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Industry review and outlook: DVB
Bert van Leeuwen
Extracted from Airfinance Annual • 2017/2018
Sponsored editorial: Rolls Royce
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The specialist in international transport finance
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2 Airfinance Annual • 2017/2018
Industry review and outlook: dvb
Industry review and outlook
Bert van Leeuwen, managing director, aviation research, DVB, says that
although aviation is going through a ‘supercycle’, some airlines and
manufacturers are not having such a good time.
A t the risk of later being filed under
“famous last words”, it now starts
to look like the commercial aviation
investors, the cloud on the horizon
may be the downward trend in used
twin-aisle values.
concludes that the cyclical rebound
in Europe – except the UK – could be
stronger and more sustained.
industry is going through a kind of So, are there no concerns? Certainly The growth forecast for the US
supercycle. Traffic volumes in revenue not. There is still a number of airlines has been revised down to 2.1% from
passenger kilometres (RPKs) have in deep trouble. Alitalia and Air Berlin 2.3% in 2017 and to 2.1% from 2.5% for
been growing in excess of 5% a year are prominent examples and while 2018. The revision reflects the weaker
each year since 2010 and, halfway not in the danger zone in any form, growth during the first quarter of 2017
through 2017, it seems like this year even the mighty Middle East carriers but more so the less-than-assumed
traffic will again grow at more than are not shining as brightly as they expansionary fiscal policy changes.
7%. In addition, airlines are continuing once were. While the manufacturers Market expectations of fiscal stimulus
to enjoy ever-increasing load factors cannot produce enough A320s and have also receded.
with the projected level for 2017 now 737s it seems, the A380 and 747 are Growth in China is expected to
at 80.7%. struggling and the current-generation remain at the same level in 2017 as it
While a number of airlines is A330 and 777 aircraft do not fly off was in 2016, 6.7% with a slightly lower
struggling, on a global basis the the shelves. Investors with significant 6.4% projected for 2018. China is
bottom-line results of the air transport positions in large twin aisles, such as now expected to maintain high public
providers looks healthy, with positive the A380 or even 777s, probably look investment, which comes at the cost
net operating results every year since at future lease terminations with some of further large increases in debt (with
2010 and for the past four years even concern. additional downside risk).
decent returns on invested capital. The title of the most recent (July Emerging and developing countries
While order volumes for new aircraft 2017) update of the International are also expected to see a sustained
reached a peak in 2013-14, today, the Monetary Fund’s (IMF) World pickup in activity, with growth rising
industry backlog is still equivalent to Economic Outlook nicely summarises to 4.6% in 2017 and 4.8% in 2018.
more than eight years’ production at the current macro-economic situation: The IMF expects gradually improving
2016 levels. “A Firming Recovery”. conditions for commodity exporting
Clearly, not all airlines are The IMF confirms that the pickup of countries, which suffered during the
profitable and not all manufacturers the global economic growth remains recession of 2015-16.
have reasons to celebrate. Sales on track and projects a growth On the risk side, the IMF signals
volumes for the Airbus A320 family in global output of 3.5% for 2017, a more protracted period of policy
and the Boeing 737 have reached increasing to 3.6% in 2018. Projected uncertainty, citing difficult-to-predict
unprecedented levels, but twin-aisle oil price increases have been adjusted US regulatory and fiscal policies.
sales are definitely not as strong. In downwards for 2017. The average oil For China, financial sector risks and
the regional jet market, a relatively price was $42.8 per barrel in 2016 excessive credit growth could result
large group of manufacturers is and the IMF now projects an average in an abrupt slowdown. For some
competing for a relatively limited of $51.9/bbl (adjusted from $55.2) European countries, concerns remain
number of new aircraft orders. for 2017 and $52/bbl (adjusted from about weak bank balance sheets
Lessors and investors seem to $55.06) for 2018. Growth in global and financial stability. On a global
have little to complain about. There trade and industrial production as well basis, the risk of more inward-looking
is plenty of new equity available for as receding oil prices are obviously policies could fuel protectionism,
investment, trading volume is high good news for commercial aviation, while, as always, geopolitical tensions
and airlines are generally willing to so from that perspective the industry’s can result in a slowdown of growth.
extend leases, even for slightly older supercycle should not be at risk. The global aviation industry has
technology aircraft. For investors While on aggregate level growth proven remarkably resilient
eager to expand their portfolios, the projections remain stable, the IMF’s to many geopolitical and other
consequence of the above is that outlook for individual economic noneconomic shocks. According to
purchase prices of aircraft on lease regions has changed over the past UNWTO – World Tourism Barometer,
are very high and investment can only year. Interesting enough, despite global travel and tourism remains
be justified under optimistic residual Brexit, the IMF states that, in Europe, relatively strong. Over the full year
value assumptions. For some of the the political risk has diminished and 2016, international tourist arrivals
6 Airfinance Annual • 2017/2018
Industry review and outlook: dvb
new era after 2014. Before that year,
IATA - Net airline profit (post tax) per region global airline operating profit margins
would be about 3% to 4% at best and
US$ bn/US$
generally any profitable year would
35
quickly be followed by one or more
31.30
years with break even or negative
30
results.
25
In 2015, the profit margin suddenly
20
16.32
skyrocketed to 8.5% and preliminary
15.40
15 figures for 2016 indicate an even
10 7.40 6.94
7.40
7.66
higher level of 8.8%. For 2017, the
5
4.96 expectations are a little more modest,
2.87
1.78
0.80 0.40 with a forecast for 7.5%. It should
0
-0.10 be noted that the main source of
-1.50
-5
Africa Latin America Middle East Europe Asia/Pacific North America Global
profitability in 2015, 2016 and in
2017 was and is the North American
Source: IATA Net profit 2017 (F) in US$ bn Net profit per passenger 2017 (F) in US$
market. It is interesting to compare the
absolute post-tax profit per region, as
increased 3.9%, but also there were surcharges and taxes) in constant well as the profit per passenger. By
big differences among the various (2016) US dollars dropped from $417 both criteria, North America stands
regions. Sub-Saharan Africa and in 2015, to $366 in 2016, and is out.
