Multi-billion dollar challenges

Entry costs into the airliner business are formidable and even the two major players are upgrading their aircraft rather than committing to new designs. Murdo Morrison, Editor of Flight International, reports.

Airbus A380

Duopolies are hard to break, and the dominance of Airbus and Boeing in the market for airliners of over 120 seats looks fortress-like. Canada’s Bombardier is determined to disprove that with its CSeries, and at June’s Paris air show finally displayed in public the two variants of the single-aisle jet. The airframer – which has specialised in smaller regional and corporate jets – launched its 110-seat CS100 and 130-seat CS300 programmes in 2008 and the aircraft were meant to be flying passengers by now. After several delays, the CSeries should start paying its way next year, but Bombardier is still several dozen short of the 300 orders it wants by the time the aircraft enter service, and Paris – for all the hype surrounding the debuts – failed to secure any more.

Bombardier is not the only entrant vying for a slice of a market for some 1000 narrowbodies a year – a market set to grow perhaps by a half by 2020 as regions such as Latin America and South East Asia continue with their seemingly insatiable appetite for short-haul air travel. Russia’s Irkut and China’s Comac both have large single-aisle jets in development, powered by Western technology, including variants of the CFM International and Pratt & Whitney engines on the latest Airbus and Boeing narrowbodies. Prototypes of the Chinese C919 and the Irkut MC-21 are in assembly and due to begin test flights in the next 12 months. Of the two, the C919 arguably has the stronger prospects, with 450 commitments so far, most from Chinese customers.

The challenge for these interlopers is cracking a duopoly enjoyed by Toulouse and Seattle for 20 years. Entry barriers are huge. The multi-billion-dollar expense of developing a new aircraft has proved almost disastrous for Bombardier, which has had to fund the CSeries (and two long-range business jet launches) at the same time as sales of its regional aircraft and lighter business jets have been falling. Russian industry, despite its heritage of building airliners for a captive Soviet market, has had to reinvent its business model to compete with the West. China may have deep pockets and a large local customer base, but developing its closeto-certification ARJ21 regional jet has been fraught with problems, and, despite Western input, the much larger C919 is unproven.

Critical mass is another barrier. With monthly narrowbody production of more than 40 aircraft each and global supply chains – with components dual-sourced to encourage competition – the big two are able to price products attractively. Not only that, but with a range spanning single- and

twin-aisle jets, Airbus and Boeing can offer deals across entire airline fleets, throwing in tempting aftercare and pilot training packages. Rather, for Toulouse and Seattle, the biggest problem is one the newbies would love: ramping up their monthly production to 60 narrowbodies a month or beyond in the next two years to meet demand – and convincing a nervous supply chain, burned previously by investing heavily in capital ahead of a cyclical downturn, to do the same.

Despite this ramp-up occurring as the industry approaches the tenth anniversary of the previous post-2008 downcycle – some sort of ‘correction’ has occurred roughly every decade since the 1960s – few seem worried that unprecedented demand is creating an orders bubble that will at some point burst. Short of a unforseen geopolitical cataclysm, most experts believe average global GDP growth of 2 per cent into the 2020s will sustain current production forecasts of some 120 narrowbodies a month. Of course, the fortunes of Airbus and Boeing will depend on how successful the newcomers are, but even the three new kids on the block are not suggesting they can take more than a small share from the big two this side of the 2030s.

Different strategies

While Airbus and Boeing face competition in narrowbodies, in twin-aisle aircraft barriers to entry are even higher and their only rivals are each other. But unlike narrowbodies – where they each enjoy roughly half the market with broadly parallel ranges – their widebody product strategies diverge. Seattle has based its offering around two families – the 250- to 320-seat 787 Dreamliner, and the larger, long-range 777, to be superseded towards the end of the decade by two new versions of the twinjet. The latest variant of its venerable jumbo, the 747-8, sells modestly and mostly as a freighter. Boeing may also launch a socalled middle-of-the-market replacement for its 757, an out-of-production larger singleaisle aircraft used mostly for thin transatlantic and coast-to-coast routes.

Airbus has what it likes to think is a simpler product range, based on two versions of its A350 XWB, which competes with both the larger 787s and the 777, and its A380 superjumbo, although last year it took the decision to prolong the life of its smaller A330 – the most successful widebody jet ever – with a re-engined version called the A330neo. The latter effectively takes the place of the smallest A350, the -800, which was not selling. With around 700 orders for the now-in-service A350-900 and the soon-to-follow, larger A350-1000, that programme has kept Airbus a serious contender in the long-haul segment.

