All we ever know for sure about the future is that it will look a lot like the past, only different – or maybe very different, depending on the timescale and interim events. That makes forecasting a black art best left to fortune tellers, charlatans and consultants.
But in the same way that weather forecasts often have value in the short term, recent events and past experience can guide reasonable expectations. No warranty express or implied, but herewith the FlightGlobal team’s take on the year to come.
BIG TWINS SQUARE OFF
With Boeing getting its 777X ready for a maiden flight, probably in the first quarter, the twin-aisle market looks set to have an interesting year. Flight testing and certification is expected in time to deliver the first -9 example – 7,600nm (14,075km) range for 400 to 425 passengers – to launch operator Emirates in 2020.
The 777X series – a 350- to 375-seat -8 version will follow – promises to breathe new life into the most successful widebody family ever; all-time 777 orders stand at greater than 1,600 units and the new X variants have already chalked up some 320.
With carbonfibre wings – folding tips, to fit airport infrastructure – and new, GE Aviation GE9X engines, the 777X can perhaps be expected to prove as popular with airlines as the earlier versions; the 777-300ER, with passenger capacity of up to a massive 550 and range of 3,970nm, has seen nearly 800 deliveries owing to its unbeatable economics.
But where Airbus's slightly smaller A330 always trailed its US rival – with fewer than 1,400 all-time orders – its new A350 sits more squarely in 777X payload and range territory – and is proving to be a hit. Total orders for -900 and -1000 variants are approaching 900. Early factory issues seem to be ancient history, so the Rolls-Royce Trent XWB-powered widebody appears to be making healthy progress towards steady-state production.
On top of that, Airbus rolled into the end of 2018 with its updated and re-engined A330-900neo in service. The smaller -800neo had a rougher year, losing launch customer Hawaiian Airlines to Boeing's arch-rival, the 787, but got through its maiden flight in November. And it now has a new launch customer in Kuwait Airways, which looks to take first deliveries in the first half of 2020.
AIRBUS ENTERS THE FAURY ERA
Airbus enters 2019 with a refreshed management team after the largest shake-up of its senior management since the corporate carnage triggered by the A380 production crisis more than a decade ago.
Almost a year after taking over Airbus's backbone commercial aircraft operation, Guillaume Faury (pictured) is preparing to succeed Tom Enders at the helm of a group whose line-up features a new chief operating officer, custodian of aircraft sales and finance head. Airbus's last three years have been characterised by turbulence at production and corporate level and Faury will want to ensure that the airframer regains its stability.
The critical ramp-up of the A350 programme towards its 10-per-month target has progressed smoothly, despite the impact of issues such as the supply problems affecting cabin interiors firm Zodiac. But while the A350-900 has a solid backlog, Airbus will want to address slack order activity for the larger -1000 which, by the end of October 2018, had not secured any significant new sales – other than a virtually dead-on-arrival deal with Iran Air – for more than two-and-a-quarter years.
The overall number of A350-1000s on order actually declined over the period, while rival Boeing recorded orders for 38 777-300ERs, the aircraft against which the -1000 was designed to compete, and edged closer to rolling out its 777X.
Airbus will also aim to jump-start interest in its re-engined A330-800, hoping to catch the wave of A330-200 replacement demand, while pushing its larger -900, newly in service, against the 787. Delivery schedules for 2019 will depend on whether Rolls-Royce overcomes hitches in its supply of Trent 7000 powerplants.
The airframer will be desperate, too, to avoid another year of single-aisle disruption, after the A320neo family's own engine supply problems and the production difficulties encountered with the revamped A321neo – particularly because it faces pressure from a planned ramp-up of output to 60 aircraft per month, its highest-ever rate.
Airbus's ambitious delivery target for 2018 left it, for the third year running, with a daunting production burden in the fourth quarter. Whether or not this exercise in stress management will figure in Airbus's 2019 delivery estimates, the raised single-aisle rates and top of climb for A350 production will be partly offset by plans to limit A330 and A380 output.
Boeing's New Mid-market Airplane threat is likely to drive further enhancements to the A321neo – and potentially to other members of the single-aisle range – given that Airbus has adopted a strategy of pairing the A321neo with the A330neo in a bid to shut out the prospective US rival.
While the backlog for the A320neo family is extraordinarily robust – and is the reason for the rate hike – the single-aisle family has its own weak spots in sales. Four months after taking over the Bombardier CSeries programme and rebranding it as the A220, Airbus had still to demonstrate that it can secure firm orders for the twinjet.
Its own rival to the A220, the yet-to-be-certificated A319neo, remains in limbo – accounting for less than 1% of A320neo-family sales. Airbus is keen to market the A220 but will need to decide the extent to which the A319neo will form part of the future single-aisle line. The A319neo has executive customers, which could spur Airbus to promote a VIP version of the A220.
Faury and his team also inherit the onerous A380 programme, but do so with little or none of their predecessors' attachment to it. While the A380's development was responsible for a period of turmoil among Airbus's leadership, its senior management had remained stable and, at least outwardly, committed to the aircraft since the first delivery more than a decade ago.
