Focus: 2010
December 24th, 2009
Markers For 2010 Outlook
Orders/Production
Deferrals/Traffic
Cancellations/Financing
WTO Impact
After a tumultuous year, the forthcoming twelve months will likely be a pivotal one for airframers Airbus and Boeing, maybe even Bombardier too if they can secure further orders for their much vaunted, but equally so far unsuccessful-in-getting-new-orders CSeries family.
Regardless of who wins the orders race for 2009 (or indeed 2010), the biggest challenge for the big two jet makers will be the impact of their respective cases at the WTO.
Image courtesy of Boeing
Many still seem to (foolishly) assume the cases are linked. But as Boeing’s legal counsel stated earlier, they are independent and their outcomes will likely have a more profound impact on the aid Airbus has received since its inception - and is a primary driver behind their seemingly juvenile threats to withdraw from the KC-X tanker competition because the EADS/Northrop Grumman untested partnership is not winning the battle to make the USAF change the RFP. Boo-hoo…
Regardless, Boeing’s flight test plate will be full next year as it races toward first deliveries of the 787-8 and 747-8F.
The key markers next year will focus heavily on production, not least because a slew of carriers have adjusted deliveries to be pushed back between now and 2014. Boeing will have already started the 777 rate cut that comes into effect next summer, while calls for a 737 and A320 rate cut may also be on the cards.
Equally, new orders next year will be a driver for production rates. Backlogs do not last forever. Of course, orders will be dependent on traffic (or lack thereof as the case may be for dozens of airlines). With the winter season in full swing, capacity that has been stood down may well be brought back into service as summer rolls around, but not for the older jets being withdrawn from active service.
Financing though, will be a critical component.
Yield erosion, changes in consumer spending habits has forced many carriers to re-evaluate their business models - the era of dependency on high fares is dead and buried and isn’t coming back. Without revenue (or profit), credit rating stagnation or downgrades will make access to funding harder - and that’s before you consider the ongoing credit market woes.
While Airbus and Boeing have secured financing for an array of customers this year, their cash balances are both perilously exposed and will be loathed to loan out yet more money in the future while the prospect of revenue pressure increases.
Airbus is seeking yet more money on the A400M, without which the program may well come to an untimely end before first delivery.
Image copyright/owned by FleetBuzz Editorial.com
The A380 too, stuck in a massive loss position while EADS evaluates its financial viability is being strangled by production issues that are not related to cabin customisation, (doesn’t every cabin on existing airplanes have a unique offering from another, unless for the same customer, Airbus?) but rather, EADS is still grappling with supplier angst, some of which seek further cash injections to increase their rates to allow Airbus to stabilize A380 production.
Costs on the A350XWB too, have continued to balloon and Airbus still faces a funding shortfall in the $17.5bn program. EADS CEO Louis Gallois claims this will be self-funded, despite the engineering drain that has diverted resources away from the A350XWB to the A380 and A400M, the 2013 service entry date is an out-of-date proposition.
Boeing is saddled with continued R&D expense on the 787, compensation payments in lieu of the five crippling program delays, as well as those on the now loss-making 747-8 family. The 767 soldiers on in anticipation of winning the US Air Force aerial tanker refuelling duel while the C-17 lives to fight on for another couple of years as the Chinook comes under the radar for the UK armed forces.
While the financial crisis cripples the ability to spend, airlines are stuck between a rock and a hard place. Factor in oil price rises, up circa 50% at the start of FY09, making money in a depressed travel market is no easy feat.
All eyes will be on the 787 now that it has finally flown.
It won’t get any easier as 2010 goes on, but the impact of the 787’s service entry late next year will certainly set the ball in motion for a production recovery in 2011 when customers can finally take advantage of the savings and efficiencies the Dreamliner was built for.
On the bright side, the Farnborough Air Show can expect to welcome the first 787 and/or the 747-8F, weather permitting!
Roll on 2010.