Asia-Pacific grew by 10.7% and 8.6%, anticipated to drop further to $353 in Comparing net profit figures, the
respectively. The Americas saw 3.9% 2017. While average fares have been system-wide global commercial airline
more tourist arrivals, while for Europe falling for decades, it has been the profit reached $34.8 billion in 2016.
growth was limited to 2.1%. lower fuel price that enabled airlines Just over 47% of this, or $16.5 billion,
Within Europe the performance to lower ticket prices. Fuel cost for the was generated by North American
varied by country, with Belgium, global airlines dropped dramatically, airlines. Some 25% came from their
France and Montenegro in the red especially between 2015 and 2014, European colleagues, with another
and Cyprus, Finland, Iceland, Malta by 22.1%. Another significant drop of 23% from the Asia-Pacific operators
and Portugal among the winners. 24.1% could be noted between 2015 and 3% from the Middle East-based
The Middle East showed the worst and 2016. For 2017, the fuel bill will players. For 2017, this is not likely
performance as a region with a 4.1% decrease only by a modest 2.6%. The to change a lot. North America is
decline, and Turkey and Egypt deep average annual fuel price in $/bbl projected to account for 49% of the
in the red. dropped by 41.9% in 2015, 21.9% in anticipated $31.4 billion net profit,
For 2017, not too many statistics 2016 but will increase again in 2017 by Europe and Asia-Pacific 24% each
have been published, but UNWTO an anticipated 22.8%. Between 2015 and Latin America for just under 3%.
indicates that international tourist and 2017, fuel cost as a percentage Profitability of the Middle East carriers
arrivals over the period of January- of total operating cost decreased to is expected to come under pressure,
April increased by 6%. Even some 18.8% from 26.5%. resulting in a contribution of just 1% to
areas that were under pressure The projected total spend on air global net profit.
during 2016 seem to be recovering. transport in 2017 is anticipated to Comparing the profitability per
The Middle East numbers increased be about $775 billion, 5.3% higher passenger eliminates the impact
by 10%, Africa by 8%, Europe as compared with the $737 billion from of the relative size of each region.
well as Asia-Pacific by 6% and the 2016. In real volume terms, both Asia-Pacific as an example has a
Americas by 4%. UNWTO concludes: the RPKs, as well as the number of share of 32.8% of global traffic, versus
“Destinations affected by negative passenger departures, are projected only 2.2% for Africa. Profitability
events during 2016 are showing to increase. The RPKs volume will per passenger as such reflects the
clear signs of recovery in a very short rise from 7.164 billion in 2016 to an performance of each region more
period of time …” estimated 7.694 this year, a 6.4% fairly. For 2017, each North American
Over the first half of 2017, global increase. The number of passenger airline’s passenger is projected to
revenue passenger kilometres departures will increase by about 7.2% generate $16.32 net profit. In Europe,
increased by no less than 7.9%. to 4.085 million. this is $6.94, in Asia-Pacific $4.96,
According to the International Air The airline industry is offering its in Latin America $2.87 and in the
Transport Association (Iata), the customers an increasing range of Middle East a meagre $1.78. African
global airline trade association, the direct connections. Over the past carriers subsidise each passenger
brighter economic circumstances 20 years, connectivity has doubled as they generate a negative $1.5 per
in combination with generally lower and today the world’s airlines offer passenger.
airfares were the main causes for this connections between almost 20,000 Apart from the benefit of lower fuel
acceleration versus the 7.4% growth unique city-pairs. cost, the North American result can be
achieved in 2016. From a financial perspective, the explained by the increased (domestic)
The average return fare (before airlines seem to have entered a whole market power of the major airlines
www.airfinancejournal.com 7
Industry review and outlook: dvb
jets (all civil operations) is equal to
Crude oil & jet fuel - price development in USD and EUR about eight-and-a-half times the
number of jet deliveries made in 2016.
US$ cents/gallon cents/gallon
As production is set to increase in
350 350 the coming years (bar any supplier
constraints, such as engines and
300 300
interior parts), burning off the backlog
250 250
in reality may not take as long though.
200 200 The launch of a new aircraft type
150 150
can have a stimulating effect on
order volumes. Compared with the
100 100
boom years in the first half of the
50 50 decade, major new product launches
0 0
were almost absent during the years
Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17
2015-16. The importance for aircraft
US Gulf Coast Jet Fuel Spot (US$ ct. per gallon) WTI Spot (US$ ct. per gallon) US Gulf Coast Jet Fuel Spot ( ct. per gallon) WTI Spot ( ct. per gallon)
orders of the launch of a new aircraft
type was vividly illustrated during the
Source: EIA and ECB
Paris air show in June this year, when
Boeing launched a new stretched
after a wave of consolidation. This has either. Widebody aircraft sales were version of the Boeing 737 family,
enabled improved pricing power, as particularly hit in 2017, with only about dubbed the Max 10.
well as higher load factors and more 160 orders over the first eight months, Shortly after the launch of this new
income from ancillary services. of which half were Boeing 787s. version, Boeing could book over 360
Traditionally, when airline Despite some fuel price increases commitments, 260 orders plus more
profitability goes up, also the new during the recent months, fuel remains than 100 letters of intent (LoI) and
order volume for commercial aircraft relatively cheap and airlines seem options. It must be noted that the
increases. In recent years, this relation to be comfortable with extending majority of these orders were changes
has been broken. While the industry leases on existing old- and current- in variant. As an example, United
profit doubled between 2014 and technology aircraft, rather than a Airlines swapped an order for 100 Max
2015 and stayed at near record high massive switch to new-technology 9 aircraft originally placed in 2012 to a
levels in 2016, the number of new equipment. By doing so, airlines can similar number of Max 10 aircraft.
aircraft orders dropped from about benefit from the highly competitive For the near future, it seems unlikely
3,500 in 2014 to about 2,350 in 2015 situation among aircraft lessors and that we will see major new product
to about 2,100 in 2016 (new orders operate low capital cost (or lease rate) launches, albeit Airbus and Boeing
for western-built jets, all commercial aircraft without paying a huge penalty are rumoured to be contemplating
operations including type-swaps). in the form of a massively higher fuel new aircraft versions, such as an
Over the first eight months of bill. A350-2000, a 777-10X, an all-new
2017, the trend in new ordering has As airlines generally expect middle-of-the-market aircraft, the
continued with about 800 orders a gradual increase in fuel cost, 797 and a stretched and re-winged
versus just over 1,000 over the same the market has not seen massive A322. Effectively, none of these have
period in 2016. Both the Boeing 737 cancellations of the new-generation been confirmed. Most developments
and the Airbus A320 continue to aircraft; however, reportedly, aircraft that were announced focused on
be the most popular types by far. lessors are not able to generate range increases and high-density
Airbus sold about 180 new engine significant lease-rate premiums for interiors, by applying slimline seats,
options (Neo) and 90 current engine the new-technology aircraft compared more compact galleys and lavatories
option (Ceo) aircraft but there was with the older aircraft. and reconfigured emergency exits.
a significant number of type swaps After having fluctuated between Examples of this trend include the 737
included in this number. Boeing sold about $2.8 and $3 in 2013-14, jet Max 8-200 and the A321-200NX.
about 250 Max aircraft and about fuel (US Gulf Coast, FOB) reached a One thing is clear: any airline or
60 next generation (NG) aircraft but low in January 2016 at just over $0.8 leasing company looking to finance
booked additional commitments for per gallon. Subsequently, the price its fleet purchases today has ample
the new Max 10 during the Paris air showed a generally upward tend to choice from a range of funding
show, that later during the year may be fluctuate between about $1.5 and sources. Both debt funding, as well
converted to official orders. $1.55 in August 2017. as equity, is abundantly available at
Embraer has seen a limited order Apart from the price of jet fuel, it historically low cost and offered by a
volume during 2017, fairly evenly split seems the new order volume is held broad range of lenders and investors
between the current E-Jets and the back by the record backlog already from around the world. The only
new E2. After a successful 2016, order on order and the resulting significant traditional sources of funding that
volumes for the Bombardier CSeries lead times for the delivery of the have not been available for almost
collapsed again and Mitsubishi’s more popular jet types. Overall, the two years has been export finance for
MRJ has not had much sales success backlog for western-built commercial Airbus and Boeing products.
