https://www.reuters.com/business/airbus ... 021-05-10/

Another step for Airbus to try to figure out how to make money on the A220.

I find the sales strategy regarding the A220 interesting.

But while sales have benefited from the stronger Airbus marketing machine, industry sources say the European group has yet to secure low enough prices for many of the plane's components to push the A220 project convincingly into the black.

That creates a growing dilemma for Airbus as although new sales are good for the order book, producing those extra planes at costs that remain too high could simply deepen the losses.

There have been examples in the past where sales were made at losses with the goal of eventually reducing production costs.

Airbus Chief Executive Guillaume Faury has been seeking cuts of 20% in the cost of major components, industry sources say.

Cutting supplier costs for an airplane already in production also sounds familiar. Sell the plane at a loss with hopes of increasing production rates to allow for renegotiated supplier costs which will in turn lower production costs to make the plane profitable. I can see why Boeing wasn’t interested in the CSeries back in 2018. Doing that is no easy feat

https://www.reuters.com/business/airbus ... 021-05-10/

[quote="Weatherwatcher1" I can see why Boeing wasn’t interested in the CSeries back in 2018. Doing that is no easy feat /[/quote]

I don't see them being related at all. Hmmm, if no easy feat it certainly didn't stop them doing it.

Sell the program to someone else for $2 and double their money?

As Airbus has said from first day on...Airbus is seeking to earn money, when all investments have been done, and the production capacity has been increased to a total number of 14/15 A220 per month. This is foreseen for 2025.

So what is new, what has changed, why we are discussing this storm in the waterglass?

And yes, I agree, it is not even good...it is even excellent, that Boeing has not bought the A220 program...

...so Airbus was able to buy it.

Is this not great for Airbus?

It eats into the MAX 7 market and it provides new airplanes that will not need (Boeing) replacements for some time. And it is keeping the MAX prices down so it might be worth it this way. Look at the Southwest-order.

Weatherwatcher1 wrote:

Sell the plane at a loss with hopes of increasing production rates to allow for renegotiated supplier costs which will in turn lower production costs to make the plane profitable.

Despite the countless A220 at WN threads on this board, Airbus did not make a serious move to get a part of what was almost certainly the largest order for aircraft in this market segment with the biggest operator overall in this segment.

I think we can say the high volume strategy is just not happening.

Add to that the Airbus statement that said A220 had to be self funding going forward, and this new exec has a big job on his hands.

TFA says:

Airbus could further reduce costs by redesigning parts and overhauling the production system for the A220, which competes with Embraer (EMBR3.SA) regional jets and smaller Boeing (BA.N) 737s, but such spending is seen unlikely during the pandemic.

This suggests things won't change till after we get past the covid crisis, and may even require large investments in the future.

Weatherwatcher1 wrote:

I can see why Boeing wasn’t interested in the CSeries back in 2018. Doing that is no easy feat

People seem to forget that BBD said they were selling their share of the program because they could no longer project hitting their target ROI for the program, and this was many months after turning things over to Airbus Canada so they had good insight into where things were going.

Jetport wrote:

https://www.reuters.com/business/airbus-puts-supply-chain-executive-helm-loss-making-a220-2021-05-10/

Another step for Airbus to try to figure out how to make money on the A220.

I personally think Airbus went into the A220 program with a view of not only selling the aircraft, however also with the idea of being able to reuse the technology especially with regard to wing layup onto another narrow body in the future.

Weatherwatcher1 wrote:

There have been examples in the past where sales were made at losses with the goal of eventually reducing production costs.

The success of that strategy depends on the components of cost. Remember, in the 1Q21 earnings call an exec was cited as saying there was no contribution margin: that means no contribution to engineering overhead, manufacturing overhead, or SG&A. Higher volumes can leverage overhead - but if there's no contribution margin, that doesn't work.

So they're left with pounding vendors to supply components and systems more cheaply, or demanding that (the same crew of) workers simply make more to improve per-dollar labor productivity -- and we a.net don't know the direct labor cost component of the avg as-delivered priced of an A220. Working at Mirabel isn't supposed to be service du travail obligatoire.

When there is negative contribution margin just making more means losing more.

Weatherwatcher1 wrote:

There have been examples in the past where sales were made at losses with the goal of eventually reducing production costs.

...at Airbus???? we know about that at Boeing, but Airbus?

Revelation wrote:

People seem to forget that BBD said they were selling their share of the program because they could no longer project hitting their target ROI for the program, and this was many months after turning things over to Airbus Canada so they had good insight into where things were going.

Why weren't they able to see this before they launched the program?
Did they misjudged the demand for this segment of the market?

par13del wrote:

Weatherwatcher1 wrote:

There have been examples in the past where sales were made at losses with the goal of eventually reducing production costs.

...at Airbus???? we know about that at Boeing, but Airbus?

We can go back and time to the 1970s and 1980s and the A300 and MD80 probably fit in that category.

