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:: December 2000 Newsletter ::

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Dear Fellow Y2K+1 Survivors,

Holiday Greetings! This supplement contains updates of a variety of exciting Christmas-spirit war machines. The F/A-18 and F-14 reports haven’t changed much; although our long-term outlook for the Hornet has been boosted by our new negativity of the JSF program (see below). The AH-64 has prospered, and we think it will continue to prosper thanks to Comanche’s ongoing troubles. The new E-737 AWACS has won an important Turkish order, which has helped to cement an earlier, also important, Australian order.

Well, it’s that time of year again. In keeping with an old established Teal Group tradition that I just made up, it’s time to look at all the winners and losers (and fence-sitters) in the aircraft biz during 2000. First, The Winners:

• Airbus’s A3XX/A380. With 50 firm orders and a definite industrial launch (the day this was written, for the convenience of Teal readers), there’s no denying that this program is a success. I think I owe some people a few bottles of champagne (sounds like a professional expense, right?).

• Boeing’s 777. The 777 basically hit a home run in 2000, with well over 110 orders. And, the new 777-200LR/-300ER seems to be outpacing the A340-500/600 handily, among airlines that matter. The GE90 sole-source decision didn’t hurt after all. Now, you could say that anybody without a 777 is either not a global player, or Lufthansa.

• Lockheed’s F-16. The UAE order is only half the story. While the UAE launched the Block 60, there is a whole roadmap of new F-16 Block versions, which look set to supercede JSF (again, see below). The Air Force, in fact, probably wants this solution. In the short term, the F-16 order book looks the healthiest in years.

• Mezzanine Subcontractors. They spent 2000 rationalizing with a vengeance. GE/Honeywell is the obvious big winner, with a UTC/Collins response waiting in the wings. Thomson-CSF/Sextant created Thales (motto: “Look, we named our new company after an obscure Greek mathemetician. Aren’t we just smart enough to kiss?”). And on the military front, BAE Systems folded Sanders into its growing portfolio.

And Now, The Losers:

• Airbus’s A3XX/A380. Of course I wasn’t going to leave this in the “winner” category without further comment. The launch order book comprises the very people who might actually need a plane in this class, yet they received incredible discounts (a $145 million price, by several oft-cited accounts). What will the airlines that don’t need the A3XX as much pay? Is there any hope of recouping the colossal up-front investment in the next 15 years? This could turn into Europe’s aeronautical equivalent of the US Savings and Loan Bailout.

• Boeing’s 717. It wouldn’t be a Teal Group year-end summary without a ritual condemnation of this long-moribund fiend, which continues to hurt the 737-600 (and the rest of the 737 family, by extension). And the annual “should we shrink it to a 717-100X ‘Lite’?” discussion is just plain silly.

• Joint Strike Fighter. A brilliant concept that was supposed to cement America’s export fighter market share, keep US and allied force structures intact, and preserve the industrial base, JSF looks increasingly like a fiscal fashion victim. Bush and Co. will loot it for missile defense cash, and the USAF and USN will circle the wagons around their multirole heavyweights, F-22 and Hornet E/F. We’d better rethink force structures, fast.

• Let, and Ayres. The Czechs have gone bust, killing the L-420 and L-610G, and potentially dragging the Loadmaster down with them. We’ll update the latter report as the situation clarifies.

• Raytheon Aircraft Company. First, manage your new programs successfully. Then we can talk about a sale. But flailing around with two key new programs (and announcing a third) while simultaneously asking for a 2X revenue sale price just won’t wash. That oversold T-6 export market fiasco doesn’t help, either. Dassault is said to be the front runner, but given Raytheon’s unceasing efforts to break into the European market, this could easily be a discounted sale price.

Finally, the jury is still very much out on the following Fence Sitters, and we expect their fates to be decided in the coming year:

• Airbus Military Company’s A400M. The Eurolift hot air-to-action ratio has reached a boiling point. Either the governments involved will put up the cash, or this project will be unmasked as a political pipe dream. Odds? 6-5 against.

• Boeing’s 747-X. If Boeing had known that it’s strategy of torpedoing the A3XX business case with this proposal would fail, it would have stuck to its “no market for large planes” argument, to which it seems to be returning. Nevertheless, the company must continue to offer this family of derivatives, particularly in Japan. We’re betting that it stays dormant, for now.

• Boeing’s F-15. To steal a phrase, this venerable fighter’s sales record in the ‘90s was almost unblemished by success. Only US political action has preserved the production line, which continues to hang by a shred. In 2001, Korea’s FX decision will determine whether all of the last-minute Congressional plus-ups, and general political heavy-handedness, were worth it. If Korea buys 40-80 of these, it will be a terrific last hurrah. We give it a 51% chance.

In January, we’ll start the New Year (and New Milennium, really) with a new World Aircraft Overview. We’ll also update the Comanche, B-2, and the Embraer and Canadair regional jets. As usual, please call with requests.

An Extremely Happy New Year To You All,

Richard Aboulafia
 

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