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What´s next?

There is one major question that is going to dominate this year’s Paris Air Show. It’s a very short, but very complex question: What’s next? – What’s next in aircraft development? How will Airbus and Boeing deal with the growing pressure to come up with more fuel efficient aircraft and how will that affect their overall portfolio strategies in the year to come?

Airbus has already given the answer. It launched the re-engined Airbus A320NEO (new engine option) that is now expected to enter service around late 2014. The aircraft is on offer with either the Pratt & Whitney geared turbofan PW 1000G or the General Electric Leap-X engine, both of which are expected to deliver up to 15% fuel burn savings.
The initial success of the new – but otherwise little changed aircraft – has  been surprising for most observers.

International Lease Finance Corporation (ILFC), Lufthansa, Indigo and others have signed orders and commitments for more than 300 of the aircraft only months after the launch. And if you look at how Airbus has been using air shows as a platform to announce orders in the past, you can expect much more for Le Bourget. The Aérosalon will be Airbus territory again this year, and not only because it is taking place in France, but also because the European manufacturer seems to have a success story to tell.

A difficult terrain for Boeing

On the other hand, Le Bourget has always been difficult terrain for Boeing. It will be even tougher this year. Not only because the show is located in Paris, but mainly because Boeing does not have the answer to the ”What’s next?“ question yet. Boeing has been floating the idea of re-engineing the existing Boeing 737 for some time with customers, but the reception it has received was lukewarm at best. That has led the U.S . manufacturer to more closely examine the option of introducing an all-new design towards the end of this decade. Such a multi-billion investment would only make sense if Boeing is convinced that significantly more advanced technologies will be available for commercial use by then.

That demand must apply for the airframe where composites could bring weight savings also in a narrow-body and short-haul application or techniques such as laminar flow could help to reduce drag and thus fuel burn. While the initial version of Pratt’s geared turbofan will be available on the Bombardier C-Series and the Mitsubishi Regional Jet (MRJ) in 2013 and a larger variant on the A320NEO in 2014, the engine manufacturer has already spelled out a roadmap for later upgrades that would push fuel savings well beyond 20%. Depending on when those advances could be achieved, Boeing might be the first airframer to take advantage of them.

Airbus, obviously, has a clear no as the answer to whether or not sufficient technologies could be ready in or around 2020 to justify developing an all-new aircraft by then. That is little surprising, because such a move would also destroy the business case for the NEO. Instead, Airbus now argues that any new design will not even come around 2025 (as argued until very recently), but probably after 2030.

To some degree that decision has to do with technology availability. But that is not the entire explanation. Airbus also has no strategic interest in building a new narrow-body: It has a strong backlog for the current A320 version plus customers seem to like the NEO. But maybe even more importantly, Airbus cannot afford another new full-fledged development program: It will be probably decades before the A380 program becomes profitable (if at all).

At the same time, Airbus is finalizing development and flight tests of the A400M military transport with production ramp-up to follow suit – that process is producing several billion in excess costs. And then there is the A350XWB wide-body which is planned to enter service in 2013. Boeing does not have these kinds of restrictions. The company has plenty of money and made acceptable profits in spite of the fact that it is only later this year delivering the first units of its long-delayed Boeing 787 to launch customer All Nippon Airways. But the fact that it is further ahead in its development cycle, means that Boeing has resources available earlier than Airbus.

Boeing, too, does not only have to address the technology questions, but has to clarify its broader strategy. In addition to a new aircraft in the narrow-body segment it also has to decide what to do with its 777. The aircraft will be 20 years in service in 2015 and more and more customers such as Emirates are expecting significant upgrades – if not an all-new design.

But Boeing CEO Jim McNerney has made clear that he would rather avoid doing two all-new aircraft at the same time. The Paris Air Show will come too soon for Boeing to have the answer. Instead of launching a 737 successor in Le Bourget, Boeing will only provide “more clarity on which direction we are leaning.” An all-new aircraft would give Boeing not only the opportunity to use new the latest technologies, but also to redefine which market segment it would like to address with the aircraft.

The company could well decide that the Y1 – as the project is called internally – could become significantly larger than the current 737 with a baseline aircraft of around 170 seats and stretched versions seating well in excess of 200 passengers. That would open up a segment of below or up to 150 seats that others, like Bombardier, would be happy to fill.

Such a move would not be too much of a surprise. Already the 787 does not really compete head to head with the A350 – it is a significantly smaller aircraft. The same situation lingers in the narrow-body arena. It would be good for the customers, they would have simply more choice.

But they will have to be patient and otherwise enjoy a sip of champagne in one of the Le Bourget chalets while watching A320NEO orders accumulate. They know that the picture could change soon.

Jens Flottau

German  Summary

Eine klare, prägnante Frage schwebt schon jetzt über dem diesjährigen Aerosalon in Le Bourget (20. bis 23. Juni 2011): Was kommt als nächstes? Adressiert ist diese scheinbar harmlose Frage an die Entwicklungsabteilungen von Boeing und Airbus. Denn sie müssen innovativ auf die Nachfrage nach kraftstoffeffizienteren Ver-kehrsflugzeugen reagieren und ihre Mo-dellpolitik neu ausrichten.

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