For years, Airbus executives have routinely stolen the limelight at the big European air shows and this year they did so again.
On the second day of the Farnborough Air Show, Airbus sales chief John Leahy sealed a massive jet order with a razzamatazz that underlined the urgency of Boeing’s search for its next new single-aisle jet.
The difficulty of Boeing’s position came across in interviews the same day with two senior airline industry executives, who offered opposing assessments of the tentative proposals Boeing has put forward.
For years, Airbus executives have routinely stolen the limelight at the big European air shows and this year they did so again.
Their accomplice on Tuesday, for the second time in five years, was Tony Fernandes, chief executive of Malayasian-based low cost carrier AirAsia Group and a showman in the vein of British billionaire Richard Branson.
On Monday, Boeing sales chief John Wojick mocked the Airbus order backlog as less than solid. He specifically called out AirAsia, an airline with a fleet of less than 200 airplanes, for having what he implied was a speculative order backlog of 304 Airbus A32oneos.
On Tuesday, Airbus gave Wojick his answer. Fernandes ordered another 100 of the jets, this time the larger A321neos.
The list price is $12.6 billion, but according to estimates from market valuation firm Avitas, after standard discounts the real value of the order is about $5.7 billion.
The scene at the order announcement wasn’t quite as circus-like as when Fernandes first ordered 200 of the neos at the 2011 Paris Air Show.
But it was entertaining, as the lively Fernandes joked about the German rigor of the Airbus moderator, the hair of a Japanese journalist, and the 14 “fantastically beautiful” flight attendants in their bright red uniforms flanking the podium – his standard entourage.
Though just last year, AirAsia was in financial trouble – hit by intense competition in southeast Asia and by an economic downturn in some of its markets – Fernandes thanked Airbus for helping the airline recover by allowing it to defer some deliveries.
He said the airline is back with “record profits” this year.
At the Boeing media reception later, Boeing executives were stoic. Commercial Airplanes chief Ray Conner said Airbus “always plays a numbers game.” He noted AirAsia’s shakiness last year.
Still, there’s no escaping that Airbus has again extended the considerable sales advantage of its A321neo over Boeing’s competing 737 MAX 9.
In response Boeing has proposed to airlines two separate airplane concepts.
The first idea is to replace the MAX 9 with a variant that has a longer fuselage, new bigger engines and taller landing gear. This is dubbed the MAX 10.
The other idea is to develop an all-new, clean-sheet design that would be sized between a large single-aisle jet and a small twin-aisle jet. Boeing has named this the New Mid-market Airplane, or NMA.
Boeing believes it has the resources to do both. But first it must find out, by canvassing its airline customers, if there is a demand – and if the plane the airlines want can be built at the right price.
The responses coming in must be complex.
Interviewed inside the Airbus chalet at Farnborough on Tuesday, Aengus Kelly, chief executive of Aercap, the world’s largest lessor of commercial jets, made clear that he thinks the NMA is a poor idea and that in contrast there’s a good market for the MAX 10.
“The MAX 10 is a better answer,” said Kelly. He compared the NMA to the now discontinued 757, noting that “anyone who bought a new 757 has lost a lot of money on it over the years.”
In direct opposition, Bjorn Kjos, chief executive of Norwegian Air Shuttle, the successful European low-cost carrier that also flies long-haul international routes, said he’s not interested in the MAX 10 but is very keen on the NMA.
“If they can build (the NMA) economically, I think that can be a winner,” said Kjos. “We will definitely be interested in such an aircraft.”
Mike Delaney, the head of Boeing product development, in a Farnborough presentation Tuesday said the NMA is not a 757 replacement but a more capable airplane that will carry more people and fly further.
The concept is for a small twin-aisle airplane, yet providing airline costs more in line with single-aisle jets.
Kelly and Kjos have some standing to assess the case.
Kelly heads a leasing firm with about 1,230 aircraft worth $44 billion. He likes to say that Aercap buys, sells or leases an aircraft somewhere in the world every day. He has 109 Boeing 737 MAXs on order and 209 Airbus A320neos.
Kjos runs an airline that flies 101 Boeing 737s and 10 Dreamliners. He has firm orders for 22 more current model 737s, a further 32 Dreamliners, plus 108 Boeing MAXs and 100 Airbus neos.
Kelly insists that the economics of the 757 suggests an NMA won’t work.
Although some U.S. carriers still fly 757s, he said, they only are able to do so economically because they wrote off much of the capital costs of the jets in bankruptcy.
He said 37 percent of 757s are not flying but stored on the ground.
“So many of them are in the desert because it’s not worth reactivating them,” he said.
As for Delaney’s idea of the NMA being an entirely new category of jet, Kelly said that makes selling it more difficult. While the MAX 10 would be sold to existing 737 operators, who would buy the NMA?
“There’s no family of them out there right now,” he said. “You have to go out and find a new customer base for it.”
But Kjos, with all his MAXs on order, doesn’t want a MAX 10. He said it’s a difficult engineering challenge to make the 737 bigger and the likely outcome would be less range.
However, he agrees with Delaney on the enticing possibilities the NMA would open up. Today, Norwegian flies a 787 Dreamliner on low-cost, long-haul flights between large cities, such as London to New York.
A smaller NMA would allow him to open up such international low-cost service on smaller routes between secondary cities, say Cork, Ireland, to Boston.
The NMA is “a very interesting concept,” said Kjos. “We could offer direct flights and much lower fares.”
At the Boeing reception on Tuesday afternoon, chief executive Dennis Muilenburg said that if Boeing decides to go ahead with all these proposals, it will work through its list of development programs in sequence.
First, Boeing will introduce the MAX into service next year, then follow that, in order, with the 787-10, the 777X, the MAX 10 and then the NMA entering service around 2025.
As the views of Kjos, Kelly and all the other customers are weighed, the trigger has not yet been pulled on the last two in the list.
Meanwhile, Tuesday at Farnborough belonged to Airbus, to AirAsia and to the A321neo.
Unlike Boeing’s Wojick, Peter Harbison, executive chairman of CAPA, an Australia-based consulting firm that analyzes Asia Pacific aviation, is not skeptical of AirAsia’s growth plan.
In an interview he said AirAsia has every prospect of taking all of the airplanes in its backlog because of the tremendous growth of air traffic in China and the rest of southeast Asia.
“AirAsia is beautifully positioned geographically,” Harbison said. “Those opportunities are enormous.”