9Patch wrote:

Revelation wrote:

People seem to forget that BBD said they were selling their share of the program because they could no longer project hitting their target ROI for the program, and this was many months after turning things over to Airbus Canada so they had good insight into where things were going.

Why weren't they able to see this before they launched the program?
Did they misjudged the demand for this segment of the market?

BBD judged they discovered an unfilled niche—sub-110 seat airliners fitting below the A319/B737-700. Oops the entire market isn’t that big, probably unprofitably small in my guess.

9Patch wrote:

Revelation wrote:

People seem to forget that BBD said they were selling their share of the program because they could no longer project hitting their target ROI for the program, and this was many months after turning things over to Airbus Canada so they had good insight into where things were going.

Why weren't they able to see this before they launched the program?
Did they misjudged the demand for this segment of the market?

I think they did not realize that launching CS would cause both A and B to do everything they could do to crush CS. A320neo family was pretty much launched as a direct response to CS. Airbus execs have even admitted they launched the neo to crush the CS. Boeing of course went down the dumping path and won the battle but lost the war.

I think they did underestimated how much time and money it would take to bring the product to market. Insiders said money was being split between too many projects at once and so they lost critical mass and focus with regard to CS.

And it seems Airbus's drive to cut production costs show that they underestimated what it would cost to produce the airplane.

BBD spent many multiples of their original budget to develop the CS series. The original budgets met the business case, but spending extra billions make that case difficult except as a loss leader.

So cost overruns put the A220 in this position? Is that the only issue?

JayinKitsap wrote:

BBD spent many multiples of their original budget to develop the CS series. The original budgets met the business case, but spending extra billions make that case difficult except as a loss leader.

Yes, but that doesn't explain negative (or zero) contribution margin. Those 'investments' - probably engineering charges and tooling - don't lead to the high variable costs that aren't being covered today.

Instead of a manufacturing cost problem I wonder if it's a price problem. Fuel costs may be a lot lower than BBD's original business case, leading to carriers being unwilling to pay much of a premium. And, as Revelation notes, Boeing and Airbus didn't stand still on pricing or tech.

Mightyflyer86 wrote:

So cost overruns put the A220 in this position? Is that the only issue?

No, the plane is just currently too expensive to build so Airbus loses money every time one goes out the door- that is independent of development costs (which Airbus did not pay). The cost overruns just meant that BBD couldn’t afford to hold on and had to get bailed out first by the Quebec Government then Airbus.

Beyond just component pricing, complicating the matter is despite the relatively low total production rate production is split across two different locations as a result of the tariffs threat.

It seems logical to try to continue to trim production cost on A220. It's not like A320 cost can be cut that much more.

How many $billions did Boeing spend on developing 787 and producing them before they were finally in the black ink?

How many $billion will Airbus have to spend to develop an A320 replacement and how much losses on production before they are finally in black?

The investment Airbus has put into A220 is minimal compared to the profit it will bring in if it can take a significant chunk of the 100 to 180 seat market.

"We lose money on every plane, so let's sell more to make it up on volume!"
What could possibly go wrong?
I assume Airbus is either going to get the program profitable, or have to discontinue it at some point. Which would suck for those airlines that purchased it.

MIflyer12 wrote:

Instead of a manufacturing cost problem I wonder if it's a price problem. Fuel costs may be a lot lower than BBD's original business case, leading to carriers being unwilling to pay much of a premium. And, as Revelation notes, Boeing and Airbus didn't stand still on pricing or tech.

I suspect it's both. Manufacturing in Quebec doesn't offer cost savings vs. the U.S. or Europe, and they don't have the economies of scale afforded by the mature production systems of the A320 and 737. Airbus and Boeing have been able to leverage their scale in order to profitably price at levels that are loss-making for competing products like the A220.

Further, improved fuel efficiency for the A220 may be inadequate to compensate for higher labor productivity per seat on the A32Xneo and 737 MAX. Ignoring productivity powerhouses like the A321neo and MAX 10, if WN, for example, can get 10 more seats on a MAX 7 vs. A223, it's probably worth eating somewhat higher fuel burn in exchange for greater revenue opportunity and more efficient utilization of pilot labor.

Chemist wrote:

"We lose money on every plane, so let's sell more to make it up on volume!"
What could possibly go wrong?
I assume Airbus is either going to get the program profitable, or have to discontinue it at some point. Which would suck for those airlines that purchased it.

It's starting to sound like the $1 A220 program is a 'gift' akin to the Trojan horse for Airbus.

Mightyflyer86 wrote:

So cost overruns put the A220 in this position? Is that the only issue?

Nope. In addition to the cost and pricing issues, one has to wonder about how big the addressable market is. Basically A221 is A318/B736 sized, A223 is A319/B737 sized and even a bit smaller which is not a thriving market and one where a most of the big sales opportunities have been taken. They can consider growing into the A320/B738 size, but then they take on internal and external competition and they need to spend money developing a new family member at the same time they aren't bringing in money with the existing family members.

tphuang wrote:

It seems logical to try to continue to trim production cost on A220. It's not like A320 cost can be cut that much more.

