Airbus blasted by leasing companies over plans to lift jet production

Duke91 · Mon Oct 25, 2021 3:59 pm

On top of that, Airbus did everything right to be in this position to crush Boeing this decade, starting with the A321neo outselling the Boeing equivalent hard, the A220 picking up steam and the A380 finally coming to an end and not costing money anymore.

The lessors will very likely survive and have a much easier time in this pandemic, especially as they come out on top out of the pandemic due to the whole sell and lease back at a higher than normal rate, and dont have much fixed cost or employees anyway. But they are asking Airbus to forsake this decade for the sake of not giving them a hard time, with nothing in return. I dont see how the lessors are in any way justified to make this demand, as it is not a matter of survival for them anymore.

edit: I just looked it up, Aercap already posts profits exceeding the losses in 2020, same as other lessors. It is not a matter of survival of lessors or a matter of avoiding a disruption of the entire industry here. I can sometimes understand airlines trying to wiggle their way with Airbus if they dont receive much government support, but not if they can clearly survive.

It is like demanding priority at a hospital for a little boo boo you wont die from, while others are fighting for their lives.

MIflyer12 · Mon Oct 25, 2021 4:26 pm

Duke91 wrote:
I dont see why Airbus should tread carefully here. Airbus is not an airline and isnt as affected by Covid as airlines or lessors, simply because they can smooth out production. Should they adjust according to short term demand as much as lessors would do? Sucks to be in the wrong business at this time, but thats life

Should Airbus and Boeing treat lease companies and carriers as valued business partners, or as chum meat?

Leasing does have a useful role in the industry. Among other things, for a carrier it removes the risk of trying to sell an asset that has depreciated to a surprising extent, such that it can have regular fleet renewal (with is surely a benefit to manufacturers).

lightsaber · Mon Oct 25, 2021 4:37 pm

MIflyer12 wrote:
Duke91 wrote:
I dont see why Airbus should tread carefully here. Airbus is not an airline and isnt as affected by Covid as airlines or lessors, simply because they can smooth out production. Should they adjust according to short term demand as much as lessors would do? Sucks to be in the wrong business at this time, but thats life

Should Airbus and Boeing treat lease companies and carriers as valued business partners, or as chum meat?

Leasing does have a useful role in the industry. Among other things, for a carrier it removes the risk of trying to sell an asset that has depreciated to a surprising extent, such that it can have regular fleet renewal (with is surely a benefit to manufacturers).

More building on your comment, I posted a link on how leasing companies buy 40% of airliners. A hostile relationship never works, either way.

As you noted, leasing companies take on the value risk. If more risk is imposed on them, they must price in that risk.

Plus there is a lot of sales/leaseback where effectively the mortgage has walk away provisions.

Leasors have not made the business case on A380s, A340-5/6, and now the A320CEO.

When 40% of the customer base complains...

Lightsaber

seahawk · Mon Oct 25, 2021 4:53 pm

JonesNL wrote:
seahawk wrote:
Gremlinzzzz wrote:
Boeing's issues lie with Boeing itself. It is hard to imagine that Airbus should stay still just because they need to maintain a duopoly where one competitor is sabotaging itself.

What means staying still? Does it mean making money considering that the portfolio is as up-to-date as it can be. With neither product having an EiS more than 10 years ago.

A350 - 2014
A320NEO - 2016
A330NEO - 2018

it seems like a good time to earn the money for the next generation that will be needed around 2035, when the engines promise the next significant step in fuel burn reduction.

While I agree that both Boeing and Airbus will need to reap the fruits this decade of their labours last decade, I think they need a bigger step change for the next iterations. You are not moving the needle In the most ideal scenario where they introduce a plane that is 30% more efficient and the market grows by 30%.

In Europe aviation will be given hard targets to reduce total impact and not only reduce co2 per passenger seat...

Agreed, technology alone will not achieve the desired CO2 emission reduction. The amount of flying will have to be reduced as well. And 2020 showed how little flying is actually unavoidable.

Phosphorus · Mon Oct 25, 2021 5:20 pm

MIflyer12 wrote:
Duke91 wrote:
I dont see why Airbus should tread carefully here. Airbus is not an airline and isnt as affected by Covid as airlines or lessors, simply because they can smooth out production. Should they adjust according to short term demand as much as lessors would do? Sucks to be in the wrong business at this time, but thats life

Should Airbus and Boeing treat lease companies and carriers as valued business partners, or as chum meat?

Leasing does have a useful role in the industry. Among other things, for a carrier it removes the risk of trying to sell an asset that has depreciated to a surprising extent, such that it can have regular fleet renewal (with is surely a benefit to manufacturers).

It could be down to a simple choice -- Airbus makes a lot of planes, trying to drive costs down via scale, while maintaining excellence, and expects both airlines and leasing companies to soak them up.
Leasing companies have place on their portfolios, it's just (some of) these spots are occupied by competing product. Removing competing product from leasing companies portfolios helps Airbus to place their product.
Competing product can go find business elsewhere -- like with airlines directly; or in cargo business, or in military applications.

