I dislike the ordering several years in advance practice.
One Indian airline had ordered a lot very cheap. They received the planes in times of high demand. They sold the planes and leased them back. The profit they used to subsidize tickets to grow market share.
Since ordering planes seems to be a gamble, airlines can't complain if the gamble goes wrong.
The reality is that there are a lot of long lead time parts in an aircraft. Things like landing gears or jet engine cases or wing spars need to be ordered 1.5-2 years in advance. Then add in normal queuing effects and it's a few more years. I don't see how this will change.
For discounts, airframers and engine makes must promise 3+ years at a certain rate. The longer out the promised production, the more the discount. For example, for the A350 engine (Txwb), I know of one vendor who ordered $24 million of machine tools. These tools make components gor about 40% less than the old tooling. The vendor actually wouldn't pay for the tooling. For them it made more sense to keep the old machines and charge more per part while making half the profit. So RR paid for the tooling and rents back to the vendor with rent tied to Txwb part production on a rent to own scheme. Without a large backlog if orders, automation in aviation would be poor.
If an aircraft has less than 18 months backlog, it is time to shut down the line. This means for some long lead items, if there is less than 42 months of production, there is talk of halting production.
Long lead times allow investing in automation. Automation requires buying the tooling, programing the software for a few months, and testing for a few weeks. For radical production changes (e.g., 3D printing) that requires re-qualifying the component including vibe testing, performance and life testing. That takes volume.
For example, to develop the CMC PiP for the LEAP would require:
$150 million in testing
$250 million to build the factory (more with higher volume)
A test campaign that is $200 to $300 million
All for a 2.5% to 2.8% reduction in fuel burn. To pay for $700 million or so takes economics of scale.
The whole reason we are discussing production chicken is no one wants to lose that scale.
For example, CFM could have sold more engines in 2014-2016 if they could have ramped production. They demanded volume discounts and vendors demanded another year at peak production (with the NEO wasn't going to happen). So no ramp as the obsolete generation couldn't sell out far enough.
Embraer: In trouble as E1-175 customers are losing contracts to fly. They must low ball which means no buying. The E2 needs scale to get PiPs and better MRO terms.
A220: sold on volume discounts. Airbus is dramatically cutting cists, but vendors demanded volume. There is some volume, but not for a great business case. But their could be.
A320NEO: Everything was based on volume, including the automated Hamburg production line which will eventually be copied everywhere. Without volume, engines go out at a loss. To achieve volume discounts, vendors were promised long stable production.
MAX: Much of the MAX business case was on production automation to sell at very competitive pricing.
A330NEO: to compete with 787 needs volume to automate more
787: Ramped up some automation, 3D printing, and other to cut millions in costs. Airbus can do the same. To save a million in production costs 100 million in R&D and tooling. That takes a backlog. Boeing needs volume as this is their cash flow.
A350: Needs production volume as last I looked, these were going out close to break even. There must be volume to invest billions to save billions to bring this plane to its planned profits.
I could keep going, but what matters is too many production lines see they need volume and the production is far too high.
This means all those A320CEOs and 737NG are not worth what the leasing companies expected. Oh well, they make less profit (but enough, in particular in this low interest rate environment).
I've posted before this link if 5 year old Aircraft values:https://leehamnews.com/2020/08/25/hotr- ... -aircraft/
A321CEO from $37.5 to $30 million
738 $31.5 to $26.5 million
A320 $ 29.5 to $24.5
73G $26 to $21 million
This price drop hasn't cleared the market (huge number of sellers. e.g., Allegiant is considering buying and is "inundated" will A320CEO offers:https://www.ch-aviation.com/portal/news ... 320-offers
(Better sources out there, search Allegiant Airways inundated, I just hit monthly article limits).
To justify production we need to be back to sale leaseback. As described, that is years away.
5 months without TV. The best decision of my life.