Airlines
A year ago we noted 2014 had been among the most profitable years for the airline industry, with carriers raking in some $20 billion at the bottom line. Surprisingly, the fall in oil prices during 2014 – which saw the price of a barrel of crude roughly halve from the $100-120 that had long prevailed – was not a big driver in the 2014 profit rush, as airlines were still locked in to hedging contracts that assumed higher prices.
However, the ultimate prize proved much greater than Flight International anticipated, based on International Air Transport Association guidance. Where we looked to see airlines enjoy a roughly 25% rise in profits during 2015, to a record level of about $25 billion, the industry in fact closed the year with $33 billion in its pockets.
Widebodies
In the market for twin-aisle, long-haul airliners, Flight International anticipated an interesting year for Airbus’s A380 superjumbo – and we weren’t disappointed.
At Airbus, much debate goes on as to the merits of an A380 upgrade. Tim Clark, who heads Emirates Airline, the type’s biggest customer, has long been calling for the double-decker to be re-engined, creating – as with the A320 and A330 – a “neo” version. Other talk has been of a stretch, to make the big even bigger.
By November, Airbus chief salesman John Leahy was saying an A380neo service debut by “2022 or 2023” was “inevitable”, an expectation chief executive Fabrice Brégier soon declared “too early”.
In truth, the debate is about whether or not the type has a future beyond its current order book. To date there have been 317 firm orders for the A380 and as 2015 closed the backlog was down below 140 aircraft, half of which are for Emirates. An ugly fact for Airbus is that, as the Christmas break approached, A380 orders for 2015 totalled exactly …zero.
Narrowbodies
Falling oil prices and rising interest were expected to take some of the urgency out of airlines’ drive to order next-generation aircraft. In the event, 2015 didn’t prove to be another record year for Airbus and Boeing – but neither did worst fears arise, namely cancellations; the re-engined versions of both companies' single-aisle workhorses remain in demand, and Airbus’s A320neo even reached certification.
Where life got interesting was at would-be narrowbody contender Bombardier. As we noted a year ago, management turnover saw 2015 start with a new-look sales team and hopes of boosting a 243-aircraft backlog for the CS100 and CS300 models to 300 aircraft by the time the smaller CS100 entered service in the second half of the year. Sadly, that service entry has yet to happen and the financially-troubled company rolled into the festive season having added nothing to its order book.
Regionals
Full marks here for the crystal ball gazers at Flight International. Mitsubishi’s MRJ did indeed make its maiden flight “at about the same time” as Comac – finally – delivered the first of its ARJ21 regional jets. It remains to be seen whether that ARJ21 will “wear the burden of its delays”, principally its soon-to-be-outclassed GE Aviation CF34-10 engines.
Embraer, as foretold, made steady progress on its E2 programme, which like the MRJ features Pratt & Whitney Pure Power engines. And, Bombardier indeed did not divert resources to shore up its CRJ900 and CRJ1000 positions in an increasingly competitive regional jets market, sticking to the overriding priority of realising its CSeries narrowbody programme.
M&A
One statement stands out from our January 2015 remarks on the prospects for mergers and acquisitions in the aerospace and defence industry: “The broad economic background of the post-crisis period is best described as an unstable equilibrium, which suddenly looks more like unstable than equilibrium.”
True enough and, if anything, background factors got worse, with “signs of sustained growth” in the US and UK economies looking more like fits and starts. The Middle East only got hotter while terrorism, security and the Syrian refugee crisis started to heat up US and European politics.
But the broad thrust of our aerospace expectations held, with companies taking restructuring action after several years of holding fire.
As for Rolls-Royce, the troubled UK aero engine maker was certainly “one to watch”. Strategy announcements, however, did not quell investor anxiety and that tale rumbles on into 2016.
Defence
In retrospect, some of our 2015 forecasts were easy calls. As last year dawned, the security world looked daunting and the task of “striking Islamic State militants in Iraq and Syria” was not expected “to be completed any time soon”.
But the kicker, in retrospect, was this line: “Russia’s influence on world events should not be underestimated.” Following a year which saw Russian air support thrown into action over Syria – and in one case shot down by the Turks – we can say the same again today.
Perhaps controversially, but not surprisingly, events of 2015 are breathing life into calls in Europe and the US for greater defence spending, or at least greater spending on the sort of air assets that take the fight to IS.
For sure, recall our spot-on expectations of political battles over two of those assets: The F-35 and the USA’s new LRS-B long-range bomber. Neither disappointed in 2015 and both will continue to provide much taxpayer-funded “entertainment”.
Helicopters
We kicked off 2015 with a description of a soft market thus: “The growing civil market [has been] a welcome refuge from military budget cuts [but] reduced investment in the parapublic segment – plus the relative modernity of the Western fleet – is also beginning to tell.” And, of course, falling oil prices meant “oil companies are reining in spending on new exploration”, which hits demand for the big helicopters that service offshore rigs.
All true, but maybe understated; we could have summed up by suggesting helicopter makers had been enjoying a period of overinvestment by customers. And that won’t work itself out soon; continued low crude prices just add oil to the fire, so to speak.
Safety
Our expectation that airline safety would continue to improve was, thankfully, well-founded. The problem – and we recognised this a year ago – is “deliberate action”. Back then, we pointed to the two 2014 losses of Malaysia Airlines flights, one over a war zone and one unexplained but, perhaps, owing to pilot choice.
What came in 2015 was altogether more sinister. A mentally ill pilot flew one aircraft into a mountainside and terrorists took down another with a bomb. Both incidents flag up the safety reality of this era, and while security may be tightened up against both types, it’s difficult to imagine any watertight system.
Space
Anticipating Johann-Dietrich “Jan” Wörner’s appointment to head the European Space Agency on the June retirement of the long-standing and hugely popular Jean-Jacques Dordain, we noted that “Wörner’s stewardship…promises to continue Dordain’s legacy of an ESA that shows the way when it comes to realising projects that rely on deep-rooted, reliable collaboration, such as the International Space Station or, perhaps, a journey to Mars.”
Wörner hasn’t disappointed. As 2015 wound down, he opened a campaign to build support for a permanent – or at least long-lived – international Moon base. The scientific value and cost-benefit calculus may be up for debate, but when the ISS reaches the end of its life in 2024, a Moon base may well prove to be the next story of international co-operation in space.
Business aviation
Sadly for Bombardier, the news of 2015 went beyond our expectation that it would deliver its revamped Challenger 605 large-cabin jet from the second half. During the year, the financially struggling company “paused” and then cancelled its Learjet 85 programme and announced a two-year delay for the Global 7000, citing the need for more time to redesign the wing.
One top-end rival suffered an unfortunate, and in fairness to our forecasters unforseeable, surprise. Dassault’s Falcon 8X flew as planned, but a first-half maiden sortie eluded the all-new 5X, which remains on the ground awaiting resolution of trouble with its Snecma Silvercrest engines.
Source: Flight International
