There was action at both ends of the commercial market at this year's Farnborough air show as optimism finally begins to seep back into the civil manufacturing sector
The mood was upbeat throughout the Farnborough air show in July from all segments of the aviation community - manufacturers, suppliers and customers alike - as the industry began to feel it was really beginning to recover.
There was a partial return to significant air show order announcements, with Airbus and Boeing booking over $13 billion worth of business during the week. The show also featured the familiar war of words between the European and US manufacturing giants - this time on the issue of aircraft subsidies. However, this was mainly a distraction to the central task of bringing new airliners to market, selling and developing current models and getting down to the business of building up production rates once again.
Airbus was keen to talk about progress with its 550-seat A380, which was rolled out in the weeks before the show, while Boeing was full of enthusiasm for its mid-sized 7E7 cruiser. At the smaller end of the market, Canada's Bombardier unveiled its ideas for a new 110- to 135-seat twinjet family. It seemingly has no qualms about creeping up into the traditional territory of the majors. Embraer flew its 190 at an air show for the first time.
Production buoyancy
The more buoyant mood was reflected in a decision by Airbus to raise its production rates next year. Boeing is also boosting output. Airbus has the more bullish outlook, increasing the production rate of narrowbody aircraft to 30 in the first half of 2006, up from just over 20 today. Its production rate of the widebody A330/A340 will increase to eight by the end of 2005, from just over six today.
Boeing, which cut back further during the downturn than its European rival, believes it will be a gradual recovery. The manufacturer plans to build 300 jetliners in 2005, up from 285 this year, says Alan Mulally, president of Boeing Commercial Airplanes. The models with the most pressure for output hikes are the 737 and 747, he says. The success of the former is being driven by low-cost carriers, while the interest of Asian carriers in the freighter version of the 747 is putting pressure on that type.
During the show, Airbus announced $10.6 billion worth of new orders, representing 84 aircraft commitments including options. The largest was from Etihad of the United Arab Emirates which signed a memorandum of understanding (MoU) for aircraft from each of the manufacturer's current widebody range, including four A380s.
Airbus president Noel Forgeard cites increasing airline traffic, rising fares, improving yields and the return to profitability for Asian and European carriers for his optimism, adding that even North American carrier losses have been halved. "So overall, the outlook is really improving," he says, although adding that there would be a lag before this translates fully into orders.
In recent years, Boeing has stated its reluctance to save up orders for the big shows, but long-time customer Emirates had other ideas. It placed an order for four 777-300ERs with options for nine more at Farnborough. Emirates, a large 777 operator, is already on track for 26 777-300ERs from leasing companies, with deliveries to start next year.
But Boeing's attention is elsewhere:firmly on its 7E7 project, with its manufacturing team nearly complete and much of the design already done. There is an undercurrent of excitement about the aircraft at Boeing, buoyed by its success in signing up four airlines with 62 commitments for the 7E7 so far.
Although it is early days in Boeing's 7E7 marketing campaign, there was a strong positive buzz about it among long-time show-goers. Suppliers - even those not connected with the aircraft - called it "a winner" and an aircraft with a "huge market" that brings Boeing back into the fray in a big way.
Scarce deliveries
Boeing 7E7 project chief Mike Bair hopes to have won 200 commitments for the $120 million list-price aircraft by year-end and 500 by the time it first flies in 2007. UK and Italian leisure carriers First Choice and Blue Panorama were the latest to sign up just before the show, with orders for six and four respectively.
Bair says that there will be 90 7E7s available in the first two years of production in 2008-9. Interest in the aircraft has been such that early delivery slots are already becoming scarce, he adds. The inability of the cash-strapped USmajors to become early customers for the 7E7 is a "bit of a conundrum" for Boeing, says Bair. It has been considering whether to reserve some early positions for these carriers, but admits that is a tough one to sell to its sales force and other airlines. "It's an interesting problem to manage," says Bair, with the most likely outcome being to stick with a "first come, first served" policy.
Predictably, perhaps, Airbus officials dismissed the aircraft - at least for now. "It's probably a project that is real at this time," Forgeard said. "We at Airbus are not in a state of denial...There probably will be a 7E7."
Up until now, Airbus has been insisting that its relatively young A330 is the right product for this market. "The 7E7 is clearly a reaction to the A330, which is the market leader by far," says Forgeard. "We do not need to react to a reaction." Still, behind the scenes, Airbus is evaluating the clear interest in the 7E7 and weighing what modifications it might make to the A330-200, such as engine improvements, should it decide that is a necessary course to keep its potential customers from moving over to the new Boeing product. However, sources say it would be difficult to make sufficient changes to match the attributes of a new-technology, clean sheet of paper aircraft with a promise of 20% lower operating costs. For the record, Forgeard said only that "we look at various scenarios but feel under no pressure".
Pressure of another kind is causing Boeing to alter its long-term view of airliner demand over the coming decade and more. Presenting its 2004 Current Market Outlook at the show, vice-president of marketing Randy Baseler said that faster than expected liberalisation and greater competition in Asia, particularly driven by an emerging low-cost sector, will result in significantly more need for single-aisle types than previously thought. Over the 20-year period, Boeing sees a demand for 14,715 aircraft in the 90- to 200-seat category, a rise of over 1,100 aircraft compared with its thinking of a year ago.
Future thinking
Boeing's forecast further reinforces the diverging view between it and Airbus on how the industry will absorb future growth, with the former believing that airlines will plump for more frequencies and nonstop services while Airbus suggests a trend towards larger aircraft serving hub systems. Boeing's new forecast sees a drop in demand over the next 20 years for aircraft of over 400 seats - 747 and A380 size - of 115 units to 535 aircraft. Around half are in the 500-seat- plus category of the A380, says Baseler. This view contrasts sharply with the Airbus forecast that sees a demand for 1,100 aircraft in this class.
Whichever is right, there is little doubt that the next major aerospace fair - Paris 2005 in June - will be the A380 show. The aircraft is scheduled to take to the air early in 2005 for the first time and is pencilled in to fly at the French industry's biennial showcase if an intense flight certification programme allows. The industry will be fascinated to catch a close view of the Airbus giant. An equally interesting talking point in a year's time at Paris will be the cabin configurations launch carrier Singapore Airlines, and others, will unveil for the double-decker.
Report by mark pilling and carole shifrin in Farnborough
Source: Airline Business