10 Airfinance Annual • 2017/2018
Industry review and outlook: dvb
Both the Export-Import Bank of
the US (Ex-Im) and the European IATA passenger market data
export credit agencies (ECAs) had
% %
their problems. While Ex-Im’s charter
was reauthorised for five years at the 20 82
end of 2015, the US Senate did not 15
14.9
79.7 79.8
80.5
80.5
80
nominate three new board members 10
8.9 6.9 8.0 8.3 8.0
9.5 78.4
79.3
6.6
for Ex-Im, essentially taking away the 78.6 6.3 7.5 5.3 5.7 6.0 6.5 6.3
78
5 2.8 1.7 2.4
bank’s ability to approve big ticket $10 1.0 76.1
0 76
million-plus transactions. US President 76.0
77.0 76.0 -1.2 -1.4
Trump in August 2017 nominated -5 74.9 -3.9
-2.5
74
73.5
former Congressman Scott Garrett -10 -8.8
to lead the bank, but some fear that -15 -13.7
-11.7 72
– as one of Ex-Im’s fiercest critics -20 70
– the appointment of Garrett is an 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
intentional act of sabotage. The issue Source: IATA RPK growth Pax. yield PLF
could come to a head this autumn if
Senate Republicans move forward
with a hearing and confirmation votes down to a low of 7% last year. This Air transport market – first half
for Garrett. Some of the leading is probably partly a result of the of 2017
groups opposed to Ex-Im are warning 2011 Aircraft Sector Understanding The good times for the global air
the Senate Banking Committee that increased the cost of export transport market continued during the
about the consequences of failing to financing for most borrowers and first half of 2017, maintaining a very
advance the nomination. Reportedly, made commercial funding more similar growth rate to 2016 despite
at least three Senate Republicans – attractive. Given the political situation political uncertainties in some of the
the number it would take to block his in the US, it is unlikely that Boeing’s biggest markets. According to Iata,
confirmation if Democrats uniformly 2017 forecast – assuming that US total RPKs increased by 7.4% year on
were to oppose him – have indicated and European ECAs will come back year for the full-year 2016, practically
they are on the fence. online – of a 10% share for the export matching the 7.5% increase in capacity
In Europe, the problems are of credit agencies will be achievable. (available seat kilometres, or ASKs)
an entirely different nature. In April As an alternative to export credit, and, in the first months of 2017,
2016, the export credit agencies of Boeing, together with Marsh & passenger growth has accelerated to
the United Kingdom (UKEF), France McLennan and Aircraft Finance 7.9% year on year, the fastest growth
(Coface) and Germany (Euler Hermes) Consortium (AFIC), developed the in the first half of a year since 2005.
halted all guarantees and export Aircraft Finance Insurance Product. This is even more positive when
support for Airbus aircraft. Reportedly AFIC is a syndicate of insurance taking into account ASKs growth was
inaccuracies in applications for export companies providing a default or 6.1%, meaning demand growth has
credit financing relating to information non-payment insurance for banks outstripped capacity growth, leading
provided in respect to consultants and and capital market investors that are to record load factor levels at 80.7%
other third parties were the reason for funding new aircraft purchases from for the first half of 2017.
this suspension of support. In June Boeing. The premiums as well as the International traffic – representing
2017, the chief executive of Airbus, advance rates are inspired by the 63.7% of total traffic – grew by a
Tom Enders, was reported to be terms set forth in the 2011 Aircraft remarkable 8.1% (2016: 6.2%), while
expecting prolonged investigations Sector Understanding. The structure domestic traffic – representing 36.3%
by government antifraud authorities has already been used to refinance a of total traffic – grew 7.4% (2016:
before various probes are completed. new 747-8. 5.6%). The 2017 numbers are above
Enders expected these investigations While AFIC reportedly has no the 10-year average rates (5.5%), and
“...to last for some time, probably immediate plans to support Airbus are sustained by a positive global
years…” He said Airbus was facing aircraft, there seems to be no economic development and also by
“serious compliance issues” but, in the specific reason why the European lower fares. Having said that, there
meantime, the company reportedly manufacturer could not pursue a is a slowing trend in RPKs growth,
has stepped up efforts to enhance similar solution. driven mainly by two factors: business
compliance procedures. As another export credit innovation, confidence is now keeping stable
Probably the timing of these two LOT Polish Airlines has taken two 787s after several months growing, and
incidents could not have been better. on finance leases with guarantees average fares seem to have bottomed
Boeing reported that the percentage from UK Export Finance. These aircraft out and, in fact, some data show that
of deliveries supported by Ex-Im are the first 787s to be guaranteed by yields have started a modest growth,
reached 30% during the global UKEF under a programme in which the reversing the downwards dominating
financial crisis between 2009 and agency offers support for (Rolls-Royce- trend since 2013-14.
2012. In the period 2012 to 2016, powered) aircraft with a significant UK Unlike in previous years when the
this percentage had steadily come content. Middle East carriers were leading
www.airfinancejournal.com 11Industry review and outlook: dvb
traffic growth, most of this growth in in first half of 2017, African carriers record load factor levels at 83.1% in
2017 comes from airlines in Asia- saw their traffic increase by 8.1%, the first half of 2017.