Airbus's new executive line-up, then, will be able to take a fresh view of the A380 with a greater degree of detachment, and decide whether the aircraft genuinely has prospects and a place in its portfolio.
Guillaume Horcajuelo/EPA-EFE/REX/Shutterstock
AIRBUS A330-800 FIRST FLIGHT
November's first flight of the smaller A330neo variant had Airbus whooping with delight. The larger -900 model was by that time ready to begin service, with TAP Air Portugal, but the -800 had been seen as at risk since March 2018, when launch customer Hawaiian Airlines cancelled in favour of the arch-rival Boeing 787. The whole point of the A330neo project, kicked off in 2014, was to a keep pace with the 787 without having to match Boeing's spend – thought to be around $50 billion; Airbus says it spent $2 billion on its re-engined and updated rival.
Certification is expected in mid-2019, with newly signed launch customer Kuwait Airways expected to take first deliveries in the first half of 2020.
BOEING EYES CLEAN-SHEETS
Will 2019 be the year Boeing shifts gears in product development? Recent years have seen its commercial aircraft unit take a conservative strategy of updating older aircraft rather than betting big on innovating clean-sheet designs. But Boeing may soon revert back to innovation mode by pulling the trigger on development of an all-new model, provisionally known as the New Mid-market airplane (NMA).
Significantly, Boeing this year expects to acquire Embraer's regional jet business; that deal would further consolidate the aircraft market, check Airbus's advantage in its 2018 acquisition of Bombardier's CSeries – and possibly bolster Boeing's capacity to meet any NMA engineering challenge.
Boeing executives have talked for several years about the NMA, saying they see an opportunity for an aircraft to replace stalwart 767s and 757s. In terms of range and capacity, those aircraft sit between the 737 Max 10 and 787-8, making them uniquely suited for certain long-haul, medium-demand routes, including many across the Atlantic. Boeing has said its NMA would seat 200-270 passengers and have a range of up to 5,000nm (9,260km).
The total sales opportunity remains unclear, but Boeing has produced about 2,170 757s and 767s to date, of which nearly 1,470 remain in service, according to Flight Fleets Analyzer. US carriers American Airlines, Delta Air Lines and United Airlines alone operate nearly 400 of the types.
Though the 767 remains in production, the 120 aircraft on Boeing's books include only military variants and freighters for UPS and FedEx, Fleets Analyzer shows.
Boeing's talk of the NMA has caught the attention of the entire industry, and Boeing's top brass have said repeatedly the company will make a go/no-go decision in 2019. Entry into service would theoretically come around 2025, executives have said.
If Boeing does move forward, also unclear is the degree to which it will push the technological envelope. The company has suggested the NMA could have next-generation engines, a new composite wing and a composite-constructed hybrid cross-section fuselage (a design generally thought to mean an aircraft with a wider passenger cabin and narrower cargo bay).
All that new design work might come a lot more easily should Boeing successfully close its planned acquisition of Embraer's commercial unit. That deal, announced in July, would give Boeing control over Embraer's enormously successful E-Jet programme – a competitive weapon against Airbus's A220.
But analysts have also suggested Boeing's attraction to Embraer rests largely on its widely-respected army of engineers, who could possibly be put to work on Boeing's next aircraft project. The deal would see Boeing acquire 80% of "all aspects" of Embraer's commercial division – meaning aircraft design, manufacturing, certification and sales. The Brazilian company would retain the remaining 20% of the commercial unit, which Boeing has valued at $4.75 billion.
The deal still requires regulatory approval and faces a legal challenge in the form of a class-action lawsuit in a federal court. That court issued an order blocking the deal in early December, though an appeals court quickly overturned the order, putting the deal back on track. Embraer and Boeing have said they expect to close the agreement by the end of 2019.
As if Boeing does not have enough to keep it busy, in 2019 the company also faces pressure to progress with 777X development. The company aims for its GE Aviation GE9X-powered 777-9 flight-test aircraft to achieve first flight during the year, putting it on track to begin deliveries in 2020.
And 2019 will also see a push to repair supply-chain issues that have hobbled 737 production. Boeing struggled last year to meet its goal of producing 52 737s per month amid supply-chain shortages – notably those involving fuselage maker Spirit AeroSystems and engine maker CFM International. Boeing intends to boost production again to 57 737s per month in 2019.
WHAT NEXT BOMBARDIER?
Not too many years ago, Bombardier was a regional aircraft powerhouse, churning out hundreds of jets and a popular turboprop. But the word linked to Canada's aerospace champion today is retrenchment – and it could end 2019 focused solely on business jets.
Following the sale to Airbus of its CSeries narrowbody programme and the November 2018 revelation that the Dash 8/Q400 turboprop programme would be sold to Viking Air, maker of the Twin Otter utility aircraft, the question hanging over Bombardier is, what will happen to the CRJ regional jets? The Q400 announcement included the statement that Bombardier was considering its CRJ "strategic options", so no-one should be surprised if that programme, too, is hived off.
