Airbus and Boeing battle for widebody jet market dominance in Asia

/ September 26, 2013 09:15

Let’s take a closer look into the Asian battle for dominance in the widebody jet market waged by Airbus and Boeing. The launch of the A330-300 Regional this week by Airbus  heats up the competition between its A330 and A350 against the Boeing 787-10 and the 777X.

Airbus has modified its twin-aisle, long-haul A330-300 to make it optimal for shorter routes. The ‘regional’ A330-300′s operational weight is 200 tons less, but can seat 30 percent more passengers on flights of up to 3,000 nautical miles. It can also offer around 15 percent in savings from lower fuel burn and maintenance costs, Airbus said.

Airbus expects to sign up its first customer by early 2014, and hopes to sell “hundreds” over the next 10 years, said Bregier. It designed the new A330-300 to meet demand in high-density, short-haul markets such as Southeast Asia, India, the Middle East and China in particular, he said.

“We are announcing the A330-300 lower weight variant today in China because here we see strong pent-up demand for efficient and reliable wide-body aircraft connecting mega cities such as Beijing, Shanghai, Chengdu and Guangzhou,” Bregier said.

There could be as many as 185 A330-300s in China by 2015, based on existing fleet numbers and orders. The new variant could double that figure, said Airbus China President Eric Chen.

Since the last Paris air show Airbus has been offering the airlines “Regional” versions of the A330-200/300 and the A350-900 with reduced the Maximum Take Off Weight (MTOW), engine thrust ratings and range to better match most routes flown by airlines that don’t need the 8,500nm range and weights.

Boeing has been offering a lighter weight 777-8X, reducing the planned 9,400nm range to 8,500nm to more closely match the A350-900’s weight and specification. While the 777-8X “Lite” has substantially longer range and weight than the “A350-900R,” the concepts bring airplanes to the market that are more closely aligned with airline realities than with maximum performance.

The A330 originally was designed as a medium-range airliner to replace the A300 , with ranges in the area of 4,000-5,000 miles, and its sister four engine A340 aircraft for long-haul service. Since the airplanes entered service in the early 1990s, Airbus has undertaken a number of improvements, bringing the A330-200 to a range of 7,200 miles and the A330-300 to around 6,000 miles.

But Airbus also says that a majority of the flights of the aircraft are 2,000nm or less—“regional” service within Asia, Europe and the Middle East. Most of this service was operated with the A330/340 and the Boeing 747-400; no Boeing 777s are used to Europe. For several years, China’s busiest air route, the 670 nm. between Beijing and Shanghai, has been operated mainly by A330s capable of flying about eight times as far.

Over the years, as Airbus improved the A330-300, carriers began using this sub-type for the first time on the routes, reflecting the range improvements in the aircraft. The A330 series is also now used across the Pacific from Seattle as range improved.

The A350-900’s 8,500nm range is far more than is needed for many routes, as is the similar range of the Boeing 787-8 and 787-9, and is one reason Boeing settled on 7,000nm for the 787-10.

At one time, Boeing planned a larger wing for the 787-10 to maintain the 8,500nm range of the smaller sisters, but more than a year ago said that airliners didn’t need or want the range. Initially Boeing planned a 6,750nm range but at the urging of Steven Udvar-Hazy, CEO of Air Lease Corp, and some key Middle East carriers, the range crept up slightly.

An Airbus spokesman said recently, “We have the A330 workhorse today. We’re looking at A330 as a regional optimized spec[ification] today and its part of a larger strategy. [The A350 and A330] aircraft will be the same physical hardware.

“In both cases there is a slight engine derate, optimizing capacity and payloads for regional routes. We aren’t permanently changing hardware. There will be a software change.” “Airbus has products that will be at least as cost effective as anything Boeing puts out.”

A key part of this will be the lower capital cost/lease rate than the 787 family. Our assessment is that if capital costs were the same, the 787 would have a significant economic advantage. We further believe that the price-point difference has to be significantly lower for Airbus to have an economic advantage.

With the A330 family, which has been amortized in the production system for years, there is considerable pricing flexibility but as fuel prices rise, Airbus will have greater challenges to offset the economic disadvantage with capital costs.

The new A350’s economics are, according to our analysis, competitive but the lighter-weight 787s make the economic advantages of the larger-capacity A350-900 (to the 787-9) challenging.

Flights for the A330 will be up to six hours and up to eight for the A350-900. The lower MTOW will reduce landing fees.

“Operating flexibility full range can easily be restored with software and paperwork back to full range, so can go back to maximum flexibility if customer wants it,” Airbus says.

The changes for the Regional are all done via software and FADEC (the engine software) changes, or as Boeing’s Mike Bair said with respect to the 777-8 “Lite,” it amounts to “papering” the weight.

This permits the operator the flexibility of re-papering the weight to return to a long-range, maximum weight/payload aircraft.

Because Airbus is focused on the A350-900 at this point, the spokesman said he has no information about offering a Regional aircraft for the A350-800 and -1000 sub-types. The jetmaker says the economics shape up this way:

  • The A330-200 at standard max MTOW is 4% lower than 787-8 per trip;
  • The A330-300 has 6.5% DOC vs 787-9; and
  • The A350-900 has 4% COC per trip vs 787-10.

Note the distinction between Direct Operating Costs (DOC) and Cash Operating Costs (COC) Airbus claims.

Key to the Airbus assumptions are the fuel cost and lease rates. In 2011, Airbus used a fuel assumption of $2.50 per gallon, a range of 2,000nm and lease rates of $900,000/mo and $1.2m/mo for the A330-300 and the 787-9 in arguing the A333 contributed a net $113,000/mo to revenue more than the 789.

The assumption of $2.50 fuel could be considered unrealistic, unaware as we were of anywhere fuel could be purchased for this price. We also know that lessors were charging $1m/mo for the A330-300, which essentially made the calculation advanced by Airbus at $2.50 fuel a break-even proposition and a net negative to the 787-9 at $3.50 fuel.

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