Pacific and Europe (representing outperforming a 4.2% increase in While much smaller overall,
32.8% and 26.5%, respectively, of ASKs capacity. Nevertheless, African compared with the international traffic
world RPKs in 2016), with a 10.6% and carriers still show the lowest figures flows, domestic markets often reveal
8.8% each of RPKs increase. This is of all regions in terms of load factor, interesting developments and, during
against an ASKs growth of only 7.9% with a mere 68.6% (although an the first half of 2017, showed certainly
in Asia-Pacific and 6.3% in Europe, increase of 2.5 percentage points more extremes. Except the domestic
which, therefore, resulted in slightly compared with earlier in the year). US market (15% of world traffic) and
higher load factors in both areas (plus The third highest international RPKs China (8.7%), the other domestic
two percentage points in Asia-Pacific growth percentage was recorded markets for which Iata releases
and plus 1.9 percentage points in by airlines in the large Asia-Pacific monthly figures (Australia, Brazil, India,
Europe). region, which is responsible for 32.8% Japan and Russia) represent between
The other side of the coin is the of world traffic. Asia-Pacific carriers’ 1% and 2% of world traffic each. India
Middle East, which at a 7.5% increase international traffic grew by 9.1% and surged to the top of the domestic
in ASKs has grown at a slower pace of overall by 10.6%, as mentioned earlier. markets in 2015 and 2016, and while
6.9% in RPKs, therefore dropping load ASKs production increased modestly growth slowed a bit compared with
factors to 73.4% (-0.4 percentage with 7.9%. previous year, this growth continued
points compared with the previous European international traffic in 2017 with a very significant RPKs
year). Despite the political turmoil in increased by 8.8% (RPKs) and ASKs volume growth of 18.6%, ahead of a
the region and the shift in strategy at production by 6%. European carriers 15.5% production increase. The load
Etihad, the big three still took delivery achieved the second-highest load factor in the Indian domestic market
of 19 passenger widebodies in the factor, 82.4%. This is despite of the beat the previous year’s record of
first half of 2017 (including six 777s, six negative impact of terrorist events 84.4%, reaching an impressive 85.9%
A380s, four 787s and two A350s). in Europe, which, according to Iata, in the first half of 2017, which (at least
In the first half of 2017, the region represented a loss of traffic equivalent for now) continues to support the
showing the highest growth rates in to 1.6% of international traffic or huge fleet purchases of Indian carriers
international traffic is Latin America, about $2.5 billion in revenues in in recent years.
with 9.4% (compared with 7.7% in the 2016. Nevertheless, traffic levels The recent developments in
first half of 2016). With a share of 5.2% rebounded, showing once more how government economic policy in
of world RPKs, it is still behind the air passenger demand is resilient China did not hinder the domestic air
Middle East (9.6%), but it is showing an to shock events such as terrorism, transport market, where demand grew
overall growth of 6.6% on RPKs versus the Sars pandemic, or the Icelandic also above production, 15.2% and
a 4.2% growth on ASKs, delivering the volcanic ash cloud. 12.5%, respectively, delivering very
third-highest load factor at 81.4%. North American carriers – high load factors at 84.4%. Russia also
Interestingly, international RPKs representing 23.7% of world traffic saw a significant surge in domestic
within South America have grown – continue maintaining a profitability demand, with a 13.4% RPKs growth,
by almost 13%, which shows a focus, and the region has been once based on a 13.8% increase in ASKs.
slight improvement in some of the again the most profitable, while being Despite this growth, Russia had the
economies in the region (Argentina the one with the lowest growth rates second-lowest load factors of all
and Brazil) and despite the very in both RPKs (plus 3.8%) and ASKs domestic markets measured, reaching
negative development of Venezuela. (plus 3.4%), delivering once again 77.2%. Whether this is the underlying
It is also worth noting the incoming
low-cost carrier (LCC) presence in
one of the last countries to adapt the Air freight growth vs. global new export orders
model, Argentina, which will possibly
stimulate further traffic growth by % y-o-y
adding capacity and also lower fares.
40
As in 2016, Africa had very high 30
rates in terms of international traffic 20
30
growth, with 8.2% growth in RPKs, but 20
admittedly from a low base because 10 10
Africa represented only a 2.2% share 0
0
in world RPKs in 2016 and there are -10
strong differences within the region – -10 -20
with Nigeria seeing improvements in -30
business confidence on the positive -20
-40
side, and South Africa’s economy -50
-30
entering into recession in early 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
2017. If we take into account both Growth in industry FTKs Global PMI new export orders component Implied PMI series if the index remains flat
(LHS) (RHS, adv. 2 months) at its July 2017 level in the months ahead
international and domestic routes,
Source: IATA Economics, IATA Monthly Statistics, Markit
Sources: IATA Economics, IATA Monthly Statistics, Markit
12 Airfinance Annual • 2017/2018Industry review and outlook: dvb
impact of Abenomics or the factor, the lowest of all measured the case over the past few years, load
increased presence of LCCs, Japan’s domestic markets. factors in the domestic US market
domestic market grew way above its The big US domestic market have maintained its mark, reaching
production, reaching a 6.5% RPKs showed a reasonable traffic increase the 84.5% this year. The relatively
increase on only 1.6% ASKs growth, of 3.4%, very much in line with the small Australian domestic market
although with a meagre 68.9% load 3.3% ASKs expansion. As it has been went almost down under with a 0.3%
RPKs growth on a 2.3% decrease in
production In Brazil, the political crisis
seems to affect the slight economic
Global production and global trade (YoY chnages in %)
recovery, but RPKs grew by 1% on
% y-o-y a slight decrease in ASKs of -0.1%,
meaning load factors improved to
25%
80.2%.
20%
Moving on from the passenger
15%
market to the air freight market (air
10%
cargo officially includes airfreight
5%
0%
and expresss/mail, but we use
-5%
the terms interchangeably), it is
-10% important to realise the global
-15% fleet of maindeck commercial jet
-20% freighters (including combis and
-25% convertibles) is about one-eighth
of the size of the passenger fleet.
Source: CPB Netherlands – World Trade Monitor World trade Production Over the past couple of years, the
airfreight market has experienced
some rough turbulence and it did not
experience the good times of the
IATA cargo market data passenger market. Nevertheless, in
% the second half of 2016, global air
cargo volumes, expressed in freight
25 tonne-kilometres (FTKs) started to
19.4
20 show some improvement. This trend
14.4
15
11.6 has accelerated in the first half of
10
6.3 7.0 2017, when FTKs grew by 10.4%
4.4 4.7 5.6 5.0
5
3.9
2.3 2.2
3.8
in annual terms, on a production
0.5 0.4 0.8 0.6
0 increase of only 3.6%. In 2017,
-0.7 -0.9
-5
-4.2
-2.0 the airfreight operators benefited
-4.9
-10
-8.8
from a stronger global economic
-15 -12.5 situation, which generated higher
-15.2
-20 -18.0 trade demand despite some political
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
issues pointing at an increase in
Source: IATA FTK growth Cargo yield protectionism.
Continuing with the positive
tone, freight demand improved
Traffic growth and capacity on order in all regions (unlike in previous
years), and it was mainly driven by
% % Asia-Pacific and Europe, with solid
development also in North America
20% 100%
18% 87% 90%
and the Middle East. Overall, load
16% 80%
factors have improved by about four
14% 70%
percentage points compared with
59% 59%
12%
10.4 52% 10.6 54% 60% 2016, being close to the highest level
10%
8.4 8.4 8.8 43% 50% in the past two-and-a-half years.
