Feb 17, 2016

Bold caution grips Singapore Airshow

Updates* The 2016 Singapore Airshow was thought to have been likely to produce at least two or three major orders for new jets as recently as six months ago, but an abundan

Ben Sandilands — Editor of Plane Talking

Ben Sandilands

Editor of Plane Talking

Will the mystery buyer of 14 of these A330-900 NEOs please come forward
Will the mystery buyer of 14 of these A330-900 NEOs please come forward

Updates* The 2016 Singapore Airshow was thought to have been likely to produce at least two or three major orders for new jets as recently as six months ago, but an abundance of caution has led to few orders of size from airlines.

“The market is holding up well”, meaning no-one has cancelled anything yet, has become the common message from Airbus, Boeing and Embraer, in the most ‘nuanced’ of the big bi-annual airshows for the last two years.

There were significant contests said to be underway for Airbus A350s or Boeing 787-10s with purchases potentially approaching as many as 100 such jets.

However so far as larger airliners go, an undisclosed buyer order for 14 Airbus A330-900 NEOs (a new engine technology version of the A330-300) is, as of early Wednesday, the only sale made in that category.  Emirates and Philippine Airlines have in recent months been regularly reported as moving close to deciding on medium sized wide-body airliner purchases.

Flightglobal has reported a bold yet cautious call from Boeing on its making a decision as to whether to go ahead with a Middle of the Market or MoM jet by the end of this year.  Bold because this is an insider account of a meeting by Boeing to actually do something to a deadline about a project that has in various forms been discussed in the technical media for at least five years. Cautious because the meeting decided that Boeing might decide to go for an all new design, or extend and revise its existing 737 MAX program, or do nothing at all for the time being.

A decision on an MoM was being reported in recent months as being likely by the middle of the year Farnborough Airshow in the UK.

This new Flightglobal report on the MoM was overlaid by a Boeing sourced story saying airlines in eastern Asia were “more cautious” when it came to fleet decisions than elsewhere, a caution that has clearly only recently overtaken massive Asian enthusiasm for new jets for upbeat predictions of growth that far exceeded the requirements of aging fleet replacements.

Anxiety about the risk of an economic bubble in SE Asia, notably in Singapore and China, has become apparent in the region, and was firmly dismissed by the aircraft makers in the Singapore Airshow briefings to date.

The highest value contest for new airliners in the world and in Asia in particular is in the larger capacity single aisle market dominated by Airbus and Boeing.  That’s the contest that readily eclipses the market for wide-body jets and gives the big two jet makers unshaken confidence in the underlying strength of their businesses.

An excellent up-to-date infographic on the state of play has been published by Flightglobal here.

*Update Airbus subsequently announced an MoU with Philippine Airlines for  six A350-900s plus purchase options for a further six of the new design twin engined widebodies.  Intended routes include daily year around full load non-stops between Manila and New York City and new European  destinations for the airline.

Boeing announced a further commitment by China carrier Okay Airlines for 737 MAX jets, for eight 737-8s and three 737-9s which will take its fleet for the new technology upgraded single aisle jet to 17. Okay also took a further eight MAX options. The 737-9s should become the first of this largest member of the MAX family to be flown by a PRC carrier.

Since this morning there have also been announcements of deferred orders by various carriers. It won’t be clear for a day or so whether orders delayed to dates to be fixed outnumber new commitments, memorandums of understanding or signed and sealed deals.

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8 thoughts on “Bold caution grips Singapore Airshow

  1. comet

    It’s a wonder any airlines are buying planes, with the risk of a global downturn combined with predictions that the oil price will remain low for at least another decade.

    Boeing is just worried because it is haemorrhaging blood through a hole in its aircraft lineup where the 757 used to exist. With the A321-NEO selling 5x more than the Max-9, Boeing is loosing a lot of blood.

  2. Tango

    And in other news, as anticipated by ours truly (and put in print), Air Aisa X canceled all its current A330s and kicked the can down the road with A330NEOs.

    Of course then those will get deferred until they go out of business.

  3. George Glass

    Jeez Comet,good thing youre not in charge.Would you really allocate $3 billion to develop a clean sheet design for a market of maybe,maybe, a thousand airframes?I am mystified by this infatuation for a B757 replacement.Boeing stopped making it because demand dried up.And the reason for that is pretty obvious.Single aisle aircraft make money when you turn them around quickly. Most airlines are looking at 35 to 40 minute turn arounds and maybe 6 or 8 sectors a day.That means getting passengers on and off.The B737-900 and A321 are already at the limit of what is possible.The B757 was eventually confined to long,skinny,low return,high commercial risk routes.Hence its demise.Airbus has lucked out with a niche for the A321 but Boeing will not feel under much pressure to compete what is a small, high risk, niche market.It will be content to make lots of revenue on its low risk Max.

  4. comet

    But Boeing is losing massive amounts of revenue to the A321 now.

    It’s a market slot that Boeing needs but can’t fill with current models.

    Instead of focusing on the market segment that airlines plainly want (something a bit bigger than the current 737), Boeing kept its vintage 737 on the market for 30 years too long, and then went off and developed the 747-8 that nobody wants.

    After 11-Sep-2001, an aviation industry downturn forced airlines to downsize their aircraft. The reason they gravitated to the 737/A320 was to avoid financial risk.
    Since the decision to axe the 757

  5. comet

    Ah, I bumped the ‘Post’ button prematurely.

    Anyway, it was during that temporary downturn that Boeing decided to axe the 757. Now the market is upscaling, and Boeing has nothing to offer.

    Boeing’s muttering to the press, that it will build a whole new undercarriage and wing for the 737, is bizarre.

  6. keesje

    George, Comet,

    I think Boeing wants to do a MoM, for which I see a market of at least 2000 in the next 20 years (Boeing denies until they have a plan). The 757 was suboptimal & things have changed since 2002. E.g. traffic doubled & most 757s, 762s, A300s are in the desert now, makes a 300% difference.

    Still I feel Boeing can no longer say the 737 will be just fine & focus on a MoM. The MAX ain’t fine. So they have to come up with something new & two aisles won’t compete on typical 1000NM / 180 passenger flights. where the bulk of the market is.

    So a compromise has to be found, maybe an in between.

  7. Dan Dair

    I understand the pro & con arguments here,
    but one thing which I think is significant is that to redevelop the whole wing, wing-box & undercarriage of the existing B737 would be a lot cheaper than a ‘clean-sheet’ design.
    Perhaps as little as 3 or 4 billion USD, against 10 to 15 USD for a clean-sheet.

    As Tango has often commented, it’s much easier to recover a smaller investment in a ‘known, tried & tested’ airframe, than it is to start from scratch with a big budget & no previous sales history.
    All you have to do is look back at the shambolic history of the B787, to realise how easy it is to overspend on a new design & how difficult it will be to recover all the $’s invested in that product.?

    All that said,
    I still believe that an MoM or a major redesign of the existing 737 is not actually immanent.
    For me, Ghost nailed it when he said it was all to prop-up the Boeing share-price.

    Last time the share price took a hit, they rolled-out the MoM plan, this time it’s a new 737 wing.
    Maybe next quarter it’ll be re-starting the B757 line.????

  8. NSJ4

    With the massive reduction in oil prices and future prices likely to be governed by the marginal cost of shale fracking, the whole economic equation for new jets vs extending current frames has been up-ended. It may well be that the capital cost of new aircraft now exceed the value of their fuel savings. It would not be surprising for this year to be very quiet for new orders as airlines re-assess their economic tradeoffs.

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