Product Void?
In releasing its long awaited Global Market Forecast, Airbus echoed Boeing’s comments on market resilience while at the same time offering a different perspective on just how the split between competing models will serve the flying public over the next two decades.
Where Boeing forecast demand over the 2009-2028 period to be some 29,000 airplanes, slightly lower on the forecast from 2008, Airbus increased their target from their 2007 forecast to almost 25,000 new airplanes - if anything, the figures show that both jet makers are inching slowly toward convergence in their overall numbers in anticipated demand in the next twenty years.
All images courtesy of Airbus/Boeing
Airbus predicts that demand for very large airplanes, such as the A380 and 747-8 equates to 15% of total value, representing 5% of the world fleet. In contrast, Boeing observed that the same segment would be worth just under half that amount representing just 3% of all units sold between the 2009-2028 time frame.
Thus far, only 200 A380’s have been ordered during the last decade - representing just 15% of the total Airbus is aiming to capture over the next twenty years. (The Big Debate)
Critically, the most interesting data to emerge from the forecast was this graphic below (p160, click to enlarge).
Between the A350-1000 and the A380, Airbus clearly has a product void.
Part of the problem with the A380 forecast stems largely from the wide-ranging demand for smaller, long range airplanes as opposed to hub-to-hub high volume flights. Frequency increases between primary and secondary hubs has eroded the business proposition for large jets and this is reflected in the weak passenger sales of the A380 and 747-8 Intercontinental.
Added to this is the marginal step in seating (11%) from the A350-900 to the A350-1000. With definitive specifications on the largest Airbus twin engine jet still shrouded in mystery while engineers focus on weight loss from the baseline A350-900, a possible further stretch of the A350XWB to plug the gap between the 350-525 seat void in the portfolio is compounded by financial constraints as well as engineering resource challenges.
The A380 in present guise is not geared up for a shrink - and with the A350 unable to grow beyond the A350-1000 without a new wing, the 777-300ER still occupies a segment that is pretty much uncontested. The only real alternative is the 747-8I, however, with the greater appeal coming in form of the 747-8F, the need to update or replace the 777-300ER is still a distant adventure.
The A350-1000 risks cannabilising the already shrinking A380 market niche, despite not being positioned any better than the A380, as reflected by its extremely narrow spread of orders. It is more probable that airlines take delivery of more flexible aircraft in the changing environment before increasing capacity and using very big aircraft - already we’ve seen over half the A380 customer defer deliveries as they try to adjust to dwindling demand and the destruction of yields upon which so many business models have been reliant upon.
Compounding the A380 issue is that of engines - by the time the 787 and A350XWB enter service, the engines on the A380 will be over a decade old since inception and given the slow market demand for the airplane, any possibility of a re-engining proposal is almost certain never to materialise given the costs involved.
With parent EADS’ finances stretched, despite the €8bn cash it has, plugging the portfolio void may not be an easy task. The A380 and A400M programs are both still increasing in costs along with controversial launch aid still being sought to finance the A350XWB family.
Any new widebody for Airbus not only risks eating both A350 and A380 segments, but the bill for such a move would be north of $15bn. Of course, much of this will depend on whether the A350-1000 meets its projections and may even negate the requirement to address the gap, however a stretch too far or a shrink too small will not cater for every customer.
Is that void where Boeing will step in and offer a replacement for the 777 when the A350-1000 develops further?
Quite possibly - however, Boeing’s own headaches with the 787 and getting it fixed, flown, certified and enter service may mean that just as the A320 and 737 replacements have hit the backburner, the 777 may also have to wait a while longer as well.
72 comments September 21st, 2009
