Taking to the air

Boeing vs Airbus Market Share

2013-02-07T00:15:00.002+01:00

Today I had a quick conversation and a question was on the table: how long will take for a newcomer in the larger than 100 passenger airplane segment for being able to face both Airbus and Boeing?

Some context for starting, the first Airbus' airplane was the A300, with the first deliver at 1974. Airbus was a joint venture between European companies that were having experience in a smaller segment of airplanes. On the other side, Boeing was founded at 1916 and has been manufacturing aircrafts since the beginning of aviation. The B707 was the first successful commercial jet and was introduced in 1958. At the introduction of A300, Boeing already delivered several B747.

We can say that the situation at 1974 was similar to the one I would like to answer, a newcomer in the market with previous experience in a different segment at the same industry trying to enter in a market dominated by one competitor.

Reuters has prepared a graphic summarizing the evolution in deliveries from both manufacturers:

Right, until 2002 Airbus was not able to obtain the same market share as Boeing. 28 years in total. This number is giving us a reference of how long will take to a new competitor to enter in the market, with one remark: both manufacturers were protected by their own Governments and the country airlines were supporting them.

So, my answer to the question of how long will take to a new competitor to enter in the market, my answer is: 20 years. Given that the newcomer has already got experience in the industry in a different segment.

787 problem, impact?

2013-01-16T23:35:00.000+01:00

Yes, AOG (Aircraft on Ground) for the 787. The source of the problem: failures at their lithium-ion batteries. Is this a big issue? Well, for Boeing it is. Airlines and certification authorities are now transferring some pressure on Boeing...

What's about passengers?

Not a problem. Look to the reaction in the industry, a single incidence and all aircrafts are grounded. That's the reaction...

Next, the number of flight tests performed on a new model to allow it carrying passengers is, in a single word, brutal. If a single passenger can get inside an airplane, the model was prior tested in conditions that would never happen in the model life...

Finally, if a car is affected by a system failure, it simply stop working. Airplanes are design for safety, if a system fails airplane keeps safety flying. Just notice how automotive industry keeps cars around our streets with a brake failure.

A320 Sharklet delivered to Air Asia

2012-12-24T17:35:00.000+01:00

Air Asia has become the very first operator of the new A320 equiped with Sharklet option. The delivery was performed last 21th at Toulouse. So, Airbus met their target in delivering before the end of the year the first Sharklet to the customers. So... updating the list...

Q4 2012 (Achieved):                A320 Sharklet EIS
~~December 2012~~ June 2013:       CS100 first flight
H1 2013:                                    A350-900 first flight
~~end 2013~~ June 2014:                  CS100 EIS
H1 H2 2014:                              A350-900 EIS
2014:                                          C919 first flight
end 2014:                                   CS300 EIS
October 2015:                            A320NEO EIS
mid 2016:                                   A350-800 EIS
2016:                                          C919 first flight
2017:                                          A350-1000 EIS
2017:                                          B737 MAX EIS

EADS selected as disruptive company

2012-11-21T22:20:00.002+01:00

MIT technology review has published their view of the companies implementing disruptive technologies. EADS is one of the selected companies for their investment in weight reduction by redesigning them taking the advantage of 3D printers.

How really Ryanair is making money?

2012-11-14T23:49:00.001+01:00

Curiosity brought me to take a look to the P&L summary of Ryanair, Easyjet and Lufthansa. By a quick analysis we can see that there are 2 main revenues perceived by the three airlines, the called "scheduled revenues" and the "ancillary revenues". The first ones represent the traditional ticket selling revenues, and the others are baggages fees, marketing on web pages, sells on board... and other revenues not coming from tickets.

Message is clear, no airline is able to make profit without ancillary revenues (in Ryanair you will need to include financial losses to get losses) and they represent one of the main contribution to the revenues being an important percentage of total revenues, more precisely: Ryanair (2011) 18,7%, Easyjet (2009) 20,7% and Lufthansa (2011) 17,2%.

Finally, to give some small completion to my analysis I also made a small analysis of subsidies from European Goverments to Ryanair, the total amount spent in Europe towards the airline was 760 million euros and 100 were spent in Spain. That means a 22,3% of tickets selling prices. Wow!

What's that number for a passenger? Well, the total number of passengers of Ryanair during 2011 was 32,3 millions in Spain. That means for a return ticket (passenger is counted twice) is a total subsidy of 6,2 euros. I don't see this as a real incentive to travel to Spain, when can be done more efficiently by reducing the cost of coaches to the main city.