How many $billions did Boeing spend on developing 787 and producing them before they were finally in the black ink?

How many $billion will Airbus have to spend to develop an A320 replacement and how much losses on production before they are finally in black?

The investment Airbus has put into A220 is minimal compared to the profit it will bring in if it can take a significant chunk of the 100 to 180 seat market.

That's a big 'if', to do so it'd need more investment to produce the A225 and it'd need to defeat internal competition from A320 and external competition from B738 with the later two having huge economy of scale advantages.

Mightyflyer86 wrote:

So cost overruns put the A220 in this position? Is that the only issue?

The problem with Bombardier is that it produced an excellent aircraft, but with spending (1) twice as much as CAPEX and worse (2) with an excessively high production cost. Higher cost per seat than the B737, A32x and the E2. Increasing the production rate can help, if unit costs are reduced, otherwise selling more will not help.

- Nobody in the oil industry believes that the price of fuel will return to the record levels of 2006-2015.
- The era of low interest rates may be coming to an end.
- The Covid crisis has sharpened the perception of risk in the air transport industry, which now seems very unwilling to go into debt.

9Patch wrote:

Revelation wrote:

People seem to forget that BBD said they were selling their share of the program because they could no longer project hitting their target ROI for the program, and this was many months after turning things over to Airbus Canada so they had good insight into where things were going.

Why weren't they able to see this before they launched the program?
Did they misjudged the demand for this segment of the market?

When you are too far from the market leaders there are no simple and safe choices to make. With each new and important project you are basically betting your company's fate.

Nean1 wrote:

Mightyflyer86 wrote:

So cost overruns put the A220 in this position? Is that the only issue?

The problem with Bombardier is that it produced an excellent aircraft, but with spending (1) twice as much as CAPEX and worse (2) with an excessively high production cost. Higher cost per seat than the B737, A32x and the E2. Increasing the production rate can help, if unit costs are reduced, otherwise selling more will not help.

- Nobody in the oil industry believes that the price of fuel will return to the record levels of 2006-2015.
- The era of low interest rates may be coming to an end.
- The Covid crisis has sharpened the perception of risk in the air transport industry, which now seems very unwilling to go into debt.

Is it an excellent aircraft yet? I’ve read plenty about passengers liking the airplane, but there had been reports of reliability/teething problems

viewtopic.php?f=3&t=1441801

https://airinsight.com/deltas-a220s-schedule-struggle/

https://www.forbes.com/sites/tedreed/20 ... 9a9d354007

https://airinsight.com/sas-demands-bett ... 220-or-e2/


It’s hard to know if the teething problems are commensurate with other new airplanes or if there is a reliability problem with components where the Bombardier didn’t have sufficient funds to address prior to selling the program. If airlines like Delta force Airbus to invest in reliability improvements to address teething issues, it can impact the investment required to bring down production costs. Reliability can be improved. It takes time and money and with both the airplane can be excellent.

When Airbus first announced the take over of the CSeries back in 2017, they mentioned that:

Significant C Series production costs savings anticipated by leveraging Airbus’ supply chain expertise

https://www.airbus.com/newsroom/press-releases/en/2017/10/airbus-bombardier-cseries-agreement.html

It's an indication they were expecting that significant cost savings were achievable and necessary. This Reuters news now shows that nearly 3 years after the closing acquisition of the CSeries program, the cost saving exercise is far from being complete. It might be that Airbus first focused on the integration of the program and on planning the production rate increase before starting the bargaining exercise with the supply chain. It's indeed difficult to extract cost reductions from the suppliers without showing them a credible roadmap to rate increases.

Let's also remember that Airbus said last year they didn't expect the A220 to become profitable before 2025. It's nothing new that the A220 is currently not profitable.

Airbus today said the A220 will be profitable when the production reaches 150 aircraft per year which, is expected around 2025.

https://leehamnews.com/2020/02/13/airbus-buys-bombardiers-share-in-a220-now-sole-owner-together-with-the-government-of-quebec/

I see some conversations about the A220-500. I think the #1 priority for Airbus is to make the A220 program profitable. Until that happens, an A220-500 shouldn't even be considered.

It's not as if a possible A220-500 would help the A220 program. Competing with the MAX 8 and the A320neo, which are two well-established aircrafts on the market, with thousands of orders, I doubt that there is a considerable market share left for the A220-500 to be viable. Nor do I see Airbus spending money on something they are already losing money on and that will compete with a product they already have.

Slightly profitable isn't enough. If an A220 makes 1million $ profit/ plane and an A319Neo 5 million $/ plane, why push the A220 even if 50% of sales go to Boeing?

If oil prices increase again, its time will come.

Noshow wrote:

It eats into the MAX 7 market and it provides new airplanes that will not need (Boeing) replacements for some time. And it is keeping the MAX prices down so it might be worth it this way. Look at the Southwest-order.