Or am I getting it wrong?

Noshow · Mon Oct 25, 2021 5:29 pm

Sort of convincing theory. Airbus currently has an advantage with A321neo vs. MAX and now wants to flood the market in a short time with more A321neos. This is affecting the existing mainstream aircraft fleets of leasing companies. Residual value, rates, demand and such. Cargo conversion looks like some tempting option.

Duke91 · Mon Oct 25, 2021 5:38 pm

Lessors are in the business of curbing risk, especially in times of sudden drops of demands. Airbus is in the business of selling planes.

I get it, you have to keep customers happy. However I don't see any reasons whatsoever why Airbus should do so, losing billions just so that lessors can keep their lease rate up earning them money instead of Airbus. Especially as lessors are not even bleeding money. They are just not making as much as would have if supplies were low.

And if Airbus does them that favor, how are they 'guaranteed' that lessors will honor their commitments or words in return? It would be a win - potential lose situation. Bad deal. At least do some kind of contract (which would be cartel like)

PhilipBass · Mon Oct 25, 2021 7:44 pm

AerCap and GECAS both made over 1 billion in profit in 2019. If they are earning supernormal profits and soaking up all Airbus production then Airbus should increase production to allow other Leasors to enter the market pushing down lease prices to Airlines generating further demand for new airframes. It isn't as though there isn't an excess of money seeking opportunities these days.
The large Leasors are eating Airbus' lunch.

lightsaber · Mon Oct 25, 2021 9:41 pm

Duke91 wrote:
Lessors are in the business of curbing risk, especially in times of sudden drops of demands. Airbus is in the business of selling planes.

I get it, you have to keep customers happy. However I don't see any reasons whatsoever why Airbus should do so, losing billions just so that lessors can keep their lease rate up earning them money instead of Airbus. Especially as lessors are not even bleeding money. They are just not making as much as would have if supplies were low.

And if Airbus does them that favor, how are they 'guaranteed' that lessors will honor their commitments or words in return? It would be a win - potential lose situation. Bad deal. At least do some kind of contract (which would be cartel like)

There are no guarantees. Airbus needs to increase production, but if they do so fully, the leasing companies and banks that are in aircraft loans will not be able to loan as much. In more demand than supply, the leasing companies increase their profits.

This isn't about fair. Neither side will be fair. It is to start a discussion. Airbus doesn't care about the leasing companies losing $1 billion. They care if because of the lost leverage, the leasing companies then cannot do leases on say $7 billion in aircraft.

There is demand at Airbus price, but a reduced demand if leasing companies are forced to change their assumptions impressed by their investors.

Have you read "The Lexus and the Olive Tree?" Investors have the power via mouse clicks. They either make their ROI or move the money.

With the three biggest leasing companies warning of over-production, they might just be saying we won't finance anymore than we promised. There is Airbus' problem. 40% of aircraft per my prior link were financed by leasing companies, how do you plan to finance this production increase? Airlines must borrow.

Lightsaber

EBT · Tue Oct 26, 2021 1:53 am

Revelation wrote:
Duke91 wrote:
I dont see why Airbus should tread carefully here. Airbus is not an airline and isnt as affected by Covid as airlines or lessors, simply because they can smooth out production. Should they adjust according to short term demand as much as lessors would do? Sucks to be in the wrong business at this time, but thats life

There is obviously a lot of backlog that needs to be reduced, so should they just sit still and dont reap the once in a lifetime opportunity to crush Boeing and gain even more market share just because lessors have a hard time?

Seems to me that lessors are desperate, and seeing that Airbus is projected to make 4 billions or more in profit this year, they are begging for more relief without offering anything in return.

it's not clear to me that increasing market share by producing large numbers of aircraft that lessors can't place is a winning strategy. In the end you just force lessors to go under, then their assets get sold cheap in bankruptcy court, then the manufacturers lose out because this undermines future selling prices. It also makes other lessors less willing to order more frames since supply exceeds demand. It could cause a nice profit in a small window while sinking the market for many years to come.

Yes, there is risk in letting the production cycle get ahead of the credit cycle, and the space between them is where the lessors and financiers make their money. If conditions stayed the same as they are today and production of narrowbodies went up, then the lessors may be OK given the cost of debt is cheap, passenger demand will be on the rebound (albeit with a few significant dips along the way) and so placement shouldn't be too much of an issue - albeit on terms not as good as they have been previously.

The bigger issue is how the extra supply of new generation jets affects the residual values of the 737NG/A320ceo families, and I think this is where the lessors see the challenge. The huge amount of cheap capital that has been swishing around the aircraft financing market over the past decade was good for airlines seeking good deals on sale and leasebacks, but also kept the used andsale-with-lease-attached markets quite bubbly, thus keeping demand up. Once you get past the tipping point with the new generation jets, that's when an anchor gets attached to the values for those older jets. And the likes of AerCap, Avolon and BOC Aviation are full of relatively new (but nonetheless older generation) NGs and ceos that are less attractive in the market. Sure, freighter conversions help some of that, but reality is that most pax aircraft are converted when their values are just above scrap value, and in the next five years or so there will be a lot of good aircraft with green time before their next major check for freight operators to choose from.

