A big reason why the sentiment for the Airbus A330neo was quite negative was because Airbus lost key sales campaigns for the aircraft in 2018. Airbus went head-to-head with Boeing to win orders from United Airlines (UAL), Hawaiian Airlines (HA) and American Airlines. All of these airlines already operate the Airbus A330ceo (current engine option), so there was definitely something to win there.
With United Airlines and American Airlines, Boeing had the big advantage that it already introduced the Dreamliner in the fleet of these airlines. So an order for the Airbus A330neo would mean that a new aircraft type would be introduced and more importantly a new propulsion system. With Hawaiian Airlines the big blow to Airbus was that it lost what was at that time the sole customer for the Airbus A330-800. Reality, however, is that especially in the campaigns with American Airlines and Hawaiian Airlines Boeing gave steep discounts or attractive financing terms.
Air Asia X turmoil
What didn’t help the image of the Airbus A330neo was the fact that Air Asia X, the biggest customer for the Airbus A330neo, was openly discussing the 787-10 with Boeing. Air Asia has the Airbus A350 on order, which was ordered in 2009 but could easily been kept in place to pressure Airbus to improve the capabilities of the later launched Airbus A330neo. The fact that Air Asia X, as the biggest customer, couldn’t reach an agreement with Airbus for a second batch of neo aircraft and negotiations with Boeing really cast doubt on the entire order though we did believe that this has been a negotiation strategy. Nevertheless, out of the 100 Airbus A330neo aircraft the Malaysian carrier has on order it is looking to convert some. Air Asia X is really giving Airbus a run for its orders and the low-cost carrier doesn’t shy away from negotiating via the media.
Lack of big names
One of the things that has left many with a bad impression about the Airbus A330neo is that at times when investors and industry observers were awaiting Airbus adding new big customers to the A330neo, it didn’t manage to pull it off. Airbus sold aircraft to some relative unknown airlines in recent years such as Aircalin, Uganda Airlines and Air Senegal and that must have raised questions whether a program such as the A330neo with a huge installed base can only generate interest from relatively unknown airlines. At this point, Delta Air Lines (DAL) is probably the best known airline to operate the A330neo. Other customers include Air Asia X and TAP Portugal, but those were customers that were already known at an early stage and after that Airbus (until recently) wasn’t able to sign a major customer.
Airbus A330neo versus Boeing 787
What doesn’t help the A330neo either or better said what skews the picture somewhat is that the A330neo is a 2-member family versus the 3-member Boeing 787 family. It’s not to say that that wouldn’t be a fair comparison, but the Airbus A330-800 and Airbus A330-900 directly compete with the Boeing 787-8 and Boeing 787-9 and not with the Boeing 787-10, which is more the size of the Airbus A350-900. So any sale the Boeing 787-10 got over the past few years already shouldn’t be considered a sale that potentially could have gone to the A330neo, but that is something that you don’t see when you lump the orders per variant into family order numbers.
Things should be getting better…
So a combination of lost sales campaigns, media coverage and negotiations via the media made the prospects of the Airbus A330neo look more grim than they actually were. Reality was still that Airbus hadn’t signed a major customer in years. That changed in February as Emirates’ fleet review resulted in an order for the Airbus A330neo. The Middle East airline ordered 40 A330-900s, which is a huge support to the Airbus A330neo program and possibly airlines that were in doubt about the stability of the program might be persuaded to buy the A330neo now that a new major carrier has appeared as a customer for the aircraft.
What should also be kept in mind is that the Airbus A330neo has solid backing from lessors. Lessors account for 1 out of every 5 orders for the program signalling trust in the Airbus A330neo. With value retention and risk adverse investment in mind, backing from lessors is extremely important. If lessors don’t see value in something they simply don’t buy it. So 20% of your backlog being lessor purchases does say something. Recently Delta Air Lines (DAL) also ordered more A330neo aircraft, so there is reason to be optimistic about the A330-900.
What also needs to be mentioned is that the Airbus A330 replacement cycle will kick in early next decade, when there will be a step up in aircraft reaching the 20-year mark. The A330ceo is an aircraft that is performing well, so airlines have been eager to operate the aircraft longer than usual (not swapping it out necessarily after the first lease term), while availability of second hand A330s did not directly benefit the prospects of the A330neo in a low fuel price environment. However, as aircraft continue aging and fuel prices head higher that should bode well for the A330neo.
A big advantage the A330 has is that it is a favourite in China and there even is a completion center for the A330 in China. The Chinese A330 fleet is still young, but it is on the Chinese market where Airbus should be able to sell the aircraft in rather large quantities.
Two years ago, the bad case scenario would see the order book for the A330neo falling to 140 units even before a single aircraft had been delivered. Fast forward 1.5 years and the order book stands at roughly 280 units. This still includes an order form Iran, which we expect to be prone to cancellation but overall we see that while some expected the Airbus A330neo order book to be wiped out or had the impression that that was happening, the contrary is true; The order book grew by roughly 30%.
Several lost campaigns made it seem like the Airbus A330neo was in an incredibly bad spot. Although these lost campaigns have been painful for Airbus, the A330neo should still do well in the future. The aircraft recently received an important order from Emirates while we should be getting closer to a replacement cycle leading to a step up in sales opportunities for Airbus. An order inflow comparison to the Boeing 787 might also not be completely valid because the Boeing 787 order inflow is partly driven by the replacement of the Boeing 767 whereas the A330neo order inflow should be driven by the replacement of the A330ceo which entered service a decade after the Boeing 767 and so naturally will be replaced at a later point in time (not including any impact on replacement driven by fuel prices or availability of cheap lease options).
Next to that, the Airbus A330ceo is a desired aircraft in one of the fastest growing markets: China. So the Airbus A330neo should be doing well, despite its slow start. Surely, Airbus has it work cut out competing with the Boeing 787, but for some airlines the Boeing 787 might be the better option and there definitely will be airlines for which the Airbus A330neo will do the trick.