Airbus needs A330neo…or another A350 production facility,

A330neo is a very hot topic…Customers are pushing for this development –most notably Delta (see related post). Number of articles in media and blogosphere also go in this direction (see CIT article post & Leeham news blog).

Now, two main reasons are being presented to go for this development

  • #1: Airbus low wide-body production capability in case of no A330neo development
  • #2: A330neo qualities vs A350-800: commonality, similar economics

In this article, we discuss reason #1.

Market demand

Airbus & Boeing long-term projections do not differ significantly in 250-350 pax segment.

It would seem that 2013-2032 average demand for

  • 250-300 pax segment would be ~120 AC/ year
  • 300-350 pax segment would be ~110 AC/ year

In this segment (250-350 pax), Airbus backlog represents ~50% of total.

Airbus production capabilities

In long term, Airbus wide-body capability will be limited to A350.

At present, long-term targets for A350 production rates are ~10 AC/ month i.e. ~120 AC/ year

Therefore, Airbus capabilities will be limited to around 120 A350 per year.

Assumption: Continuing current A330 production (i.e. without any major improvement) is not considered here due to product difference with new generation competitors specially B787

As demands for 250-300 pax, 300-350 pax and 350-400 pax segments seem to be roughly equivalent (projecting recent production rates averages), Airbus production capability in 250-350 pax segment represents roughly 80 A350-800/-900 per year

A330neo needs

If Airbus wants to maintain 50% market share in 250-350 pax segment, it would need to be able to produce 115 AC per year. However, its forecasted long-term capability is 80 AC per year.

Therefore, it would need ~35 extra AC to match demand, thus  A330neo!

Conclusion

To maintain ~50% market share in 250-350 pax market in long-term, Airbus needs additional 35 AC/year capability

  • This extra capability could come via A330neo production with ~3 AC per month rate (early 2000s rates). In addition, A330neo development would probably be perfect to stop what seems to be painful A350-800 development. Otherwise, it would raise A330neo vs A350-800 canibalization issue.
  • Another solution could be to increase A350 production rate to ~13 AC/ month, really a stretch with current production facilities…

 Support data

Table 1: market data

 

Capacity

   

250-300 pax

300-350 pax

Market data

Airbus market 2013-2032

2438

2256

Boeing market

2353

2177

Average

2395

2217

Yearly market

120

111

Current Airbus market share

52%

Source

Wikipedia, Airbus results presentation

Table 2: A330neo needs

   

250-300 pax

300-350 pax

Airbus at 50%

Airbus yearly market share 50%

60

55

Gap between Airbus production capability & market needs at 50%

20

16

A330/ A330neo production capability needs

20

16

A330/ A330neo monthly production capability needs

1.7

1.3

Airbus at 40%

Airbus yearly market share 40%

48

44

Gap between Airbus production capability & market needs at 40%

8

5

A330/ A330neo production capability needs

8

5

A330/ A330neo monthly production capability needs

0.7

0.4

 

A330neo vs A380neo: the market view

There’s been a lot of discussion on development of ‘neo’ concepts on widebody aircraft recently, specially for Airbus aircraft and after B777X launch.

In this article, we will focus on A330-300 & A380 and try to understand if market demand as it stands today justifies an A330neo or an A380 development.

Note: A330-200 is not treated here.

Market demand

Using Airbus & Boeing market forecasts for A330-300 & A380 aircraft, we find following rough demand estimates

Data

A330-300neo A330-300neo A380neo A380neo

Market forecast origin

Airbus Boeing Airbus

Boeing

Market 2013-2032

1752 1673 1124

550

Market share

30% 30% 70%

70%

Market / year 44 42 39

19

Assumptions:

  • A330-300neo & A380neo EIS = 2019
  • A330-300neo production rate = 72 AC / year
  • A380neo production rate = 30 AC / year

Development costs & depreciation aircraft

Data

A330-300neo A330-300neo4 A380neo A380neo7

Dev cost – Aircraft (2013 – M€)

2000 2000 3500

3500

Depreciation horizon (years)

10 10 10

10

Dev. costs ~ Depreciation / year (M€)

200 200 350

350

Dev. costs ~ Depreciation / AC (M€) 4.6 4.8 8.9

18.2

Assumptions:

  • A330-300neo development costs = A320neo development costs x 300 /150 ~ 2 000 M€ (300 is standard seat capacity for 3-class A330-300 & 150 is standard seat capacity for bi-class A320)
  • A380neo development costs = A320neo development costs x 525 /150 ~3 500 M€ (525 is standard capacity for 3-class A380 & 150 is standard seat capacity for bi-class A320)

Conclusion

  • A330-330 type aircraft demand is x1.5 / x2 vs A380 demand – at this stage, Airbus A380 forecast demand seems too optimistic (1300 aircraft over next 20 years => > 60 aircraft /year but average A380 yearly sales to date only 30!)
  • A380neo development costs should also be x1.75 vs A330neo
  • Pending specific profitability analysis (even if I would not expect very big surprises), A330neo development seems more attractive than A380neo as
    • A330neo development cost per unit of aircraft demand stands at ~4.7M€ whereas
    • A380neo development cost per unit of aircraft demand stands at ~14 M€