Having said all that, the lessors will figure it out - they always do. A few may end up caught short, and the assets will be bought up by others that see the opportunity to make money. There's always cash sloshing around in aviation, and it is the financiers and lessors that generally take the lion's share of it.

zkojq · Tue Oct 26, 2021 4:40 am

Revelation wrote:
it's not clear to me that increasing market share by producing large numbers of aircraft that lessors can't place is a winning strategy. In the end you just force lessors to go under, then their assets get sold cheap in bankruptcy court, then the manufacturers lose out because this undermines future selling prices. It also makes other lessors less willing to order more frames since supply exceeds demand. It could cause a nice profit in a small window while sinking the market for many years to come.

The aircraft that lessors are struggling to place are nearly exclusively widebodies - not something that's influenced much by the production rate of A320neo and A321neos.

seahawk · Tue Oct 26, 2021 5:07 am

Placing CEOs for good rates, has also become difficult.

Gremlinzzzz · Tue Oct 26, 2021 8:00 am

seahawk wrote:
Gremlinzzzz wrote:
seahawk wrote:
Crush Boeing and achieve what? Turning the duopoly into a monopoly just to be split up or having governments invest money into building new competitors? The only way to "crush" Boeing is destroying the business case of a MoM and securing the market with the A321. But that is not "crushing" Boeing as a company, it is just avoiding a competitor that would be most unpleasant for Airbus to counter.
Boeing's issues lie with Boeing itself. It is hard to imagine that Airbus should stay still just because they need to maintain a duopoly where one competitor is sabotaging itself.

What means staying still? Does it mean making money considering that the portofolio is as up-to-date as it can be. With neither product having an EiS more than 10 years ago.

A350 - 2014
A320NEO - 2016
A330NEO - 2018

it seems like a good time to earn the money for the next generation that will be needed around 2035, when the engines promise the next significant step in fuel burn reduction.

They have been working on a new wing for the narrow body. They can release that as they wait for new engines.

That is not sitting still.

Noshow · Tue Oct 26, 2021 8:03 am

A new wing will be optimized for new engines so it will have to be paired. Having said that they invest constantly in perfecting the A320ceo and neo. Below the horizon of some observers it seems.

Duke91 · Tue Oct 26, 2021 8:41 am

https://www.reuters.com/business/aerosp ... 021-10-25/

"The key to all this is that we have these firm contracts with our clients - we cannot say that we are not going to respect those contracts because we think they are too many for the business," said Airbus Latin America president Arturo Barreira, on the sidelines of the ALTA airline conference in Bogota.

"We have those commitments with our clients, so the demand is there and we are seeing that the interests of many airlines to improve the fleet are being reactivated," he told Reuters.

PhilipBass · Tue Oct 26, 2021 9:13 am

An Airline can "create" the "need" for a new plane, look for a lease company to "provision" it and if AerCap doesn't want to bid low enough to win the business then boohoo as another lease company supported by for example a wealth fund will step in. The leasors don't make the market, the airlines make the market.
Leasors have insinuated themselves in to the position of "Partners". They are not. They are perhaps enablers for placing of airframes with airlines. The most they can expect is that Airbus is civil to them in negotiations and doesn't mislead them with regard to their business intentions but setting the production rate is entirely within Airbus' purview.

PhilipBass · Tue Oct 26, 2021 9:14 am

seahawk wrote:
Placing CEOs for good rates, has also become difficult.

When the "good rate" doesn't equal a "fair rate" then that is only natural and that is the way it should be. Holding planes isn't like prime development land which they aren't making any more of. Leasors can't be allowed to corner the market.

Revelation · Tue Oct 26, 2021 3:46 pm

Duke91 wrote:
https://www.reuters.com/business/aerospace-defense/airbus-executive-says-output-goal-based-jet-deals-2021-10-25/

"The key to all this is that we have these firm contracts with our clients - we cannot say that we are not going to respect those contracts because we think they are too many for the business," said Airbus Latin America president Arturo Barreira, on the sidelines of the ALTA airline conference in Bogota.

"We have those commitments with our clients, so the demand is there and we are seeing that the interests of many airlines to improve the fleet are being reactivated," he told Reuters.

Seems disingenuous to me. Refers to firm contracts without referring to airlines asking for deferrals. Of course they have firm contracts, orders have to be placed years in advance, long before anyone knew COVID would change the market not just temporarily but also permanently. Yes, they have firm contracts, and yes they've been seen enforcing them, but at some point the high production rate very well can be the source of systemic issues for the industry.

pune · Tue Oct 26, 2021 4:03 pm

Noshow wrote:
A new wing will be optimized for new engines so it will have to be paired. Having said that they invest constantly in perfecting the A320ceo and neo. Below the horizon of some observers it seems.

