airliner market analysis [long]

Date:         19 Feb 98 01:33:46 
From: (H Andrew Chuang)
Organization: Concentric Internet Services
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AE316/317 vs B717-100/200 (aka MD-95)

Airbus has learned that it is very difficult to do business with
China.  Airbus wants to build the smaller AE316 to compete with the
B717.  The Chinese are interested in the bigger AE317.  The other major
partner, Singapore Aerospace, is frustrated and is threatening to pull
out.  For Boeing, losing the battle to Airbus a few years ago could
actually be a blessing in disguise.  The B717 offers Boeing an economical
way to get into the lower end of the commercial aircraft market.  As
long as Boeing can keep the cost down, the B717 might be moderately

A320 vs B737

Since the launch of the third-generation B737, the B737 has been doing
very well against the A320.  There were more than 700 NG B737s ordered
even before Southwest put the first B737-700 into service; this is a
record for a new aircraft type.  However, last year, the A320 has
chalked up quite a few big orders, most notably US Airways' order of
124 A320 family aircraft, NW's order of 50 A319s, and ILFC's order of
50 A320s.  This is the first time in quite a few years that the A320
has outsold the B737 (~350 vs 320).  In a recent press release, Airbus
compared the 350 figure against Boeing's next-generation figure of
"barely 200". (I'm not sure how Airbus arrived at this number.
According to Boeing's webpage, 235 B737NGs plus 85 second-generation
B737s were ordered.  Airbus probably excluded the smaller B737-600 with
which the A319/320/321 does not compete.  Then, the number was 195 which
is consistent with the wording "barely".)

Anyway, the A320 seems to be doing even better this year.  Iberia has
announced an order of 50 A320 family aircraft.  United will soon sign a
contract for another 50 A320s.  Many have also reported an upcoming
joint order of 100 aircraft by three Latin American carriers.  Since
the new year, Boeing only got one major B737 order by Southwest with
50+ units.  Boeing cannot afford to lose British Airways' order!

At the end of last year, all B737 models had a combined backlog of over
900 planes.  Inferring from the Iberia press release, Airbus's A320
backlog is around 730.  Boeing's planned 1998 production rate for the
B737 was at 24 aircraft per month.  The latest Airbus figures that I
could find are 10 A320s per month at Toulouse and 8 A319/321s per month
at Hamburg.  If you add UA's and the Latin American orders and do some
simple math, Airbus actually is in worse shape than Boeing.  This will
probably drive the prices for both aircraft up!

A330-200 vs B767-400

As I have said so many times, the A330-200 revitalized the A330
program.  At this time, the A330-200 has a small lead.  Boeing needs
some Asian and European customers for the -400.

A340-500 vs B777-200X

The A340-500 (along with the -600) was officially launched last year.
Two airlines had signed letters-of-intent for the ultra-long-range
Airbus plane, namely, EVA Air and Air Canada.  It seems EVA Air is not
a done deal, yet.  Boeing is still courting the airline with a B747
alternative.  Emirates may be very close to signing up for the
A340-500.  Both manufacturers are still vying for Singapore's order.
Although, the upcoming Asian Aerospace '98 show in Singapore would be a
perfect place for an announcement of such order, the financial crisis
will probably hold Singapore Airlines back from making any commitment
(unless..., see A340-600 vs B777-300X).

Asian airlines account for a lot of B777's backlog.  Thus, the current
economic turmoil probably affects the B777 line more than any other
Boeing's and Airbus's products.  OTOH, the recent conclusion of
US-Japan bilateral negotiations may have signaled a new age for the
B777.  Continental has already announced its intent to fly the B777
from Newark and Houston to Japan later this year.  It's also no secret
that American will replace its MD-11s with the B777s which will be its
workhorse across the Pacific.  Although, Delta does not have any
immediate plan to sell the MD-11s, I think you can count on the B777 to
eventually replace the MD-11 across the Pacific.  Also, US Airways will
soon decide between the A330 and B777.  All indications are US Airways
will order the B777 and Boeing will drop its lawsuit against US
Airways.  Furthermore, the A330 is not capable of flying between
Philadelphia and Tokyo, but the A340 has never been mentioned as a
candidate for US Airways.  All of a sudden, there will be four airlines
using the B777 across the Pacific.  Perhaps, TWA may join the crowd,
too (but TWA still has 10 A330s on order.)  Currently, China Southern
is the only carrier uses the B777 for trans-Pacific flights.

A340-600 vs B777-300X

With the new US-Japan bilateral, there is an incentive for American
Airlines to push Boeing for the B777-300X which it will need for the
Dallas-Narita and Chicago-Narita services.  Furthermore, AA is also
interested in secondary routes like Dallas-Hong Kong for which AA will
need the B777-200X.  Thus, I think the B777-200X/-300X launch will now
be driven by AA and maybe DL more so than by some Asian airlines.
Nevertheless, it will be a big blow for Boeing if Singapore decides to
order the A340-500.  Hence, if AA and DL do show strong enough
interest, I won't be surprised if Boeing gives Singapore a real sweet
deal to kick off the program.

The A340-600 has three sizable committments from three credible
airlines (Virgin, Swissair, and Lufthansa) plus a few additional
smaller orders.  At this time, signed firm orders stand at 19 only.  To
recover the US$3billion investment, Airbus must need more orders.
Nonetheless, IMHO, the twin-engine B777-300/300X will eventually be one
of Boeing's most successful widebody lines.  The B777-200IGW leads the
A340-300 by a good margin, even though the former lags the latter by
about three to four years.  The two-engine/four-engine argument has not
been a big issue in the B777-200IGW/A340-300 competition.  It will be
an even lesser issue in the A340-600/B777-300X competition, because
Boeing still has the B747, though not as efficient as the
A340-600/B777-300X, to offer.

B747 vs A3XX

Quite a number of B747 derivatives have surfaced.  The 30-year old B747
will never be as efficient as the A3XX on paper.  However, if Boeing
could steal 20-30% of a relatively small market without spending a lot
of money, it could be a very unattractive business proposition for
Airbus to build the A3XX.