Podcast: What’s Next For Boeing, Airbus And Embraer?

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Joe Anselmo:

Welcome to Aviation Week's Check 6 podcast. I'm Joe Anselmo, editorial director, and today we're going to take a look at the year ahead for Airbus and Boeing. Joining me are Jens Flottau, Aviation Week's executive editor for commercial aviation, Michael Bruno, our executive editor for business, and the “numbers guy,” Daniel Williams, Aviation Week's Director of fleet data.

And then there's Embraer, which has been taking a serious look at jumping into the narrowbody market. If it does, what kind of airplane would most airlines want? Well, Aviation Week teamed up with Bank of America to go out and ask nearly 500 aerospace professionals that very question, including hundreds of airline executives. Jens will update us on what they said.

Dan, let's kick off with you and set the stage with a quick look backward at how Airbus and Boeing finished 2024 in deliveries. I asked you on this podcast in December if Airbus could hit its target of 770 deliveries for the year, and you said, "It's not beyond the realm of possibility, but it will be difficult." How did they do?

Daniel Williams:

Well, it wasn't beyond the realm of possibility, and it was difficult. They strived for 770 and got to 764. I think Airbus had already started to sow the seed by the end of quarter three, early quarter four last year that 770, was probably not going to be reached. However, to be within a spitting distance as it were of that 770 number is pretty good. The most interesting fact about the Airbus deliveries is the sheer volume of A321s. We have again seen shifts into the huge amount of A321s coming off the A320 production line, which means that more aircraft that are bigger are being delivered. And they take a little bit longer to build.

So, in terms of what Airbus did on their scorecard for the year, they were probably like an A-. However, they did change their homework during the course of the year, because originally started the year at 800 and then moved it to 770 midyear. So, they shifted the goalposts, but they came in at an A-.

Boeing, on the other hand, it was a case of any number for Boeing was quite lucky. They started 2024 with, I don't want to say a bang, because that's not necessarily the best term to use with the door plug blowout. However, they started it on the down slope. Then you add in the strike, and it was just a year annus horribilis for Boeing that they just needed to get through. And they've got through it.

They did deliver over 300 aircraft. But again, not a huge amount to write home about. It was half what Airbus had delivered. In terms of, you mentioned Embraer before. Embraer had a pretty good year. That mid 70 figure, it's a pretty good number. Obviously, heavily weighted on the 175, which is the only scope clause compliant jet aircraft. So, they're really relying on that heavily. So, if Airbus got an A-, Boeing get a D, and Embraer got an A.

And ATR, as well, had a pretty good year. They were plus 30 deliveries, which when you compare to other years hasn't been too shabby. So they were probably came in at about a B. However, they are the only turboprop regional manufacturer. It's a market of one now that De Havilland Aircraft of Canada have stopped building the Dash 8.

So overall the industry suffered a lot. It wasn't without its challenges. Again, we've been saying this for many years now and hopefully as you say 2025 we can start looking forward. But who knows.

Joe Anselmo:

Okay, well I'm going to get to Jens and Michael and then come back to you to ask you about 2025. But Jens, I wanted to ask you about orders. You had come up with an interesting statistic here. Boeing and Airbus combined had roughly 2,500 orders last year and that was down by about half from the year before. Is that anything to worry about?

Jens Flottau:

Yes and no. No, because obviously you can't have 2,500 orders [each] every year. It was a very, very high number, unusually high, to be explained by obviously the recovery mod, airlines trying to get to secure delivery positions.

But if you look into the details, there are some interesting aspects. Number one, on the other side, if you look at the A220 net orders were negative. Gross orders were just 17. So the A220 did not do well at all. And if you look at the gross orders, 10 of the 17 were from the aircraft's biggest fan club, Air Baltic. So, does that tell you much about the market? I don't know. I think the aircraft is in trouble right now and if you look at the A3, and obviously that's related to the engine issues, people are waiting for the engine issues to be sorted out before they can begin to build trust again in the program. Also, the A220-500, the stretch version hasn't been launched yet.

If you look at the A320neo family, there's some interesting trends there too. A320neo orders, new orders, 150, just 150. A321neo orders, almost 500. So, airlines are beginning to, of course, are beginning to walk away from the A320neo and they're not yet moving into the A220, which was the grand Airbus plan.

So would now be the time for Airbus to launch the stretched A220? In theory, if you look at these numbers, yes, they should probably not wait much longer. But if you listen to the comments that have been made recently by Christian Scherer, the CEO of the commercial airplane business, it seems like that is moving to the right, supply chain issues, the program is still in trouble in terms of production, in terms of orders now. So that's not going to happen. There is some weakness developing in that part of the market on the AIrbus side and that's a watch item.

On the other hand, Boeing obviously had low order numbers as was going to be expected in the current circumstances. I just want to highlight an interesting one. Pegasus Airlines, a low cost carrier from Turkey placed an order that was surprising to me for 177 Dash-10s in December, which was actually a flip from Airbus. It's an all Airbus customer right now. Well actually not quite all Airbus, but almost all Airbus. But now going back into the Boeing side, which was I found pretty interesting and significant vote of confidence from a large European low cost carrier.