Boeing 737s in production

Toulouse’s problem is its biggest jet – the A380 – which almost a decade after entering service has only sold in serious volumes to one customer, Emirates.

With around 50 aircraft in service and another 90 on order (some as replacements), the Dubai carrier represents around half the fleet and order backlog for the 550-seat superjumbo – the biggest airliner ever built. Other blue-chip airlines, from British Airways, Air France, Lufthansa and Singapore Airlines to Qatar Airways and Etihad, operate the A380, but in single or low double figures, far fewer than the previous-generation 747-400 that the A380 was intended to displace. Instead, it is Boeing’s fuel-efficient 777-300ER twinjet that has taken the jumbo jet’s place as the longhaul airliner of choice in the 350-passengerplus segment, and Airbus’s best chance of competing with the latest 777s, the -8X and -9X, is with its smaller A350.

Regional rivalries

One space in which Airbus and Boeing do not play and is arguably the most dynamic in terms of new entrants is regional jets. This is a market that has been changing considerably since the 1990s, with the ubiquitous 50-seat commuter aircraft replaced by larger 70- to 110-seaters. After Saab, Fokker and British Aerospace exited the market by the early 2000s, leaving just Bombardier and Embraer to compete, three new players have entered the market and look to enjoy varying degrees of success. Sukhoi was first, with the Superjet – produced in association with Italy’s Alenia Aermacchi and France’s engine-maker Snecma. However, the Russian-built aircraft has enjoyed only modest success, with most sales in its home market to the likes of Aeroflot.

Elsewhere, Mitsubishi will soon fly its Mitsubishi Regional Jet and has built a bank of around 250 orders for the first new commercial programme from Japan in the modern era. Meanwhile, after a long gestation China’s ARJ21 may struggle to secure much of a following outside that country. Bombardier gambled its investment dollars into the CSeries, leaving the Montreal-based airframer’s CRJ range of 70- to 100-seat regional jets looking distinctly last-century, while rival Embraer looks to have played its cards right by, more conservatively, putting a new engine and wings on its successful E-Jet family to revamp a range of aircraft designed to fly both connector and short-haul routes that cannot justify a larger narrowbody from Airbus or Boeing.

One unlikely success in the airliner market is ATR – a 35-year-old joint venture between Airbus and Alenia Aermacchi – that builds 45-seat and 75-seat turboprops. After a neardeath experience a decade ago, when the rage for regional jets threatened to put it out of business, the Toulouse-based manufacturer has gone from annual production in single figures to close to treble figures. Its only competitor is Bombardier’s Q400 turboprop, but it is beating it soundly in the market. The joint venture has spoken about developing a larger 90-seat turboprop as a more economical competitor to larger Bombardier and Embraer regional jets, but with sales of the current variants ticking along nicely, 50 per cent shareholder Airbus has shown little appetite for investing billions into such a project. With no all-new Airbus or Boeing programmes in development – all their projects are variants of aircraft currently flying, albeit with major alterations such as stretched fuselages, new engines or wings – the heady days of the noughties seem far behind. Then, Airbus was almost derailed by the complexity of engineering the A380 across dysfunctional French and German organisations, while it had to go back to the drawing board with its original A350 in the mid-2000s and design an all-new aircraft. Senior management heads rolled. Boeing, meanwhile, abandoned its short-lived, high-speed Sonic Cruiser in 2002 in favour of the first all-composite airliner, the 787. However, despite strong orders, delays to that programme caused major crises within Boeing and its supply chain.

Shareholder scares mean both firms are less inclined these days to attempt moonshots. That is why Airbus and Boeing early this decade decided simply to tweak their present-generation narrowbodies rather than design all-new aircraft. And with order books for the new 737 Max and A320neo stretching into the 2020s, these calls look to have been the right ones. Innovation is taking baby steps – after the advent of large-scale manufacturing of carbonfibre aircraft sections in the early 2000s, the latest industrial trend is additive layer manufacturing of parts, also known as 3D printing, a big theme at Paris. Engines too are quietly advancing in terms of technology. But for the next big leap in commercial aerospace product development, we probably have to look beyond 2030. n