My opinion is always that subsidies are always a very good incentive to create vey bad businesses, reduce competence and keep prices really high. I don't support this situation, knowing also that Europe is currently suffering a long term crisis. My message: stop subsidies.

Bombardier's delay on CSeries

2012-11-08T00:38:00.000+01:00

One month before the expected CS300 first flight, Bombardier has announced a delay of the first flight of CS100, the newcomer in the market at single aisle business setting only 2 years of difference compared to NEO. Seems that the problem is on supplier chain, an extended issue all along the industry as experienced (in a different subject) in B787.

Updating our calendar...

Q4 2012:                                   A320 Sharklet EIS
~~December 2012~~ June 2013:       CS100 first flight
H1 2013:                                    A350-900 first flight
~~end 2013~~ June 2014:                  CS100 EIS
H1 H2 2014:                              A350-900 EIS
2014:                                          C919 first flight
end 2014:                                   CS300 EIS
October 2015:                            A320NEO EIS
mid 2016:                                   A350-800 EIS
2016:                                          C919 first flight
2017:                                          A350-1000 EIS
2017:                                          B737 MAX EIS

100-149 passengers further look

2012-08-14T02:12:00.000+02:00

Some further comments are appearing in the internet concerning this market segment and about newcomers on the ground. Turbulence in the next five years will appear, AirEnsight argues that an important number of old models being recently sold (reducing investment costs) joined with airplanes with better economics will create an interesting market movement in the coming years.

Just for adding new arguments on the discussion I tried to analyze in detail the data summarized by Leeham concerning the current demand and deliveries of each aircraft. The market is reacting similar to other segments, on which important demand is concentrated at peaks in specific years, with important cyclic behaviour (take into account 2001 and 2002 gaps in this analysis). Looks like the train is only passing by at those years, and you need to be at the station. The right move was done by Embraer capturing important demand during early 2000s, seems that Bombardier came unfourtunately late to the game. For understanding SSJ100 sales we need to consider the mayority of sales are Russian influenced contries, pick in sales early 2010s reflect this.

The question to answer is: is an interesting segment to enter? I think that analyzing the market demand yearly is a mistake, previous graph only shows how cyclic airplane sales are, however, as airplane sales are actually multi-year contracts, I consider to use backlog of sales as a better reflect of the demand. Just taking a look to it, where we still see the cyclic behaviour of the market, the market seems to be very attractive, as an average 20% of grow in backlog has been materialized each year during the period. How many markets can offer this? And a market which is not likely to have bubbles like .com .

What I think is a sensible argument to understand to analyze the segment, is that this segment is an "entry point" to the biggest piece of the cake, 150-200, largely (lonely) dominated by Boeing and Airbus and currently protected by NEO and MAX for the next 10 years, that's the more attractive cake. For Airbus and Boeing this segment is still an interesting cake, but as part of a major development (designs focus aircraft family development on 150-200 segment, being this segment like a secondary target), meanwhile the other OEM need to perform a big investment for a relatively small segment without the support of other segments above for investment recovery.

So, we've got an interesting growing market with an important number of newcomers, it's not a "Bermuda Triangle" at the moment, but some ships are going to shrink due to competion and subsecuent pressure on prices. Is the right move of newcomers? Is the only potential move to grow with a risk of billions of dolars. I agree that next 5 years are going to be interesting for everybody, but year 6 to 10 will show the reaction of survivors, which will be further more interesting.

Some updates on calendar...

2012-08-12T20:03:00.000+02:00

Adding some more detailed information about submodels of new airplanes coming up:

Q4 2012:                   A320 Sharklet EIS
December 2012:         CS100 first flight
H1 2013:                    A350-900 first flight
end 2013:                   CS100 EIS
H1 H2 2014:              A350-900 EIS
2014:                         C919 first flight
end 2014:                   CS300 EIS
October 2015:            A320NEO EIS
mid 2016:                   A350-800 EIS
2016:                         C919 first flight
2017:                         A350-1000 EIS
2017:                         B737 MAX EIS

Market analysis of 100-149 seats

2012-08-12T19:52:00.002+02:00

I've been taking a look to the article written by Leehman. I recommend to go through this article, as I consider it very interesting describing this segment status and the different offers coming from each OEM's.

