Podcast: Boeing, Airlines And Another Paris Air Show

ATW editors on location in Paris share their takes on this year's Air Show from a commercial air transport perspective.

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Transcript

Karen Walker:

Hello everyone and welcome on board to Window Seat, our Aviation Week Air Transport podcast. I'm ATW and Aviation Week Network Air Transport editor-in-chief, Karen Walker. Or should I say Bienvenue? Because this week, I'm at Le Bourget for the Paris Air Show. And I'm delighted to be joined by two of my editor colleagues who are producing our ATW On Location show coverage. They are ATW European Bureau Chief, Victoria Moores, and Middle East and European Editor, Alan Dron.

Victoria, Alan, thank you first of all, for all your work this week, during a hot and sunny show. As we've all walked up and down that endless Paris chalet line, covering numerous industry briefings. Between the three of us, we've covered probably hundreds of air shows, including many Paris shows. It has to be said at the outset, that this one occurred just days after a fatal crash of an Air India 787. And clearly that had an effect on the tone of the show, at least in terms of commercial airliner announcements and briefings. For one thing, and understandably, Boeing CEO Kelly Ortberg and Boeing Commercial Airplane CEO Stephanie Pope canceled their plans to attend the show. And then several other manufacturers canceled or postponed planned media briefings and announcements, while many briefings began with people acknowledging the crash and remembering those who are affected.

And that said, while it has been a subdued show on the commercial air transport front, there have been a few big airliner order announcements. So, Victoria, I'm going to start with you, on one order that caught everyone by surprise, including Airbus, I think. And that came from Polish LOT Airlines. Tell us about that deal.

Victoria Moores:

Yeah, I think that the big surprise was the fact that LOT decided to go with the Airbus for their A220, instead of the Embraer E2. Now this had been a campaign that had been going on for over 12 months, so obviously both manufacturers had put an awful lot of effort into their campaigns. And you could tell, this was a really big deal in terms of regional jet order, in that they were looking at going up to 80-plus aircrafts. So that's the reason why this was significant, why it's being talked about. But at the last minute, we suddenly learned that the order had gone to Airbus and that they were going to go for 20 A220-100s, 20 A220-300s, and then potentially going up to 84 aircraft once the new Warsaw airport comes online.

Now, Embraer must be very, very disappointed to have lost that order and understandably so. And in the room at the press conference, it was absolutely packed with politicians and dignitaries, and it makes you really question, and it was questioned from the floor, whether or not this decision was actually political to go with Airbus. So, politics between Poland and France, rather than strictly an exclusively aircraft decision. Obviously, the LOT Polish Airlines CEO had to be quite diplomatic about that. He said it wasn't his place to comment, they were very happy with their choice and Airbus just tipped the balance, it was a very close-run contest. But yeah, it was a surprise that they went with the A220.

Karen Walker:

Embraer did actually issue a statement afterwards, didn't they? Sort of hinting quite strongly that in strange times like now, political decisions are made, they said something like that, is that right?

Victoria Moores:

Yeah, they did. And from my experience, it's not very normal when an aircraft manufacturer doesn't succeed in an aircraft campaign that they come out with a statement. And it's understandable that they would say, we felt this aircraft was the best aircraft for the job in terms of operating economics, that it really did come through that they felt as though, potentially, the order should have gone to them. And like you say, some interesting phrasing in their statement.

Karen Walker:

But still, very good news for Airbus. I mean, A220, for one thing, new customer for the A220, and there was a little bit of comment about that LOT and Airbus hadn't really known each other very well until quite recently.

Victoria Moores:

Yeah, absolutely. I should have mentioned that this was the first deal done between LOT and Airbus, so that makes it significant. And at the briefing, the LOT Polish Airlines’ CEO [Michał Fijoł] laid down the gauntlet and said, "Now let's get it into service." So, let's hope that partnership lasts and that it's successful for both sides.