Entry Filed under: Airbus, Airbus A300, Airbus A310, Airbus A318, Airbus A319, Airbus A320, Airbus A321, Airbus A330, Airbus A330-200, Airbus A330-300, Airbus A340, Airbus A340-200, Airbus A340-300, Airbus A340-600, Airbus A350, Airbus A350-1000, Airbus A350-800, Airbus A350-900, Airbus A350XWB, Airbus A380-800, Boeing, Boeing 737-700, Boeing 737-800, Boeing 737-900ER, Boeing 737NG, Boeing 747, Boeing 747-8 Intercontinental, Boeing 747-8F, Boeing 747-8I, Boeing 767, Boeing 777, Boeing 777-200LR, Boeing 777-300ER, Boeing 777F, Boeing 787, Boeing 787 Dreamliner, Boeing 787-3, Boeing 787-8, Boeing 787-9, Boeing Commercial Airplanes, Boeing Current Market Outlook, EADS
37 Comments Add your own
1. Tweets that mention &hellip | December 24th, 2009 at 08:48
[...] This post was mentioned on Twitter by FleetBuzz Editorial, Kom Campiranon. Kom Campiranon said: Airbus & Boeing Forecast In 2010 http://is.gd/5zGAy [...]
2. ikkeman | December 24th, 2009 at 11:46
Totally agree, the last 30some days did set the weels in motion for a momentous 2010.
Airbus, Boeing and Gulfstream all flight testing exiting new programs;
Another round finished in the tanker saga (is it really to much to hope for it being the final round?);
The major players in aviation in financial straits, struggling to get their latest and greatest imaginations into the air - and the future looming brighter than ever;
The WTO likely to forever change the dynamic of the large aerospace industry (enabling more transatlantic outsourcing?);
exiting times - happy holidays and a glorious new year!
…
…
3. Mike M | December 24th, 2009 at 12:45
The WTO ruling against Airbus will give them a new credit crunch!
4. Leelaw | December 24th, 2009 at 15:04
The “WhaleBus[t] is reduced to non-Hajj milk runs to Jeddah 4x week beginning in 2010.
http://www.flightglobal.com/articles/2009/12/24/336606/emirates-to-use-a380-on-saudi-arabian-route.html
5. Paula K | December 24th, 2009 at 15:08
I agree with respect to Bomabardiers C-Series. It has been slow to get traction but eventually it’ll emerge as a great A319/73G alternative as those models become less cost-efficient to run.
Happy new year peeps!
6. Vero Venia | December 24th, 2009 at 16:39
4. Leelaw | December 24th, 2009 at 15:04
I think it will transport many saudis who want to have fun in Dubai. They can’t do it in their home country.
Maybe they can go to Thailand or the Philippines via Dubai.
7. falcon | December 24th, 2009 at 17:00
@Leelaw,
Why always so negative?
@Mike M,
Why will the WTO case bring a credit crunch? Isn’t the typical result some minor changes to make things compliant? Exim bank is still able to enable a lot of Boeing sales so why can’t that happen with the RLI’s? Especially since the rumor has it that one of the used models was accepted per the draft?
8. Vero Venia | December 24th, 2009 at 17:10
2010 will be a difficult year for the manufacturers. Every manufacturer will see its turnover down.
Production level must go down in 2010 especially if some more airlines bite the dust.
Must we expect more deferrals and cancelations? Possible.
9. Paulo M (Johannesburg, RSA) | December 24th, 2009 at 19:22
Well, looks like fun. Whether airlines are making any money or not, some airports will be in prime position to make lots of money - and line it properly..
Merry Christmas all.
10. Dougloid | December 25th, 2009 at 20:40
Merry Christmas from snowy, white Christmas Iowa.
11. B380 | December 27th, 2009 at 14:46
Fleetbuzz…
“and is a primary driver behind their seemingly juvenile threats to withdraw from the KC-X tanker competition”
Sorry, how did you link WTO cases with the threat to withdraw from the competition?