7.5 7.9
8% 7.0 6.9
7.5
6.7 7.0 6.9 7.4 7.0 40% Airfreight has outperformed
6.0
6%
4.4
30% wider world trade ratios, which is
3.8 3.7 3.7 4.0
4% 15% 20% probably a result of both a decline
2% 10%
in inventory-to-sales ratio and also a
0% 0%
Africa Asia Pacific Europe Latin America and Middle East North America Global higher market confidence. In fact, the
Caribbean
new export orders component of the
Traffic growth H1 2016 (y-o-y) Traffic growth H1 2017 (y-o-y) Production (ASK) H1 2017 Backlog as % Pax. fleet global purchasing managers’ index
Sources: IATA, Ascend
(PMI) is at an almost six-year high and
www.airfinancejournal.com 13Industry review and outlook: dvb
although in the past few months has
remained stable, it suggests that FTKs Airline net profit (post tax, in US$bn) by IATA region
growth in the third quarter 2017 will
continue to be robust and growth will US$ bn
ease a bit towards the end of the year, 40
and Iata forecasts that overall FTKs 35
31.3
will grow at 7.5% or more for the whole 30
of 2017. 25
The turnaround of air cargo is 20
remarkable. About a year ago, it 15
15.4
looked like the world had just entered 10 7.4 7.4
a phase of deglobalisation. Air
5
cargo operators were not the only 0.8 0.4
0
ones suffering. Maritime container -0.1
-5
carriers are confronted with the Africa Latin America Middle East Europe Asia/Pacific North America Global
same problem. Danish shipping
Net profit 2012 Net profit 2013 Net profit 2014 Net profit 2015 Net profit 2016 Net profit 2017 estimate
conglomerate AP Møller Mærsk at Source: IATA
the time voiced concerns over how a
potential shift in global policy in favour
of more protectionism threatened to
reduce global trade. Tariff barriers, Worldwide airline profitability
Brexit and the potential political shift
US$ bn
in the US were examples of this. Early
2016, growth of global production for 45
35.9
a while exceeded growth of global 35
34.8
31.4
trade – in other words, deglobalisation 25
was happening. In the meantime, 14.7 17.3
13.7
15 10.7
fortunately, things returned to normal 5.0
8.3 9.2
5
and in recent months global trade
has outpaced production again, as is -5
-5.6 -4.1 -4.6
clearly shown in the chart based on -15
World Trade Monitor data provided by -25
the Dutch Central Bureau of Statistics. -35
-26.1
During the first half of 2017, 10 new 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017F
widebody freighters were delivered Source: IATA "Economic Performance of the Airline Industry" (June 2017) Net airline profit
(five 767-300ERFs to FedEx, two
747-8Fs, two A330-200Fs and one
777-200 LRF), plus 21 passenger- capacity growth of 1.5%. airlines (as of September 2017, the
to-freighter cargo conversions (11 Africa and Latin America, by far the Middle East orderbook for passenger
767-300ERs mainly for Amazon’s smallest markets in terms of share jets stands at 87% of its current fleet
Prime Air, nine 757-200s and one (both below 3% of world share), size), and especially on widebodies,
747-400). During the same period experienced quite different evolutions. despite the decreasing demand
only 16 widebody freighters were Africa grew an impressive 25.9% trends and the political tensions
retired (mainly 757-200SFs but also FTKs on an 11.2% capacity growth. arising in the region.
four 747s, two MD11Fs and one A300). Nevertheless, it is still the region with Airlines can attract more passengers
The 20 converted narrowbody jet the lowest load factors by far, having by offering more capacity in the form
freighters are mainly 737-400s and achieved a 25.1% load factor after of more (direct) connections, as well
737-300s, but also one 737-700, and this significant growth. On the other as increasing frequency of service.
three MD80s. hand, Latin America remained more or The number of unique city-pair
In volume terms, Europe and Asia- less stable in terms of FTKs with 0.3% connections is expected to reach
Pacific carriers lead the way in the air growth, although capacity decreased more than 19,000 this year, almost
cargo market with double-digit growth, by -0.6% compared with last year. At double the connectivity by air 20
13.6% and 10.1% FTKs, respectively, the global level, load factor improved years ago, enabling the big increase
on a capacity growth of 5.4% and by 2.7 percentage points to 44.8%. in passenger numbers that we have
4.8%, thus improving load factors by Returning to the passenger market consistently seen in these years.
3.4 and 2.5 percentage points. North and looking at the relationship Likewise, another way of stimulating
American carriers came close with between traffic growth and capacity traffic is by lowering ticket prices.
9.3% growth in demand, achieved with expansion, the commercial jet Since 2013, this has happened on a
a tiny 1.5% increase in production. The orderbook stands at 54% of current global scale and, in 2016, fuel price
Middle East grew at a slightly lower fleet. Nevertheless, there is some reached levels not seen in more than
pace but still relevant 7.6% on a small concentration in the Middle East 10 years, resulting in a lower fuel
bill that allowed airlines to lower the
14 Airfinance Annual • 2017/2018Industry review and outlook: dvb
(fuel price). Nevertheless, 2017 results
IATA estimates - net post tax profit H1 2016 and H1 2017 will still be positive and above cost of
capital (WACC), with IATA forecasting
US$ mn $31.4 billion net profit for the year.
Over 2016, commercial airlines
10000
booked (again) a record profit, with an
8000
operating margin of 8.8% and a net
profit of $34.8 billion (compared with
6000 $35.3 billion and 8.5% operating profit
4000
in 2015). As in 2015, the net result by
far exceeded anything that the industry
2000 had seen before. This means that 2016
delivered a 9.9% return on invested
0
capital, delivering for the second time
-2000 in aviation history a percentage that
North America 2016 North America 2017 Asia/Pacific 2016 Asia/Pacific 2017 Europe 2016 Europe 2017 2017
Sample total 2016 Sample total 2016
exceeds the weighted cost of capital
Source: IATA
Q1 Q2 (this happened also in 2015). Clearly,
the unexpected fall in fuel cost was the
main reason for this profit boom but,
in addition, a robust growth in demand
Order volume commercial jets for air transport, a more bottom-line
focused airline policy in general and
Number
certainly the consolidation of the
4000 North American airlines were other
3,485 3,505
3500 contributing factors.
3000
Speaking of consolidation, it seems
2,406
2,548
2,350
that 2017 might be the year when
2500 2,305
2,108 consolidation in Europe might help the
2000
1,500 (extrapol.)
airlines in the region boost their profit
1,416 1,393
1500 1,331
1,155 margins closer to those of their North
1000
652
793 American counterparts. With both
500 Alitalia and Air Berlin in the process
0
of being sold, together with the
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 shareholder tie-up among some other
carriers (Virgin Atlantic with Delta, Air
Sources: Flightglobal, Ascend Orders 1 Jan–31 Aug Orders 1 Jan–31 Dec
France-KLM and China Southern), but
also a continuing trend of consolidation
prices significantly, resulting in an below those of 2016 as it has been among smaller, regional carriers, it
8.8% lower passenger yield. However, shown in both the first and second is safe to expect a quite different
fuel prices showing upward quarters. Yields have started to show outlook in the mid-term where less-
tendencies around mid-2017, together a modest upward trend, but unit costs efficient airlines either disappear or are
with rising labour costs, might mean are growing more because of both acquired and start generating better
that traffic stimulation by lower ticket internal (labour) and external factors returns to their investors.
