Saturday, December 26, 2015

The A380 Slowly Fades In Stage Three Of Market Pulse (Part II)

The demonstration today is about the various periods or stages of an Airplane Order cycle.

1.  Promise (Authorization to build announcement date and initial ordering until Production starts) 

2. Production/(delivery period starts with entry into market until customers start reordering the type)

3. Performance (signals a double down on a successful program when significant reorders and up-orders for larger types are booked.)
The three stages above could be quantified in math formulas from data after an aircraft framer announces a new and huge aircraft type. The cases brought forward are exemplified by the Airbus A380, and the Boeing 777X. Even these two different classes of airplane each having different philosophies for supporting its inceptions, also cross each other market lines within the world markets. Making them an interesting study about ordering.  Because the cost of buying these two aircraft represent immense fortunes for any customer, it takes on a process using mathematical smoothing when determining risk and before any sense is made about what aircraft will settle the WB battle. 

In other words, the risks are from cost of buying (or not), and it represents a value found in the Airline Company's affirmative purchasing schemes or decision making.
The A380 has entered into stage #3 identified during an order life cycle called "Performance Phase". The 777X has entered into stage #1 “Promise Phase”, of its own order life cycle. Taking both of these different two aircrafts, and examining its respective order histories can help map out future numbers predicting an order flow for each type. 

The first effort is drawing a circle for charting the respective order dichotomy of the Market. There is only a certain potential a market can absorb concerning the orders for super large aircraft, or any aircraft type for that matter. The circle chart represents 100% for super large aircraft types and its market potential. 

Even if only one airplane type is in play, it may not sell up to a total market potential, because not every customer can match its own corporate needs coming from just one maker, who happens to have a super large aircraft for sale. 

Therefore, even having a sole sourced A380 available as the Jumbo default offered, it does not include all customers who were interested in a super sized flagship. Boeing swooped in during 2007, and upgraded with its 747-8i having a small dampening effect on the A380 sales progress. Boeing then again switched gears in 2013 announcing the 777X family of aircraft. It's the old counter move using the 787-8i blocking and gaining more buying time perfectly. They made a wedge in time for its secret 777X completion schedule formed back in 2007, and have aided the A380 complacent spiral downward all the while as Boeing got it going. The 777X jumped through the time hole, while the 747-8i provided a counter block slowing the A380 for another market score.

The limit of the A380 orders has a finite quantity hidden in the Venn diagram circle, even if there are super bodied aircraft that are smaller, a market remains available for ordering. Boeing is counting on the Airbus stage three A380 marketing status where it will give Boeing an opportunity for its stage one 777X. So far it appears they are correct, as Boeing's 777X strategy will be validated when it reaches its own stage 3, of Performance. The 777X family straddles the market when compared with the A380 size or its capacity metrics. However, Boeing is counting on the 777X flexibility for making its fortune. The 777X can out dispatch, out fly, and out arrive the A380. Boeing is counting on not caring about passenger capacity per aircraft when it examines the 500-800 passenger level, but it makes the A380 appear unimportant in the scheme of things. 

Proof comes from observing order history from both framers of the WB class.

CustomerEntry into serviceFirm OrdersDeliveriesEARRPress Release
Air Austral2*
Air France20091210*[3]
Asiana Airlines201464*[5][6][7]
British Airways20131210*[8]
China Southern Airlines201155*[9]
Etihad Airways2014105*[13]
Unidentified Customer(s)10
Korean Air20111010*[14]
Malaysia Airlines201266*[16]
Qatar Airways2014106*[18][19]
Singapore Airlines20072419*[20]
Thai Airways International201266*[21]
Transaero Airlines20164*[22]
Virgin Atlantic20186*[23][24]

As you come to appreciate the facts, only 317 units of A380's have been ordered in the fourteen years since 2001, or known as the start of stage one A380 orders. However, It has demonstrated going from stage one to stage three, the A380 is rapidly becoming the "A380 white elephant" of which many aviation experts had initially predicted.

777X Summary Through November 2015

Model SeriesOrdersDeliveriesUnfilled
777X Total306-306
Customer NameEngFirst OrderOrdersDeliveriesUnfilledFirst Delivery
All Nippon AirwaysGE31-Jul-201420-20
Cathay Pacific AirwaysGE20-Dec-201321-21
Etihad AirwaysGE17-Nov-201325-25
Lufthansa German AirlinesGE17-Nov-201320-20
Qatar AirwaysGE16-Jul-201460-60
Unidentified Customer(s)GE04-Jun-201510-10
Model SeriesOrdersDeliveriesUnfilled
777X Total306-306
The stage one of the 777X order number count resides at 306 units and counting, validating the concept before its first stage ends in the year 2020, and even, before entering into stage two order cycle known as Production/delivery. The Production/Delivery stage can only establish the Performance stage 3. The Production/delivery causes a stir in the market as other potential customers weigh the merits of the 777X. 

The Airbus A380 had settled at 189 purchased during its Stage One order period, and it cannot go any further since by this definition it's locked in after entry into service. However, once the 777X Production/delivery "Phase two" begins in 2020, it will ice the A380 as the biggest loser. 

When the 777X reaches its final "Ordering phase three", or a successful performance phase, the A380 becomes "Dumbo the elephant.

Additional Information regarding the A380:Program History Orders

Order: analysis:

Stage 1: A380:   189 Units (currently in stage 3 with 317 A380's ordered).

Stage 1:  777-X: 306 Units and its counting continues until first delivery arrives in four years marking the start of 777X’s stage two).

As an example using the 787 program, Boeing announced in 2004 it would build the 787 where it gained 348 initial orders through 2006. Once the 787 body pushed out in 2007, 267 orders were booked in one year. After first delivery in 2011 and the "Battery problems" following, it gained only 86 orders for those two years ending in 2012. 

However, since the "Promise Phase" began, and since the 787-10 announcement, the "Production/delivery" phase including its overall battery solution, during the 2014 and 2015 order period continues with a solid 138 more 787 orders. The Airbus A350 orders began to languish in 2015, even though it has not experienced any battery problem. The total is zero A350's ordered this year. Though the A350 "Production Phase" has begun its delivery schedule is topped with only 13 delivered in 13 months. A slow start-up is apparently costing Airbus some orders.

Boeing 787:

1. Promise Stage = 787 units ordered

2. Production stage = 362 units ordered, until it transitions to Performance stage. The production stage ends per each customer, when Boeing adds newly booked aircraft for a same type (i.e. 787) while having a prior order history from the customer for that type.  

3. Performance Stage = further analysis for the period is required. However, follow-on orders have begun showing-up similar to ANA's, who has since ordered 3, 787-10's, or Norwegian Airlines ordering 19 more 787-9's this fall. This illustrates stage 3 orders defined as coming in for the performance phase for ordering.

Ordering a 787 is more confident decision than ordering the A350, and now customers are getting one in a reasonable amount of time.

If the Classic 777-300ER orders are added in this comparison, it's obvious game over for the A380 in spite of what John Leahy can sputter at the next airshow.