Karen Walker:

Excellent, thank you. Now, Alan, once again, this has become a bit of a pattern lately, we've seen some more big orders for airliners coming out of those in Saudi Arabia. In this case, there's a relatively new lessor based in Riyadh, called AviLease. And they announced an order for 50, 5-0, new aircraft, that could grow to 77 and significantly includes an order for [Airbus] A350 freighters. So that's a big deal for Airbus. And then Riyadh Air, which has yet to take to the air, placed a firm order for 25 A350-1000s, which are of course passenger airplanes. Again, as I said, these are big deals for Airbus on the widebody side. I'm just curious, you cover the Middle East and you've been seeing all of these orders coming in over the last few years. What do you make of this continued buying spree from the Saudis in terms of aircraft and investment in building new hubs in Saudi? Is it going to continue?

Alan Dron:

I think so, Karen. I think, to be honest, the Saudis are acting pretty much as normal. They've made it very clear that aviation will be a major plank of their Vision 2030 policy, to diversify their economy away from the oil and gas industries. Aviation and tourism go hand in hand in this case, and the Saudis are, frankly, throwing the kitchen sink at both. They are throwing an enormous amount of money into both building up tourism infrastructure and developing airlines. As well as funding Riyadh Air, which is still supposedly going to take to the air by the end of this year. They're determined that AviLease will become a major player in the leasing market. Although it's interesting that they are now looking, obviously, at moving into the cargo sector, which they haven't done previously.

Karen Walker:

Oh, yeah. There were some questions about that for AviLease, they were saying, "Is this the right time, really, to be buying this many freighters?" They came back quite firmly saying, "Yeah, it's the time.” We're still seeing a lot of ... They're saying there's huge demand for that sort of capability and capacity within Saudi Arabia, that they also saw a demand for that globally. Victoria, thoughts?

Victoria Moores:

Yeah. Just recently I've been doing some border cargo coverage, so not specific to the Middle East. But what I've been hearing on those calls, is that, in terms of Europe, really, it's not that active in terms of intra-European cargo. Asia is the big market where freight traffic is really, really picking up and there's insatiable demand. So, actually, some European ACMI providers of cargo aircraft are relocating their cargo aircraft to Asia. So, perhaps they're looking to tap into those flows between the Middle East and Asia.

Karen Walker:

Yeah, that's interesting, because one of the carriers that I saw here and also doing a signing ceremony, Japanese airline All Nippon Airways, ANA, and I asked them about, they didn't place any new freighter orders, but cargoes are important to them, they made it very clear, very important. And they also made the comment that because of what's going on politically, China-US cargo market has considerably weakened. But they said elsewhere, and to your point, Victoria, in Asia, demand is actually still very strong. So that was interesting.

So yeah, there was another big deal announced here at the Paris Air Show, and that was a signing ceremony for an MoU for 100 Airbus A321neos. Obviously, that's the newer narrowbody. And that order came from Vietnamese low-cost carrier Vietjet. That's a fast-growing airline in a fast-growing market. And so that was obviously another very nice order. Alan, you were there when that was signed. Did you get a sense of Airbus, this is a great deal to be able to announce?

Alan Dron:

Yeah. As you say, Airbus is clearly very pleased with that. As you said, it's a very rapidly growing airline with big ambitions. The chairwoman, who interestingly turned up in a traditional Vietnamese outfit, made it clear that they're looking at creating a very dense international network, especially linking China, India, Indonesia, and Vietnam and pulling traffic flow in from those countries to link up with long-haul international services that Vietjet will be operating out of Hanoi, and I suspect, Ho Chi Minh City.

Karen Walker:

So yes, still signs of growth and potential from both the manufacturer side and the airline side. So that's good. And as I mentioned earlier, ANA finalized an order for 24 A321neos, and three A321XLRs, that's of course the new trendy aircraft in the pack, isn't it? That's the one that can go a long, long way even though it's a narrowbody. So ,it's not a show without airliner orders, but it's clearly one that's low on the scale relative to previous major air shows and one that inevitably tipped into Airbus's favor.

