In Paris , aviation executives arrived on Monday for the first air exhibition in the city in four years. The largest gathering in the industry was anticipated to result in a surge of orders for jetliners from Boeing Co. and Airbus SE, with India’s IndiGo starting off with a groundbreaking impact.
The industry is grappling with the challenge of managing a surge in growth as travelers have returned to the skies in full force following the Covid-19 pandemic. One of the major obstacles is the persistent issues in the supply chain, which have led to a slowdown in production. This has left some airline executives questioning when they will receive the jets they have ordered at the exhibition, while Airbus and Boeing are striving to increase production as quickly as possible to help mitigate the bottleneck.
The CEO of Dassault Aviation SA, Eric Trappier, stated that the labor shortage post-Covid-19 is gradually improving, and the company, known for its production of Rafale fighter jets, will use the Paris Air Show as an opportunity to attract new talent, particularly women. According to the CEO, the supply chain problems, which have affected civilian aircraft deliveries more than Rafale jets, are improving gradually.
Safran SA stated that it could potentially engage in share buybacks even if it proceeds with the acquisition of the business unit of Raytheon Technologies Corp., which manufactures products including flight controls. The CEO of Safran said in a Bloomberg TV Interview at the Paris Air Show that talks are ongoing and the deal makes strategic sense as flight control is crucial. He further added that Safran has a strong financial position and aims to generate substantial cash flow in the coming years. The CEO stated that the company aims to keep shareholders satisfied, while also considering “opportunistic” mergers and acquisitions.
Another industry veteran warned of a potential surplus of aircraft capacity as airlines, desperate for planes, place large orders during the travel upcycle.
“It’s a bit of a herd mentality that is unjustified by economics or reality,” said Steve Udvar-Hazy, chairman and co-founder of Air Lease Corp.
Udvar-Hazy, a pioneer in aircraft leasing who founded International Lease Finance Corp. almost 50 years ago, echoed the comments made earlier by Akbar Al Baker, CEO of Qatar Airways. “We will not make large irrational orders just for the sake of getting publicity,” Udvar-Hazy said.
Udvar-Hazy considers the delayed launch of Airbus’s largest and longest-range narrowbody aircraft as one of his greatest frustrations at a time when every aircraft program is facing delays. He predicts that the A321XLR will enter the commercial market in the third quarter of 2024 or early in the fourth quarter, which is approximately 16 or 17 months behind the original schedule. Airbus is currently targeting mid-2024 for its release. “It will be a great aircraft, but it will be delayed,” Udvar-Hazy said in an interview.
Several air-taxi manufacturers, including Archer Aviation, Joby Aviation, Lilium, Volocopter, and Boeing’s Wisk Aero, sent representatives to Paris. Archer Aviation’s CEO stated in an interview that they are in serious discussions with five airlines to become customers for their electric vertical take-off and landing aircraft.
According to the CEO, carriers do not want to be left without these aircraft, and participating in the Paris Air Show has facilitated other conversations with airlines and suppliers. Automobile manufacturer Stellantis invested in Archer early in 2021 and recently increased its stake.
The top official of the Federal Aviation Administration expressed confidence that there is sufficient funding available to achieve the US target of increasing sustainable aviation fuel production to 3 billion gallons per year by 2030. She also stated that there would be enough SAF to meet 100% of aviation fuel demand by 2050, which amounts to approximately 35 billion gallons per year.
SAF, a substitute fuel derived from renewable resources or waste, costs about five times more than traditional jet fuel. The FAA plans to allocate $300 million to establish the necessary infrastructure for SAF transportation, as stated by the acting administrator of the FAA during a panel discussion at the Paris Air Show. She emphasized that there are enough funds to implement these changes.
Airbus secured the largest aircraft order in aviation history, signing a deal for 500 planes with India’s major airline, IndiGo. This massive contract for Airbus’s best-selling A320 family of single-aisle jets brings IndiGo’s order backlog to nearly 1,000 planes, solidifying its position in the world’s fastest-growing large aviation market.
“No one has ever placed an order of this magnitude,” said the CEO of IndiGo from the podium. “It demonstrates the potential of Indian aviation and the ambitions that Indigo has.”
Another Indian carrier, Akasa Air, is also in negotiations with Boeing for a follow-on order of 10 or fewer 737 Max single-aisle jets, subject to finalizing financing, according to people familiar with the matter.
Saudi Arabian low-cost carrier Flynas confirmed an order for an additional 30 Airbus A320 aircraft, as the airline capitalizes on the Gulf state’s extensive tourism drive. This agreement, which confirms an earlier report, is part of a deal to purchase 120 jetliners for Flynas’ all-Airbus fleet. The airline aims to increase its aircraft order book to 250 planes as it expands.
The CEO of General Electric Co. evaded speculation about the US industrial giant’s announcement of a jet engine manufacturing program in India during the visit of Prime Minister Narendra Modi to Washington this week. “It’s only Monday,” the CEO said. “It’s going to be a busy week.” He also expressed optimism about GE’s business in China despite tensions between Beijing and the US.
