Airframe manufacturing has become a family matter. Industry chiefs may have differing views on which products will excite most demand, but all agree on the importance of being able to offer a top-to-bottom range of closely related aircraft.
Like proud parents, all are optimistic about the prospects for their offspring. Words of caution are few and far between; instead, buoyant terms such as 'upswing' and 'strong growth' echo around the globe as the various manufacturers push their growing family of aircraft in a largely prosperous marketplace.
These fervent attempts to match the every need of the customer, and at the same time induce 'brand loyalty' through commonality, is producing a wide array of airliner types. By the early part of the next century that range looks set to include everything from 30-seater jets to at least one 650-seater 'super-jumbo'. In between, the capacity increments are becoming smaller as the manufacturers scramble to ensure that no gap is left in which the competition might get a toehold.
Nowhere is the rush to offer a family of products more evident than at the regional aircraft end of the spectrum. Here, the entire face of the industry is changing: just as the last hopes for the world's most famous regional jet manufacturer, Fokker, are fading, a new generation of small jets is being spawned by its successors. Hard on the heels of Bombardier's announcement that it had 'completed its family' with the launch of the 70-seater Canadair Regional Jet 700 in mid-February, Embraer's president Mauricio Botelho has firmly committed his company to producing a Brazilian-built jet family as well. Botelho has confirmed to Airline Business his plans to develop 30-seat and 70-seat jets to complement the existing 50-seat EMB.145. The Brazilian manufacturer is planning to launch the smallest jet, the EMB.135, at the Paris Air Show in June, with first delivery tentatively set for early 2000. The 70-seater EMB.170 will be launched by the end of 1997 and possibly as early as Paris, says Botelho. The earliest first delivery date for this aircraft is 42 months after launch.
This segment of the market looks set to become even busier. Fairchild Dornier is preparing to launch a 30-seat jet, while the European consortium, Aero International (Regional), is optimistic of a mid-year launch for its Airjet family, consisting of a 50-seater and a 70-seater.
The burst of enthusiasm for small jets is both market and technology driven. At the same time as it is becoming possible to make small jets economically viable, apparently even down to aircraft as small as 30 seats, there is also increasing resistance from the travelling public to turboprops. This is especially true in North America, despite the US Regional Airlines Association's best efforts to reassure the public that turboprops are safe. Embraer's Botelho admits this perception is one of the main reasons why he believes it is the right time to triple his family of jet products. 'The passenger, who is our final customer, is willing to fly jets and refusing to fly turboprops. It is a matter of perception, of course. They perceive the jet as more comfortable and safer,' says Botelho.
One London-based aerospace analyst agrees. 'My heart sinks every time I have to take a turboprop,' he admits. 'It's a very bottom-up approach, but I am a normal passenger and if I have a choice, I would choose to fly on a jet. The airlines have to take notice of that.'
Indeed the airlines are taking notice. Since launching its 50-seat Canadair Regional Jet in 1992, Bombardier has secured orders for almost 200 aircraft. In the first two months of 1997 alone the Canadian company has received orders for almost 40 CRJs and has options on 60 more. Four years after launch, the production rate has been ramped up to five aircraft a month. Bombardier launched the CRJ-700 with four firm orders, 28 options and 35 memoranda of understanding from eight airlines, including French-based Brit'Air and Taiwan-based Great China Airlines. '1997 is starting on a good foot,' observes Bombardier Regional Aircraft division president Pierre Lortie.
Can it be equally as good, however, for the turboprop industry now that new jet products are emerging to compete head-on? Bombardier, which offers both types in its family, sees no clash. 'Turboprops serve a very definite need in the marketplace,' says Lortie. 'That market is the shorter routes. In the US or Europe you see very, very little use of turboprops over 300 miles. That defines what the two segments are.'
According to Bombardier, just 21 per cent of European turboprop flights and 18 per cent of US flights are longer than 300 miles. Lortie adds that the de Havilland Dash 8, its 30- to 70-seat turboprop, also enjoyed 'good business' last year, taking 71 firm orders and 71 options. The aircraft is penetrating many new markets around the world, says Lortie, including Japan and Papua New Guinea.
'Is there room for both?' asks one analyst. 'At the moment, I would say "yes", but the requirement for turboprops is reducing because the difference in costs is not that great anymore. But at the low budget end and for cargo, the turboprop should continue to find its market.'