787, not doing too bad, 777, 30 orders last year, 777X, I should say. That is also good news for Boeing, but obviously a ways to go to back into normal territory.

Joe Anselmo:

Okay, thanks Jens. Michael Bruno, speaking of Boeing, as Dan did, we recorded a podcast at the end of 2023 titled Did Boeing Turn the Corner in 2023? And we all know the answer to that after disastrous 2024. But I'm going to put you on the spot again. Is 2025 going to be the year that Boeing turns the corner?

Michael Bruno:

It could be. Hope springs eternal for Boeing. And I do believe that there is widespread confidence within industry that we've probably seen the worst, the absolute worst of, specifically, within the Boeing ecosystem of what can happen with 737 production having to be shut down essentially again. If you remember, it got shut down in the previous part of the MAX crisis and shut down again last year essentially. And here we are.

And so there's optimism that if you look over what will be a coming long arc of the next cycle of commercial aircraft production, that things are going to get better from here. But I would say it's not even a cautious optimism. It's more of a resignation that we're at the beginning of climbing a mountain and we're in a valley. And so there's a big mountain to climb and once we get there, it's going to be great, the view's going to be great, everybody's going to make lots of money, or everybody that's still around is going to make lots of money. But getting there is going to be a long, long trek.

And of course you would be reasonable, anybody, any listener here would be reasonable to have skepticism because as, Joe, you mentioned, we've had one podcast or maybe two or three over the years where we've said, "Hey, has Boeing finally turned the corner?" And at this point it's a trend. Two, three years of asking that question and it not happening gives you reasonable doubt.

But I would say overall people are expecting things will get better. Now, a couple of markers to look for, January 28th is when they're having their fourth quarter 2024 earnings announcements. We of course expect them to lose money for the year. Nobody's going to be surprised by that. But what people are going to be listening for is any update on the official forecasts for narrowbody and widebody production. Boeing has a couple of markers out there that are what they've told people to expect hitting production of 38 737s a month at some point this year.

And believe it or not, technically they still have this marker out there of hitting production of 50 737s as early as this year. Now it's been fudged officially/unofficially already that it could happen maybe next year. Nobody in industry expects that. The expectations are basically that Boeing production of 737s will be in the 20s somewhere for most of this year. Nobody really expects them to hit 38 until next year, at least on a sustained basis. And nobody expects them to get to 50 until maybe 2027 or even later in the decade. So that's kind of current expectations in the supply chain right now. But hey, at least people think things are looking up.

Joe Anselmo:

And 38 is a key number because they need to cross that threshold to stop losing money, right?

Michael Bruno:

Yeah, it's a cash flow breakeven point, not necessarily profit, that's a different metric. But as you said, it's a key production marker to hit because at that point it’s kind of month in month out, they can start really collecting cash that they can use for other uses. And they've got many, many, many uses. CFO Brian West has already set the marker that overall Boeing as a corporation is going to lose money again this year. So again, not an expectation of profits, but you got to get to cashflow breakeven first before you can even dream about profits.

Joe Anselmo:

Dan Williams, I want to get to Jens to talk about the Embraer survey, but before I do, you issued your commercial forecast for the year in the middle of the Boeing strike, unenviable position. But you're constantly massaging the numbers. What are you looking for in terms of deliveries from Airbus and Boeing and Embraer in 2025?

Daniel Williams:

There's many elements to this because production and deliveries are two very different things. So, let's go back pre-strike, we were hoping Boeing could produce somewhere in the 360, give or take, a handful MAXs in 2025. That was the original plan. However, as a result of that, having to ultimately re-ramp up post-strike, they're probably going to lose somewhere in the region or the ability to lose 40 to 50 737s that they can produce. So instantly there, 40 or 50 down on what numbers would be.

However, Boeing still have around about 115 built MAXs that are not MAX 7s and MAX 10s. Because they've got about 35 of those that are sitting in their inventory awaiting certification. So, in terms of MAX 8s, MAX 9s, they have the ability potentially to produce somewhere in the lower 300s and deliver another 100. So, they could deliver 400 to 450 MAXs in 2025. And that's without talking about MAX 7 and MAX 10 certification. And that's probably a topic for another day because we have no idea when that, in reality is going to be, it keeps shifting to the right.

So that's where we're looking in terms of those kinds of numbers. Obviously, the boost in the arm has been the 777X resumption of flights after the engine link fix has been put in place. So that's good news. But again, they are not coming this year anyway and they would probably be lucky if they come before the end of 2026. So, the Boeing outlook is brighter than last year. I don't think it could have been much less brighter. The year started badly and then went from bad to worse. So let's hopefully, Boeing can draw a line under 2024 and progress onwards and upwards.

Airbus have the opportunity to beat their all-time record. That's not going to be easy. They need to move north of the 800 figure this coming year. It is very difficult. Going back to what Jens was talking about before, if you look at the number of A321s that are ordered, it's nearly 60% of the orders were for A321s. That's the same when it comes to building A321s and A321s simply take longer to build. So, it makes it difficult for Airbus to ramp up production even more. Again, that rate 75 I think keeps shifting further to the right. So that's positive in the sense that they should move onwards and upwards.