Airbus agreed to establish a helicopter production facility in Saudi Arabia in collaboration with local defense company Scopa Industries Corp. The deal is valued at over 25 billion riyals ($6.7 billion).
Scopa’s CEO stated in an interview from the Paris Air Show that construction of the helicopter factory is expected to commence early next year. The plant will have the capacity to produce up to 100 military and commercial helicopters per year by the end of the decade.
According to Qatar Airways’ CEO, there is a risk of airlines placing too many aircraft orders, “at least in our region.” Emirates and Turkish Airlines have expressed their desire to acquire more aircraft, and Riyadh Air has announced orders as it establishes a new airline in Saudi Arabia.
“We have players flooding the market with a huge number of planes. I just hope that they are doing this correctly,” the CEO said.
The CEO stated that Qatar Airways will place orders again in the near future once the carrier’s fleet replacement plans are complete.
Pratt & Whitney is making solid progress in its supply chain and is currently returning more GTF engines to service than it is removing, said the president of the Raytheon unit in a Paris presentation. The number of GTF-equipped jetliners being grounded for maintenance and repairs, which currently accounts for about 10% of the commercial fleet, is stabilizing and is expected to improve by the end of the year. The president attributed customer disruptions to operational issues and maintenance shops waiting for parts, emphasizing that the engine is not the cause.
To improve performance, Pratt is introducing upgrades to the existing fleet and plans to introduce a GTF Advantage variant that is expected to be certified by mid-2024. The president stated that this will enhance the engine’s time on wing, meeting expectations upon entry into service.
Boeing Co. plans to increase the production rate of its popular 737 Max model to 42 aircraft per month by the end of the year or even earlier, according to the head of the company’s commercial operations. He also stated that the company aims to gradually increase the monthly production rate to 48 jets in the future.
Regarding the larger 787 Dreamliner, the Boeing representative stated it is a natural step to offer the aircraft as a freighter model.
Despite the focus on commercial deals, defense plays a significant role at the air show. US Senator Jerry Moran emphasized the importance of showcasing the defense sector at the exhibition. Further, New Hampshire Senator Jeanne Shaheen stated that Russia’s invasion of Ukraine has galvanized the world and invigorated NATO. The senators called on President Joe Biden to nominate a permanent head of the FAA who has a deep understanding of the aviation industry and passenger safety.
Steven Udvar-Hazy, considered a pioneer in the aircraft leasing industry, expects the air show to be dominated by “mega orders,” but cautioned that the delivery of these deals is uncertain. Udvar-Hazy, the CEO of Air Lease Corp., compared the Paris Air Show to “kids in a candy shop” due to the rush of airline orders in a supply-constrained market.
Pratt & Whitney’s CEO stated that they have a compelling story to tell about the GTF engine, which has experienced durability issues on Airbus A320 and A220 aircraft. The CEO of the parent company expects the engine to have a longer life than initially anticipated, considering that there will be no new narrow-body aircraft introductions until the mid-2030s.
Raytheon reaffirmed its financial outlook for this year and committed to returning a significant amount to shareholders through dividends and stock buybacks. The company plans to return $33 billion to $35 billion to shareholders by 2025.
According to sources familiar with the matter, Airbus is in discussions to secure a significant narrow-body deal with Mexico’s Grupo Viva Aerobus. If successful, this agreement could expand the fast-growing budget carrier’s operations in Latin America.
Separately, IndiGo is expected to make a landmark order to meet the growing demand in India. According to a report, the company may place an order for 500 aircraft today.
Saudi startup Riyadh Air is actively looking for narrow-body aircraft and is engaged in discussions with both major aircraft manufacturers, as previously reported. The CEO confirmed that the airline has brought an aircraft to Paris to showcase its unique dark lavender livery.
The Covid-19 pandemic caused upheaval for aerospace manufacturers, leading to layoffs as demand for aircraft diminished, followed by a rapid rehiring of workers to meet the surge in post-pandemic orders. As Airbus and Boeing grapple with the challenge of increasing production, their top executives provided updates on their efforts to overcome the strain on their complex manufacturing networks.
According to Airbus’ CEO, the ramping-up of production is at stake due to challenges faced by suppliers in tiers 4 through 6, who provide parts for larger aircraft assemblies. The CEO stated that Airbus is sending its own staff to smaller suppliers’ factories, but this is not a long-term solution. The CEO expressed particular concern about the labor and financial situations in the US.
Boeing Co. plans to accelerate the production of its profitable 737 jets to 38 units per month as soon as possible, as stated by the head of the company’s commercial operations. This move will increase the company’s revenue after a supplier issue caused a slowdown in production.
Boeing is also addressing a supplier issue with the 787 Dreamliner, which is another significant source of revenue. The company has already shipped the first of its wide-body jetliners that underwent inspections and repairs on the horizontal stabilizer bar.
The defense division of Boeing expects to post a second-quarter margin similar to the negative operating loss reported in the first quarter.