http://online.wsj.com/article/SB1233807322...l?mod=wsjcrmain

http://online.wsj.com/article_email/SB1233...NTgwMDU3Wj.html

Time to change the FleetBuzz LCAL B787 logo .. and give QF a go ? LOL

Seriously, 30 B787 cancellations in a period of 2 weeks has got to be worrying to Boeing, to say the least.

My, how times have changed. A few short months ago we were counting the days to 900 orders ~ and now, it appears that we'll all be counting down to see how really bad the 'recession' is .. and how the effects of an 'out-of-control' program can damage credibility.

Seriously, cancellations were, are, and will be expected and will eventuate. And not necessarily restricted to this or any one specific frame.

BCA has an existent applicable aircraft available to the marketplace, as opposed to some pie-in-the sky concept.

When, as will inevitably occur, carriers require frames so effective as the 787, there it will be.

Meanwhile, where will AI be in this situation? (This is, by the way, 97.627% a rhetorical question.)

+?

LCAL won't be the last lessor to cancel its 787 orders or other airframes.

Both OEMs need to really worry about ILFC. They still haven't found a buyer. Who wants all that debt in today's economic climate?

From a PR point of view, yes its worrying - but 16 orders lost (or 31 including S7) is a drop in the ocean for the 787.

As Errol notes, we know the coming 12-24 months will be bad, but the 787 has the demand stretched out to 2018 and beyond - the A32X family took a hit last year and no model is immune really.

Given the appeal of the airplane, even 200 orders lost would be no bad thing - having several hundred orders for a plane yet to fly is commendable. All we see with the cancellations is confirmation of how bad the marketplace is, not because the airplane is wrong for the market.

Thirty orders is probably not batting any eyes at Boeing. Even three hundred would not be crippling considering five-hundred orders is considered "quite successful" for a widebody model (if not necessarily an entire program).

And look who has canceled - a Russian domestic airline that has seen it's traffic collapse like a house of cards in a strong breeze and a brand-new lessor. And no, I'm not trying to "spin" this to try and make it look like a non-issue. Boeing has lost upwards of $2 billion in revenue and that's not peanuts.

But seriously, to listen to some people on a number of aviation forums, you'd think we're looking at a collapse of civilization on the order of the Fall of the Roman Empire and the next five hundred years we'll all be living in thatch huts and never traveling more then 10 kilometers from them.

I would be more concerned about the Middle East's order book in general.

Indeed. Boeing and Airbus both have not-insignificant exposure there over a period of a decade, so any disruptions in the short, medium and/or long terms could affect both manufacturers, especially since most of that exposure is in widebodies.

Airbus has just under one-third of the A380 orderbook secured with EK and circa 50% of the A350 saddled with M.East carriers - while there's no threat these carriers (EK/QR/EY) will go tits up, the splurge of orders may well be pushed farther and farther out...

Its the "bigger" widebodies such as the B77W, A350-1000 and of course, the A380 I think which are more exposed. The B788/A358 and even A359s' are better off. The B772L is a bit exposed as well. The A332/A333's will be fine.

As Boeing777 stated, Airbus is a bit more exposed than Boeing is when it comes to the Middle East order book. Nonetheless, Boeing should be concerned as well.

The problems are broader and more complex. Bubble money flowed into the aircraft market in the past three years in a couple different ways. The most obvious are the rash of start up airlines/small airlines ordering a bunch of expensive jets. There's also the Gulf order surge, which is in part fueled by the revenues associated with high fuel prices, with part of that run-up being speculative.

Another sort of speculation are an explosion of leasing companies ordering planes hoping top place them. The market for those planes has just gotten a lot smaller. Ask LCAL.

Aircraft size is not per se the determining factor of risk. That's too simple. I'd argue that years of backlog at peak production and how many unplaced frames ordered by leasing companies would give a better idea of where the risks lie. The bigger the wait, the bigger the risk is likely to be. The more aircraft to lease, the bigger the uncertainty.

The 737 backlog at the end of January was 2263 -- that's about 6 1/2 years worth of production. The A320 backlog is about 400 planes more with a higher production rate. The 787 is much worse than that with lots of unplaced leased aircraft. The 777 backlog was only 343 at the end of January -- four years worth of production with only 8 unplaced 77Ws currently on order by leasing companies.