prices may not be a viable option for
much longer. As it is to be expected, Orders placed all civil operators (1 Jan–1 Sep 2017)
airlines are not able to translate fuel Western single aisles New Swaps Western regional jets New
737 MAX-10 53 214* E175-E1 13
cost increases in higher average fares 737 MAX 8
737MAX-8-200
42
10
E190-E1 5
E190-E2 3
immediately, so airline profitability 737 MAX-9
737 MAX 7
8
5
E195-E1
E195-E2
1
12
in 2017, while still positive, is slightly 737 MAX BBJ
738 MAX TBD
2
135
ERJ135 Legacy
CRJ900NG
3
10
below that in 2016. 737-800
737-900ER
47
10
47
Western turboprops New
On the air cargo markets, demand is 737 BBJ
A319CEO
2
7 ATR72-600 34
A320CEO 31 5 Dash 8 - Q400 14
performing solidly, with growth since A321CEO 47 1 Lockheed LM-100J 5
A320NEO 111 15 DHC-6 Twin Otter 3
the second half of 2016. This uptick A321NEO 14 39 CASA C-295 12
68
524 60
in demand is also helping increase Western twin aisles New Eastern aircraft New
yields in the first part of 2017, which 747-8F
747-8I
2
1
Superjet 100
L-410 Turbolet
10
3
therefore help to improve profit 777-200LRF
777-300ER
1
16
13
777 8X/9X 20
margins for cargo operators. 787-8 7 Grand total all 874
787-9 56
Even if we are only halfway through 787-10 19
A330-200 6
the year, it is reasonable to assume A350-900XWB
A350-1000XWB
33
1
that the final financial results for * Boeing "variant changes" not reported for all new transactions
162
the global airlines in 2017 will be Source: Flightglobal
16 Airfinance Annual • 2017/2018Industry review and outlook: dvb
Equipment market
Commercial jets – backlog as per 1 Sep 2017 After several years of increasing
(western built, all civil operators)
sales volumes, a commercial jet
Family Versions/variants Total Family Versions/variants Total order slow down started in 2015. This
E170 E175 E190 E195 A319 A320 A321 downward trend continued into 2016,
E-Jets E1
E-Jets E2
1 52
100
58
86
8
102
119
288
A320NEO CFM
A320NEO ?
31
18
1281
1462
560
260
1,872
1,740
as well as over the first half of 2017.
MAX7 MAX8
MAX8-2
00 MAX9 MAX10 MAX? A320NEO (ALL) 49 3552 1418 5,019
According to the latest Flightglobal
A330-20 A330-20 A330-30
B737MAX 66 2071 210
B737-70 B737-80 B737-90
122 267 1093 3,829 0 0F 0 figures, western-built jet sales (all civil
0 0 0ER A330CEO 25
A330-80
0
4
A330-90
0
72 101
operations, including type swaps)
B737NG 4 520 73 597
B747-8F B747-8I A330NEO 6 204 210
collapsed by about 17% between 2015
A350-80 A350-90 A350-10
B747-8I/F 17 1 18 0 0 00 and 2016. At the time of writing, early
B767-300ERF 68
B777-20 B777-30
68 A350 8 521 212 741
September 2017 sales had dropped
A380 102 102
0LRF 0ER
CRJ700 CRJ900 CRJ1000
another 32% compared with the first
B777 CURRENT 31 68 99
B777-8X B777-9X
B777--?
X
CRJ 10 24 14 48 eight months of 2016.
B777X 53 243 30 326
CS100 CS300
A simple mechanical extrapolation
Cseries 110 232 342
B787-8 B787-9 B787-10
ERJ-135 17 17
of the sales total (as reflected in our
B787 83 438 168 689
A319 A320 A321
MRJ90 233 233 database) of 793 as of 1 September
Grand total all 13,337
A320CEO 27 231 233 491 to a full-year level would roughly
A320NEO PW
Sources: Flightglobal, Ascend
809 598 1,407
result in less than a 1,500 sales total
over the full-year 2017. Obviously,
a few mega-orders can change this
Nonetheless, in 2017 we have seen million. On a per passenger basis, the number dramatically and, in some
also other rumbling factors – ie, a result of North America is even more cases, reported orders – such as the
growing number of unions requesting spectacular. With a realised net profit of many swaps of 737 Max 9s to Max
better conditions (some of which $16.32, this continent is more than two 10s (United Airlines, Spicejet, Copa
were waived by employees in the times as profitable as the joint runner- Airlines, TUI, etc) – are registered
restructuring years some time ago, up, Europe, with $6.94 per passenger. as “variant changes” and are not
so now the airlines are delivering Based on a sample of 24 airlines, included as new orders in the graph.
consistent profits they are claiming Iata has published some very early In addition, a letter of intent (LoI)
those back) and disrupting the airlines’ results for 2017. While first-quarter by Lion Air for 50 Max 10s was not
revenue generation by a series of overall profitability was down from officially registered as a confirmed
strikes, particularly at flight crew level. 9.6% to 4.8%, the second-quarter order yet.
In North America, airlines have trend was inverted and second According to Flightglobal data as
had to agree to significant pay rises, quarter 2017 delivered a 13.2% of early September, over the first
partly responding to pilot union aims net margin versus 12.7% for the eight months of 2017, a total of 874
to restore salaries to pre-Chapter 11 same period in 2016, Overall, IATA commercial aircraft were sold, of
levels. In Europe, several of the larger forecasts 2017 net margin to be at which 13 were for eastern aircraft
airlines have been or still are in the 4.2% (compared with 4.9% in 2016). (including 10 Sukhoi Superjet 100s)
process of negotiating agreements. Of course, the sample is too small to and 68 were for western turboprops.
This may cause a significant increase draw any conclusions, but it looks like The remaining 793 aircraft are
in the airlines’ cost but with the market airline profitability this year will be western-built jets. This number
consolidation we have seen and its lower than both 2015 and 2016. included 60 so-called type swaps,
effects on the revenue side, it is still
too early to assume these cost
increases will translate into negative Commercial aircraft orders 2017 y-t-d
(All civil operators, as of 1 Sep, including A320 family swaps, excluding 737 variant changes)
results.
As in the previous year, the global Numbers
results over 2016 could mainly be
contributed to the North American 300
airlines. IATA estimates that $16.5 250
255
billion or 47% of the net airline profit
was generated by airlines from this 200 179
continent. Europe generated about
150
24% of the global result and Asia-
Pacific a similar level at 23% with $8.6 100 91
billion and $8.1 billion, respectively. 59 56
50 34 34
The (still) expanding Middle East 20 19 19 16 15 13 14 15
7 5
carriers generated $1.1 billion, while 0
1
Latin American carriers scored an
improved $600 million net profit and
Sources: Flightglobal, Ascend
Africa one more time ended in the red
with a consolidated loss of $100
www.airfinancejournal.com 17Industry review and outlook: dvb
1200XWB, nor an A322, a redesigned
Cumulative orders single aisle jets winglet equipped A380 Plus, a 777-
Including type swaps (1=year of 1st order; recorded on date of original order) 10X or a CS500 were launched.