Just wanted too add a small analysis based on the data source from the same article:

a319neo: 134 passengers, MTOW 141109lb and range 4200NM
737-7 MAX: 140 passengers, MTOW 159400lb and range 3800NM
CS300: 130 passengers, MTOW 139600lb and range 2950NM

The comparison seems to be very in favor of A319NEO (just comparing this data from airplanes entering into service in 2014, 2017 and 2019, so data doesn't seem to be mature enough), for a similar MTOW (comparable, full deposits with given OEW) NEO is able to fly further 4 more passengers than CS300. And comparing NEO and MAX, more fuel seems to be needed on MAX.

A350 delay

2012-07-27T19:59:00.001+02:00

Airbus has just announced, at the half year earnings briefing, that another three months of delay for the A350-900 EIS will be added to the schedule, not affecting the first flight as the problem is due to a blockage in the drilling station for the wings. It is clear that OEMs are having further issues with their schedules as before with A380 and B787. Airplane development is a highly complicated program on which many small projects are really being done for the very first time, making it very difficult to estimate the actual dates.

If experienced OEMs are having issues with their plannings, the planning for C919 shall be affected, for sure, by this problems in a higher level, I'm expecting news about this in 2013.

I will update the calendar (notice that was started not using the original plannings):

Q4 2012:                   A320 Sharklet EIS
December 2012:         CS100 first flight
H1 2013:                    A350-900 first flight
end 2013:                   CS100 EIS
H1 H2 2014:               A350-900 EIS
2014:                          C919 first flight
October 2015:            A320NEO EIS
mid 2016:                   A350-800 EIS
2016:                          C919 first flight
2017:                          A350-1000 EIS
2017:                          B737 MAX EIS

Fanborough orders

2012-07-13T22:34:00.002+02:00

Airshow has finished with relative low airplane sales compared to other years (one argument could be that we have been getting used to a high demand period). Having NEO and MAX launched last year concentrating most part of their sales by then, both giants have been unable to get further big commitments. NEO's backlog is 1500 airplanes and only 37 airplanes were sold at the airshow, meanwhile, MAX made it up to 175 airplanes (removing 75 that were a conversion to firm orders and also releases of previous customers already accounted) raising the total orders to 655.

Although Boeing is seen as the "winner" of the week, my impression is that they are taking advantage of an earlier delivery of airplanes compared to abig backlog at Airbus, industry seems to have in their mind "you are now late for NEOs". My opinion is that the manufacturer that really made a good job was Bombardier, from 138 orders before the airshow, a total of 35 new orders were acquired. 25% of their sells (similar to Boeing increase) but for a newcomer on the segment. That makes 2012 one of the best years of Bombardier CSeries. Europe and USA should move their eyes to Canada and forget for a moment about China.

Aircraft Schedule

2012-07-07T13:01:00.001+02:00

I have tried to compile the upcoming schedule for the different aircraft developments projects. Notice that Bombardier expects only one year of flight tests for ensuring entry into service of CS100, the same time that Airbus (as experienced manufactured on wing mounted engines):

Q4 2012:                   A320 Sharklet EIS
December 2012:         CS100 first flight
H1 2013:                    A350-900 first flight
end 2013:                   CS100 EIS
H1 2014:                    A350-900 EIS
2014:                          C919 first flight
October 2015:            A320NEO EIS
mid 2016:                   A350-800 EIS
2016:                          C919 first flight
2017:                          A350-1000 EIS
2017:                          B737 MAX EIS

Further comments on Aircraft Demand forecast

2012-07-05T22:56:00.000+02:00

Yes, another article about market forecast, after Boeing's recent release a lot of traffic about this topic is appearing in internet, so I will keep on with the tendency.

Reading Leehman forecast analysis I have notice several important strategic decisiones made by the airplane manufactures companies. Part of this decisions can be understood from their market forecast. I would like to base the analysis in the following information that can be extracted from the different documents:

Boeing (following Leehman) analyzes the regional market (70-90 seats) just one segment below their B737-600.
Airbus analysis considers the peak of demand on the segment 150-175 which matches with the current demand of A320 and B737-800. However Bombardier declares a similar demand size in the smaller segment (100-150) segment already covered, and with the market experience from Airbus (A319) and Boeing (B737-700) doesn't seem to be the biggest market.
Bombardier stops at that segment, up to 149 seats.

