Boeing and Airbus Enjoy Boom in Orders/Major Aircraft Market in China

Governments around the world quickly stepped up to subsidize their airlines due to the Coronavirus pandemic. While the new jumbojets, like the A380 and the 787 got a lot of press and admiration, perhaps more important is the demand from global airlines of all types for smaller, single-aisle planes to replace older models that are not particularly fuel-efficient. In 2021, Airbus delivered 611 aircraft while Boeing delivered 340. For 2022, Airbus delivered 661 aircraft and Boeing delivered 524. Each aircraft manufacturer enjoys an orders backlog of thousands of aircraft (as of late 2022, Airbus’ backlog was 7,239 aircraft while Boeing’s was 4,578), which will take many years to fulfill.

In recent years, Boeing focused on a new high-efficiency version (called the 737 MAX) of its exceptionally popular, single-aisle 737, rather than go through the expense, delays and uncertainties of designing and launching an entirely new airliner. The aircraft features CFM International LEAP engines, lowered maintenance requirements and high fuel efficiency. An all-new interior design, called “Sky Interior,” has better headroom, overhead bins that disappear into the ceiling yet carry more baggage, as well as LED lighting.

Boeing delivered the first 737 MAX in May 2017. Tragically, two tragic crashes of 737 MAX aircraft occurred, one in October 2018 in Indonesia and another in March 2019 in Ethiopia. Regulators worldwide grounded the 737 MAX pending further investigation in mid-March 2019. After completion of modifications to the aircraft and updating of pilot training, the aircraft was cleared to fly by the FAA in November 2020, with the first delivery made to United Airlines in early December. As of year-end 2022, Boeing had 561 orders for the 737 MAX series (the largest of which is the 737 Max 10).

This highly effective strategy of updating existing aircraft designs is likely to be standard operating procedure for both Airbus and Boeing for the near term. It saves on research and development investment, speeds up deliveries and enables customers to acquire advanced, fuel-efficient aircraft in a relatively short period of time.

Meanwhile, Boeing’s competition in the 737 market is the single-aisle Airbus 320 family of jets. The updated versions (including the A319neo, A320neo and A321neo; “neo” stands for new engine option) feature high efficiency through CFM International LEAP engines or the Pratt & Whitney PW1100G PurePower engine. The result is a 15% to 20% reduction in fuel use over the original A320s, along with two tons of additional load capacity and a boost in range of up to 500 nautical miles.

As with Boeing’s 737 MAX, the 320neo family is an update of an extremely popular aircraft (the A320) that Airbus has sold for many years. The first flight of the A319neo was in May 2017. In 2023, IndiGo, a discount airline based in India, placed an order for 500 A320 narrow-body aircraft valued at $50 billion making it the largest purchase in civil aviation history.

Boeing and Airbus have been in particularly fierce competition since 2004 when they first announced new jumbojet concepts. The success of Boeing’s new fuel-efficient 787, which had its first flight in late 2009 and made its first commercial delivery in September 2011, is based on growing demand for more frequent international flights on mid-size aircraft. To serve this market, the 787, known affectionately at Boeing as the “Dreamliner,” gives airlines the ability to offer non-stop intercontinental flights between smaller regional cities, rather than just the standard flights between major cities, such as New York-London.

The Dreamliner’s maximum range is 9,600 statute miles. While the 787 is not Boeing’s biggest aircraft, it is one of the company’s most fuel-efficient. The price tag is $157 million to $167 million per airplane, depending on the model. Much of the aircraft is constructed from carbon-based composite materials, which are lighter than aluminum. Today’s demand for fuel efficiency positions the 787 in a favorable light. In addition to being lightweight, its composite materials are easy to mold into precise shapes. This is important for aircraft, which involve lots of curved surfaces. By using such materials, fewer pieces need to be manufactured to create a curve. Boeing promises that the materials are durable, to the extent that airlines should see 12 years of service before a 787 requires its first major maintenance overhaul (as compared to six years for an aircraft made of aluminum).

Such materials are not entirely new to Boeing’s assembly line—about 11% of its 777 is already made from composite materials. Yet a commercial aircraft built primarily of composites is new. Another development is the installation of structural sensors. While diagnostic sensors that measure temperature and pressure are commonplace on aircraft, Boeing is installing multiple sensors on the 787 that allow pilots to continually monitor its structural integrity.

The company has developed different models of the 787, with varying nautical ranges and seating capacities. The 787-8 is available with the capacity to carry 210 to 250 passengers with a range of 8,640 to 9,266 statute miles. There is also a 787-9 that carries up to 290 passengers for up to 9,600 statute miles. In addition, the 787-10 carries 323 passengers with a range of 7,020 statute miles. Another plus for the 787 is the choice of General Electric or Rolls-Royce engines. Boeing designed the airplane in such a way that one engine can be swapped for the other in 24 hours as opposed to the two months required for typical aircraft. This ability is a great selling point for airlines planning ahead to times when they might wish to sell a used 787 to an airline that uses the alternative engines.