Keeping your competitors price down is a really bad reason to keep a money losing program going. In a capitalist system you don't try to make your competitor make less money, you try to make more money. Always maximizing profits is one of the reasons capitalism works well and no other economic system humans have devised to date works at all.

Airbus and Boeing are in a duopoly, they should never ever keep a negative production margin product in production just to keep their competitors pricing down, that is crazy talk. The object is to make more money than your competitor, not lose less.

Sokes wrote:

Slightly profitable isn't enough. If an A220 makes 1million $ profit/ plane and an A319Neo 5 million $/ plane, why push the A220 even if 50% of sales go to Boeing?

If oil prices increase again, its time will come.

You are not winning over new customers with a319neo. But you could win new customers with a220.

Not every airline want to upgauge to a320neo or max8. A220 is the right replacement for a lot of a319 and 737-700 users.

Why would a220 only get 50% market share if it faces minimal competition in it's class?

I actually think the A220-500 is the key for program profitability.

Firstly, the longer versions in every family always have higher profit margins. For a few extra metres of cheap boring metal the OEM can charge 10-15% more.

A321 has a higher profit margin than the A320.
787-10 is higher than the 787-8.
737-8 is higher than the 737-7

I will put up some hypothetical numbers to explain the simple mathematics. If the A220 program makes a 1% average loss per aircraft over both models then the A220-300 is likely to be 1% profitable and the A220-100 makeing a 3% loss. The average between the two is then a 1% loss.

The A220-500 could easily make a 5% profit per frame.

+5% +1% and -3% margins over 3 models means a 1% profit average instead of 1% loss average.

Secondly, the A220-500 will add to the appeal of the family as it creates more spectrum in capacity and airlines can now consider using it as their only narrowbody type.

Thirdly, sales heavily push towards aircraft with the best CASM. A 1% CASM advantage can turn into a 30% sales advantage. The A220-300 currently matches the larger narrowbody aircraft on CASM. Being a cleansheet does not make up for the fact it is smaller in size. The A220-500 would definitely have better CASM than the 737-8 and A320. History shows a flood of orders would come to the superior CASM A220-500. Economy of scale should reduce production costs and then all models become profitable.

Without the A220-500 they are stuck squeezing suppliers.

Revelation wrote:

Weatherwatcher1 wrote:

Sell the plane at a loss with hopes of increasing production rates to allow for renegotiated supplier costs which will in turn lower production costs to make the plane profitable.

Despite the countless A220 at WN threads on this board, Airbus did not make a serious move to get a part of what was almost certainly the largest order for aircraft in this market segment with the biggest operator overall in this segment.

To make a serious move, you need to be invited. IIRC, WN didn’t invite Airbus.

All the same old arguments, and they're still wrong.

There is no market for 319Ns or 737-7Ms, the market has spoken.

Meanwhile, A220s continue to be delivered. It's the lowest block operating cost airplane available that is suitable for operating a major airline (not an RJ).

Owning the A220 Airbus can optimize the A321neo for heavier weights.

Will the A220 line ever become commercially viable? I hope so but what is way more important is that Airbus got IP (and a lot of that including a new cockpit and wing) for free. What was the development cost of the A220? If all Airbus has to do is pump the value of the free IP (3bn$?) into the production it was a good deal. 3bn$ worth of IP paid off over 5-6 years is good, if after that there is still no business case it will become hard to justify more investment.

FluidFlow wrote:

Will the A220 line ever become commercially viable? I hope so but what is way more important is that Airbus got IP (and a lot of that including a new cockpit and wing) for free. What was the development cost of the A220? If all Airbus has to do is pump the value of the free IP (3bn$?) into the production it was a good deal. 3bn$ worth of IP paid off over 5-6 years is good, if after that there is still no business case it will become hard to justify more investment.

Will any all new airplane ever become commercially viable again?

The 787, 777x, and A220 have been train wrecks. The A350 is only slightly better. The "hot plane" right now is the 321, a re-engineed 30+ year old design. I know I sound like bestyear1989, but it's true. Commercial aviation cannot generate enough capital for any length of time to sustain itself. Meanwhile, NASA pi$$es away billions every year on concepts that will never see the market.

Given this environment, the lowest block cost advantage would seem to have an advantage.

I think there are two problems. First, a -500 if you will, canibalizes the A320. Second a -500 is probably better than an A320 and it probably makes the A220 program profitable at the same time. Then there is the Boeing NMA. What is it and can Airbus match it with an A321 and a stretch of the A321 or a new plane in two frames? Does it then make it viable to just dump the A320 with a -500. It may be the A220 is the right plane at the wrong time (too soon) filling the A318/319 gap (Delta has made the move to fill that gap for them). The need isn’t in massive numbers, but there is a gap in that space with no commonality to the A320 so a -500 is needed for that commonality. There needs to be a plane in that space and I think a few airlines are sitting back wondering how to do it. The market has spoken short term with RJs, but now we have a hole with the CRJ being dead and the E175E2 being too heavy. Interesting place to be. Could be Airbus is willing to eat costs in the short term in order to better respond to NMA by letting the A320 go to the -500, just not right now. It’s an interesting quagmire.