Can somebody share more info. on the same -

https://www.avweb.com/aviation-news/air ... prototype/

Duke91 · Tue Oct 26, 2021 4:32 pm

Revelation wrote:
Duke91 wrote:
https://www.reuters.com/business/aerospace-defense/airbus-executive-says-output-goal-based-jet-deals-2021-10-25/

"The key to all this is that we have these firm contracts with our clients - we cannot say that we are not going to respect those contracts because we think they are too many for the business," said Airbus Latin America president Arturo Barreira, on the sidelines of the ALTA airline conference in Bogota.

"We have those commitments with our clients, so the demand is there and we are seeing that the interests of many airlines to improve the fleet are being reactivated," he told Reuters.

Seems disingenuous to me. Refers to firm contracts without referring to airlines asking for deferrals. Of course they have firm contracts, orders have to be placed years in advance, long before anyone knew COVID would change the market not just temporarily but also permanently. Yes, they have firm contracts, and yes they've been seen enforcing them, but at some point the high production rate very well can be the source of systemic issues for the industry.

The thing is that these systemic issues are likely not long-term given that demand for planes will return to normal level at some point. It may lead to some stress in the short term, but as said, lessors are not exactly bleeding from this pandemic given that they were the first to post profits again. I would hardly call that a systemic issue then.

I don't see why Airbus should do them a favor in this case. And even if some lessors go down (which they won't, since they are not as affected by the pandemic, hell aercap has like 400 employees), new lessors will sproud again when demand returns. That is not a long-term systemic issue to me.

Revelation · Tue Oct 26, 2021 4:56 pm

Interesting suggestion from the CEO of Raytheon (Pratt's parent):

Raytheon Technologies (RTX.N) Chief Executive Greg Hayes said earlier he was sceptical whether the market would support tentative Airbus proposals to lift A320-family output to 75 a month by 2025 from some 40 now.

Ref: https://www.reuters.com/business/aerosp ... 021-10-26/

GE's CEO is not willing to go on the record beyond saying they're committed to existing targets:

Jet engine maker General Electric Co (GE.N) is aligned with "near-term" plans of both Airbus (AIR.PA) and Boeing (BA.N) to ramp up production, its Chief Executive Larry Culp said on Tuesday.

Culp, however, declined to comment on Airbus' plan to go beyond an immediate ramp-up and almost double production of its best-selling A320 jets by 2025. This plan has drawn criticism from engine makers and aircraft leasing companies about the risk of overproduction during a fragile airline industry recovery from the pandemic.

Ref: https://www.reuters.com/business/aerosp ... 021-10-26/

sxf24 · Tue Oct 26, 2021 5:42 pm

PhilipBass wrote:
An Airline can "create" the "need" for a new plane, look for a lease company to "provision" it and if AerCap doesn't want to bid low enough to win the business then boohoo as another lease company supported by for example a wealth fund will step in. The leasors don't make the market, the airlines make the market.
Leasors have insinuated themselves in to the position of "Partners". They are not. They are perhaps enablers for placing of airframes with airlines. The most they can expect is that Airbus is civil to them in negotiations and doesn't mislead them with regard to their business intentions but setting the production rate is entirely within Airbus' purview.

It is important to understand that the (non-governmental money) that funds commercial aviation comes from the same pool of banks and investors, whether it goes to airlines or lessors. If lessors are unable to profitably place a type of aircraft and/or have to take write-downs on those airplanes, funding will get cutoff. Airlines will also struggle to get funding for the same aircraft type. If available, funding will be at a lower amount than anticipated. Since most airlines don't have excess cash to cover the shortfall in financing, they'd go to the OEM and ask for a price cut. Of course the OEM can step in and fund the deliveries themselves, but it's not a great outcome.

Lessors are the largest owners of single aisle airplanes. The largest LCC airlines, like Air Asia, EasyJet, Frontier, Indigo, Lion and Wizz depend 100% of lessors to fund their deliveries. While it's highly unlikely lessors would stop funding Airbus narrowbodies, a pull back would be catastrophic.

PhilipBass · Tue Oct 26, 2021 6:16 pm

If you treat them as of systemic risk then they become of systemic risk. Airbus would be better off taking them down a peg or two.

smartplane · Tue Oct 26, 2021 6:47 pm

NB financing has a massive following, attracting lazy, unsophisticated funding participants, who have undertaken little or no due diligence, because it was a 'sure thing' when interest rates were at record lows.

Now, lessors have funding participants who realise outcomes will not be as they envisaged, especially on longer leases, on no longer current models.

This will result in a funding gap for lessors, as current participants do not roll funding into financing new leases at current production rates, let alone increased levels.

Lessors are looking at some relief on NB's as has happened previously with WB's, including buybacks to protect residuals long after that opportunity has traditionally gone, and / or for OEM's to directly / indirectly purchase existing portfolios, and / or more financial support on new purchases.