Botelho agrees; he believes that the type of customer will change for the EMB.120 Brasilia, the turboprop member of the Embraer family. 'I think that the change from turboprop towards the jet is a fact now and that larger operations will substitute their turboprops over the next few years. But for some people at the third level - for instance, in developing countries where there are very short or unpaved runways- the turboprop is the correct choice,' says Botelho.
With increasing enthusiasm for the regional jet, what could possibly stand in its way? Contractual disputes for one, at least in the US. 'It's a small aircraft with a big jet feel,' observes a proud CRJ pilot - a point not lost on the American Airlines pilots as they make the issue of who should fly regional jets central to their current dispute with management. Bombardier itself, while steadfastly refusing to comment on the matter of US pilot scope clauses, estimates that 22 per cent of its CRJs are being used to replace larger jets - double the percentage that are being used to replace turboprops. With the US identified by most manufacturers as one of the most important near-term markets for regional jets, the outcome of the American dispute, and its possible ripple effect across other US majors, cannot be ignored. 'I would at least hope that the American dispute won't stem the overall trend towards jets,' says BT Securities equity analyst Wolfgang Demisch, echoing the concerns of many. 'The pilots at American are conscious that if you train a lot of commuter jet pilots, you potentially create a new pool that might not be so content with the status quo and that presents a challenge in the longer term. American is going, hopefully, to be able to find a formula which will alleviate those concerns.'
Big disagreement
Controversy rules at the extreme opposite end of the airliner range also, with Airbus and Boeing both airing their diverse opinions on the size of market for a very large aircraft. The two manufacturers have emphasised their views, and the gulf between them, in their respective 20-year market forecasts published in early March.
'The airlines will need 1,440 aircraft larger than anything flying today,' says the Airbus study. 'Although representing only 9 per cent of the demand in terms of aircraft units, this represents a quarter of the world demand by value.' Thus, Airbus confirms the wisdom of its plan to develop and build the A3XX, the smallest version of which would carry around 550 passengers and the largest more than 650. Airbus plans to decide on an A3XX launch by December 1998.
Boeing, having shelved its stretched version of the B747, sees matters differently. 'The market demand just isn't there right now for an airplane larger than our 747,' states the US company, which concludes that the market segment for the B747-size or larger aircraft is the smallest at 7.3 per cent of the total in terms of units, or 18 per cent in dollar terms.
Bruce Dennis, Boeing Commercial Airplane Group's vice president of marketing, admits there has been confusion about the way the market figures have been presented by each side, but insists: 'No matter how you slice and dice it, we see the total as 1,180 airplanes.' But John Leahy, Airbus' senior vice-president commercial, asks: 'If they didn't think there was a market for a super-jumbo, why were they trying to get customers for the stretched 747 at Farnborough last year?'
Numbers games
While the manufacturers play games with numbers, industry observers are consistent in their belief that, ultimately, Boeing will not let Airbus move into the top end of the market unchallenged. Charles Armitage, equity analyst at Lehman Brothers, says: 'The Boeing argument is that people are getting to capacity on the hub and spoke system, so the efficiencies of running very large aircraft are not so great as having more aircraft on point to point routes. The 747 stretch was only going to be an interim and would have been up to four years ahead of the A3XX, but as they were putting the decision off that came down to two years - so airlines were prepared to wait for the A3XX. But it would be wrong to say that Boeing has canned the idea of very large aircraft.'
Boeing, says Armitage, is now in a 'very powerful position' in which it can wait for Airbus to get far enough through the A3XX development cycle to make a change of direction difficult, then move in with its own, all-new product. He believes that Boeing would still be able to match Airbus' planned in-service date of 2003, especially if its new aircraft was based on the blended wing-body design being studied by McDonnell Douglas.
Boeing refuses to discuss any possible amalgamation of its product line with that of McDonnell Douglas until after the planned merger of the two companies is completed. But Armitage is not alone in spotting this opportunity at the top end of Boeing's future family tree. Demisch worries about fuel prices and thinks the blended wing-body might prove to be the right product at the right time. 'We have not had a fuel crisis for some 15 to 18 years and I am beginning to wonder,' says Demisch. 'It seems to me that supply and demand of fuel is getting snugger. If there is to be a significant adjustment of fuel over the next decade, then no airline manufacturer would want to make a multi-decade investment without those parameters being more or less fixed. It would need to be as efficient an airliner as possible, and the Douglas blended wing-body points towards that. I think the 777 was the swansong of the conventional airliner and it would not surprise me if Boeing is looking for something more sophisticated.'
