Airbus is preparing to steal a march against rival Boeing with the launch of a new long-range aircraft that could pre-empt the US company's plans for a similar plane.
The European aircraft maker has been courting potential airline customers about a longer-range version of its single-aisle A321 jet, and could launch the model on its home territory at next week’s Paris Air Show – the industry’s showcase event where the world’s two biggest jet manufacturers like to trump each other in a public battle of orders.
Potential airline customers, including IAG, the owner of Aer Lingus and British Airways, have already expressed an interest.
The expected move by Airbus comes at an uncertain time for the industry, which has been buffeted by a number of headwinds, from the 737 Max crisis to escalating trade tensions between the US and China and the spectre of Brexit, prompting some to ask whether a possible tailing-off of the decade-old order boom for jets is in the offing.
The longer-range jet, dubbed the A321XLR, could be flying from 2023-2024 – a full two years before Boeing’s planned new mid-market aircraft, designed to bridge the gap between the US company’s biggest narrow-body passenger jet and the 787 Dreamliner twin aisle.
Crisis
Boeing has been considering the launch of the jet but its fate is unclear as the group grapples with the crisis surrounding its 737 Max. The aircraft remain grounded and there is still no timetable for when the model will return to the skies after two crashes in March and October, killing more than 300 people, because of problems associated with the aircraft’s software.
Airbus and Boeing tend to hold back some big orders to make a splash at the show, which could be a test of how robust the industry is
The XLR variant would have a higher maximum take-off weight and some 500 nautical miles more range than the A321LR, Airbus's current longest-range single-aisle – allowing it to fly from the middle of the US, for example, to the centre of Europe. Airbus will launch the jet, if it has signed up enough customers, and use the variant to compete against any moves by Boeing in the hotly contested middle of the market.
Airbus and Boeing tend to hold back some big orders to make a splash at the show, which could be a test of how robust the industry is. There is speculation that both companies will announce some orders for their wide-body aircraft, their largest aircraft usually configured with multiple aisles.
Dennis Muilenburg, Boeing's chief executive, will also face his first major public outing at the Paris show in the wake of the Max issue.
Speaking at an analyst conference at the end of May, Mr Muilenburg stuck to his optimistic outlook for the industry over the longer term, arguing that the old days of boom and bust were over.
“The fundamental nature of traffic has changed . . . it’s no longer a cyclical environment. It’s a much more steady growth kind of environment,” he said, adding that “it’s a long-term sustainable trend”.
Cancellations
If the long-term outlook remains strong, then this year is looking less healthy. Orders for both aircraft manufacturers in the first five months were anaemic, while cancellations have increased. Boeing on Tuesday said it delivered some 50 per cent fewer aircraft in May compared with a year earlier as deliveries of its bestselling 737 Max jet remained suspended following the second deadly crash in March.
IBA Group, the independent aviation consultancy, is also predicting a significant drop in orders, both firm and intended, based on memoranda of understanding, at the show – from 996 in 2017 to just 440 at this year’s show.
Airlines are expected to earn $28 billion this year, down from a previous forecast of $35.5 billion in December
Stuart Hatcher, IBA chief operating officer, said he thinks the airline industry is "gearing up for a downturn" following an "unprecedented number of aircraft returning from failed operators". While he still expects traffic to grow, it will do so at "a more sedate level".
The International Air Transport Association, the trade body that represents airlines, this month lowered its profit forecast for the industry, citing rising fuel prices and weakening world trade. It said airlines are expected to earn $28 billion this year, down from a previous forecast of $35.5 billion in December.
Eric Bernardini, global leader of the aerospace, defence and airlines practice at consultancy AlixPartners, said the Max crisis has "shone a spotlight on an industry performing well, but one with inherent tough issues".
“Despite strong performances across the board of late, with increased budgets and passenger numbers, industry participants could be in for a rough ride in the coming years,” he said. He cites diminished consumer trust as a result of safety concerns, the sustainability of supply chains, rising input costs, and an increasing focus on the environment by outsiders as key challenges.
“All this is set against a backdrop of further global economic slowdown, meaning the year ahead will be a challenging one,” he added.
Market plateau
Richard Aboulafia, analyst at the Teal Group, cautions against panicking. "The twin-aisle market peaked in 2015 and has been on a plateau since. Single aisles are more traffic-growth dependent but let's not panic. The only thing that would make me panic would be a comprehensive meltdown on the China trade front."
One of the more prominent themes of this year's Paris show will be electrification as the industry strives to meet stringent emission targets
Both Boeing and Airbus remain insulated from any short-term market dips given their substantial order backlogs, which together amount to more than 13,000 aircraft – or about seven years of production.
Peter Barrett, chief executive of aircraft leasing group SMBC Aviation Capital and a Boeing Max customer, said his company's "mantra at the moment" to the manufacturers is "focus on delivering what you've promised and on time".
Away from the orders battle, one of the more prominent themes of this year’s Paris show will be electrification as the industry strives to meet stringent emission targets. All of the incumbents, as well as several start-ups, are preparing to showcase electric prototypes.
There could also be more news over whether Spain will formally join the Franco-German project to build a future European combat aircraft. Germany and France in February signed a joint concept study linked to a Future Combat Air System programme, which is a rival to Britain's own future fighter programme, dubbed Tempest. A Spanish decision to join the Franco-German project could dash hopes of broader collaboration between European nations that would include Britain.
– Copyright The Financial Times Limited 2019