The Twin-Aisle Battle

IN THE BATTLE FOR SUPREMACY TO SUPPLY THE LION'S SHARE OF twin-aisle aircraft, a market estimated at 7,925 planes over the next 20 years, 2010 will go down as a pivotal year that will set strategies and fortunes for decades to come. Overall, Airbus forecasts that the global market over the period is for 25,000 new passenger and freighter aircraft valued at $3.1 trillion made up of 1,700 very large types, 6,250 twin-aisles and almost 17,000 single-aisles.

The airline industry is watching and waiting for answers to a multitude of questions: Will Airbus solve the A380's production and nettlesome reliability issues? Will Boeing's 787 perform as promised and are its nightmare development problems behind it? Will its 747-8 meet its brochure performance? And how will it update its 777 to meet the promise of the A350-1000?

The stakes are sky high and the complexity of the aircraft being built is not for the fainthearted. Two giants are slugging it out with no fewer than three twin-aisle designs each. New factors in the mix are the financing ability of airlines in the post-economic-crisis environment overlaid with the emergence of long-haul low-cost carriers and the disturbing decline in high-yield travel that is driving airlines to reevaluate their product offerings and cabin layouts.

Quite possibly the biggest gamble belongs to Boeing, which has to decide the future strategy of its all-conquering 777, which essentially has eliminated the A340 from the market as it did the MD-11 more than a decade ago. The company has sold 1,117 777s and delivered 840, almost double the combined sales of the A340 series (378) and MD-11 (200). Production rate of the 777 is currently five a month, down from a peak of around seven, while the A340 backlog is just four aircraft over the next two years.

One airline that is very clear as to what it requires is Emirates, which has the world's largest fleet of 777s with more than 80 in service. It wants an all-new 777 by 2018. "Our first [and oldest] 777 will leave the fleet in 2017," President Tim Clark explains to ATW. "The 777-300ER is a stellar performer and passengers love it. By taking weight out we are even getting it to fly Dubai-San Francisco (16 hr.) with 35 tonnes outbound and 40 tonnes coming back. That is nearly a full payload."

He suggests that while the A350-1000 looks great and will cut fuel burn, it is a 10-12-hr. aircraft with full payload and "its performance falls away after that." However, Rolls-Royce and Airbus say they have the engine power available to develop the -1000 further. "We have been patient waiting for Boeing to get the 787 into the air and I guess they are starting to get an idea of the performance, which would have some flow on to the 777 redevelopment," Clark notes. "It is great to see Lars Andersen back heading the 777 development." In January Boeing convinced the former VP and program manager of the 777, who retired in 2007, to return to consult to the Advanced 777 Product Development team. The manufacturer already is touting a 4%-5% improvement for the 777, which Clark describes as "meaningful but not enough."

New Models

In the shorter term he would like to see some significant variants of the 777: A 777-250 sized between the -200LR and -300ER and also a slight stretch to create a -400ER to seat 400 in three classes. In the longer term, a new wing and engines are needed, he maintains. "I expect to get more details in April and I hope GE comes up with the goods [more thrust]. The GE-90-115B is a superb engine with very few problems."

Boeing's line for some time has been that it is waiting to see what the A350-1000 really looks like before it responds. That ploy may have had more to do with its engineering talent being tied up with 787 issues, but now airlines such as Emirates, which was a major driving force behind the 777-300ER/-200LR models, have a clearer picture of what the A350 will do. Boeing needs to move on the 777 upgrade and successor this year if it is to remain the dominant player in that class, analysts suggest.

Airbus claims its A350 XWB is on track, with construction of the final assembly hall well underway and the first composite layup for the center wing box manufactured in Nantes in December. Teal Group VP-Analysis Richard Aboulafia sees the A350 as a "crucial plane" for Airbus and likes it more and more. "The composite panel approach is good and may give Airbus more flexibility," he notes. While he is upbeat on the -900 version, he is lukewarm on the -800 and -1000 models. Responding to the manufacturer's announcement that it had abandoned the -800 as a standalone design and would simply shrink the -900, he says, "Shrinks don't work. Essentially, Airbus has given up on [competing with] the 787."