Having said that, both Airbus and Boeing issued 20-year forecasts for demand for new airlines, and they were pretty much aligned, no surprises here. Boeing sees a need for 43,600 new aircraft over the next 20 years, while Airbus puts the number at 43,400. I'd like to go back to both of you—do you think we're going to see a return to multiple big airliner order announcements at the major air shows like Paris, Farnborough, Singapore, and of course, later this year, Dubai. We used to see these things, didn't we? They were very staged, but they were big, and they were huge numbers. And then you'd have this rivalry going on, Airbus and Boeing sort of like, "Oh, now we're up to this and now we're—the value of our orders so far."

Interesting, nobody puts a value on anything anymore, they won't give value, and they just don't do this, "How many thousands have we sold?" But given that sort of outlook for those significant numbers of planes, Victoria, again, you've done so many of these shows. Do you see us going back to a time where the big numbers and big announcements are at the air shows?

Victoria Moores:

I think there's always going to be airlines that are willing to place—or lessors—that are willing to place significant orders and obviously there's the fanfare of the show. I know that some of the manufacturers that I've spoken to said that they do still like to push to get a deal through for the air show, although obviously not every conversation that's going on in those chalets is actually an aircraft order; a lot of it is just being very nice to your customers in the hope that they will stick with you. But I think one of the things that's stuck with me coming into the show, was I saw a headline that talked about, "What's the point of a Paris Air Show if all of the order books are so far backed up that you can't get hold of any aircraft?" And I thought, that's a really excellent point.

And now, instead of asking that question about what's the value of the order, which, like you say, probably 20 years ago, that was very much the focus of, how much is this worth? The focus is on when are you going to start receiving these aircraft, because obviously the airlines are crying out for the capacity and we've had these supply chain problems. But talking about order volumes, to me, really isn't relevant too much to this show, obviously we're interested in the big-ticket announcements. But when Airbus is in a race, basically on its own, because of the situation with Boeing, kind of winning that race is going to naturally happen. Do I think that the big orders will come back? I think we'll still continue to see them, but I do wonder whether we're going to go back to the type of air show flow of order announcements as we've had in the past. I think it's a few big ones, quite a few re-announcements, which can get frustrating for journalists and obviously some smaller orders along the way.

Karen Walker:

Yeah, several good points there. And you are right, what we tend to see now is more just confirmation of orders that were actually placed earlier, so not really new orders. And then of course, the whole ongoing supply chain crisis. While that seems to be working its way through, there's still quite a lot of suspicion about that and materials and what can be ready. Along with the backlog, means, well, you probably can't get these too soon, so that's interesting. I think that dynamic, you're right, is going to keep playing out for a little while at the shows.

Victoria Moores:

And while we're still pushing the technology so hard, the big focus is on operational reliability. If I order these aircraft, am I going to be able to operate them, or is something going to happen, which means that they're grounded for extra maintenance or whatever? I think that's the big focus of the airlines. When can I get it and will it continue to operate once it's in service? So much more of a shift in focus on that.

Karen Walker:

Yeah. And there was certainly some talk of that by some of the other manufacturers, including some of the engine people, like Pratt & Whitney. Their commercial CEO was really emphasizing how much they're investing and putting into making sure that the GTF is reliable, has a longer on-wing time, etc., those sorts of things. So, Alan, any thoughts?

Alan Dron:

Yes. Victoria was mentioning that you now have this, frankly, ridiculous lag time between actually placing an order and getting the aircraft sitting on the ramp. This, I'm increasingly hearing, may open the door, to some extent, to Embraer. And so, hearing mutterings from Embraer, that they can actually deliver the aircraft 18 months to two years down the road. They have the slots available. And it's noticeable that some airlines are starting to use their E2 for surprisingly long sectors. You've got Royal Jordanian flying from Amman, right the way over to Amsterdam and Madrid, which is five, five and a half hours in a 120-, 130-seater aircraft. And they seem to be doing the job okay. So, I do wonder whether this is going to open a new door of opportunity for somebody like Embraer to win more orders.