To appreciate the context, consider events dating back to at least 2007. At that time, with the CRJ programme facing immense competitive pressure from Embraer's E-Jet, Bombardier committed its commercial aircraft future to CSeries. But development delays, financial struggles, government cash infusions and a trade battle with Boeing led it to raise the white flag and hand to Airbus control of the CSeries – regarded in every measure but orders as successful.
Meanwhile, the CRJs are years overdue for a major update and orders have fallen off; the backlog stands at about 53 aircraft, with deliveries scheduled to run until the end of 2020. And, said chief executive Alain Bellemare recently, each time a CRJ rolls off the assembly line, Bombardier actually loses money.
Some observers expect Bombardier will sell the CRJ, perhaps to a company like Mitsubishi Aircraft – whose efforts to develop its own MRJ regional jet might value Bombardier's engineering expertise and CRJ global support network.
ORDERS OUTLOOK
For any operator or lessor in a rush to acquire new aircraft, there are now only a very limited number of "open slots" available in the next five years and the firm orders backlog continues at record levels of over 14,000 jets. Perhaps not surprising, given the long lead times, there appears to be some slowdown in the rate of new order intake.
However, both Airbus and Boeing want to raise A320neo and 737 Max production rates in the early 2020s, to create open slots so every new customer does not have to wait until 2023. Any higher production rate will depend both on demand, which remains strong, but perhaps more importantly on whether the supply chain can ramp up as well.
More immediately, with the aircraft formerly known as the Bombardier CSeries now in the Airbus fold as the A220, it will be interesting to see how the Airbus marketing machine fares in gaining new orders.
The twin-aisle sector also has very few slots available in the next five years for most programmes – the popular 787 and A350 should both reach their planned production rates in 2019. Boeing appears to be aggressively using its 787 rate increase to target A330neo and A350 customers.
Talks in 2019-2020 between airlines and pilots' unions will have implications for the Embraer E2 and Mitsubishi MRJ programmes. A relaxation of scope clause restrictions, which aim to protect pilots' jobs by preventing airlines from farming out flights on bigger jets to regional subsidiaries with lower salaries, would be a boost for the 90-seat variants. Relaxation would help Mitsubishi sell MRJ90s – prospective launch customers for the smaller MRJ70 variant are, so far, keeping quiet.
Embraer, meanwhile, continues to gain orders for its current E175 from the US market, where its focus is on replacing older 70-seaters with E175s and Bombardier CRJ900s in 70-seat layouts. It will hope to gain traction for the E-Jet E2 programme, with the E195 E2 due in service.
AEROSPACE AND DEFENCE INDUSTRY FEELING FLUSH
In the problems you would like to have department, "too much money" must be near the top of the list. But companies finding themselves in that position are faced with a genuine dilemma; shareholders naturally start to expect that cash which cannot be sensibly invested in the business should be returned to them.
That is exactly what happened to US aerospace and defence companies following the 2011 Budget Control Act, designed to keep the federal debt in check by capping spending and having the effect of contributing to political gridlock in Washington DC and discouraging investment by military equipment manufacturers who, looking ahead, saw no prospect of rising defence budgets.
Companies thus started returning cash to shareholders – who were delighted until they started to ask, in around 2015, where growth might be coming from. The industry, notes Scott Thompson, national leader for the aerospace and defence practice at consultancy PwC, started spending for growth during the tail end of the Obama era, but it was the advent of the Trump administration in early 2017 that really changed the dynamics.
Under Trump, military spending jumped by one-fifth. Then came the 2017 tax cuts. The result is that the US defence industry is flush with cash; investors are still enjoying dividends, but research and development (R&D) spending is up, too.
Thompson reckons it is too early to be sure, as Trump's tax reforms are not yet a year old, but he expects the growth in R&D spending will be modest.
Another natural outlet for spare cash is mergers and acquisitions (M&A). Here, too, the cash effect might be modest. Three of the past four years have seen record M&A activity, says Thompson, and companies are still hungry to buy other companies that can fill gaps in their technology portfolios or to consolidate their positions in the industry. United Technologies' $30 billion acquisition of Rockwell Collins, closed in November, is the biggest recent example.
But Thompson reckons M&A activity will slow down this year. Not, he says, because there is any less hunger for deals, but because of a lack of opportunities. Entering an M&A desert would point companies towards ramping up R&D spending with a view to developing the technologies that will line them up for growth and profit in the future. Unfortunately, those technologies are hard to identify and the sort of cutting-edge work – more R than D – that realises them is slow, expensive and often fails.
Another outlet for cash is investment in the ongoing digital transformation of products, operations and the corporate back office. But, again, some of that work – in artificial intelligence, say – is slow, expensive and risky.
Late 2018 signs from Washington confounded expectations by hinting at continued big defence spending. Hence, shareholders in the big aerospace and defence companies may find themselves continuing to look for ways to spend spare cash – perhaps as dividends and share buy-backs.
This extract from Flight International's 2019 forecast special covers potential developments in the civil aerospace sector. See related articles for analysis of other sectors
Source: Flight International