“The A380 … issues that are not related to cabin customisation … but rather, EADS is still grappling with supplier angst”
And if anybody thinks ramping up and delivering 787s is going to be easy may have to think again.
“diverted resources away from the A350XWB to the A380 and A400M, the 2013 service entry date is an out-of-date proposition.”
So after declairing that the issues on the A380 are production and suppliers, they also diverted the engineering? I can tell you very few truely design and engineering people are working on the A380 with minimum resource on the A400M, mainly there for FT support. Primary driver is the A350. Although at this stage it may be unreasonable to say if it going to be late or not, I wouldn’t be surrprised if at least -900 makes it on time or +3 month… The others will probably be delayed.
“On the bright side, the Farnborough Air Show can expect to welcome the first 787 and/or the 747-8F”
I cannot see A400M not making it also…
12. Paula K | December 27th, 2009 at 16:25
“And if anybody thinks ramping up and delivering 787s is going to be easy may have to think again.”
I don’t think that that was alluded to here B380, although you are certainly right about production issues being a dark cloud for the 787 going forward.
Personally I think the engineering drain may rear its head again, what with a second line starting to be built and a ton of staff that need training too.
I’d also like to see the A400M at the show too - the C-130 has been a good workhorse, it’ll be nice to see something newer for a change!
13. ikkeman | December 28th, 2009 at 07:01
8. Vero Venia | December 24th, 2009 at 17:10
Production levels wil probably be lowered, But I wouldn’t be surprised if it was just a small amount.
Financial markets will recover and aircraft buying is a long term game. Ab/Bo sold about half their production output this year, but their orderbooks seem rather extensive.
It would be interesting to see how many a/c deleveries both plan this year.
11. B380 | December 27th, 2009 at 14:46
don’t forget the other new planes out there. Finances permitting, farnborough will be
Legen… wait for it …Dary!
14. Dougloid | December 28th, 2009 at 17:29
“I’d also like to see the A400M at the show too - the C-130 has been a good workhorse, it’ll be nice to see something newer for a change!”
It’s already here. It’s called the C-17 and it is the best damned airlifter there is, bar none. It’s single purpose, designed around the mission: put an all up MBT on the ground ready to fight, and do it on a 5,000 foot unimproved dirt strip. Of course, with that much ability, you can find all other sorts of uses for it and so we have.
I’m not saying that to wave the flag, but if it happens it’s all good. Reports of our demise have been greatly exaggerated.
15. keesje | December 28th, 2009 at 21:21
The C-17 does “semi prepared” runways. That means it damages soft strips & they must be repaired for further use.
Replacing the C-130 by the 4 x as heavy & expensive MTB carrying optimized C-17 has not happened yet & is unlikely to take place IMO. It’s a good strategic transport, that doesn’t make it anything else..
16. falcon | December 29th, 2009 at 00:42
Dougloid says: “It’s already here. It’s called the C-17 and it is the best damned airlifter there is, bar none.”
If so, why is the C-130 still getting orders?
Could it be that depending on mission other planes may be a better fit? Could it be that a C-17 is too much plane for all but a few missions for many air forces that can only justify single model? Can it be that some large air forces can justify several models so they can tailor plane to the missions required?
Could it actually be that there is no such thing as a single perfect plane since the requirements are so diverse and everything ends up being a compromise, i.e. shades gray and not black or white.
17. ikkeman | December 29th, 2009 at 07:36
14. Dougloid | December 28th, 2009 at 17:29
Yes, the C-17 is one great airlifter - but it is in no way, shape or form anything like an C-130 replecement. At four times the capability.
Neither is the A400M - it’s twice as capable as the C-130.
I do think it’s interesting to see EADS (casa or Ab military) is the only western airframer with an extensive line of military transports. from the small C212 right up to A400/A300MRTT.
Of course, the US still has the high ground with the C-17 and C-5, and nobody has a direct competitor for the C-130.
