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Last week much of the aviation industry came together at the Paris Air Show and the event may well be remembered by Airbus as a spectacularly successful event.  The show also provided our supply chain community critical reminders of the importance that proper timing of new products and value-chain collaboration can play in an industry market.

During last week’s event, Airbus landed a total of 730 orders for aircraft at a catalog value of slightly more than $72 billion, which was double what executives previously estimated.  Not bad at all for one week’s haul, and an envy for any value-chain.

The primary headline however was the short-haul aircraft market and recent release of the updated A320neo, which accounted for 667 orders representing over 91 percent of commitments made at the show. The A320neo further attracted one of the largest orders on-record for Airbus, 200 A320neo aircraft from AirAsia Bhd valued at $18.5 billion. Airbus has now accumulated 1029 orders of the updated A320 since its announcement in December, an order volume that is sure to capture the attention of Airbus competitors. Another takeaway from the enormous success of the updated A320 is the new market power and enthusiasm of Asia based and lower-cost airlines that have fueled buying interest thus far.

The “neo” (new engine option) A320 boasts of an efficiency improvement package which incorporates both wing Sharklets and newer engine technology that Airbus claims will deliver 15 percent reduced fuel consumption, less CO2 consumption, additional payload and 500 additional nautical miles of aircraft range.  Airbus claims that the updated A320neo can deliver 16 percent less fuel burn per seat compared to Boeing’s 737-800, and 1300 more nautical mile range than Bombardier’s new C-series CS300 aircraft. One other product marketing claim is that the updated A320 has 95 percent spares commonality with the existing A320 family.

Two different aircraft engine options are being made available for the A320neo, the Pratt or Whitney PurePower PW11000G geared turbofan, or the CFM International LEAP-X. Each of the engine manufacturers collaborated with Airbus on meeting fuel efficiency and design targets. CFM is the engineering and product design consortium among France’s Snecma (SAFRAN Group) and General Electric Aircraft Engine Group. The LEAP-X turbofan is characterized as a new generation aircraft engine designed to leverage the newest technologies.  CFM has secured firm orders for 910 LEAP-X1A engines thus far valued at more than $11 billion in catalog pricing.  CFM engines are also exclusive to powering the Boeing 737-600, 737-700, and 737-800 aircraft.

According to an Airbus brochure, deliveries of the A320neo are planned to begin in October 2015, and according to financial media reports from last week’s show, many neo customers were motivated to place orders to secure their delivery slots, which are now estimated to be in 2018

Boeing, arch competitor to Airbus, competes in this short-haul aircraft segment with the popular 737 series aircraft. Other new market competitors include Bombardier and its C-Series line and China’s Comac. Boeing has yet to decide whether to re-power its proposed new version 737NG or come up with a new design that would offer airline customers greater cost savings.  Industry speculation is that large influential airline customers including Southwest Airlines and Ryanair have been urging Boeing to decide on a direction for the 737NS.  Judging from last week’s unprecedented activity among airlines willing to plunk down a monetary commitment, Boeing may well be in a difficult catch-up position, since it only garnered 80 new orders for 737’s last week. Reports indicate that Boeing may well opt for a entirely new design for the 737. That new design will have to best the A320neo performance as well as meet expected delivery windows for customers, which places more pressure on Boeing teams.  The commercial arm of Boeing also continues to play major catch-up with overdue deliveries of the 787 Dreamliner aircraft, and that track record does not bode well for Boeing’s predictability.

The Eagles had a very popular tune, In a New York Minute, who’s first refrain included these lyrics:

In a New York Minute
Everything can change
In a New York Minute
Things can get pretty strange
In a New York Minute
Everything can change
In a New York Minute

The airline industry, and especially its new wave of Asia, Middle East and emerging market carriers are redefining low-cost travel, growth and profitability, and now, aircraft market demand. Last week was perhaps a watershed event in determining the new competitive dynamics in listening to customer needs and proper timing of a new product. We can gather some important learning from this one show.

Bob Ferrari