Aircraft & Engines: Thinking big

Over the past two years, airlines have placed very few orders for large widebody passenger aircraft. Is there really much of a market for new aircraft with more than 400 seats?

For once there is real competition in the 400-plus seat widebody market. The launch of the Boeing 747-8I last year has finally given airlines an alternative to the Airbus A380.

While in theory the 747-400 has been competing against the A380 for the past seven years, the two aircraft are in different leagues. The 747-400, which was the only offering in the large widebody market before the launch of the A380 in 2000, was introduced in 1989 and seats 416 passengers in a typical three-class layout. The A380, accommodating about 30% more passengers, will be placed into service nearly two decades later. Not surprisingly while the passenger version of the A380 has racked up 156 firm orders from 14 customers in seven years, the passenger version of the 747-400 secured only 22 orders over the same period and not a single order since November 2002.

Boeing expects to close the gap with the 747-8I, a new derivative of the 747-400 that will seat 467 passengers in standard three-class configuration. So far only one passenger airline, Lufthansa, has ordered the aircraft. Airbus has not fared any better recently. The A380, plagued by delivery delays which have scared off potential new customers, has not attracted a new customer since India's Kingfisher Airlines in June 2005.

Airbus and Boeing are not banking on a sudden rush of orders in 2007. Airbus is focusing on getting the A380 programme back on track after production problems pushed back deliveries by more than one year. Chief operating officer customers John Leahy says there is "a lot of interest" in the A380 despite the troubles and expects to chalk up 20 orders in 2007 from at least two new customers. But Airbus predicts orders will really start pouring in after the A380 finally enters service late this year.

"It's a game-changing airplane," Leahy says. "The only minor problem is we didn't build it on time."

Leahy claims the fact none of the programme's 13 passenger airline customers cancelled their order proves "the plane is worth the wait". In fact, last year the programme's first three customers all committed to additional passenger aircraft, with Qantas ordering another eight, Singapore Airlines (SIA) ordering nine more, and Emirates converting an order for two freighters to the passenger variant.

Service entry

SIA says it will receive the first of 19 A380s in October and will place it into service on the Singapore-Sydney route "within a month or so of delivery". In August 2008, Qantas will take the first of its 20 A380s and Emirates will take the first of its 43 A380s.

"We see the A380 being important for the upgauging of some of our routes, and that was partly the idea behind extending the order from 10 to 19 units," SIA says. "As demand grows, and environmental concerns mount, the industry will need to look at alternative ways of adding capacity."

Confident other carriers will follow SIA's upgauging strategy, Airbus projects a market for 1,260 large widebody passenger aircraft over the next 20 years. "We would never intend to deliver more than half those aircraft," says Airbus vice-president marketing Colin Stuart. "There will always be a competitor."

Boeing predicts a steady but smaller stream of orders. It expects 325 orders for the 747-8I over the next 20 years and believes there will be a similar number of orders for the A380 passenger variant. Boeing says it is now talking to 15 potential airline customers.

Airbus and Boeing are mainly targeting existing 747-400 operators that have not yet committed to A380s. The biggest near-term target is British Airways, which with 57 aircraft is the world's largest 747-400 operator. BA commercial director Robert Boyle says the carrier plans to decide in the second half of this year between the 747-8I and A380 for an initial 20-aircraft order.

"We have routes that would prefer the A380 and routes that would prefer the 747-8," says Boyle. "There are pluses and minuses to both."

Boyle does not rule out acquiring both 747-8s and A380s in the long-term, but in the first phase of its 747-400 replacement programme BA will only buy one type. Lufthansa has taken a different strategy with orders for 15 A380s and 20 747-8s delivering from 2009 and 2010, respectively.

"It is not a question of either or," explains corporate fleet senior vice-president Nico Bucholz. "The 747-8, with up to 425 seats, fills the gap between the A380, with up to 550 seats, and the A340-600, with around 310 seats. The 747-8 is a complementary size regarding the development of markets in the multi-hub system."

While several airlines could use 400- and 500-seat aircraft, not many require enough of them to make investing in both types worthwhile. Of the 19 passenger airlines that currently operate more than 10 747-400s, only Lufthansa has ordered both the A380 and the 747-8. Seven of these 19 carriers have only ordered A380s. The other 11 have not yet ordered either type, including All Nippon Airways (ANA), Cathay Pacific Japan Airlines, Northwest Airlines and United Airlines. These five carriers are not looking to acquire replacements in the near term. Some 747-400 operators such as Cathay are expected to acquire a replacement in the medium to long term but others, such as ANA and Air New Zealand, have indicated they will replace their 747-400s with 777-300ERs.

Boeing Commercial Airplanes vice-president marketing Randy Baseler expects several 747-400 operators will ultimately downgauge, pointing out that many 747-400s were only acquired because it was originally the only aircraft with the range to operate transpacific flights non-stop. Boeing also expects carriers to increase frequencies on major routes and launch new point-to-point long-haul services that will divert traffic from major hubs. Liberalisation may also create more competition on major international routes, further reducing the need for large widebodies.