But the C-5 is out of production, the C-17 was out of production twice? now - though it got a new lease on life and the C-130 is already breaking ground as the longest production run (or is that the 172?).
18. ikkeman | December 29th, 2009 at 07:37
16. falcon | December 29th, 2009 at 00:42
of course there is a perfect plane - I’m working on it!
19. Leelaw | December 29th, 2009 at 14:39
Dominic Gates has an interesting piece in today’s Seattle Times with another gem from the “Great Satan” Aboulafia:
“…I can’t think of a single major industry except large-aircraft manufacturing that’s avoided severe pain in 2009,” said industry analyst Richard Aboulafia of the Teal Group. “We either have more luck than Ringo Starr or we’re just waiting for the other shoe to drop…”
http://seattletimes.nwsource.com/html/businesstechnology/2010611506_2010aerospace29.html
20. ikkeman | December 29th, 2009 at 17:53
19. Leelaw | December 29th, 2009 at 14:39
You know, your “great satan” actually has his own newsletter site.
http://www.richardaboulafia.com/
21. Dougloid | December 30th, 2009 at 22:30
Where did you guys get the idea that I was promoting the C17 as a super size replacement for the C130? That’s not anywhere in the script.
“The C-17 does “semi prepared” runways. That means it damages soft strips & they must be repaired for further use.”
As usual, Keesje, you paint with a very wide, a.net style brush.
The report you are referring to, of course, refers to the heaviest loads being delivered to unimproved runways, and that’s not to say that any other heavily loaded transport aircraft would not do the same thing, including the A400M if it ever gets into production.
22. Vero Venia | December 31st, 2009 at 11:04
I followed the discussion about military transport with much interest. It is stunning to see how people are still influenced by military strategy which are based on the cold war era. I understand that old people can’t adapt their thinking to the new situation.
The reality is that the Berlin Wall collapsed in 1989. Only twenty years ago, there were not as many airstrips as today. You can find acceptable airstrips almost everywhere. Most of the countries are now friendly countries. How many countries are still hostile to the West? I can cite Cuba, North Korea, Myanmar and maybe one or two others.
Is it always necessary to have an tactical aircraft that can land on roughly prepared runways? I don’t know. I bet you can find a better place to land or to take off less than one hundred kilometers away from the point you want to reach.
Confrontation scenario with tanks and many ground forces is now out of date. It seems that the latest conflicts are “counter-insurgency” type conflicts.
The number of available commercial aircraft has also more than doubled during the last twenty years. Many of them are available for charter. Some others are stored in the deserts, they can become operational in days or weeks.
So, I can’t see a military transport aircraft as a strategic asset anymore.
23. Aurora | December 31st, 2009 at 15:10
The C-17 is still the most flexible option that is currently available, or will be available in the next 20 years. Vero, I agree with the “cold war mindset” warning. However, keep in mind that military planners must account for all known possibilities, while constantly seeking to minimize the impact of the dreaded “unknown unknowns”. Nonetheless, even in this day of “asymetrical warfare”, there is great virtue to the platform that carries the mostest of anything, while being able to deliver that load to where the end user needs it.
I have thoroughly enjoyed the debates and comments here over the last year and look forward to more next year. Who knows? The USAF may even decide on a tanker?
Happy New year to all.
24. Dougloid | December 31st, 2009 at 17:25
Happy New Year to you all from snowy, sunny Iowa.
Memo to Aurora: “The USAF may even decide on a tanker?”
Don’t bet money on it. We’re broke. Tapped. Outta cash. No credit. In hock up to our eyeballs. All the vig goes to the shys in China.
25. Paulo M | January 1st, 2010 at 13:32
24. Dougloid | December 31st, 2009 at 17:25
“Don’t bet money on it. We’re broke. Tapped. Outta cash. No credit. In hock up to our eyeballs. All the vig goes to the shys in China.”
Okay, then bet CREDIT on it, lot’s of it
Happy New Year!
Ohhhhh, just 15~20 days now!!! WOOOHOOO!!!!