COO-Customers John Leahy will have none of that, telling ATW at the Singapore Airshow last month that the A350-800 will play a role similar to that of the -200 in the A330 family and "enjoy the same success." The shortened version of the A330-300 is largely credited with driving the 767 out of the market, although Boeing's delays on the 787 ironically have breathed a bit of life into that program.

The changes to the A350-800 add 3 tonnes more payload and boost the range by 250 nm., Leahy claims, although he concedes they add a few percent to the fuel burn. Airbus has 182 orders for the -800, 248 for the -900 and 75 for the -1000 with deliveries set to start in late 2013. Production rate has been reported as reaching 13 a month by 2017.

Fewer Models

Like Airbus with the A350, Boeing is simplifying its 787 model offering by scrapping the -3 version ordered by Japan Airlines and All Nippon Airways, both of which swapped those orders for earlier deliveries of the 787-8. With no outstanding orders, VP-Marketing Randy Tinseth told this magazine in Singapore that while the company hasn't made the decision to cancel the -3, "I can't imagine us building it."

Boeing is upbeat after getting the 787 into the air late last year, and the flight test program appears to be proceeding apace, with two aircraft having completed 44 flights and more than 141 hr. by Feb. 17. Two more 787s were due to join the flight test program in February, with the first (Ship 4) being used for aircraft performance. Ship 3 was being fitted out for the passenger environment and was due to fly late in the month. All four are powered by the Trent 1000. The final two flight test aircraft, powered by GEnx engines, will be used for aircraft performance and service readiness.

According to Bernstein Research, the positive news about the flight testing is that Boeing has not reported "any serious issues, with only minor problems similar to those typically found at this stage of a program." A negative, it adds, is the low number of hours achieved so far, "which represent a level of flight test intensity well below" its expectations. By contrast, the research group highlights that the 777 program averaged 70-80 hr. per aircraft per month. It is keenly awaiting the results of the flutter and stability control tests, which it expects this month, calling them "a critical point" in terms of risk reduction.

Aboulafia is cautious on the 787, saying it is difficult after all the missteps to regain the optimism that surrounded the program when the first aircraft rolled out on July 8, 2007. He notes that Delta Air Lines has chosen to refurbish its 767s despite having orders for 18 787s and options for 50 more, a clear sign that the 767s will be in the fleet for another decade. Still, Boeing has retained 56 customers for 851 aircraft with options for 313 and price rights for 121. It holds another 201 commitments from various customers.

Bernstein is leery of the production ramp-up, forecasting just three deliveries this year, 25 in 2011, 50 in 2012 and 92 in 2013. The second production line in Charleston is due to start rolling out 787s in 2014 and will help provide the capability to achieve a 10-per-month-plus rate by that year with an eventual target of 14 a month.

While Boeing faces enormous challenges certifying the Dreamliner on its aggressive schedule and ramping up production, Airbus continues to struggle with building the A380 more than three years after first delivery. President and CEO Tom Enders admitted in January that the build rate was not up to expectations, with only 10 handed over in 2009 although three more were delivered in January. This year the company plans to deliver 17 and achieve a rate of two per month by December.

Pleasing and Frustrating

Airlines, meanwhile, are finding that the A380 has both enormous passenger appeal and some frustrating quirks, with mechanical dispatch reliability averaging 97.5%--below where Airbus and customers want it to be.

"Some weeks we get 99% dispatch reliability, other weeks we get 90%. There are a few exasperating issues but we now understand the complexity of the aircraft. It's a challenge. We get stupid failures," Clark laments. However, he also notes that "passengers love the aircraft and it is very, very profitable for the airline." He cites the fact that EK flies to both London Gatwick and Heathrow and Gatwick passengers are driving on the normally heavily congested M25 to LHR to fly on the A380.

That experience is being replicated at both Qantas and Singapore Airlines, which are boasting load factors of 83% on their A380s. According to Airbus Director-Product Marketing-A380 Richard Carcaillet, SIA is delighted with the aircraft's performance on the mid-range Singapore-Hong Kong and Tokyo Narita routes. On the Narita route, SIA, the dominant carrier, lifted its passenger count by 8% after introducing the A380 while all other airlines have declined, according to Sabre Booking Data supplied to ATW by Airbus.

