Special Report On Global Market Outlook For Wide-Body Aircraft

World Airline News, Oct 12, 2001

A330/-340 Planned Production Increases - Unlikely, But Probably No Cuts Either

The order book for the A330/-340 appears to be solid. Currently, the aircraft are being produced at a rate of about five per month, a rate that we believe will likely be able to be maintained over the next few years. Our previous forecast of increases toward 7.5 per month no longer seem likely.

We discuss the twin-engine A330 and four-engine A340 together since both are assembled in Toulouse, France by Aerospatiale on the same production line. Airbus Industrie holds announced firm orders for 309 of the A-330/-340s. The A330 and A340 were launched together in 1988. Thirty-seven of the A330/-340 announced backlogged orders are from U.S. airlines. All 44 of the orders placed during the first five months of 2000 were for the A330, including 21 from ILFC. Leasing companies hold 40 percent of the A330/-340 backlogged orders.

In December 1997, Airbus launched two stretched A340 models, the -500 and -600, the first of is projecting that these aircraft will have 14 percent lower operating costs than the 747-400. The U.K. government has agreed to loan British Aerospace $200 million to develop the wings for the aircraft. The French and German governments are undoubtedly providing close to another $800 million in launch aid to EADS.

It is interesting to note that the only orders pending to U.S. airlines other than one US Airways A330 order in 1998 are those placed 11 years ago by Northwest for 16 A330s, and 20 ordered in January 2000. None of the aircraft ordered by Northwest have been delivered. TWA had placed 20 firm and 20 option orders for the A330 in 1989. All have since been canceled or traded for orders of other models. The only U.S. airlines to have ordered the A340, Northwest and Continental, canceled their orders before any had been delivered.

As mentioned earlier, the A340 experienced a major setback in June 1999 when Singapore Airlines exercised options for 10 777-200ERs. The airline's plan to divest its 15 A340-300s puts into question its plans for the five A340-500s it ordered in February 1999. They still, however, remain on order. Amongst the issues apparently leading to the decision were the relative slowness of the A340 and the lack of headroom. Also, the more rapid climb rate of the 777 allows the aircraft to rise above bad weather more quickly.

In a subsequent quid pro quo in August 1999, however, the former all- Boeing China Airlines ordered seven A340s (along with 13 747-400F freighters). Iran Air apparently is attempting to go around the U.S. embargo that for years has kept Airbus from delivering ordered A310s. Iran is once again contemplating purchase of four A330s with Rolls-Royce engines, we presume in lieu of the A310s with P&W engines. Libyan Arab Airlines is in the market for a fleet of aircraft, likely including the A340. It has been reported that Airbus will supply China Eastern with five A340-600s, possibly on lease.

Airbus had been considering development of a eight-frame-smaller 222- seat version of the A330, the A330-500 (formerly the -100) with 7,000nm. range. This model would have replaced the A300-600 and the A310-300, and be a direct competitor to the 767-300ER. Airbus foresaw a market for about 1,000 aircraft in this category. From all indications, Airbus has abandoned this idea.