OEM's have resisted post-sale financial support, other than to strategic and / or equity partners in respect to used WB's. If they are going to play a more overt role guaranteeing lessor / funding participant returns to place new aircraft, they may as well cut them out altogether.

lightsaber · Tue Oct 26, 2021 7:02 pm

smartplane wrote:
Now, lessors have funding participants who realise outcomes will not be as they envisaged, especially on longer leases, on no longer current models.

This will result in a funding gap for lessors, as current participants do not roll funding into financing new leases at current production rates, let alone increased levels.

This is the crux of the problem the funding gap. It is a question on how the increased production will be financed.

There are multiple ways this can play out. If there is a continued increase in production, existing leasing companies will play a reduced role. Who will fund the gap?

Lightsaber

MIflyer12 · Tue Oct 26, 2021 7:52 pm

Beoing has no problem borrowing money. Does Airbus? How much money is needed for production capacity expansion and incremental working capital? Under $10 Billion? Not a hindrance to Boeing in any way.

Boeing’s capital raise, first reported by Reuters earlier this week, is the sixth-largest investment-grade bond offering of all time and the biggest year-to-date, according to Refinitiv data.

https://www.reuters.com/article/us-boei ... SKBN22C3SJ

lightsaber · Tue Oct 26, 2021 9:48 pm

Airbus rebuffs concerns:
https://www.nasdaq.com/articles/airbus- ... -10-25?amp

Airbus has responded by saying it is sticking to its plans, which involve a firm target of 64 A320-family jets a month in the second quarter of 2023, along with studies to raise monthly output to 70 in early 2024 and 75 by 2025. That compares with about 40 a month now.

I admit I have the engine maker mindset (they asked Airbus to not do this too). But nope.

At rate 40 (which is somehow 430 per year ..)
Going to rate 64 (s/b 688/yr)
Then up to 750 to 806 per year.

OMG, this is going to not only hurt Boeing, but tank used A320CEO values in my opinion. There will be little, if any, price recovery on 737NG and A32xCEO as this locks the market into surplus (again, in my opinion).

This really hurts CFM (pushes old narrowbodies with CFM-56 to low utilization duty earlier) as well as Pratt on the V2500.

Oh my, the die has been cast!

Lightsaber

late edit: This makes everyone's move into A32x & 737NG conversions to freight look brilliant.

sxf24 · Tue Oct 26, 2021 11:28 pm

MIflyer12 wrote:
Beoing has no problem borrowing money. Does Airbus? How much money is needed for production capacity expansion and incremental working capital? Under $10 Billion? Not a hindrance to Boeing in any way.

Boeing’s capital raise, first reported by Reuters earlier this week, is the sixth-largest investment-grade bond offering of all time and the biggest year-to-date, according to Refinitiv data.

https://www.reuters.com/article/us-boei ... SKBN22C3SJ

Airbus and Boeing should borrow money to pump out more airplanes that are declining in value because of oversupply?

LDRA · Tue Oct 26, 2021 11:39 pm

lightsaber wrote:
Airbus rebuffs concerns:
https://www.nasdaq.com/articles/airbus- ... -10-25?amp

Airbus has responded by saying it is sticking to its plans, which involve a firm target of 64 A320-family jets a month in the second quarter of 2023, along with studies to raise monthly output to 70 in early 2024 and 75 by 2025. That compares with about 40 a month now.

I admit I have the engine maker mindset (they asked Airbus to not do this too). But nope.

At rate 40 (which is somehow 430 per year ..)
Going to rate 64 (s/b 688/yr)
Then up to 750 to 806 per year.

OMG, this is going to not only hurt Boeing, but tank used A320CEO values in my opinion. There will be little, if any, price recovery on 737NG and A32xCEO as this locks the market into surplus (again, in my opinion).

This really hurts CFM (pushes old narrowbodies with CFM-56 to low utilization duty earlier) as well as Pratt on the V2500.

Oh my, the die has been cast!

Lightsaber

late edit: This makes everyone's move into A32x & 737NG conversions to freight look brilliant.

CO2 regulations are coming. There will be demand for these new jets. Governments in major markets will ensure that

JayinKitsap · Wed Oct 27, 2021 12:36 am

Energy prices are rising, which is a huge chunk of airline cost, but also affects consumer demand. Rising ticket prices when the heating bill went crazy reduces demand.

Inflation is rising fast, in particular in commodities. I would expect the contracts have some agreed to price escalator, so the cost to purchase the plane is rising. Interest rates will be rising, they are priced at the real interest rate + a few percent, well if inflation is at 10% for a year new leases or financing will be priced at 12% or higher.

A surplus of planes just craters the value, suddenly the lessor needs to recover his investment in 10 years, not 20. Higher interest rates also push lease terms shorter.

Maybe I am pessimistic, but I can't see aviation to return to the growth rates pre-covid and may be a few years still to get back to 100%. NB production volumes on the order of 800 per year for both A & B would still be over optimum but not distorting the market.