In other words, the Airbus strategy in buying the program may actually be A220-100/300/500 and A321/322 (or whatever they call it) or maybe an A321/322 replacement and they just want to be in the right place to respond to NMA. As for the RJ market, if they don’t find a way to change scope, there will be a massive void in that space in about 7-10 years, unless the thinking is 100 seats to fill that void which would save the A220 without a -500 leaving Boeing with no way to respond without a new plane to replace the 737 because their focus is on NMA. Personally, I think both companies need to ignore eachother on some level and move ahead. Make the jump into the NMA space knowing both aircraft will be close enough. It’s just a matter of who does what.

While it has been interesting to read the various A220 speculations, especially EG a well-supported A220-500, I feel far too little regard is being given to likely ferocious competition within AB. Traditionally France, Germany and Spain fight over allocating production.
Add to that the many A32X production-lines in various other countries (more promises made!) and I think the A220 family has a long struggle ahead of it to achieve greater investment and increased rates at the expense of the A32X family.
Especially if that A32X unit sells at a higher margin than the competing A22X unit. cheers

tphuang wrote:

MIflyer12 wrote:

tphuang wrote:

you can make that same argument about B787. There was no guarantee that the $20 billion spent on R&D or the $26 billion in production losses would be recouped but they went ahead with it. The path to recovering even a $10 billion investment from Airbus to make A220 profitable is minimal in comparison. Especially in this environment where smaller aircraft with long ranged are getting more popular.

You're conflating development costs and production costs, specifically variable production costs. There no path of increased volume to recovering a $10 Billion incremental investment in the A220. That's what zero contribution margin means.

The assumption is that they can get to black ink on each produced A220 at some point. It might take a while, but it will get there as long as Airbus is committed on the project.

And then after that, each produced unit will be profitable and allow Airbus to recover its investment. I don't see why I need to differentiate development cost with the production losses before breaking even on A220 product. To me, that's all investment required to reach profitability for a program.

I'm a big advocate on volume. Every time production is doubled, a decent management team should be able to cut costs an eighth.

To others:
AirBaltic reported an amazing 99.85% dispatch reliability.
https://airwaysmag.com/airlines/airbalt ... 0exercised.

The engine problems are mostly solver:
https://airinsight.com/happy-birthday-g ... ay-part-2/
“The initial major problems have now been largely resolved and performance, e.g. in terms of fuel consumption, is fine. We are currently working with the manufacturers to extend the service intervals, i.e. the time between two engine overhauls.”

“A lot of progress has been made in this area since the introduction of the aircraft type, but we are not yet at the level of the previous engine generations (CFM56-5B and V2500). Engine overhauls are the biggest cost item in terms of maintenance costs for the economic operation of aircraft, and this is where we are in dialog with Pratt & Whitney.”

So working on costs, not fuel burn, not reliability. But how often engines are overhauled vs. the mature A329CEO engines (a natural benchmark).

To all:
We can agree costs are important. A year ago Pratt focused on two major fixes the GTF family had issues on, the LPT (material change) and accessory gearbox (not the main fan gearbox, every engine has an accessory gearbox).
https://www.ainonline.com/aviation-news ... g-pandemic

The accessory gearboxes should have been replaced last year per that link. The LPTs should be completed by now. Oil seals were fixed.

Now is time to fix the overhaul interval is going to require combustor liner replacement. Since that part requires a major engine disassembly to replace, that might as well be an overhaul. A fix is in, but it takes years to arrive at the overhaul:
https://www.ainonline.com/aviation-news ... operations

I am not aware of anything else driving engine overhauls. What did I miss?

The opperation expenses are being tamed. JetBlue, Breeze, and AirFrance will be receiving well debugged aircraft. So now to take manufacturing to break even. It is possible.

Then market size. I believe the A318+A319+736+717+73G market has neither shrunk nor grown (just my opinion). So I see a huge potential market for the A220, in particular the A223. I also see a market for the A225 (with Airbus focusing on the A321 for the A32x family).

There were certainly teething issues, in particular on all GTFs.
“In 2017, the average mean time between unscheduled removals for engines was low, and has since grown significantly. The current dispatch reliability of Pratt & Whitney PW1500G series GTF engines is at 99.88 percent.” (above link)

That implies the airframe is responsible for few missed dispatches. (99.85% both, 99.88% just on the engine means a tiny missed dispatch on the airframe, if correct).

Airbus has delivered only about a quarter of the sold A220. It is time to make production profitable. We will have some recovery (I'm bearish, not end if the world bearish). I see no reason Airbus couldn't ramp up to 150 to 168 per year.