Demisch believes that, with such high stakes involved, Boeing is doing 'the sensible thing' to wait. 'There is no plausible reason for Boeing to rush out when customers were not enthusiastic,' he says. Not surprisingly, Dennis concurs, and suggests Boeing is merely waiting in the wings. 'We continue to study the market and, if the potential develops for that size of airplane, we'll be ready with an excellent design,' he points out enticingly.
Away from the issue of the very large aircraft market, Airbus and Boeing forecasters are more closely aligned. Both put the overall market over the next 20 years at around 16,000 jets, worth US$1.1 trillion, with the strongest growth, not surprisingly, forecast for Asia-Pacific. Boeing's projected annual air travel growth is slightly more constrained than that of Airbus, at 4.9 per cent versus 5.2 per cent, which the Seattle-based company attributes to a slowing of growth in the mature US market. Boeing says the greatest demand will be for single-aisle aircraft, which will make up 43 per cent of dollars invested, while intermediate-size aircraft, such as the 767 and 777, will be in the fastest growing segment, comprising 39 per cent of the dollar value total. Airbus, meanwhile, estimates that single-aisle aircraft will make up 54 per cent of the total demand and widebodies 46 per cent. However, because Airbus sees a 'clear trend' towards much larger aircraft, and forecasts that widebodies will make up 75 per cent of total transaction value.
Both manufacturers emphasise the 'family nature' of their product lines. Boeing says the stretched versions of the B767 and B777 will strengthen its family and sees more activity at the 80-seater end, which it will 'definitely' keep its eyes on. The company has options, also, in the 100-seat segment. First is the McDonnell Douglas MD-95, which this year will transition from paper to hardware as design reviews and prototype development are completed. Understandably, McDonnell Douglas is keen to emphasise how far along this programme has come. 'It will be a very big year for our MD-95,' says James Phillips, the company's vice president-general manager, MD-95 programme.
But Boeing, McDonnell Douglas' potential partner, might yet pursue another avenue. The company has long been in talks with Mitsubishi of Japan, which is keen to develop a 100-seater using a Boeing cockpit and a Bombardier wing. Bombardier Aerospace president Bob Brown confirms his company is studying this possibility. 'The 100-seat category is of interest to us, although not as a prime. I must emphasise, however, that we are keeping our eye on the ball.' If such a venture is followed through, it could produce a truly global aircraft family, in which Mitsubishi would form a bridge between the product lines of Bombardier and Boeing.
Similarly, Airbus is extending its family downwards via joint-venture agreements with Aviation Industries of China and Singapore Technologies. Airbus has established a subsidiary, Airbus Industrie Asia (AIA), to pursue development of the 100-seat A318/AE-100 aircraft. AI(R), which made the initial breakthrough in the AE-100 project with China through its Aero International (Asia) subsidiary, has been somewhat pushed aside by its 'big brother' - both have common shareholders in Aérospatiale and British Aerospace and the Chinese favour the larger consortium. Those links aside, however, as with Boeing and Bombardier an Asian company could form the cement in the middle of a jet product line that could extend from 30 seats all the way up to 650.
Close-knit products
Analysts are mostly confident that the market can support these close-knit product lines. 'You will see a significant build-up in production of aircraft over the next year and it will go beyond that,' says Ed Greenslet of Florida-based consultants ESG. 'We are clearly in an upswing of the cycle and I don't think, even if it turns down, you will see it do what it did in the '90s. The swings will be more modest, both up and down. But production will be up, and that says there is significant ongoing demand and need for aircraft.' But Greenslet warns competition will be 'pretty intense', keeping prices restrained.
Demisch adds a further warning, which seems timely in view of the abundant optimism around and the number of new aircraft programmes in the planning stages. The BT analyst stresses how vulnerable the industry is to global political events. 'The industry lives off global peace and prosperity. We are living in a remarkable period of relatively free travel worldwide and one always worries that this may be unnaturally calm, so we should keep a weathered eye to the possible effects of potential troubles around the world. We are, in this industry, hostages to fortune.'
Source: Airline Business