Duke91 · Wed Oct 27, 2021 4:27 am

Just to be nitpicky: Prices are going up, but not inflation right now if you look at 3 month inflation. Inflation is in fact going down these months

seahawk · Wed Oct 27, 2021 5:08 am

lightsaber wrote:
Airbus rebuffs concerns:
https://www.nasdaq.com/articles/airbus- ... -10-25?amp

Airbus has responded by saying it is sticking to its plans, which involve a firm target of 64 A320-family jets a month in the second quarter of 2023, along with studies to raise monthly output to 70 in early 2024 and 75 by 2025. That compares with about 40 a month now.

I admit I have the engine maker mindset (they asked Airbus to not do this too). But nope.

At rate 40 (which is somehow 430 per year ..)
Going to rate 64 (s/b 688/yr)
Then up to 750 to 806 per year.

OMG, this is going to not only hurt Boeing, but tank used A320CEO values in my opinion. There will be little, if any, price recovery on 737NG and A32xCEO as this locks the market into surplus (again, in my opinion).

This really hurts CFM (pushes old narrowbodies with CFM-56 to low utilization duty earlier) as well as Pratt on the V2500.

Oh my, the die has been cast!

Lightsaber

late edit: This makes everyone's move into A32x & 737NG conversions to freight look brilliant.

Imho there is one piece missing in the puzzle. This is a unusually daring strategy from Airbus, imho it only makes sense if the do an A322, which would aim at an currently unoccupied market segment and would not compete with A320CEOs at least.

Noshow · Wed Oct 27, 2021 8:55 am

How sure can we be that the chinese real estate issue is not escalating and affecting the financial markets and asian aircraft demand? What if we commit to build all those planes and then demand is flat for some years? Can the US and Europe step in with the numbers needed? If we are only two years away from dramatic rate increases they now sign firm orders upstream.

PhilipBass · Wed Oct 27, 2021 9:34 am

Airbus Investors appear unconcerned. Share price is static.

JonesNL · Wed Oct 27, 2021 12:27 pm

lightsaber wrote:
Airbus rebuffs concerns:
https://www.nasdaq.com/articles/airbus- ... -10-25?amp

Airbus has responded by saying it is sticking to its plans, which involve a firm target of 64 A320-family jets a month in the second quarter of 2023, along with studies to raise monthly output to 70 in early 2024 and 75 by 2025. That compares with about 40 a month now.

I admit I have the engine maker mindset (they asked Airbus to not do this too). But nope.

At rate 40 (which is somehow 430 per year ..)
Going to rate 64 (s/b 688/yr)
Then up to 750 to 806 per year.

OMG, this is going to not only hurt Boeing, but tank used A320CEO values in my opinion. There will be little, if any, price recovery on 737NG and A32xCEO as this locks the market into surplus (again, in my opinion).

This really hurts CFM (pushes old narrowbodies with CFM-56 to low utilization duty earlier) as well as Pratt on the V2500.

Oh my, the die has been cast!

Lightsaber

late edit: This makes everyone's move into A32x & 737NG conversions to freight look brilliant.

Looking at the projections the NB market will have recovered by summer 2022. Going to pre-covid production rate 1 year later q2 2023 doesn’t seem like a bad idea, especially looking at oil prices rising.

With 0 new orders and a production rate of 750 planes per year the order backlog is 7+ years(!!!) long. Which will be problematic for customers that don’t want to wait this long. I think Airbus van gauge demand the best as they are already complaining that they have more order requests than they can fill…

FluidFlow · Wed Oct 27, 2021 2:43 pm

JonesNL wrote:
lightsaber wrote:
Airbus rebuffs concerns:
https://www.nasdaq.com/articles/airbus- ... -10-25?amp

Airbus has responded by saying it is sticking to its plans, which involve a firm target of 64 A320-family jets a month in the second quarter of 2023, along with studies to raise monthly output to 70 in early 2024 and 75 by 2025. That compares with about 40 a month now.

I admit I have the engine maker mindset (they asked Airbus to not do this too). But nope.

At rate 40 (which is somehow 430 per year ..)
Going to rate 64 (s/b 688/yr)
Then up to 750 to 806 per year.

OMG, this is going to not only hurt Boeing, but tank used A320CEO values in my opinion. There will be little, if any, price recovery on 737NG and A32xCEO as this locks the market into surplus (again, in my opinion).

This really hurts CFM (pushes old narrowbodies with CFM-56 to low utilization duty earlier) as well as Pratt on the V2500.

Oh my, the die has been cast!

Lightsaber

late edit: This makes everyone's move into A32x & 737NG conversions to freight look brilliant.

Looking at the projections the NB market will have recovered by summer 2022. Going to pre-covid production rate 1 year later q2 2023 doesn’t seem like a bad idea, especially looking at oil prices rising.

With 0 new orders and a production rate of 750 planes per year the order backlog is 7+ years(!!!) long. Which will be problematic for customers that don’t want to wait this long. I think Airbus van gauge demand the best as they are already complaining that they have more order requests than they can fill…

They also have a great margin at the moment and with the money sink A380 gone, the money will be flowing if Airbus can conserve margin while increasing output.