A year ago Airbus was on track for a 20% cost reduction:
https://www.flightglobal.com/air-transp ... 64.article

The Breeze and JetBlue surge will help Mobile costs. Mobile ramping up for AirFrance and others will up their cists. In particular going to pre-assembly in 2022. Stuffing a tube from two open ends is much cheaper than making everyone go through doors. Ok, poor link:

https://simpleflying.com/airbus-a220-ma ... nvestment/

It is a question of what price Airbus can sell A220s. Breeze will opperate both the E190/195 and A223 and they topped up with 20 more:
https://www.nasdaq.com/articles/breeze- ... -04-26?amp

So there is a very decent backlog. This is the time to cut costs. This will make the A223 more competitive vs. the ULCCs flying 186 seat A320s or near 200 seat MAXs as well as A221 vs. E2-195.

Aircraft production is a marathon. Airbus has just put on better running shoes. I think they will make a profit off the A220. First they must invest billions.

Lightsaber

marcelh wrote:

To make a serious move, you need to be invited. IIRC, WN didn’t invite Airbus.

WN's board directed management to look at A220, that was the thread starter of one of our many A220 at WN threads here. There were earlier press reports of WN kicking the A220's tires as well. There was no lack of opportunity if the offering was attractive enough, IMO.

tphuang wrote:

You are not winning over new customers with a319neo. But you could win new customers with a220.

Not every airline want to upgauge to a320neo or max8. A220 is the right replacement for a lot of a319 and 737-700 users.

Why would a220 only get 50% market share if it faces minimal competition in it's class?

Because they already lost the business of the biggest player in the A223 market segment, and there really aren't enough new entrants to get the production volume needed to compete with the A320 and 737 families and fund A225 development without getting investments from the parent company that are unlikely.

RJMAZ wrote:

I actually think the A220-500 is the key for program profitability.
...
Without the A220-500 they are stuck squeezing suppliers.

We had the fairy tale threads saying A220 would win the WN order and use the high volume to get suppliers to reduce their prices and ramp up production so even the frames currently being built would become cash positive, the resulting cash would then be applied to develop A225 to drive even more volume, and everyone would live happily forever and ever.

In reality Airbus did not use their opportunity to gain serious consideration at WN so the volume is not going to jump so they have nothing to offer suppliers, and we even see AC cut back its A220 orders. Covid means suppliers are seeing contraction all around them, they are not going to be inclined to make concessions now or any time soon, they have nothing to give, and no volume kicker to give them an incentive to concede.

Airbus could step in and make investments to grease the skids, but the article that started this thread said this was unlikely, and even pre-covid Airbus said the program had to be self-funding.

Noshow wrote:

Owning the A220 Airbus can optimize the A321neo for heavier weights.

A220 has zero impact on Airbus's decisions on the A321neo, IMO.

Opus99 wrote:

SteelChair wrote:

All the same old arguments, and they're still wrong.

There is no market for 319Ns or 737-7Ms, the market has spoken.

Meanwhile, A220s continue to be delivered. It's the lowest block operating cost airplane available that is suitable for operating a major airline (not an RJ).

It does not change the fact that it’s a loss making aircraft for Airbus and they need to find a way to make it profitable

FluidFlow wrote:

Will the A220 line ever become commercially viable? I hope so but what is way more important is that Airbus got IP (and a lot of that including a new cockpit and wing) for free. What was the development cost of the A220? If all Airbus has to do is pump the value of the free IP (3bn$?) into the production it was a good deal. 3bn$ worth of IP paid off over 5-6 years is good, if after that there is still no business case it will become hard to justify more investment.

Wiki ( https://en.wikipedia.org/wiki/Airbus_A220 ) says the cockpit is not unique IP:

The cockpit features the Rockwell Collins Pro Line Fusion avionics suite, which incorporates 15 in (380 mm) displays along with comprehensive navigation, communications, surveillance, engine-indicating and crew-alerting system (EICAS), and aircraft maintenance systems.[112] Other elements of the avionics and other subsystems include Parker Hannifin's flight control, fuel and hydraulics systems; Liebherr Aerospace's air management system; and United Technologies Corporation's air data system, flap and slat actuation systems.[113]

it's all stuff that Airbus could buy and integrate itself, presumably at better prices than what BBD was able to secure.

Airbus has their next wing covered too, they've been working on it since 2015: https://www.airbus.com/newsroom/news/en ... uture.html

There definitely is some value-add in an aircraft program that is in production, but it's not what people here suggest it is.

There are good reasons why BBD only got $1 for the program, it is far from the slam-dunk some make it out to be, and this article confirms the struggles continue.

DL717 wrote:

In other words, the Airbus strategy in buying the program may actually be A220-100/300/500 and A321/322 (or whatever they call it) or maybe an A321/322 replacement and they just want to be in the right place to respond to NMA.

If that was the true strategy then Airbus would have done what it takes on pricing to get WN's business, then made the huge investments needed to ramp up A220 to become a peer of A320 and 737. The WN business would have given them the volume to drive the A220 family into the role you project, and would have really weakened the prospects of the MAX going forward. It would have given Airbus two very strong programs and left Boeing with one weakened one and the need to invest in a clean sheet narrowbody as its highest priority.