Even carriers that have acquired A380s do not expect to upgauge all their 747-400 routes. SIA says 777-300ERs will replace 747-400s "on some long-haul medium-density routes". Lufthansa's Bucholtz also expects "there will be a mix" of upgauging and downgauging of routes "depending on demand and frequency potential". BA's Boyle agrees: "We really see both views of the world. It will be a blend of both."

Growth or replacement?

If many of the 747-400s operating today are replaced with smaller widebodies, how will Airbus meet its A380 sales target? Clearly Airbus is banking on selling growth as well as replacement aircraft. This means Airbus will have to persuade airlines to acquire more A380s than they did 747-400s - something that has not yet happened. Airbus will also have to persuade airlines to buy large widebodies for the first time. This has already happened, with orders from China Southern, Emirates, Etihad, Kingfisher and Qatar Airways.

Airbus is confident it can sign up more new customers from the Middle East, China, India and other growth markets. "It's a replacement and a growth market," insists Stuart.

Boeing simply does not see so many new customers emerging. "The market is saturated with 400-seat airplanes. It's not about growth. It's purely about replacement," Baseler says.

He adds the 747-8I is targeted at "a limited set of customers" and with entry into service in 2010 is "perfectly timed" for the 747-400 replacement cycle.

Airbus is quick to point out that passenger traffic is forecast to triple in 20 years. This dramatic increase cannot be accommodated with smaller aircraft, it argues, when major hubs are capacity constrained and 80% of 747 flights currently connect only 37 airports. On some routes, such as London-Hong Kong, there are several 747 departures within only a few hours.

"Why are we flying two 747s within 30 minutes of each other? You can have a much more profitable experience, a much more environmental experience with the A380," Leahy says.

Says SIA: "Upgauging becomes a more environmentally friendly measure to accommodate demand growth. For instance, we can carry about as many people on three A380 flights a day between Singapore and London as it would take to carry on four 747-400 flights, with an aircraft that has significant efficiencies in fuel burn."

Cost comparisons

Airbus claims the A380 burns 17% less fuel per seat mile than a 747-400. According to the manufacturer's marketing information, the A380 costs 26% less to operate per seat than the 747-400 and 15% less than the 747-8. It also claims the A380 is quieter than the 747-8 and requires 10% less runway to takeoff and 5% less runway to land.

Boeing has published a vastly different set of statistics. "We believe the 747-8 is more fuel efficient by seat," Baseler says. Boeing claims the 747-8I's seat mile costs are actually 4% lower than the A380 and fuel consumption per seat is 10% lower. This is achieved, according to Boeing, because the 747-8 is at least 10% lighter per seat.

Boeing also claims the 747-8I is quieter and faster. While it admits the A380 is aerodynamically more efficient, Boeing says the 747-8 is structurally more efficient and has the propulsion efficiency advantage because its engines feature newer technology.

The 747-8 will be powered by the General Electric GEnx, an engine developed for the 787 that will reduce noise by 30% compared with the 747-400. Boeing is also stretching the fuselage by 5.6m (18.3ft), upgrading the cockpit, introducing a new interior architecture and redesigning the wing. The result is 12% more seats, 28% more cargo volume and 1,390km (750nm) more range. It will burn 15% less fuel per seat and cost 10% less per seat to operate - benefits made possible by bringing technologies from the 787 to the 747.

Boeing is also offering sleeping bunks that can accommodate 14 first class, 24 business class or 40 economy class passengers. The proposed "SkyLoft" is one alternative for using the extra space that will be available behind the upper deck cabin towards the tail. The space, which cannot be used to seat passengers during take-off or landing, can also be used for a business lounge, extended galley or computer stations. "It's a new space available to them that is a value however they want to use it," says Baseler.

Boeing also has designed a concierge station (pictured) at the main entrance of the 747-8I which can welcome passengers when boarding and be converted into a bar during cruise.

But Airbus thinks it has the more spacious and pleasant cabin. It points out the A380's downstairs cabin is 20in (510mm) wider than the 747, allowing airlines to make each seat 1.5in wider and each aisle 1in wider. Upstairs the cabin is 71in wider than the 747.

"The airlines want more space for high-yielding passengers," says Leahy, pointing out in recent years larger premium cabins have reduced the capacity of the average 747-400 to 360 seats.

The A380 will give carriers the flexibility to add capacity as well as further upgrade the premium cabins. While the A380 can accommodate up to 853 passengers, most airlines will have 500 to 520 seats and some airlines only 470 seats. "It is a widebody sitting on top of a widebody, leaving room for lounges, duty free shops, whatever," Leahy says.

Performance guaranteed

Airbus ensures that despite the production problems, all the specification commitments and performance guarantees will be met and the aircraft will have a smooth entry into service. Senior vice-president for A380 programme Mario Heinen says Airbus is determined to support high utilisation and short turnarounds from the beginning.

SIA and Lufthansa are confident the A380 will work as promised. "We are satisfied with the A380 programme," says SIA. "The delays have been all the more regrettable because technically the programme has been working really well." According to Lufthansa's Bucholtz: "We are confident to receive the A380 as promised in summer 2009."

"It's a fantastic aircraft," adds Kingfisher Airlines executive vice-president Hitesh Patel. "I think it will be a fantastic flying machine."

For more Airbus A380 related news, please visit our A380 page

Source: Airline Business