The Farnborough air show was a sombre, low-energy affair, as manufacturers come to terms with lower output and demands from airline customers to help them drive costs out of their business.
Airbus and Boeing warned the world not to expect major aircraft orders at the Farnborough air show and they were true to their word. KLM signed for its first Airbus aircraft with a batch of A330-200s alongside Boeing 777-200ERs. Embraer presented India's JetAirways as the launch customer for 10 of its 78-seat 175s.Richard Branson arrived in typical flamboyant style in Virgin Atlantic's first A340-600, christened by supermodel Claudia Schiffer and bearing the motif: "Mine's bigger than yours". And that was largely it.
But, while the aerospace marketing departments struggled to inject any energy into the show, beneath the surface it was clear that the manufacturers are engaged in some profound thinking about their future role in the world. The themes are hardly new. For most aerospace sectors, consolidation has become a way of life over the last decade. Most too have long since signed up to the idea of venturing beyond manufacturing, to push further into the aftermarket and beyond. In short, they know that customers want robust suppliers capable of delivering more than aluminium.
But as the industry met at Farnborough, in the wake of the worst airline crisis in memory, it became clear just how much manufacturers now feel under pressure to offer their stressed customers some real solutions.
Portfolio approach
General Electric has already led the way with its portfolio of leasing and maintenance businesses alongside core engine production. And Boeing has used previous shows to relaunch itself as a comprehensive service provider to the air transport community - presenting a bundle of products ranging from aircraft services and finance to on-board communications, and air traffic management (ATM). Others are following suit.
Airbus, having already bought into in-flight communications via Tenzing, has now followed Boeing into ATM with the creation of the Air Traffic Alliance in partnership with French systems house Thales and its own parent the giant EADS group.
At Farnborough Alan Mulally, president of Boeing Commercial Airplanes, again stressed that the group is about creating a "safe and reliable global air transport system". Behind that slogan lies not only an internal effort to change the company culture in Seattle but also a struggle to come to terms with what airline customers really need.
Avionics and systems giant Honey-well was at the show talking about its fast-growing services arm, now extending into power-by-the hour agreements and even parts leasing.
Themes such as these have come into the open since 11 September, argues Gareth Evans, an aerospace principal at the AT Kearney consultancy in London. "The crisis has forced some aerospace companies to face their demons," he says. At the top of the supply chain, the prime manufacturers are pushing programme risk down to their own suppliers, many of whom will now have to choose whether they can continue to play in this high-stakes aerospace game. At the same time the primes are becoming "supplier managers", bringing the pieces together not only in the assembly hall but also in the aftermarket. "Manufacturers are going to have to transform themselves from metal bashers into service companies," says Evans, arguing that this will extend into owning the assets, a role previously taken by customers and lessors. "I think perhaps the most fundamental change is going to be the death of the lessor," he adds.
In terms of aircraft manufacture, Airbus and Boeing are now neck-and-neck. Both expect this year to mark the low point for new orders(excluding the low-cost bonanza) while deliveries will hit bottom in 2003. By then Boeing expects to have come down from 380 this year to only 275-300 deliveries, meeting the current Airbus output of 300. But while the future of Airbus is now mapped out with massive A380 project(on which first metal has now been cut) and the drive to streamline the business after its switch from consortium to standalone company, for Boeing the future is less clear cut.
It continues to assemble the technologies that will make its Sonic Cruiser possible. "The question we are now trying to answer is the value of speed," says Mulally.He is quick to stress that it is not a question of Boeing's ability to build the aircraft but what the customers want from it. If speed cannot command the necessary premium, he says, then the technologies can be applied to produce a new intermediate family of aircraft to replace the 757/767. However, he says it will be tough to better the economics of the existing workhorses.
Mulally will not put a timeframe on when Boeing will launch either the Sonic Cruiser or a more conventional aircraft family. Walt Gillette, Sonic Cruiser programme manager, says: "We're taking the long view...most of the people who will fly the Sonic Cruiser have yet to be born."
Boeing is still adamant there is little room in the market for aircraft above 400 seats. Its latest long-range forecasts, presented by vice-president marketing Randy Baseler, suggest that the world's fleet of large aircraft, either 747-400 or A380, will grow almost nowhere outside the Asia-Pacific. The 747 itself is a niche aircraft, he adds, predicting that over the next 20 years there is room for only 945 deliveries in the sector with freighters taking 20%and the passenger demand split between the 747 and A380.
Despite the lack of excitement at the air show, there was an old-style spat between Airbus and Boeing, which has been missing of late. The enmity was reignited by the Airbus campaign promoting the benefit of its four-engined A340 and fuelled by the sight of a massive poster with the catchline "4 engines 4 long-haul". Branson added further fuel by suggesting that 18% of passengers would "go out of their way" to fly on four-engined aircraft. Boeing was furious. Baseler retorted that the A340 has twice as many turnbacks and diversions as its 777. "The A340 also burns 20% more fuel per passenger and weighs 40,000lb [18,160kg] more, so it should be four engines for the oil companies," he says.
Although no new A380 orders emerged at Farnborough itself, FedEx had firmed up its order for 10 just before the show. Airbus now has 97 orders from nine customers and is 40% on its way to the break-even target of 250 aircraft. The launch phase is over and the target is to add "one new customer per year between now and delivery of the first aircraft", says John Leahy, chief commercial officer. However, it could still be that the ability to offer a full range of value-added services may prove a more telling advantage than either aircraft size or speed.
Source: Airline Business