Addressing the aircraft's reliability record, Carcaillet says it achieved 97% on technical issues in the first year, which compares well with the 777 at around 98% and is well ahead of the 747-400, which swung between 89% and 93%. New software upgrades, introduced on the 33rd and first Air France A380, are addressing many of the reliability issues. The revisions are being installed on the 26 aircraft in service.

Relative fuel burn between the A380 and 747-8 has been a contentious subject of claim and counterclaim between the OEMs, but Carcaillet tells this magazine that SIA is achieving a 20% reduction in fuel burn compared to its 747-400s. It is understood that Qantas is getting approximately 17% improvement over the -400. These figures, he says, support Airbus's numbers that give the A380 with 525 seats an 8% fuel burn advantage over a 747-8 with 405 seats under Airbus rules. While Airbus has adjusted its seating figures to reflect new configurations, Boeing claims there is only a 100-seat difference between the two superjets, which would reduce the fuel burn advantage.

Boeing's first 747-8F took to the air on Feb. 8, launching a three-aircraft test program. At first flight, 93% of the engineering data had been released for the 747-8I"ahead of its [rescheduled] plan," according to Tinseth. The Seattle giant has been able to secure orders for 108 747-8s of all models, plus 46 options and 33 price rights, with key sales campaigns shaping up this year. Aboulafia sees "A380 pricing as a major obstacle" for Boeing. Tinseth suggests that the company will be "on stronger ground" with the 747-8 flying and producing "hard fuel data."

Leahy says he expects to secure 10 A380 sales this year, most likely from the Asia region, and it would appear from discussion in the display halls at the Singapore Airshow that Boeing and GE will have to be a little sportier if they are to secure more orders for the 747-8 passenger version. According to Aboulafia, the biggest competitor to the 747-8I is the 777-300ER and potential upgrades of the type, while with Airbus airlines will be looking critically at the profit potential of the A350-900 and -1000 when evaluating the A380.

The game of one-upsmanship between aircraft manufacturers has never been as sporty. Whereas Lockheed once pitted its TriStar against the McDonnell Douglas DC-10 and some years later Boeing squared up the 767 against the A300, today Boeing is lining up its 777, 787 and 747-8 against Airbus's A330, A350 and A380 for the dominant share of a 7,925-aircraft market over 20 years.

The Cycle is Dead, Long Live the Cycle

The 21st century's first aircraft re-equipment cycle came to an end last year--or began, depending on the starting line--as deliveries of large transports exceeded orders for the first time since 2003. Gross orders for Airbus and Boeing totaled 573 (413 net of cancellations) against 979 deliveries (see tables). That trend is expected to continue for at least another 2-3 years as airlines struggle to fund and digest a portion of the more than 9,000 jets ordered over the past five years.

Boeing Commercial Airplanes VP-Marketing Randy Tinseth told reporters at last month's Singapore Airshow that the airline recovery has begun "but will be slow and uneven," with industry profits expected to return in 2011 and aircraft demand in 2012.

After delivering 481 aircraft in 2009, Boeing expects to hand over 460-465 this year, with new orders forecast to be below that figure. It sold 263 aircraft last year but suffered 121 cancellations and 271 deferrals. It expects fewer of these in 2010, Tinseth said, adding that the number of cancellations trended downward throughout 2009. The build rate for the 737 remains at 31 per month while the 777 will drop from seven to five in June as previously announced. Plans to boost the production rate for the 767 and 747 have been put on hold.

Airbus COO-Customers John Leahy, meanwhile, said the manufacturer expects to book 250-300 orders in 2010, including 10 A380s, and deliver 483-498 aircraft, thereby out-producing Boeing for a sixth consecutive year. Airbus delivered 498 aircraft in 2009 and recorded gross orders for 310 (271 net). Its total backlog of 3,488 as of Dec. 31 was worth $437.1 billion and was equal to six years of full production. Tinseth put Boeing's commercial backlog at 3,375 aircraft valued at $250 billion. --Perry Flint