Embraer, again, they're probably not a million miles off where they need to be. The Embraer 175 fleet can only sustain them for so long, because as I said before, they are the scope clause compliant. However, the 195-E2 and the 190-E2, they're selling some, but they're not selling millions of them. You look at the whole Embraer production and it's the same as the A220 in terms of numbers, in terms of deliveries, I should say, for the 2024. And Jens was saying that Airbus was a little bit disappointed in the A220. So that showcases the differences. And the A220-100 obviously competes pretty much directly with the 195E2.

So again, I think we're probably looking at mid-70s for Embraer. And again probably ATR bobbing around the 30 to mid-30s mark, so it's probably business as usual for them as well. So that's bold statements right now. We made similar bold statements at the start of 2024, and then we had the door plug blowout and the strike and continued supply chain woes. So obviously, if you listened back to this in November, we're probably a million miles off the mark, but we shall see. We hope not.

Joe Anselmo:

Okay, we hope not. And that was a good setup for Jens. Jens, we teamed up with Bank of America, Ron Epstein's research team, and Aviation Week's research arm went out and we received responses from 492 executives across the industry, 219 of those, or about 45%, were airline executives. And we asked them, “If Embraer goes forward with a new airplane, what do you want?” What were the answers, Jens?

Jens Flottau:

Well, the short answer was just do it and do it as fast as you can. That was a clear statement like 70-80% said that, total respondents and airline respondents even more so. We asked them specifically, “If Embraer, Boeing, and Airbus were to launch an aircraft at the same time, would you still consider the Embraer if it was the right proposal?” And the answer was “yes” too. So, there's a lot of trust in Embraer. We also asked them, “Would you buy the aircraft if it was to enter service in around 2032 with the latest version of current technology engines?” So that's before RISE or any revolutionary designs are available. They also said “yes.”

So, there is this pressing demand for new technology, better than A320neo families, better than MAX. And airlines clearly stated that. What kind of aircraft? 4,000 nautical miles range, 150-180 seats. Some wanted a little more range, a little more capacity. But it was basically MAX 8 replacement or 320neo replacement. And that's coming back to what I said before. That's exactly the spot of the market that appears to be weak.

So very interesting results. Obviously we don't know whether Embraer will jump. They've been a little more cautious of late saying they could, there's no timeline. They could make a decision around 2030. They previously said it was going to be earlier than that. We'll just wait and see. But clearly on the airline side, demand is strong for a new product in that range.

Joe Anselmo:

I remember at last year's Singapore Air Show you and I met with Francisco Gomes Neto, the CEO of Embraer, and he was sort of hinting that they might have an announcement on their next move this year, but he really pulled back from that at the end of 2024, didn't he?

Jens Flottau:

Yes, he has. They've not repeated that. Previously, they said that that's going to be a decision in 2025 where they'll put their money, is it going to be bizav or defense or commercial? They've not repeated that now. And now he's given an interview to one of the Brazilian newspapers saying that it could be around 2030 until they make a decision. We'll just have to wait and see. Maybe the survey makes such an impact that they're speeding up their decision-making. Who knows.

Joe Anselmo:

Michael, I'd like you to take us to the finish line with your thoughts on this.

Michael Bruno:

Yeah, those of us who are airplane lovers, we're all desperately waiting for somebody to announce a new program. And this great survey about what maybe Embraer could do, and hopefully somebody there reads it before they come up to speak for their quarterly call soon in a few weeks or whatever. But the thing to remember is these companies, as soon as they announce one of these new programs, they've instantly alerted their shareholders about a giant use of money that the shareholders are not going to get. And that's something to keep in mind. Every time one of these new programs gets questioned, what's the future of a new aircraft? There are other people at the table. So, for everybody who's anxiously awaiting a new aircraft announcement, there are other audiences to be served here and it's worth remembering that.

Joe Anselmo:

Well, thank you. On that note, we want to thank all you guys for your insights today and Dan for your latest forecast update. That is a wrap for this week's Check Six. A special thanks to our podcast editor in London, Guy Ferneyhough.

Jens and I will be on a webinar with Bank of America's Ron Epstein and Aerodynamic Advisory analyst, Richard Aboulafia, where we'll spend an hour delving into the survey results and then taking your questions. Join us live at 10:00 AM US Eastern Time on Friday, January 24th, or listen to the recording afterwards. To register for this free webinar, click on the link in this podcast. That is a wrap for this week's Check 6. Thanks for listening and have a great week.

Announcer:

Join the largest gathering of global Aero Engine executives at AeroEngines and ELTF America's 2025 taking place from January 27th to 29th in Fort Worth, Texas. Connect with over 900 AeroEngine colleagues to start the 2025 conversations and create new business. Hear from industry experts to gain the latest insights into the aircraft engine market. Secure your place by visiting events.aviationweek.com. Podcast listeners save 20% by entering the code MROpodcast at checkout.