But this strategy has its costs, too. Multiple aircraft models are expensive to design and bring to market (not to mention the cost of the 787’s composite materials, which are significantly higher than aluminum). Boeing outsourced manufacturing of many of the 787’s components to companies overseas, including a large number of components being manufactured in Japan. While outsourcing isn’t especially new for Boeing (a significant percentage of the 777’s components were made abroad), the fact that this outsourcing also includes wing manufacture in Japan is a new development. These are risky changes for a historically conservative company, and the practice initially created many unexpected headaches, including significant delays. Boeing responded effectively by acquiring a number of its suppliers, in order to gain better supply chain control, and working to establish closer relationships with its remaining outsourcers.

In March 2023, two Saudi Arabian airlines announced plans to buy a combined 78 of Boeing’s 787 Dreamliners. Startup Riyadh Air will purchase 39 widebody 787s and Saudi Arabian Airlines (Saudia) will purchase the remaining 39. The deal includes options to buy an additional 40 aircraft.

In 2013, Boeing approached three firms, Emirates Airlines, International Consolidated Airlines Group and Japan Airlines, to become launch customers of a redesigned 777 called the 777X, first expected to launch by 2020. However, in mid-2019, General Electric announced a necessary redesign of an engine part which, combined with other factors, will delay deliveries until at least 2025. As of December 2022, there was a backlog of 350 orders for 777X airplanes. Boeing hopes to top its record sales of the 365-seat 777-300ER, which is the best-selling twin-aisle jetliner model in history. The plane is especially suited for the extreme heat in the Middle East due to its extra-wide wings and powerful engines, making fully loaded takeoffs easier. Boeing is also capitalizing on a joint venture with Mubadala, a government-owned conglomerate in Abu Dhabi, charged with diversifying the economy in the Emirates. Boeing is supplying welcome technical expertise and assistance with the venture’s manufacture of advanced composite materials for jet aircraft.

The Airbus A380 is the world’s largest passenger aircraft, and, at a price tag of $375.3 million or more, the most expensive. It holds between 555 and 800 passengers, based on single- or multiple-class models. With a range of up to 9,200 miles it can travel a great distance without refueling. The aircraft also offers good fuel efficiency. As of February 2022, Airbus reported only 251 overall orders for the A380 (all of which had been delivered), a very disappointing number. Sales of the giant aircraft slowed to the extent that Airbus ceased production of the A380 as of mid-2021.

Airbus has another new jet, the A350 extra-wide body (sometimes called “XWB”), which seats between 270 and 350 passengers. It is offered in three models, the A350-800, 900 and 1000. It is Airbus’ answer to Boeing’s 787 and its commitment to lightweight, fuel-efficient aircraft. Useful range will be as high as 8,300 nautical miles, depending on layout.

The A321 offers great fuel efficiency, cutting fuel costs by as much as 30%. The A321LR can carry up to 220 passengers up to 4,000 nautical miles. The company announced the development of the upgraded A321XLR, with the longest range yet capable by a single-aisle plane, with initial deliveries expected in 2023.

Many of the world’s airlines have very little capital and are relying on vast amounts of loans or leases in order to acquire aircraft. If large numbers of airlines are unable to make timely payments on these debts and leases, then future financing of airline purchases may be much harder to come by and jet sales may suffer.

Boeing and Airbus both will be facing new competition as China begins manufacturing large commercial aircraft. The Commercial Aircraft Corporation of China, Ltd. (COMAC) is a state-owned manufacturer that succeeded in building its first commercial aircraft, the regional ARF-21 jet. The Chinese government is fast-tracking development of its own manufacturing facilities. In late 2015, COMAC’s first big airliner, a single-aisle, 160-seat C919 prototype rolled off the assembly line. As of early 2022, the jet had yet to be certified, but the company planned to make its first deliveries by year end. Many of the aircraft’s parts are supplied by western companies, including engines made by a joint venture between General Electric and Safran, and various other parts from Honeywell, Collins Aerospace, Meggitt and Liebherr. As of mid-2023, the C919 had more than 1,200 orders from predominantly Chinese airlines, including OTT Airlines, a new subsidiary of China Eastern Airlines. The C919 made its maiden flight from Shanghai to Beijing in May 2023. Another Chinese jet, the ARJ21, is a regional jet.

Meanwhile, China has a joint venture with Airbus for manufacture of parts for the A350 (Air China was the first airline to place firm orders for the new aircraft). And, in 2009 the first A320 aircraft to be assembled in a new Airbus-Chinese joint venture plant in Tianjin rolled out of the factory. Boeing opened a finish-out facility on an island south of Shanghai in December 2018. It is not a full production plant, but instead provides paint and interior fittings for airliners built in Renton, Washington in the U.S. and delivered to Air China.

Unfortunately, Japan’s Mitsubishi Heavy Industries’ efforts to enter the passenger jet business ended in early 2023. The firm invested 15 years and several billion dollars trying to develop the Mitsubishi Regional Jet, later called SpaceJet, which would have been a 90 seat regional aircraft with routes between Japan and the U.S. The company was having difficulty achieving its design and manufacturing goals for the aircraft.

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