Monday, March 31, 2014

Flight Global Explains How The ANA/Airbus Single Aisle Order Sums It Up For Airbus.

Airbus Order Analysis excerpt: Flight Global

"Airbus will be pleased to have dislodged Boeing as ANA’s single-aisle vendor, having lost out to the US manufacturer a decade ago. That 2003 737 deal was a surprise at the time, as ANA was already established as an A320 customer and had been expected to stick with Airbus.

The airline retains 15 A320s delivered in the 1990s, but the majority of its single body fleet comprises 737NGs, with 37 in service, Flightglobal’s Ascend Online database shows.
However, orders for the 777X series were already outstripping those for the A350-1000. Airbus order data to the end of February lists 189 commitments for the -1000, while – assuming the ANA deal is firmed – Boeing has already garnered 300 orders for the revamped 777.
To an extent, the A350-1000 does not compete directly with the 777-9X, ceding around 30 seats and 200nm (370km) of range to its rival, but Airbus will nonetheless have pitched it to ANA. Save for theA380, it could offer nothing else."

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Flight Global exposes the Airbus Conundrum very clearly in the last paragraph above, where it is wedged between the rock and the hard spot of wide bodies. The Japan Airline order from last year, now becomes a one off anomaly in Asia as Boeing successfully wooed ANA with the Boeing wide body order. ANA was given solid assurances for upping the 787-9 orders. It has the most 787 flying of any single company in the world. Therefore, it has the best operational data of any airline over the last three years. Even Qatar or Air India can' match ANA numbers with its smaller fleets. ANA went ahead and ordered a substantial Amount of 787-9 with 14 units for fleet renewal of replacing its older 777 types in its fleet. As stated in the Flight Global article, Long ago Boeing wrestled away from Airbus by selling a fleet of single aisle 737 back in the 1990's. Airbus has now flipped ANA back against the MAX. Since the single aisle market is so volatile, it is possible to take some consolation that the MAX is several years behind the NEO for an ANA earlier first delivery. By the time these new NEO's are delivered the delivery books for both manufacturers are stuffed. 
Boeing (Dreaming) will have to deal with that by out producing Airbus at closer to fifty a month to fill the single aisle market with loads of Boeing 737 MAX types. They may want to consider a 32 a month NG line side by side with a 32 a month Max line for the next seven years. That would actually catch Airbus and sell more airplanes for an impatient market place. ANA considers the differences on the NEO vs MAX are small enough to get one NEO sooner rather than one MAX later. The MAX has to climb rapidly out of its R & D bunker rather quickly. The NG won't compete with the NEO in a head to head match, only as the NG can from a capitalization perspective. Its cheaper monthly interest cost buying the NG over both the MAX and NEO, and a cheaper NG with a diminished interest expense, off-sets its higher cost of operations. Flying an airplane with a smaller performance margin is paid for with the capitalization savings during its service.
An example of the capitalization model in simple numbers is as follows: 
How the  better performance aircraft cost more at the bank and has an off-set by higher interest expense costs, against that improved performance. However, an NG fleet may compete well with the NEO on the bottom line for that reason. Buying new equipment recharges a company's depreciation schedule. ANA needs to consider newer aircraft sooner, since the depreciation on older aircraft loses a tax affect as it ages. Airbus is closer to being ready than Boeing while ANA needs the pole positon for single aisle tax benefits. 

NG Purchase Price:                                          NEO Purchase Price
50 Million                                                            70 Million
-Annual Interest Cost on 50 Million                +Annual Interest Cost on 70 Million 
+Increased Net fuel/operation NG/NEO          - Decreased Fuel cost on NEO over NG

NEO Comparison For ANA customers.
NG keeps it fresh for RyanAir

RyanAir approaches its 170 Boeing 737NG purchases with a model that will compete on the bottom line with both the Max and NEO. Once those newly ordered 170 need fleet replacing, the MAX or NEO capitalization will have decreased by then, and warrant purchasing the newer generation aircraft at a cheaper than today's price.
ANA has taken the high road by model type, going with a guarantee of being closer to the front of the NEO line if they chose Airbus over Boeing. Airbus went stumping just to crack back into Japan's market. It has covered both wide body and single aisle with two different Japanese airlines. Boeing was in there slugging it out with Airbus for orders. In the Japan Airlines case, they were too late to the horse race gate. In the second attempt they won the race with Airbus with the wide body order exposing Airbus as a pretender not a contender. The A350-1000 is about as far out for delivery as the 777-9. With all things even Boeing won. What ANA also won was a great deal is made with Boeing using the threat of Boeing loosing another close call in its special market found in Japan. The ANA order with Boeing, exposes Airbus' Achilles heal with a thin line up.