Yet, none of that happened, which suggests this is NOT the strategy Airbus is following. We've seen no evidence they are willing to direct such funding towards A220 any time soon. In fact we've seen statements that A220 needs to be self-financing i.e. should not expect major investments from the parent company. hin

I'm not sure why we can't just go with what Airbus is telling us they are doing, doing its best to ramp up volume while cutting down production cost, maybe hit break even on production cost in 2025 if not too badly delayed by covid, let the program become truly commercially viable (i.e. make enough money to cover all costs plus kick off some profit) some time thereafter. Basically run it as an interesting side project that does well in the A318/9 space, and if it does well enough let it grow into A320 space, but not at the expense of A320, which certainly has loyal supporters within management and labor.

By 2030 or so A220 will be decades old and it'll be time for Airbus to do a big re-think of the entire narrowbody space, and who knows what will come of that. Personally I think by then cockpit tech and related regs will mean they will be doing something new, and won't be particularly inclined to keep writing checks to Rockwell Collins, and not particularly inclined to invest more in the A220 tech or the QC labor market, so chances are fairly good they'll let it die on the vine kinda like Boeing did with the DC9/MD80 product line. We know that BBD's unfortunate failures have resulted in it selling off its aviation assets and a lot of the people who once worked on CS have scattered to the wind. At least McDD had military programs that kept a lot of the talent in place for a while.

SteelChair wrote:

FluidFlow wrote:

Will the A220 line ever become commercially viable? I hope so but what is way more important is that Airbus got IP (and a lot of that including a new cockpit and wing) for free. What was the development cost of the A220? If all Airbus has to do is pump the value of the free IP (3bn$?) into the production it was a good deal. 3bn$ worth of IP paid off over 5-6 years is good, if after that there is still no business case it will become hard to justify more investment.

Will any all new airplane ever become commercially viable again?

The 787, 777x, and A220 have been train wrecks. The A350 is only slightly better. The "hot plane" right now is the 321, a re-engineed 30+ year old design. I know I sound like bestyear1989, but it's true. Commercial aviation cannot generate enough capital for any length of time to sustain itself. Meanwhile, NASA pi$$es away billions every year on concepts that will never see the market.

Given this environment, the lowest block cost advantage would seem to have an advantage.

So you make statements about development cost, then suggest the key is operational costs? I'm confused.

We just saw operational costs were not enough to make WN select the A220, so that doesn't seem to be the outcome.

Revelation wrote:

If that was the true strategy then Airbus would have done what it takes on pricing to get WN's business, then made the huge investments needed to ramp up A220 to become a peer of A320 and 737. The WN business would have given them the volume to drive the A220 family into the role you project, and would have really weakened the prospects of the MAX going forward. It would have given Airbus two very strong programs and left Boeing with one weakened one and the need to invest in a clean sheet narrowbody as its highest priority.

Yet, none of that happened, which suggests this is NOT the strategy Airbus is following. We've seen no evidence they are willing to direct such funding towards A220 any time soon. In fact we've seen statements that A220 needs to be self-financing i.e. should not expect major investments from the parent company.

Southwest dumped the 737-300 due to lack of commonality with the MAX. They were never going to go for the A220, or 319/320 for that matter regardless the price. This notion Southwest is going to switch to the A320 family is and has always been crackpot. The discussion makes for good fodder from time to time, but fodder is the extent of the discussion.

edu2703 wrote:

I see some conversations about the A220-500. I think the #1 priority for Airbus is to make the A220 program profitable. Until that happens, an A220-500 shouldn't even be considered.

It's not as if a possible A220-500 would help the A220 program. Competing with the MAX 8 and the A320neo, which are two well-established aircrafts on the market, with thousands of orders, I doubt that there is a considerable market share left for the A220-500 to be viable. Nor do I see Airbus spending money on something they are already losing money on and that will compete with a product they already have.

Actually, that would be the perfect excuse to launch the A220-500: when is the next available slot for a 737 MAX 8 or an A320neo? Having a 3rd option for the airlines might win many orders, and further cement Airbus' dominance on the narrowbody market.

lightsaber wrote:

Then market size. I believe the A318+A319+736+717+73G market has neither shrunk nor grown (just my opinion). So I see a huge potential market for the A220, in particular the A223. I also see a market for the A225 (with Airbus focusing on the A321 for the A32x family).

I'm not sure I agree with this, simply because the structure and role of the passenger air transportation business has evolved over the past several decades. With the emergence of lower-cost carriers, passenger traffic has been stimulated in many markets, thus leading to the use of larger aircraft with lower unit costs to help support lower fares. Further, consolidation among legacy carriers (including national carriers) has also led to the concentration of passenger traffic at larger hubs. In a number of markets, air service has been supplanted by rail or driving as ground transportation investment has improved infrastructure over time.

