Page 31 - World Airnews Magazine May 2020 Edition

MANUFACTURER

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

duction will fall to just 319 in 2021 and not possible moment. Boeing would have to pay corporations in bankruptcy, while Italy and
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, company that the stock exchange currently He said one result will be that a fear of fly-

which delivered only six commercial jets in values at (US) $1.5 billion including its defence ing, along with economic issues, will reduce

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

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

sil-Commercial, in which Boeing plans to own gle-aisles, the A220 will be more relevant so to gain market share. This would imply

an 80% stake, has not yet received regulatory than ever, particularly now that Airbus is that airlines will not increase frequencies

approval from the European Commission. getting its costs in line with the rest of its but will focus on lowering seat-mile costs.

While most observers agree it will ultimately product line.” Whether the same positive They can achieve this by consolidating

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

COVID-19 deadline for the decision was the is still to be determined. “Much depends MAX 9/10, A321. On long-haul [transatlan-

end of June, and Boeing and Embraer had on Embraer being able to get its production tic] routes this may imply the A321neo XLR

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.”

There has been much speculation as to this is a 75% Airbus market,” he adds. This sentiment is shared by Aboulafia.

whether the transaction was being held According to Bert van Leeuwen, manag- “The A321neo will continue to be hugely

hostage in the wider trade dispute between ing director and head of aviation research relevant as a widebody replacement. The
Europe and the US, which led to tariffs on for MUFG Bank’s global aviation finance 787, too, but if you don’t need its range and

Airbus aircraft imported into the US. division, the industry may well be facing capacity, the A321neo will win,” he said.
But people with close knowledge of the two possible scenarios, both of which point “Initially, we will see increased utilisation

matter say the issue has more to do with to significant downsizing across both single- of smaller airplanes,” Leeuwen said. “But
internal commission matters and how to and twin-aisle sectors. by 2023 we may slowly return to normality.

exit an investigation that has gone too far “After the COVID-19 crisis, the world will As it stands right now, I don’t expect air-

in a face-saving way. experience a major economic recession. lines to go out on a shopping spree to buy
But even if Boeing Brasil-Commercial were With high unemployment, pensions and so additional [smaller] aircraft. Leasing may be

to receive the last missing approval this on will be under pressure due to the col- an option.” Q

The A321XLR a single-aisle jetliner offers
a range of up to 4,700 nm (8,700 km)
World Airnews | May 2020
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