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By Richard Evans, Senior consultant, Cirium Ascend Consultancy
Last week, my colleague Youcef Berour Minarro rounded-up the large order announcements from Dubai. It capped a particularly good year for twin-aisle jet orders, with around 700 firm orders being placed in 2023 to-date. Even when taking cancellations into account, this means that 2023 is likely to be the best year for twin-aisle orders since 2013, when a total of 691 aircraft were ordered, or perhaps even since the record year of 2007.
Bumper orders mean a book-to-bill ratio of well over 1.0 for this year, leading to an expansion in the firm backlog.
The passenger twin-aisle backlog now stands at around 1,900, the highest level since early 2019. To have this number is notable so early in the demand recovery phase post-Covid.
The position in the single-aisle backlog is even more elevated, with very large orders for A320neo and 737 Max family aircraft being placed prior to 2020, and major orders once again being placed today. In fact, there are several orders that have been rumoured or announced, but have yet to be converted into firm orders. For example, from Easyjet, Turkish Airlines and Riyadh Air.
The passenger single-aisle backlog at Airbus and Boeing now stands at 11,900 aircraft, which is already a record high.
Chart 1: Firm order backlog for commercial passenger jets, 2010-2023
With new orders being placed in large numbers, Airbus and Boeing are both aiming to increase production rates across the board. This is driven by customer requirements, with many airlines desperate to access new more fuel-efficient aircraft in their drive to save costs, but also to meet commitments to CO2 emission reductions. The manufacturers also would like to offer more slots in the mid- to late-2020s in current and future campaigns.
Based on Cirium’s current assessment of the order backlog, aircraft delivery slots now extend well beyond 2030, as can be seen in Chart 2. While the shape of the curve could change if production rates increase, the implication is that airlines and lessors are happy to commit to deliveries of today’s technology types almost 10 years from now, presumably with some sort of pricing agreed.
Chart 2: Current delivery phasing of firm order backlog
A decade is a long time, but development timescales for new airliners have also proven to be elongated. For example, the 777-9 will finally enter service in 2025, more than 12 years after the first orders were announced in November 2013. Thus, any new aircraft type is unlikely to see service entry much before 2035, which currently coincides with the end of the committed delivery stream.
Many airlines, and IATA itself, have now published firm targets for emissions cuts, either absolute reductions or cuts in emissions per unit of traffic/capacity. Much reliance is currently being placed on fleet replacement in the shorter term, followed by Sustainable Aviation Fuels (SAF). Two questions emerge from this. Can SAF supply ramp-up to meet the aspirations, and, what happens when all the fleet of previous technology types has been replaced?
Even if SAF can be produced in abundance, airlines will still presumably want aircraft that consume less fuel than today’s production types. This is the only effective means of further emissions reduction if alternative fuels and offsets fail to deliver.
The current level of order backlog is now sufficiently large to replace nearly all the remaining 14,850 previous generation aircraft types, as illustrated in Chart 3. Admittedly, many of these deliveries are for growth needs, rather than replacement, However, the flow down of aircraft to secondary operators implies the vast majority of the 737NG, A320ceo, A330 and 777-300ER fleets currently in passenger operation will be replaced within the next 10 years.
Chart 3: Current backlog of new generation aircraft versus in-service fleets
Once this generation of fleet renewal is substantially completed in the early 2030s, further reduction in net CO2 emissions becomes reliant on SAF (possibly scarce?) or offsets (controversial?), while gross emissions reductions would rely on limited operational efficiency gains.
Will airlines therefore press manufacturers to replace their current product ranges at that point? As long as Airbus and Boeing see huge order backlogs, and split the orders roughly half-and-half between them, they may see little incentive to replace existing models. However, the aviation industry will need to demonstrate continued decarbonisation if it wants to avoid increased regulation. New engine and aerodynamic technology will likely attain sufficient confidence levels by the end of this decade to be deployed in the 2030s, and perhaps the backlog and fleet dynamics can give clues to the timing of new aircraft service entry?
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