Number
The much-debated Boeing 797 or
middle-of-the-market jet also remains
6000 a longer-term project. The dilemma
5000
seems to be that, on the one hand,
this aircraft should be Boeing’s
4000 successor to the 757 and an answer
to the success of the A321neo; on
3000
the other hand, an aircraft positioned
2000 in the market niche below the 787-
8, where once the not extremely
1000
successful 767-200 and A310 could
0
be found. At the Paris air show, a 797
0 1 2 3 4 5 6 7 8
impression was shown to the press.
737MAX Family 737MAX-7 737MAX-8/-8-200 737MAX-9 737MAX-10
737MAX TBD A320NEO Family A319NEO A320NEO A321NEO Reportedly, the small twin-aisle jet
Source: Ascend
will be suitable to serve between
congested airports on US trans-
continental routes, but should also
changes in the versions that were and four will get wider escape slides, be able to operate on transatlantic
ordered within the A320 family. Also, door two will be deleted and door routes of up to 5,200 nautical miles,
within the 737 family, version changes three will be moved aft by four frames or just over 10 hours. Capacity will be
took place, especially in favour of the and as an option can be plugged. between 220 and 270 seats.
newly launched Max 10, but here not Over-wing exit one will be deactivated In terms of sales successes, while
all changes are reported. Out of the but as an option can be activated, last year the Bombardier CSeries
remaining 793 new orders, western and the reverse is applicable to still booked a decent number of new
regional jets took 47, single aisles 584 over-wing exit two. All these options orders, during 2017 to date significant
and twin aisles 162. Per aircraft type, are intended to optimise the door order volumes could only be added to
the split-up is reflected in the table. configuration for different cabin the A320neo and A320ceo and 737
While the already full orderbook, layouts. As extremes in a generic 164- Max backlogs.
as well as the low fuel price, can be seat interior, doors one and four plus Commercial jet orders during the
used to explain the softening of the over-wing exit one are activated. In a first eight months of 2017 were 35%
new equipment market, the fact that high-density 240-seat configuration, from operating lessors and 63% from
no really new aircraft types were all doors and exits are activated. the airlines. The biggest confirmed
announced during 2016 and 2017 Two new aircraft versions entered order this year (as of 1 September)
to date, does not help to stimulate into service in 2017. The first A321- was placed by GECAS for 103
the market either. Generally, new 200N went to Virgin America in April A320/321neo aircraft. Second came
aircraft introductions significantly and the first 737 Max 8 to Batik Air China Aircraft Leasing, which ordered
stimulate sales volumes. In a way, Malaysia in May. Rumours about new 50 737 Max aircraft.
this is illustrated by the impact of versions of existing aircraft types The biggest airline order – pending
the launch of the new 737 Max 10 at persist, but neither a stretched A350- the confirmation of a Lion Air order
the 2017 Paris air show. The Max 10
achieved a respectable volume of
267 orders plus 112 LoI/options shortly Cumulative orders regional jets
Including type swaps (1=year of 1st order; recorded on date of original order)
after launch. In this case, the majority
of orders so far were mainly the result Number
of airlines swapping their existing Max
400
9s into Max 10 orders, but the market
– both airlines and lessors – were 350
clearly interested in the new version. 300
Airbus did not launch a new version 250
of the A320 family but announced 200
the new nomenclature to identify
150
the Neo version of the A320 family.
100
The A320neo will be called A320N,
the A321neo will become the A321- 50
200N and the A321-200NX will be 0
0 1 2 3 4 5 6 7 8 9 10 11 12 13
the new designation for an A321neo
with the Airbus Cabin Flex (ACF) door Source: Ascend
MRJ Cseries E-Jets E2 E175E2 E190E2 E195E2 Superjet 100
configuration. Under ACF, doors one
18 Airfinance Annual • 2017/2018Industry review and outlook: dvb
for 50 737 Max aircraft – came from engines is high because of technical significant number of version swaps
Delta Air Lines, placing an order for 40 problems plaguing in-service aircraft, was reported. Unfortunately, there is
A321s. The United order for 100 737 such as rotor bow, prematurely no clarity about 1,093 737 Max orders
Max 10s was not a new order but just deteriorating combustor liners and for which the exact version remains
a variant change. Maybe the most carbon seals and, in some cases, undecided or unannounced.
remarkable order came from lessor in-flight shut downs. Pratt indicated With a rather unimpressive backlog
AerCap, ordering no less than 30 that later in 2017, new – redesigned for the regional jets, the A350 and
787 Dreamliners next to a handful – parts would be introduced to solve 787 twin-aisle families take third
of A320s and two E-Jets. Easyjet some of these issues. and fourth position in the current
ordered 30 A321-200Ns. Interestingly, some airlines backlog chart, despite a softening
Aviation Capital Group added 20 announced that because of the of the twin-aisle market. The A350-
737 Max aircraft to its orderbook, issues around the new engines, 900XWB features an orderbook of
next to three A321s. Air Lease (ALC) demand for the current-generation 521 aircraft, supplemented by 212
Corp spread its risk by ordering both 737NG and A320ceo seems to have orders for the stretched -1000XWB
12 Max aircraft and 13 Neos, plus two received a positive impulse. Wizz and – on paper – eight orders for the
787-9s. Another rare order for big Air, as an example, announced it A350-800XWB. The latter is unlikely
twin aisles came from China Southern had decided to add more A321ceos to be produced and it seems the
Airlines, which committed to buy 20 to its fleet instead of Neos, awaiting type will be cancelled as soon as an
A350-900s. Ethiopian committed to the PW1100G to reach operational agreement between Airbus and its
10 aircraft of the same type, while maturity. The backlog for the NG is still sole remaining customer, Asiana, has
Canadian Westjet ordered 10 787s. a significant 597 and, for the Ceo, still been reached.
