

state of health of the two biggest manufac- celled an order for 75 737 MAXs that would mand is temporarily suppressed. An Airbus
turers - Airbus and Boeing - going into the have been due for delivery between now and production forecast by Agency Partners an-

COVID-19 pandemic, it seems the European 2023, reducing its own exposure to what is alysts envisions the A220 as the only model
company with its A220 and smaller A320/ likely to be a very weak airline market. The les- that can sustain increased production rates

A320neo may be better positioned. sor also deferred deliveries for nine A320neos over the next seven years, albeit at lower

Boeing’s long-stalled efforts to recer- from 2020 and 2021 to 2027 or later. numbers than initially planned.

tify the troubled 737 MAX, added to the But even as the backlog takes a hit, there Analysts Sash Tusa and Nick Cunningham
scenario in which airlines will face acute is the possibility that order substitutions forecast that Airbus will be able to deliver

overcapacity problems even without taking may also take place as airlines attempt to 65 A220s in 2020, compared to 48 in 2019.

any of the large numbers of MAX aircraft in adjust for midterm capacity needs. The number will rise to 97 in 2022 and stay

storage, do not appear to bode well for a around that level for several years, they say.

Whether this is reflected in an uptick for

speedy recovery. orders of the slow-selling 737-7 variant of Airbus had hoped to bring the A220 up to
Compounding the issue for Boeing is the the MAX remains to be seen? Though Boe- the current maximum possible rate of 14
737 production halt, which seems likely ing does not provide a breakdown of MAX aircraft per month, or close to 170 a year,

to extend beyond even the provisional orders, the smallest member of the family by the middle of the decade, a target that
“worst-case” conditions originally con- is thought to currently account for only now seems elusive.

sidered last December. Growing delays around 50 aircraft against 3,000 for the -8, But it is growth, at least. According to

to recertification of the aircraft and the more than 450 for the -9 and more than Agency Partners, Airbus will still be able

termination of deliveries in 2019 have 520 for the yet-to-fly -10 stretch. to deliver 541 A320neo-family aircraft this The A321XLR a single-aisle jetliner offers

significantly affected the company’s cash a range of up to 4,700 nm (8,700 km)
World Airnews | May 2020 World Airnews | May 2020
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