17/11/2023

Dubai Airshow 2023 Roundup

The 2023 Dubai Airshow saw significant order movement, especially in the widebody market, which further proved the region’s unwavering interest in the aircraft class.

Boeing

Boeing managed to secure most of the show’s widebody orders, mainly thanks to Emirates increasing its, already very sizeable, 777X backlog. This included an additional 55 777-9X as well as restoring the previously cancelled order for 35 777-8X. This brought the airline’s, already market-leading, 777X backlog to 205 aircraft. Additionally, the UAE’s biggest carrier also decided to readjust its 30 787-9 order, changing its composition from 787-9 only to 20 787-8 + 15 787-10.

Emirates order wasn’t the only winning front for the American manufacturer, as flydubai also announced its intention to take over the entire 787-9 order from Emirates. This moves them into the widebody market; however, the move is reportedly only to thicken routes. Boeing’s winnings also stretched to the narrowbody area, where SunExpress signed a letter of intention to acquire 17 737-MAX 10s as well as 28 737 MAX 8s, with an option for an additional 45.

The American manufacturer also saw an order from SCAT Airlines for 7 737 MAXs. These orders are very much needed if Boeing is to regain its market share in the narrowbody market.

Airbus

Nonetheless, Airbus was not quiet at the show, with airBaltic placing a firm order for 30 A220-300s, with an option for an additional 20. As the world’s only all-A220 operator, they are seen as something of an ambassador for the type, especially given their commitment amid recent Pratt & Whitney engine issues. The European manufacturer also had greater success on Tuesday, after reaching a provisional agreement with Ethiopian Airlines for 11 A350s, with an option for 6 more. However, the airline did decide to place 11 787 and 20 737 MAX aircraft at the same time, with the option for an additional 15 Dreamliners and 21 MAXs.

Emirates was not finished at the show as they eventually decided to award Airbus the consolation sale of 15 additional Airbus A350-900. This was smaller than their initial stated intention of up to 50, due to engine issues to be resolved in the bigger -1000 variant. To add to the Airbus tally, as predicted in IBA weekly, EGYPTAIR has placed an order for 10 A350-900s.

Ultimately, the rumours regarding a Turkish Airlines order never came to fruition, as the airline is said to still be in talks with Airbus over its 350+ aircraft order. We are still waiting to see when the airline will reinvest their bumper 2022 profits. Nonetheless, both OEMs and therefore the broader aviation market will be pleased that the large appetite for growth in aviation continues to the close of 2023.

Source: IBA Intelligence

Written by Neil Fraser, CFA, Manager - Airline Analysis, and Piotr Grobelny, Aviation Analyst.

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Paris Air Show round-up: $72.4bn total, with most firm orders ever

IBA Weekly Date: 23/06/2023 (issue 32) Whilst Paris Air Show is known to be quiet on the last two weekdays, no one quite expected the absence of significant business that would continue until late on Monday. This quiet was broken by a blockbuster 500 aircraft order from IndiGo. Air India then followed up by firming their 470 aircraft order the next day. The week had been flush with rumours of large orders, leading IBA to forecast a total greater than 2,000 aircraft. We did not hit that estimate. However, if Turkish Airlines had committed to their rumoured 600 aircraft order, we would’ve been very close! At the time of writing, on Friday lunchtime, the total orders including Firm, MOUs, LOIs and Options reached 1,303 aircraft, worth $72.4bn based on IBA’s 2023 Current Market Values. This is an impressive total, with only 2013 accruing a larger tally. A more interesting detail is that 1,160 (89%) were firm orders, the highest ever. Having firm orders is good news for the programmes in terms of long-term confidence in them as well as securing Pre-Delivery-Payments (PDP). Large orders will allow the operator to demand a superior price, however, the OEM may also be able to benefit from demanding higher PDP in the higher risk transactions. Operators appear to be firming up orders to secure delivery slots in an environment of supply delays. However, with orders of such scale, questions arise as to whether the local markets can accommodate the growth. This is especially the case when the two airlines making the largest orders are in the same country. Source: IBA Insight & Intelligence Indian carriers dominated orders as expected The Airbus press conference on Monday got the tally off the ground, announcing 500 new A320 family aircraft for IndiGo. In numerical terms, this eclipsed the 470 Air India order that was firmed on Tuesday, with the Boeing and Airbus announcements happening almost simultaneously, as to avoid one getting more headlines. It is also worth noting that IndiGo already had a backlog of 485 aircraft, putting their new total just shy of the 1,000 mark. IBA values this new order at $28.0bn. Despite the numerical inferiority, IBA value Air India’s order at $33.1bn. This difference can be attributed to Air India also ordering widebodies. Their order in full was 220 aircraft, with Boeing (190x 737 MAXs, 20x 787s and 10x 777Xs) plus 250 aircraft with Airbus (140x A320neos, 70x A321neos and 40x A350s). There is also an option with Boeing for a further 50x 737 MAXs and 20x 787s), which would take their order total to 540. Unlike IndiGo’s Airbus loyalty, the order is split between the two large OEMs, reflecting the very mixed fleet of the Indian flag carrier and its present and future subsidiaries. Including widebodies in the order will likely solidify the airline’s dominant international market share (27.8% share compared to IndiGo’s 10.7% in 2023). The airline severely lags IndiGo in the domestic market share however (26.6% compared with 57.5% of IndiGo). Both are expecting to gain share from each other but will also be reliant on the market’s growth. Recent estimates have the Indian aviation market growing at 9% annually and the country has pledged $12bn to Indian infrastructure. Whether that can accommodate these 970 aircraft before their first flights, is another thing. Avolon led the lessors With the scale of the orders, one could be forgiven for thinking there were lots of participants. Among operators, Western Europeans were conspicuously absent, albeit Ryanair had placed a large 150 aircraft order (plus 150 option) pre-show. It was also the case with lessors. Avolon’s 40x 737s and 20x A330 order, as well as an 80 LEAP engine deal the only large business among them. Interestingly, Avolon’s ratio of orders to current fleet is getting closer to parity, similar to the likes of well-known speculative lessors like Air Lease Corporation (ALC). In an aircraft supply bottleneck, the lessor has more control over lease rental pricing. This is compared to an operator receiving multiple lessor offers for Sale and Leaseback. This relationship of course reverses in oversupply. Their A330s are expected to be delivered through 2026-2029, with the narrowbodies likely in the 2030s. We don’t know what the market will look like then, so these orders are therefore purely speculative. Source: IBA Insight & Intelligence Airbus beat Boeing comprehensively The week had success for many OEMs with De-Havilland’s 49 aircraft orders and Embraer’s 28 up among pre-Covid levels. However, the gulf between Airbus and Boeing was quite sizeable. As discussed earlier, IndiGo operate solely A320 family aircraft which pulled the OEM far ahead in the narrowbody stakes. Airbus already led pre-show in total backlog with 8,546 aircraft to Boeing’s 7,069. When looking at the A320neo and 737 MAX alone, the Airbus advantage was 1,300. This is now wider. In the show, Airbus totalled 846 orders. This is over double Boeing’s 356 orders. What is particularly interesting is that Airbus also won on the widebody stakes this year, with 72 firm orders to Boeing’s 40 (excluding 20 on option). Boeing had exceeded Airbus in widebody orders in eight of the last ten years. Boeing will be hoping that production delays to the 777X don’t cause a turning point. Source: IBA Insight & Intelligence This IBA Weekly was written by: Neil FraserHead of Consulting Neil FraserManager - Airline Analysis