BOC Aviation, JP Lease Products & 491, indicating the Airbus product is a Within the Dreamliner family, the
Services and Ryanair ordered 10 737 little further in the generation change -9 is clearly the most popular version
Max aircraft each. Apart from these, process. and with a very limited order inflow
the remaining orders were all in The share of the 737 Max family in over the past few years for the
single-digit volumes. the single-aisle backlog seems to be shorter -8, the -9 is likely to become
Overall, it is a good year so far for falling behind the A320neo, although the standard version going forward,
the 737 Max and A320neo families admittedly the 737 Max was launched similar to the -300ER as standard
and, in the context of the relatively some months after its European version of the old 767 family. The
soft twin-aisle market, for the 787-9. competitor. Splitting the combined double-stretched 787-10 is likely
Looking beyond the most recent A320neo/737 Max backlog gives the to become a bigger sales success
(lack of) sales successes, how are the Airbus family a 57% share, versus 43% compared with its equivalent in the
various programmes progressing? The for the Boeing range. 767 family, the 767-400ER, but with a
table, which includes a few corporate Within the Boeing 737 Max family, sales volume of only 168, there is still
jet versions as well, shows the current the Max 8 is clearly the most popular some ground to cover.
backlog by aircraft family and main version. Its backlog of 2,071 (2,281 In the regional jet market,
versions or variants. With 5,019 including the Max 8-200) dwarfs the Bombardier could not maintain the
orders outstanding, the A320neo backlogs of the Max 7, the Max 9, as sales volume of 2016. With orders
family clearly remains the top seller well as the new Max 10. Effectively, from Air Canada and Delta Air Lines, it
in the market. Within this family, the the launch of the Max 10 has diluted looked like 2016 was the breakthrough
A320neo is the most popular version, the position of the Max 9 because a year for the Canadian product. So far,
followed by the A321neo. The CFM
LEAP-powered A320/A321neos are in
the lead over the Pratt & Whitney GTF
version, but a large number of orders Cumulative orders (very) large twin aisle jets
Including type swaps (1=year of 1st order; recorded on date of original order)
has an undecided engine selection.
Obviously, the A320neo engines Number
have been a hot topic in the past
few months. Production volumes 350
of, in particular, the Pratt & Whitney 300
PW1100G geared turbofan is falling
250
behind plan and the entry into service
has been plagued by a number of 200
technical problems. While Airbus is 150
planning to ramp up production to 60
100
a month in two years, reportedly over
the first seven months of 2017, only 68 50
A320neos were delivered (of which 0
48 were LEAP-powered). 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Apart from the slower production Source: Ascend 777X 777-8X 777-9X 747-8 A380
of the Pratt engine, demand for spare
www.airfinancejournal.com 19Industry review and outlook: dvb
there have not been any new orders United’s contract with the Air Line order for this aircraft type was placed
announced during 2017. However, Pilots Association (Alpa) limits it to 12 years ago and sales volume has
compared with other regional jets, 255 large regional aircraft (up to 76 reached about only 170 aircraft during
the CSeries is not lagging behind seats and MTOW of 86.000lb). Delta that entire period. Within the Russian
and, in terms of order volume, is in Air Lines will follow in December 2019 civil aircraft-manufacturing world, a
the lead with a backlog of 342 aircraft and American Airlines at the end of major reorganisation is taking place
and some very “interesting” sales 2020. and United Aircraft is to combine MS-
campaigns, reportedly including Air The same issue is giving Mitsubishi 21 airframe builder Irkut with Sukhoi
Asia. Aircraft Corp headaches, because its Civil Aircraft, the producer of the
The competing – equally PW1000- MRJ90 is in the same situation. The Superjet.
G-geared turbofan powered – MRJ90 can be configured with up to Italian aerospace firm Leonardo
Embraer E-Jet E2 family was launched 90 seats, although in a two-class disclosed earlier this year that it
years after the CSeries and seems to configuration to meet the 76-seat had sold its share in Sukhoi Civil
accumulate orders at a slightly faster scope clause restriction. It will be more Aircraft and SuperJet International to
pace. The total backlog of 288 aircraft difficult to meet the MTOW restriction. United Aircraft. Under a new Russian
is fairly evenly spread over the three The MRJ90’s MTOW ranges from government proposal, Russian airlines
versions – E175-E2, E190-E2 and 87,300lbs for the MRJ90STD to will need to have a proportion of
E195-E2. The E2’s predecessors, the 90,300lbs for the MRJ90ER and just domestically produced aircraft in their
original GE CF34-powered E-Jets E1, over 94,000lbs for the MRJ90LR. fleet in order to obtain an operating
still enjoy a backlog of 119 aircraft. The Restricting the MTOW to 86,000lbs certificate, which may be positive
E175-E1 has proven especially to be would result in a clear range shortfall news for both the MS-21 and the
very popular among the US regional with passengers on board. Superjet. This change to the federal
airlines. The MRJ90’s backlog has been aviation regulation is intended to
Unfortunately for Embraer, the stuck at 233 since last year, because stimulate the use of new Russian-built
E175-E2 is not scope compliant. no new orders have been announced aircraft.
Under current scope clauses, the E2’s in recent months. Taking into account In more hardware-related news,
maximum take-off weight (MTOW) is the time since the launch of the Sukhoi completed tests of a new wing
slightly too high. Scope clauses limit programme, the MRJ is losing ground structure capable of taking winglets.
the number and capacity as well as against the CSeries as well as the Sukhoi says installation of what it
the MTOW of aircraft that are allowed E-Jet E2. The first MRJ delivery to calls the “saber winglet” will boost
to be operated by commuter airlines All Nippon Airways is still scheduled the Superjet’s fuel efficiency and
on contracts with the US major for mid-2020, and a recent flameout of increase its range “not less than 3%”.
operators. These scope clauses are the PW1200G engine during flight Take-off and landing performance will
negotiated between the US major testing near Moses Lake in the US was also be improved. The winglets will
airlines and the pilot unions. Embraer another unexpected set back for the be optional on new aircraft and not a
hopes that during the next contract programme, but so far this seems to retrofit solution.
negotiations, scope clauses will be have no consequences for the entry- Moving back to the larger twin-aisle
more liberal, but initial responses into-service date. aircraft, the A330ceo’s backlog is
from the unions indicate this may be In July, Russian airline Aeroflot still about 100 aircraft. About 75% of
a tough fight. United will be the next ordered 10 more of the Russian/Italian this is for the A330-300 high gross
US major to negotiate pilot contracts UAC Sukhoi Superjet SSJ100. The first weight (HGW) version, but Iberia
in early 2019. The scope clause in and ACMI operator HiFly ordered
a few more -200s as well this year.
Despite about 50 aircraft in storage
Cumulative orders medium/large twin aisle jets and about 37 retirements (mainly
Including type swaps (1=year of 1st order; recorded on date of original order)
non-HGW -300s), the A330ceo still
Number is a workhorse for many operators.
Some airlines expressed the desire
1400
to acquire additional used A330ceos
1200 to supplement their fleet. Looking at
1000
prevailing market values and the low
fuel cost, the A330ceo is an excellent
800
entry-level twin aisle, with the -200
600 and -300HGW variants showing
400
decent long-range performance.
Airbus launched the A330neo
200
to plug the gap left behind by the
0 cancelled A350-800XWB. At that
0 1 2 3 4 5 6 7 8 9 10 11 12 13
787 787-8 787-9 787-10 A350XWB
time, fuel costs were still relatively
Source: Ascend A350-800XWB A350-900XWB A350-1000XWB A330NEO high and the fuel cost savings offered
by the A330neo looked interesting,
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