pre-Farnborough comments [long]

Date:         18 Aug 98 01:04:45 
From:         Chuanga@cris.com (H Andrew Chuang)
Organization: Concentric Internet Services
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Farnborough Air Show will take place in less than a month's time.
Boeing and Airbus have used this and other air shows to announce
aircraft launches and major orders.  Last February, both manufacturers
were awfully quite at the Asian Air Show in Singapore.  Hopefully, it
won't be as quite at Farnborough.  Here is my usual long-winded
comments:  ;-)

A319M5/B717

The AE31X project between Airbus Asia and China's AVIC is no longer on
the table.  Airbus has been promoting the A319M5 feverishly in the past
few months in an attempt to keep Boeing from securing major orders for
the B717. The two major 100-seater orders on the horizon are NW, which
has more than 150 aging DC-9-30/40s, and ILFC, which is poised to order
50 100-seaters.  However, NW is unlikely to make any commitment anytime
soon due to its labor disputes with various unions.  Thus, I doubt there
will be any significant breakthrough.  The likelihood of the A319M5 to
be launched at the Farnborough Air Show is 50-50 at best.  IMHO, I think
Bombardier and Fairchild/Dornier are taking the right approach in
introducing jet-powered aircraft to regional operators.  That is, both
companies are attacking from the low-end (50- and 70-seaters) while a
larger aircraft is also planned.  Boeing's (or, originally McD's)
approach of building a 100-seater first, then, expand to 80-seat and
120-seat categories is questionable.  Airbus' plan to build the A319M5
without other product to cater the low-end of the regional market is
even more ludicrous.  Nevertheless, the strategy is necessary for Airbus
to achieve its goal of garnering 50% of the commercial aircraft market
in the near term.  Also, other than NW, there are not that many major
potential 100-seat replacement orders.  Most sizable DC-9-30 operators
(such as SAS, Continental, and US Airways) have already made their
replacement decisions.  Most regional operators are not likely to take a
big jump to fly 100-seat planes.  Thus, I think the potential for the
100-seater market is way over exaggerated.

A320/B737

The spotlight will be on British Airways' narrowbody order.  It seems
Airbus is a locked-in, but until it's official, Boeing might still have
a chance.  Personally, I don't think the lack of B737 delivery slots is
an issue.  GE Capital has previously swapped A320 delivering slots when
US Airways was unable to secure earlier slots because of pilot union
problems.  If BA were to order from Boeing, GE Capital would no doubt
play an integral role.  With or without BA's order, the A320 has proven
to be extremely successful.  It will soon eclipse the once-successful
DC-9/MD-80 family in a not-too-distant future.

A330-200/B767-400ER

The longer-range, more current A330-200 is out-selling the B767-400ER by
a two-to-one margin.  Other than Delta and Continental, Boeing has not
been able to secure any other sizable orders.  American Airlines'
decision to order the B777-200ER to replace the DC-10 is, IMO, a setback
for the B767-400ER.  Boeing does not seem to know what it wants to do
with the -400ER.  Both Pratt & Whitney and Rolls-Royce are interested in
offering powerplants for the -400ER, but they don't seem to be able to
get a clear definition from Boeing.  Even GE is ready to offer an
updated CF6-80G2 for the -400ER in addition to the -80C2 which will
power all the current -400ER orders.  On paper, I think the A330-200
should be an excellent fit for SAS which is about to choose a long-range
plane.

A340-500/600/B777-200X/300X

In the 300-seat category (A330-300, A340-300, B777-200A/ER), Boeing is
doing quite well.  Recent DC-10 replacement order by American, and
upcoming orders from British and potentially from Taiwan's China
Airlines should make a good year for the B777, especially considering
the fact that Asia, where the B777 heavily relies on, is in a serious
recession.  However, if Boeing is unable to launch the B777-200X/300X in
the near future, it will hurt B777's future viability.  IMHO, Boeing
decided to compete in the 300-seat market because Boeing has a design
that can replace the older B747s *and* compete with the original
A330/340 (and MD-11).  Boeing has cheaply launched the B777-300, but it
has a limited range capability.  Boeing must need the B777-300X to
effectively compete with the A340-600 for the B747 replacement market.
OTOH, it's not an inexpensive business proposition for Airbus to launch
the A340-500/600.  Although, the A340-500/600 has created a lot of
headaches for Boeing, Airbus will need a lot more orders for the new
models to recover its US$3b investment (which is more than half of
B777's original development cost).  Boeing has successfully delayed EVA
Air's and Emirates' decisions to convert their respective MOUs for the
A340-500 into firm contracts.  Nevertheless, if Boeing cannot launch the
B747-400X and/or the B777-200X anytime soon, Airbus will get those
orders.  Hopefully, we will get an answer at the Farnborough Air Show.