777-200LR "exposed?" no, not really. Very front loaded order book. Only 26 on order as of the end of January, now 25 after the first Qatar delivery, with about half due for delivery in the next few months. The Brunei UFO order is suspect (and has been for some months) but other than that, I don't really see significant issues.

If you want risk, try the A330F, with a majority of orders from leasing companies and teh big customer being an Indian start-up.

Hi MightyM

A few comments:

-I should have been a bit more clear regarding the -200LR being "exposed"...I meant potential orders for the -200LR.

-To a certain extent, larger planes are indeed exposed...they decrease flexibility for a carrier.

-Regarding the Gulf Carriers, that is why I mentioned both are exposed but Airbus more so (due to its larger order book compared to Boeing's)

-Airbus also has more startups-Skybus was an example of one.

-LCAL was a small trivial player in the first place. Now if ILFC has a problem leasing the B787, then there is some troubles for the aviation industry in general-especially given ILFC has some good slots as well as the B788 as its majour order.

-9W has shown us recently that its not just the leasing companies which are having problems with the B77W. That being said, I think there are enough carriers to "cover" for the "exposed" B77W's..at least for now.

-I do agree the A330F is a bit suspect, however, Airbus has more than enough backlog on the A330 pax where neither Airbus nor the cargo companies would mind a deferment...it will help out both.

Jacobin,

I find your use of "exposed" to be confusing. The term has no meaning to me. You seem to use it to cover all of aircraft sold/leased as excessive to a carrier's current needs, order cancellations/deferrals, and potential orders that do not come about. I find it more useful to look at these they elements individually though there is obviously some overlap. For example, I would argue that the 777 backlog is less speculative (more solid) that most but it also has limited potential for additional orders -- basically, pretty much everyone who is likely to order passenger 777s has already done so (barring an NG version) and what Boeing is chasing now is largely follow-on orders. I would argue that 777F market is also limited than general thought (maybe 100 more frames beyond current sales +/- 50). Obviously, current conditions cut the chance of follow-on orders as does used aircraft hitting the market.

I would agree that Airbus' backlog is riskier overall, with more start-ups etc. Airbus also does have more of the Middle East risk though that subject warrants its own thread.

I don't share your optimism on the A330. Oh, and another 200 787 cancellations wouldn't surprise me.

MPL

Personally, I find the ideas of some .. that the "widebody" market is the most "exposed" somewhat curious.

After all, large widebodies are placed on routes where demand is strongest. Also, the acquisition cost for each of these frames demands greater total financial committment and leasing / purchase examination by individual carriers. Not to mention that in their appropriate markets, such widebodies are generally capable of greater, bottom-line savings for the carriers involved. Lastly, such VLA orders are generally held by industry behemoths, who are financially more stable, most likely to be ekeing out a profit .. and are governed by finite expansion plans that are quantitatively backed.

Ergo, it's chances of being most affected frame sector should be less than that of : startup companies, new entrants and smaller less-resourced carriers ordering bucketloads of narrow bodies. Think the likes of Skybus, LionAir, (the now defunct) AdamAir, RyanAir and the like, where a good dose of 'optimism' often reigned supreme.

So far to date, the cancellations received by Boeing and Airbus have been not in the VLA arena, but generally in the lower echelons of their respective families. The exception here has been Boeing's loss of B787 contracts, defined mainly by the specifics of the accumulated delays on the program.

While companies such as EK might eventually seek to defer large VLA / widebody orders, I don't see 'cancellations' of such being on the cards. To me, there is far more risk in the NBJ market. And that is set not only to affect Boeing and Airbus/EADS, but also Bombardier and Embraer.

Of course, the B787 program is a special case in its own right - and one that has its vunerabilities increased by the current economic cimate.

No market is completely immune or isolated in such conditions ~ but I would believe that the lower end of the market is where more potential damage can be done.

One customer who canceled - S7 - did so to secure 787s earlier then they could get them, so I see that as a vote of confidence in the program. And the other - LCAL - is a start-up so I see that falling under your general statement about start-ups being riskier then "established" airlines and not as a sign of the 787 being "at risk" due to the current economic climate - especially since the 787 will be one of the most economic widebody twins in service.