26. Lawyerchick | January 2nd, 2010 at 11:30
You think The EU (Airbus) has been hit hard by the preliminary WTO ruling issued in 2009? The US is up for a crushing defeat in the reciprocal case EU versus the US (Boeing).
I think neither the US nor the EU will dare to drag China in front of the WTO panel, even as evident as that case is.
27. ikkeman | January 2nd, 2010 at 13:48
26. Lawyerchick | January 2nd, 2010 at 11:30
you have any insight into the proceedings of the WTO panel?
28. Leelaw | January 2nd, 2010 at 15:05
A poster on the SP-I blog recently made this observation:
“…If the US doesn’t like RLI it will need to respond likewise to EU RLI. Providing US manufacturers with RLI would remove any competitive advantage and make the EU very amenable to a deal and would be a much more effective method of dealing with the RLI issue than filing a WTO complaint…”
The multiplier effect from “front-loaded” launch aid subsidies is far greater than governmental subsidization via favorable tax rates/credits, which require large, costly, and risky capital investments before any possible benefits may be derived. US policymakers will have to move from a system of providing governmental subsidization via tax incentives to one which emphasizes “strategic investments” if they want to maintain a competitive domestic industry.
29. Mike M | January 2nd, 2010 at 16:39
Or course lawyerchick fails to realize that the WTO complaints/counter-complaints are separate:
http://www.fleetbuzzeditorial.com/2009/11/04/wto-ruling/
And I quote:
“As a legal matter, there is no relationship at all between the two [complaints and counter-complaints] - they’re two completely separate sets of [WTO] panels. The outcome, there’s no off-setting. The fact is the obligation for [Europe and Airbus] to come into compliance will emerge in the middle of next year - the US will move forward and take whatever action to enforce this [WTO] decision.”
Further, if you look at the cases, it is Airbus that will lose more than Boeing.
1) Who gets state aid/tax breaks - Airbus & Boeing
2) R&D funding through military/space contracts - Airbus & Boeing
3) Direct state aid for commercial jets - Airbus only
Boeing is also poised to launch WTO cases against the likes of Bombardier and the US has already hit China with Tire import tariffs too, so there is good grounds for the USA to gun for COMAC/AVIC as well.
The Europeans are all mouth and will not do the same. If they piss their paymasters off in China, the A320-cheese line there will be gone along with 300-odd outstanding Airbus A320 orders. Before long, the Airbus crew will be bending over backwards to help the Chinks to build the C919, just like they tried and failed with the AE31X project - and look how that turned out!
http://www.flightglobal.com/articles/1997/05/21/3843/avicairbus-sign-ae31x-agreement.html
Makes you think why in their litigation that Airbus didnt go for the Japs too - but of course, they pussied out because they want in on the Japs territory where their 4% market share is all but evaporated.
But lawyerchick isnt supposed to know this sort of stuff, she’d rather spew her pro-Airbus juices laden with inaccuracies.
30. Lawyerchick | January 2nd, 2010 at 17:06
Lawyerchick is aware, of course, that the cases are principally independent and that there is no offsetting. Yet - inevitably - both rulings will have to apply the same rationale, e.g. towards the legitimacy of state loans vs commercial application of technolgies developed with government R&D funding. The latter was judged as illegal subsidy in the US vs EU ruling. As you correctly point out, both parties are guilty of that. BUT…make an educated guess who’s exposure is at least one order of magnitude higher in that area.
Mike M fails to ealize that neither Airbus nor Boeing are going to lose money. Mind you this is not Airbus vs Boeing. It is a US vs EU case and a reciprocal EU vs US case.
31. paul gibbs | January 2nd, 2010 at 19:29
For me it is confirmation about the 787 performance claims esp. with the GE engine; this may lead to sales of the 747-8. Passenger travel/yields will continue to be under pressure for 2010 and discussions around single isle production rates and 737 & 320 midlife and replacements.
