By Ray Jaworowski, Senior Aerospace Analyst, Forecast International.
As usual, the order contest between Airbus and Boeing will take center stage at this year’s Farnborough International Airshow in the U.K. Through the end of June 2018, orders for the two giant manufacturers were somewhat ahead of the pace set in the first six months of 2017. With few or no signs evident of an immediate sales slowdown, the stage is set for another big order haul at the show for Airbus and Boeing. It should be kept in mind, though, that the Farnborough show tends to generate a lower number of order announcements than does the rival Paris Air Show.
Also front and center will be the new strategic teaming arrangements recently established by Airbus and Boeing. Airbus has a newly formed joint venture (in which it has the majority share) with Bombardier. The partnership has assumed marketing and production responsibility for Bombardier’s CSeries family of commercial airliners. Airbus has already rebranded the CSeries as the A220 family, thus providing the aircraft series with a nomenclature that is in line with the rest of the European manufacturer’s product catalog. What will be closely watched at Farnborough and in succeeding months is how much the Airbus connection acts as a spur to increasing sales of the A220 series, which is a somewhat unique product family spanning the top end of the regional jetliner market and the lower end of the narrowbody airliner segment.
Also at the show, Boeing and Embraer can be expected to reveal further details about their recently announced plans to form a joint venture to market and produce Embraer’s line of commercial aircraft. At this point, the partnership is only at the level of a non-binding Memorandum of Understanding, and a number of steps remain before any such deal is finalized. Clearly a response to the Airbus/Bombardier tie-in on the A220, the planned partnership between Boeing and Embraer puts Boeing’s powerful sales and service network behind Embraer’s already successful series of regional jetliners while, at the same time, fully integrating Embraer into the Boeing supply chain. Boeing is to have an 80 percent stake in the joint venture.
Meanwhile, Boeing is getting ever closer to a launch decision for its New Midsize Aircraft (NMA), also known as the 797. However, the odds of a launch taking place at Farnborough may be less than even. The NMA would be positioned above current narrowbody airliners and below small widebodies – essentially where Boeing once positioned the now out-of-production 757. Determining the size of the potential market for the NMA is critical, not only for Boeing but also for potential suppliers on the project.
Aftermarket services is another area that is sure to be highlighted by manufacturers at Farnborough. This is a very lucrative side of the business, and Airbus and Boeing want to capture a larger share of it.
To varying degrees, the new strategic partnerships, the drive to increase aftermarket revenue, and recent moves by Airbus and Boeing to insource certain work that had previously been outsourced can be viewed as protective responses to the rise of super-suppliers. Faced with pressure from OEMs to significantly reduce costs, some suppliers have opted to protect themselves by becoming bigger and more diversified. The upcoming acquisition of Rockwell Collins by UTC will combine two of the largest suppliers in the commercial airline industry. The product lines of these two companies are quite complementary, with little overlap. A similar supplier giant has already been created in Europe. In early 2018, aircraft engine and systems manufacturer Safran acquired interiors specialist Zodiac Aerospace.
As will the UTC/Rockwell Collins entity, the newly combined Safran and Zodiac can provide nose-to-tail parts and service for commercial airliners. Potentially, companies of such size and scope could have a lot of bargaining power when it comes to negotiating supply agreements with the OEMs.
Raymond Jaworowski currently co-authors three of Forecast International’s best-selling products: Civil Aircraft Forecast, Military Aircraft Forecast, and Rotorcraft Forecast. As a contributor to Aviation Week & Space Technology’s Aerospace Source Book, he has authored Aircraft Outlooks, and provided input for the publication’s Aircraft Specifications tables. Raymond has represented Forecast International at numerous conferences and trade shows, often as a featured speaker.
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