Even the carrier which has basically been synonymous with the 733 and later 73G, WN, hasn't taken delivery of an aircraft in that size range for nearly a decade (yes, I know they'll take a few hundred MAX 7s). U2/EC/DS started with the 732 & 733, switched to A319 almost 20 years ago, and since then has been upsizing to the A320/1. G4 initially went airbus with used A319s, but today their fleet is over two-thirds A320.

While I do think there still exists a market for the size range covered by the A221 and A223, that market is smaller than it was twenty years ago.

lightsaber wrote:

I'm a big advocate on volume. Every time production is doubled, a decent management team should be able to cut costs an eighth.

That's a gross generalization that doesn't bring much value in this context. We don't know the fraction of the cost that is:

- direct labor (although I'm pretty confident Mirabel workers won't take a XX% pay cut, nor work at twice the speed)

- purchased components and systems ('Suppliers will sell Airbus twice as many at half the price' - but the A220 will be lucky to get to 1/3 of MAX or 32Xneo run-rate volume)

- engineering overhead (although zero contribution margin means the program is covering absolutely none of it!)

- manufacturing overhead (although duplicate lines at Mirabel and Mobile can't be cheap; and, again, zero contribution margin means the program isn't covering any of this today)

Developing an A220-500 variant adds to engineering overhead. It will add to manufacturing overhead, too, unless commonality is just staggeringly high.

tphuang wrote:

The assumption is that they can get to black ink on each produced A220 at some point. It might take a while, but it will get there as long as Airbus is committed on the project.

'Just keep trying' didn't save the 747-8, the A380, or the Q400. There are combinations of variable cost, competition, and size of market space that just leave some programs fatally flawed - across all competitive industries. It's not unique to aircraft manufacture.

SteelChair wrote:

All the same old arguments, and they're still wrong.

There is no market for 319Ns or 737-7Ms, the market has spoken.

Meanwhile, A220s continue to be delivered. It's the lowest block operating cost airplane available that is suitable for operating a major airline (not an RJ).

Maybe you missed WN's order for a hundred 737-7Ms. How many posts did you have in the 'Southwest will buy A220s thread'? How many single orders for 100 frames has the A220 received in the 13 years since launch? That would be zero.

Revelation wrote:

it would have saved everyone a lot of typing.

Indeed.

ScottB wrote:

lightsaber wrote:

Then market size. I believe the A318+A319+736+717+73G market has neither shrunk nor grown (just my opinion). So I see a huge potential market for the A220, in particular the A223. I also see a market for the A225 (with Airbus focusing on the A321 for the A32x family).

I'm not sure I agree with this, simply because the structure and role of the passenger air transportation business has evolved over the past several decades. With the emergence of lower-cost carriers, passenger traffic has been stimulated in many markets, thus leading to the use of larger aircraft with lower unit costs to help support lower fares. Further, consolidation among legacy carriers (including national carriers) has also led to the concentration of passenger traffic at larger hubs. In a number of markets, air service has been supplanted by rail or driving as ground transportation investment has improved infrastructure over time.

Even the carrier which has basically been synonymous with the 733 and later 73G, WN, hasn't taken delivery of an aircraft in that size range for nearly a decade (yes, I know they'll take a few hundred MAX 7s). U2/EC/DS started with the 732 & 733, switched to A319 almost 20 years ago, and since then has been upsizing to the A320/1. G4 initially went airbus with used A319s, but today their fleet is over two-thirds A320.

While I do think there still exists a market for the size range covered by the A221 and A223, that market is smaller than it was twenty years ago.

The A220 success will be due to the lack of RJ capacity driven by scope, and it will come. There is nothing in production that is economically viable -and- fits scope for the RJ market at this time. Without a solution, the 220 is it. Same markets, fewer flights. Think mid 1990's type scheduling.

DL717 wrote:

The A220 success will be due to the lack of RJ capacity driven by scope, and it will come. There is nothing in production that is economically viable -and- fits scope for the RJ market at this time. Without a solution, the 220 is it. Same markets, fewer flights. Think mid 1990's type scheduling.

Ignoring the fact that this is mostly relevant to the U.S. market, we have seen that the DL order came at a selling price which was clearly uneconomical for BBD. Boeing kept United from buying the A220 with a cut-rate deal for 73Gs. I'm not convinced that AA wouldn't choose the MAX 7 if Boeing wanted to make a deal happen.

Embraer will continue to produce the OG E175 as long as the U.S. carriers continue to buy it at acceptable prices. The fuel burn penalty is worth it for the lower trip costs thanks to outsourced carrier wages. I think that ultimately there will be some relaxation of scope to allow the E175-E2, but the U.S. legacy carriers are going to have to make significant concessions to their pilots to make that happen.

But yeah, in the U.S. market we will see continued upgauges -- this is supported by legacy and LCC hub consolidation. STL, CVG, and PIT all peaked north of 500 daily departures for their hub carriers and yet are hubs no more. That traffic all goes through other hubs now (or on different carriers).