On top of that with the improvements from the XLR development + the expected thrust bumb we might also see an additional PIP regarding fuel burn. So I can see why Airbus is pushing ahaed, the oppurtunity is there to cash in massively in the next years. And this is needed to finance the huge R&D needed for the next generation of NB that will be inevitable because the moment the technology seems somewhat feasible governments will push hard for fleet renewals and even stricter environmental regulations. I predict that in 2040 the EU will ban the use of aircraft with engine tech older than the 737Max/Neo and probaly the productition and aquisition of the current generation.

Jetport · Wed Oct 27, 2021 11:08 pm

seahawk wrote:
lightsaber wrote:
Airbus rebuffs concerns:
https://www.nasdaq.com/articles/airbus- ... -10-25?amp

Airbus has responded by saying it is sticking to its plans, which involve a firm target of 64 A320-family jets a month in the second quarter of 2023, along with studies to raise monthly output to 70 in early 2024 and 75 by 2025. That compares with about 40 a month now.

I admit I have the engine maker mindset (they asked Airbus to not do this too). But nope.

At rate 40 (which is somehow 430 per year ..)
Going to rate 64 (s/b 688/yr)
Then up to 750 to 806 per year.

OMG, this is going to not only hurt Boeing, but tank used A320CEO values in my opinion. There will be little, if any, price recovery on 737NG and A32xCEO as this locks the market into surplus (again, in my opinion).

This really hurts CFM (pushes old narrowbodies with CFM-56 to low utilization duty earlier) as well as Pratt on the V2500.

Oh my, the die has been cast!

Lightsaber

late edit: This makes everyone's move into A32x & 737NG conversions to freight look brilliant.

Imho there is one piece missing in the puzzle. This is a unusually daring strategy from Airbus, imho it only makes sense if the do an A322, which would aim at an currently unoccupied market segment and would not compete with A320CEOs at least.

Adding 12 coach seats to an A321 fills an unoccupied market, really? :confused:

zkojq · Wed Oct 27, 2021 11:29 pm

Higher production rate = lower unit costs. 75 a month is enormous, Boeing will be struggling to match unit costs for the MAX. And Airbus seems to be having no problem maintaining margins on the A321neo.

This move is going to be decisive for winning future RFPs. Could likely swing multiple "must wins" for the MAX in the neo's direction.

seahawk · Thu Oct 28, 2021 5:33 am

Jetport wrote:
seahawk wrote:
lightsaber wrote:
Airbus rebuffs concerns:
https://www.nasdaq.com/articles/airbus- ... -10-25?amp

Airbus has responded by saying it is sticking to its plans, which involve a firm target of 64 A320-family jets a month in the second quarter of 2023, along with studies to raise monthly output to 70 in early 2024 and 75 by 2025. That compares with about 40 a month now.

I admit I have the engine maker mindset (they asked Airbus to not do this too). But nope.

At rate 40 (which is somehow 430 per year ..)
Going to rate 64 (s/b 688/yr)
Then up to 750 to 806 per year.

OMG, this is going to not only hurt Boeing, but tank used A320CEO values in my opinion. There will be little, if any, price recovery on 737NG and A32xCEO as this locks the market into surplus (again, in my opinion).

This really hurts CFM (pushes old narrowbodies with CFM-56 to low utilization duty earlier) as well as Pratt on the V2500.

Oh my, the die has been cast!

Lightsaber

late edit: This makes everyone's move into A32x & 737NG conversions to freight look brilliant.

Imho there is one piece missing in the puzzle. This is a unusually daring strategy from Airbus, imho it only makes sense if the do an A322, which would aim at an currently unoccupied market segment and would not compete with A320CEOs at least.

Adding 12 coach seats to an A321 fills an unoccupied market, really?

12 or 18 - but yes in that size your only option are old 757s.

Duke91 · Thu Oct 28, 2021 6:25 am

Airbus doing the exact opposite what the lessors demand: A320, A330 and A350 production targets raised by one each.
https://www.aero.de/news-41133/Airbus-b ... Blick.html

Sorry couldnt find a short news version in english yet

PhilipBass · Thu Oct 28, 2021 9:55 am

If a company like Ryanair which had 100% commitment to Boeing openly express a desire to buy Airbus then they'll have no problem selling their wares to the market. It seems their product stands head and shoulders above the competition.

FluidFlow · Thu Oct 28, 2021 10:25 am

Also very interesting, Airbus projects 4.5Bn€ operative profit (before tax). That is massive, no wonder they can increase production rate.

Duke91 · Thu Oct 28, 2021 3:38 pm

FluidFlow wrote:
Also very interesting, Airbus projects 4.5Bn€ operative profit (before tax). That is massive, no wonder they can increase production rate.