Analyzing just this information, my reflections are not very possitive for Bombardier. Boeing and Airbus seem to have a better market forecast experience at this aircraft size segment which has been mastered by them in the last decades. However, a newcomer moves the forecasted market peak to smaller aircrafts, segment already covered by both airplane manufacturers having already available data. Probably, Bombardier has performed their business analysis based on a market share on a bigger cake that actual one, finally giving them an important amount of airplanes sold to satisfy the business case of a new airplane development in the segment. If the market forecast is wrong, have they made the wrong movement? Risking to create a completely new airplane configuration (first time Bombardier develops a wing-mounted airplane), why don't reach the biggest cake?

Is interesting to see as well, that Boeing is taking care at the regional segment. Is this a forecast intended to understand potential movements of regional manufactures or reflects an intention from the company?

Boeing's 2012 Current Marke Outlook

2012-07-03T23:32:00.001+02:00

Thanks to Leeham News I've read about the recent update made by Boeing about its market forecast for the next 20 years. The outlook is not very detailed, but the big headlines are quite interesting. The full debrief will be available by 5th July, but I will provide as well my very first view after having a glance of what's available:

Focus is China and Asia market. Asia Pacific will be covering 35% of the market (it is not clear if we are talking about 2031 market of 2012-2031 market). What's the outlook from Boeing for capturing such market with COMAC in the game?
Fleet will be around 40000 airplanes at 2031, that means 21000 of them coming from market grow which is seen as 60% of demand. So total demand will be close to 35000. Which is 20% more optimistic than Airbus' previous year outlook.
Boeing's view is that the current product market sharing is heading in higher frequency and smaller size. Taking from Airbus and Boeing historical deliveries and orders we can see that the market share (former deliveries) of SA is close to 47%, and the current orders in the backlog show a market share of 71%. From the product demand in the last years I think it is confirmed that smaller aircraft demand is growing. The comment about low level of demand of very large aircraft seems to be sensitive, and from my point of view, very large aircraft was a fashion in the early days of B747, shrinking now down. This raises a question to me, were B787 and A350XWB an early move instead of a new SA?
Mobile, the hot topic of the week, the concern from Boeing is the efficiency in having 4 final assembly lines. However, this statement is not confirmed with data, if each FAL is producing 40 airplanes per month, where is the efficiency limit, is it 20 or 100?, has Boeing performed such analysis and share the data? Moreover, how your measure efficiency, at the moment Airbus is having 3 final assembly lines for SA for one in Boeing, but the backlog of Airbus orders is 3300 airplanes and Boeing's is 2600, so Airbus product is more competitive, that includes airplane performance, cost and political advantage for very similar products. Who is more efficient? (ok, next step is knowing the margin of the airplane but in terms of marketing Airbus is on top)

Via: Leeham News

Sobre el valor de Bankia

2012-06-28T14:27:00.002+02:00

Bueno, como dije en la introducción alguna de las entradas la haré en español, dependerá un poco del público objetivo de lo que escriba.

Ayer mismo se publicó la evaluación de Bankia por parte de diferentes auditores externos contratados por el Gobierno, la evaluación arrojó un valor negativo de más de 13000 millones de euros, sin embargo las acciones de Bankia no han bajado significativamente desde los 0.91 euros de inicio.

Básicamente, el gobierno ha pedido la evaluación para saber el precio de Bankia, lo cual indicará qué porcentaje de la entidad se quedará si hace una ampliación de capital. Si el valor es negativo entonces, cualquier euro que introduzca será el 100% del capital. Es decir, si yo como particular introduzco 1 euro, me debería convertir en el mayor accionista de la entidad, ya que he introducido más de lo que vale la misma.

Sin embargo, el mercado no está de acuerdo, mientras escribo esta entrada la acción sube desde el valor mínimo de esta mañana de 0.875 euros por acción hasta 0.896. Es decir, el mercado no acepta la evaluación y sigue pensando que la entidad tiene un valor positivo aunque bajo.

Al final, cuando se hace una valoración de una empresa se tienen en cuenta varias cosas, y una de las más importantes es como se espera que evolucione en un futuro la entidad, en función de esa expectativa surgirá un valor u otro.

La pregunta que hago es, ¿quién paga el trabajo de los tasadores? ¿cuáles son sus incentivos? Es Bankia quien paga su trabajo, el Estado o Europa. El mensaje actual para los inversores que acudieron a la ampliación de capital es que todo lo que han invertido se pierde.

Via: Finanzas.com

A320 at Mobile?

2012-06-28T13:56:00.002+02:00

A post from FlightBlogger published today (28th June) declares some rumors about a new Airbus assembly line at Mobile, Alabama. Expectation from FlightBlogger is that the production will grow to 60 aircrafts per month, while current production up to May 2012 at Airbus is around 36 per month. As per market forecast of Airbus there will be in the next 20 years a demand for 19165 airplanes and 23370 as per Boeing expectations.