Karen Walker:

Good point. Again, the more recent shows, I'm thinking particularly Farnborough, but also Paris, we've had a lot of emphasis on sustainability in aviation. And a lot of talk up about what airlines and in particular, manufacturers, are doing to make everything more sustainable, more efficient. I've not, so far, heard that much here, but there has been a little bit of that. I think you've attended an EU talk, didn't you, Victoria? So, what were your thoughts on that?

Victoria Moores:

Yeah, I agree with you Karen. I mean we've had fewer briefings, so there has been less talk about sustainability, which has really been the headline topic for the last, ever since the pandemic ended, every single briefing you go to it will mention sustainability, and I think that they still do. But two things stand out for me. One is, we are not getting the new aircraft designs coming through. We seem to be sticking with the current generation of aircraft. We seem to be pushing back that window on when we are going to see genuinely new technologies entering the market. In previous shows, we might've heard about an iteration of an aircraft or something different.

The other thing that's caught me a little bit by surprise at this show, is hydrogen has been talked about a lot. And I feel as though over the last year or so, hydrogen has slipped down the agenda; we've seen the timelines pushing back on hydrogen. But in actual fact, a surprising amount of conversations and a surprising amount of the technologies are looking at hydrogen. And I was beginning to think that that slipped down the agenda, still plenty of companies working on it.

Karen Walker:

What are your big takeaways? Maybe one or two things, apart from your sore feet, all right. So, I'll start with you Alan. One or two big takeaways, you've been to so many shows.

Alan Dron:

I think that like Farnborough last year, this Paris show has been relatively subdued and obviously there's a particular reason for that one, this year. But I have to say, over the past few years, my feeling is that air shows have lost a bit of the old excitement that they used to have. I'm not entirely sure why that is, whether it is because the airline industry is very cautious of the fact they've got to be so careful these days. They need to win the public's approval to continue to operate. The license to operate, I think they refer to it as. They are conscious of the fact that a lot of people do look increasingly askance at the airline industry as a polluter. Which is rather unfair, because the industry gets so much publicity simply because it is a very high visibility, high-profile industry. But I do think that an awful lot of executives are somewhat constrained these days in what they say and how they say it.

Karen Walker:

Yeah. I think that's a fair point and I think we're aligned here. I think it's a huge falsehood to say that this industry is not sustainable. You could point to just about any other industry and its way, way more polluting than air travel and then air travel and air transport does so much for people around the world. But I think you're right, I think that is having sort of a muting effect, if you like, on what people are prepared to stand up and say.

Victoria Moores:

My top takeaway is that safety tops everything, and when there's an accident or an incident in the industry, when something goes wrong, everybody in the industry feels it. So, it's not just limited to Boeing, there's a ripple effect through the supply chain, and this current example of having had a serious tragedy right before an air show. So that's my first thing, is that topping sustainability or anything else, it's still safety. And I think that that's what we always hear from the companies that we speak with, but we really felt that here. And then my final thought is, there's always extreme weather. At every air show I ever go to, there's never nice, mild weather, it's always extreme.

Karen Walker:

Yeah, we didn't get the horizontal rain and the severe thunderstorms that knocked out everybody's power and Wi-Fi, we didn't get that this time, but we have had some pretty blazing heat and not much air conditioning in all of that. So yeah, there's always something isn't there.

Anyway, thank you both so much. Always a privilege working with you and thank you for slogging it out this week. Thank you also to our producers, Guy Ferneyhough, who is also working here at the show this week, and Cory Hitt. And of course, a huge thank you to our listeners. If you weren't able to get to Le Bourget, I hope you are enjoying our coverage of the show at aviationweek.com\airtransport\atw-on-location. I hope you got that. Be smart, just look up, Aviation Week Transport ATW On Location, that'll get you there. And also of course, we have aviationweek.com\shownews. So, enjoy all of that coverage please. This is Karen Walker, disembarking and saying au revoir from Window Seat.