Even the 4.5 seems to be quite a conservative estimate, as they did not include the 5th quarter

Jetport · Thu Oct 28, 2021 4:11 pm

Duke91 wrote:
Airbus doing the exact opposite what the lessors demand: A320, A330 and A350 production targets raised by one each.
https://www.aero.de/news-41133/Airbus-b ... Blick.html

Sorry couldnt find a short news version in english yet

Here is a Reuters article on the EADS announcement. The A330 increase is shocking, they don't have any backlog? I thought the next A330 announcement would be a reduction to zero/month.

https://finance.yahoo.com/news/1-airbus ... 50661.html

Duke91 · Thu Oct 28, 2021 4:28 pm

Jetport wrote:
Duke91 wrote:
Airbus doing the exact opposite what the lessors demand: A320, A330 and A350 production targets raised by one each.
https://www.aero.de/news-41133/Airbus-b ... Blick.html

Sorry couldnt find a short news version in english yet

Here is a Reuters article on the EADS announcement. The A330 increase is shocking, they don't have any backlog? I thought the next A330 announcement would be a reduction to zero/month.

https://finance.yahoo.com/news/1-airbus ... 50661.html

The backlog is 300 for all A330 variants, so that would be a whooping 25 years at the rate of 3 a month.

Jetport · Thu Oct 28, 2021 4:37 pm

Duke91 wrote:
Jetport wrote:
Duke91 wrote:
Airbus doing the exact opposite what the lessors demand: A320, A330 and A350 production targets raised by one each.
https://www.aero.de/news-41133/Airbus-b ... Blick.html

Sorry couldnt find a short news version in english yet

Here is a Reuters article on the EADS announcement. The A330 increase is shocking, they don't have any backlog? I thought the next A330 announcement would be a reduction to zero/month.

https://finance.yahoo.com/news/1-airbus ... 50661.html

The backlog is 300 for all A330 variants, so that would be a whooping 25 years at the rate of 3 a month.

The real backlog is a fraction of 300, their largest customer (AirAsia X) will not be taking any. If Airbus allowed customers out of their A330 contracts penalty free today the backlog would likely shrink to a few dozen.

texl1649 · Thu Oct 28, 2021 4:46 pm

Jetport wrote:
Duke91 wrote:
Airbus doing the exact opposite what the lessors demand: A320, A330 and A350 production targets raised by one each.
https://www.aero.de/news-41133/Airbus-b ... Blick.html

Sorry couldnt find a short news version in english yet

Here is a Reuters article on the EADS announcement. The A330 increase is shocking, they don't have any backlog? I thought the next A330 announcement would be a reduction to zero/month.

https://finance.yahoo.com/news/1-airbus ... 50661.html

They must be preparing for some order announcements in Dubai etc.

In all seriousness, Airbus has a massive backlog, and yes the Chinese will own about 20 percent of the market in 5 or so years (regardless of what anyone says about their product). The C919 and ARJ21 are going to just ramp up. This is one of those ‘smoke ‘em if you’ve got ‘‘em’ moments for them, as the volume also let’s them decrease costs/win more orders. Mfg’s are always essentially ‘frenemies’ with leasing companies. Frankly, I’ve felt that the share of the global fleet that has been leased has been a bit too high anyway.

Revelation · Thu Oct 28, 2021 5:07 pm

sxf24 wrote:
Airbus and Boeing should borrow money to pump out more airplanes that are declining in value because of oversupply?

Yet they have firm contracts in hand. It's not like they can cancel orders because they fear oversupply. Boeing canceled some freighter contracts because deposit payments stopped but still got sued later when the freighter market kicked in and those contracts became valuable.

Leasing companies exist to handle risk. When they get it wrong they suffer. There definitely were warnings about a bubble pre-covid. Some will pay the price. That may mean future leases are more expensive, but life will go on.

sxf24 · Thu Oct 28, 2021 7:20 pm

Revelation wrote:
sxf24 wrote:
Airbus and Boeing should borrow money to pump out more airplanes that are declining in value because of oversupply?

Yet they have firm contracts in hand. It's not like they can cancel orders because they fear oversupply. Boeing canceled some freighter contracts because deposit payments stopped but still got sued later when the freighter market kicked in and those contracts became valuable.

Leasing companies exist to handle risk. When they get it wrong they suffer. There definitely were warnings about a bubble pre-covid. Some will pay the price. That may mean future leases are more expensive, but life will go on.

Forcing a contract down a customer's throat is a good way to loose future business.

WayexTDI · Thu Oct 28, 2021 7:47 pm

sxf24 wrote:
Revelation wrote:
sxf24 wrote:
Airbus and Boeing should borrow money to pump out more airplanes that are declining in value because of oversupply?

Yet they have firm contracts in hand. It's not like they can cancel orders because they fear oversupply. Boeing canceled some freighter contracts because deposit payments stopped but still got sued later when the freighter market kicked in and those contracts became valuable.

Leasing companies exist to handle risk. When they get it wrong they suffer. There definitely were warnings about a bubble pre-covid. Some will pay the price. That may mean future leases are more expensive, but life will go on.

Forcing a contract down a customer's throat is a good way to loose future business.

Customers have no problem forcing a contract cancellation on their suppliers when they see fit, breaching the contract; why wouldn't you want a supplier to force a customer to respect their contract?

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