32. Mike M | January 3rd, 2010 at 10:19
>>>both rulings will have to apply the same rationale, e.g. towards the legitimacy of state loans vs commercial application of technolgies developed with government R&D funding.
>>>make an educated guess who’s exposure is at least one order of magnitude higher in that area.
If your implication is that Boeing has more to lose then you are sadly mistaken.
The EU cannot prove that resources were diverted and it is also because the EU/Airbus didnt lodge a complaint against Japans involvement on the 787 as the money came from their respective Governments - oh, a bit like how Airbus gets its Govt aid, if you will.
If you think that neither Airbus or Boeing will not lose money then you’re a beer short of a 6-pack. Both will be hit, but Airbus will be forced to pay back ALL aid its gotten for its jets - that will bankrupt Airbus at a time when its mommy at EADS is bending over backwards to get another 7bn for the A400M.
33. falcon | January 3rd, 2010 at 11:14
Mike M says ” but Airbus will be forced to pay back ALL aid its gotten for its jets - that will bankrupt Airbus”
Time will tell but I think you’re wrong on both accounts.
My worst case prediction as it relates to RLI’s is that the interest rates will increase and payments will be due monthly.
34. Lawyerchick | January 3rd, 2010 at 11:47
>>> If you think that neither Airbus or Boeing will not lose money then you’re a beer short of a 6-pack.
All I’m trying to do is start an intelligent conversation which, it seems, you have trouble with.
>>> Both will be hit, but Airbus will be forced to pay back ALL aid its gotten for its jets.
I have the impression that you haven’t fully understood the preliminary ruling on the US vs EU case issued last year. Government loans to Airbus by and large were found to be legal.
You also fail to comprehend that the WTO ruling in no way implies that Airbus or Boeing have to repay subsidies, even in case they are found to be illegal.
>>> The EU cannot prove that resources were diverted
Well, wait and see.
35. Mike M | January 4th, 2010 at 21:40
>>>Time will tell but I think you’re wrong on both accounts.
Not even the festive season could cheer you up then I see? Humor clearly isnt one of your strong points. Or lawyerchix either.
Anyway.
>>>Government loans to Airbus by and large were found to be legal.
Funny, they were also found to be illegal by the WTO, or so the press leakages had us believe.
>>>the WTO ruling in no way implies that Airbus or Boeing have to repay subsidies, even in case they are found to be illegal.
…and what then, is the purpose of these claims/counter-claims if that isnt one of the objectives?
No need to answer that chick, I wouldnt want you to get all upset now.
36. Leelaw | January 5th, 2010 at 07:42
In a somewhat surprising development, Scott Hamilton, until now one of the leading proponents of the WhaleBus[t] in the aerospace commentariat, has turned negative about Airbus’ future prospects for the program in his 2010 outlook:
“…We have been a consistent supporter of the A380 and believe it will indeed prove to be a technically proficient airplane that passengers will enjoy. But given the long-term financial implications, we have to ask, Has the time come for Airbus to cut its losses and terminate the program? While we continue to believe that the company will sell 500-600 airplanes over 20 years (down from our previously believe of 700), if you stand little chance of making money, why bother? The resources are better put to use on the core A3-Series programs.”
http://.leehamnews.wordpress.com/2010/01/04/2010-outlook-for-airbus-boeing/
IIRC, in the past at least, some of the leading WhaleBus[t] aficionados active in the blogosphere have frequently lauded Mr. Hamilton as being a particularly “insightful” analyst.
37. Paula K | January 5th, 2010 at 14:35
Leelaw,
Scott Hamilton is as usual late to the game. Not that his views count beyond the Seattlite borders anyway.
If he is regarded as “insightful” well, I won’t draw comparisons since there isn’t anyone I know of stupid enough to do that with.
I did however, find this piece interesting:
http://www.glgroup.com/News/Airbus-A380-Faces-Difficult-Year-45724.html
The A380 will live on, but most like Leelaw and others know that it will never become a cash-cow for Airbus.
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