Thursday, June 22, 2017

PARIS AIR SHOW ANALYSIS: Five reasons for the widebody sales slump

While Airbus and Boeing racked up orders for narrow-body aircraft at the 2017 Paris Air Show, with the newly launched 737 MAX 10 garnering the most attention, wide-body orders have been few and far between this week.

Several of the wide-body orders that were announced were disclosures of customers for sales already on the books or the firming of options. Significantly, Boeing so far has announced no new orders for the 777X; the manufacturer already is making two production rate cuts to the 777 program this year because of weakness in wide-body sales.

Why are airlines shying away from wide-body orders? Five major reasons:


Delta Air Lines CEO Ed Bastian said earlier this year that there is “excess capacity in wide-bodies as we look to the future of the industry as a whole.” That means many airlines feel they have enough already—Delta and American Airlines have collectively deferred 32 A350-900s this year—and, if they do need a few in a pinch, there is a surplus of used wide-bodies available at very attractive prices.

Middle East challenges

The Big Three Gulf carriers—Emirates Airline, Etihad Airways and Qatar Airways—have been the big drivers of wide-body orders in recent years. But these are difficult times for those airlines for a number of reasons, including the laptop ban, the diplomatic rift between Qatar and its Gulf neighbors, the ongoing conflicts in Syria and Yemen and basic business issues such as Etihad’s problematic foreign investments. The Gulf carriers are simply in no position to order more wide-bodies at this time.

Neo and MAX range

The A321neoLR has a range of 4,000nm while the 737 MAX 7, 8 and 9 all can fly at least 3,500nm. Norwegian is planning to deploy the MAX 8 on transatlantic routes. These extremely efficient aircraft can operate many shorter long-haul routes that were previously only viable with wide-bodies. So airlines can buy a cheaper aircraft and deploy it at less risk from a capacity standpoint on routes that used to be the province of wide-bodies. That is making carriers think twice about wide-body purchases.

Waiting for what’s next

Boeing this week teased details of its potential middle of the market aircraft—the so-called 797—that would enter service in 2025, and could be formally launched within the next year and a half. Boeing said the aircraft will include a fifth-generation composite wing, a “hybrid” composite fuselage, next-generation digital architecture and super-efficient engines. It would have two aisles, seat up to 270 passengers and have a range of more than 5,000nm. If Boeing—and potentially Airbus in response—will be launching a new aircraft by early 2019, why pull the trigger now on an order? If an airline is looking to replace older 757s or 767s on transatlantic routes—as is the case with United Airlines—why place an order when a tantalizing new offering is coming soon?

Previous large wide-body orders

Finally, at least with the Airbus A350 and Boeing 787, many airlines have previously made their new wide-body fleet picks and placed their orders. Airbus has more than 850 A350 orders; Boeing north of 1,200 Dreamliner orders. With these orders already placed, there are simply fewer opportunities for Airbus and Boeing in the wide-body market compared to the narrow-body market, where startups and low-cost carriers are big players. Much of the current wide-body focus, therefore, is on production execution and delivery.

(Aaron Karp - ATWOnline News)

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