Typical ramp-up for a new assembly line will take close to 2 or 3 years for fully operational capacity at a level of 60 aircrafts (still will be interesting to see if a new transport system will be implace instead of Beluga, or a number increase of these old aircrafts)

Depending of how you make this forecast, we will end in a total production during the next 20 years of 13400 aircrafts. Based on previous forecasts Airbus is targetting between 57-70% of market share in that segment. Knowing that Bombardier and COMAC are potentially new comers to this business segment, the strategy of Airbus is very aggresive.

In parallel, Boeing is having a lack of experience in working outside USA, any subsidiary of Boeing is focused in a very single skill or it's part of the supply chain. What will be so the answer of Boeing if Mobile's plant is finally built? My expectation will be that Boeing will react in a similar way, in line with their bigger market grow expectation, but expanding their plants at USA and not going abroad.

Airplane Market Forecast

2012-06-27T17:47:00.001+02:00

I have been recently surfing around Boeing and Airbus webpages, trying to take a look to the different global market forecast of both companies, from my point of view results are very optimistic at Boeing and slightly conservative at Airbus.

The report from airbus is very interesting and the methodology highly detailed, I recommend spend some time to read it. Seems to be a model with a lot of historical improvements within and very mature, including in the model economic grow, travel needs from consumer, urbanization of population (especially at developing countries) and ending with airport analysis. However, I've got some remarks to the model that has been developed along years at Airbus:

Low cost airlines at Europe are still in growing mode. Going to page 86 of Airbus report, it can be seen how from a low market share they have reach the level of 50% and are still growing. Moreover, global market is growing in such direction like AirAsia (with around 60 airplanes has already put in place a big order of 200 NEO) and LionAir (is increasing from 80 with 200 MAX). It doesn't seem that these structural changes in the airlines business model are not considered, as will create in the future a higher relative demand at single aisle segment, with reduction of hub oriented travelling.
At 1992 European Union's deregulation create an important grow of new low cost airlines, the example is the important grow of Ryanair from 90s, however, their actual grow was notable during early 2000s. As EU-US Open Skies treatment was signed in 2007 I would expect that some airlines will position themselves in low cost model but flying between both continents requiring bigger airplanes than traditional low cost airlines. On top, there's a tendency of deregulation across the world, apart from EU and US. Relative grow of wide bodies is also expected.
Recently, airlines are in a process of consolidation (10 years to now... recent for airplane industry), the fall of national airlines... pressure on prices over both competitors shall be also considered. Lower price, higher number.
Finally, Airbus is moving to VIP airplanes, Corporate Jetliners and Military ones (refuelling MRTT), but noting is included about these segment on the airplane forecast.

All previous comments can be added as potential scenarios, the document is just showing a single scenario, my remarks can be included in optimistic or pessimistic scenarios.

As a conclusion, I would say that the report is very interesting and seems to include years of experience on it. Airplane industry is growing at a single digit factor, far from internet business like Smartphones, but still is one of the biggest sectors in the world economy and clearly a technology driver.

Linkedin and Blogger

2012-06-27T00:59:00.000+02:00

The blog framework that I am using in this blog is Blogger from Google, the other option I was considering was to use WordPress. In a previous one I was using it instead of Blogger but my experience during that time was not very possitive as I was expecting, probably due to the installation server. However the fact is that the response time of my WordPress based blog was not good enough and I found some funny bugs I was living with.

I decided to switch to a Google based blog for a main reason: google. Indeed, my email, my feeder, my youtube account... everything connected to a single profile, one login and access to all applications.

Also, we can find easy links to other social networks, like Twitter or Linkedin (and Facebook, but honestly I don't care about this one), At LinkedIn you are able to link directly at your profile your published posts, any new one will appear in front of your contacts at profile level.

For making it real just do the following at LinkedIn:

Edit your profile
Go to application section (it was the last one in my profile)
Add the application BlogLink
Finally, update your webpages at your profile adding your blog link.

It took me just 1 hour to set up the blog, adapt to my preferences and configure other applications linked to it.

Hello World!

2012-06-26T23:50:00.001+02:00

After being almost 2 years busy without any single minute of free time, I'm starting again to write a blog. This is simply the very first post for means of testing the blog features in blogger.
As you can see I will use as default language english, however, as my native language is Spanish, some post will be written in such beautiful language.

See u soon.