GE analysis post Farnborough

Our wrap up of Farnborough would be incomplete without looking closer at the world’s leading engine supplier, GE Aviation, which together with partners (like SAFRAN in CFM joint venture) garnered more than $36 Billion in orders and commitments during the show. This figure was only significantly bettered by Airbus ($75 Billion) and it came close to Boeings $40 Billion. With such level of business the claim by GE Aviation CEO, David Joyce, that the Airbus A330neo engine business was not the right thing for GE as they have more business than then they know what to do with, was certainly no case of “sour grapes”. Continue reading

An alternative air show

The Farnborough Air Show got all the headlines this month, but we went to a small air show in Everett (WA), right at Paine Field, where Boeing dominates.

The Historic Flight Foundation is the brainchild of John Sessions, who has put together a private collection of all-airworthy airplanes. It’s also near by the Paul Allen (yes, the Microsoft Paul Allen) collection of airworthy airplanes at the Flying Heritage Museum and across the field from the restoration center of the Museum of Flight, which is at Boeing Field.

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Bombardier woes go beyond CSeries

The news last week that Bombardier reorganized its business units, laid off another 1,800 employees and saw the retirement of Guy Hachey, president and CEO of the aerospace division, was viewed by some media and observers as an indictment of the CSeries program. While it’s certainly true that delays in the program weigh heavily on BBD, the problems don’t stop with CSeries.

Bombardier has 203 firm orders and 310 commitments for CSeries. This delivery stream doesn't include any potential rescheduling as a result of the grounding of the Flight Test fleet from May as a result of the engine incident.

Bombardier has 203 firm orders and 310 commitments for CSeries. This delivery stream doesn’t include any potential rescheduling as a result of the grounding of the Flight Test fleet from May as a result of the engine incident.

Slow sales of the CRJ, Q400 and business jets–as well as program development issues with a new corporate jet–all combined to drag down financial performance and bleed cash. Bombardier doesn’t have the balance sheet strength of Boeing or Airbus, nor strong sales of other airplane family members, to weather the challenges of new airplane development programs.

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Farnborough does little to relieve 777 Classic, A330ceo production gap issues

The orders and commitments announced by Airbus and Boeing at the Farnborough Air Show last week for the A330ceo, the A330neo, the Boeing 777-200LRF and the 777-300ER will help fill the looming production gaps for the two airplanes, but work by both OEMs still needs to be done.

See the production gaps, before the orders and commitments were announced, by clicking the following links:

Airbus A330 delivery schedule, 2015-2020

Boeing 777 delivery schedule 2015-2020

A330/777 backlog comparisons

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Odds and Ends: CSeries schedule; BBD and Russia; MH370

CSeries schedule: An intriguing news item came out of Russia this week concerning the Bombardier CSeries. Lessor Ilyushin Finance Co., which has more orders for the CSeries than any other customer except Republic Airways, claims (according to the article) that BBD sweetened the terms of the final contract following the engine incident in May that results in a grounding of the test flight during the investigation and fix.

The issue was tracked to a faulty oil seal. The fix, according to our sourcing, is relatively easy and straight-forward, but Transport Canada hasn’t green-lighted a return of the test fleet to service yet, and it still may be a few more weeks before it does, we’re told.

BBD maintains that it still plans first delivery in the second half of 2015, but we’re also told all the schedule margin is now gone. And here’s where we get to the heart of the IFC news report.

According to Russian Aviation, IFC has rescheduled deliveries from November 2015 to April 2016, a five month shift to the right. There is no indication, although it is inferred, if this is reflective of a new program delay–or whether this is a rescheduling at IFC’s preference.

  • Bombardier announced a reorganization that saw the retirement of Guy Hachey, president and COO of the Aerospace division. Another 1,800 employees have been laid off as well. BBD continues to burn through cash as delays in the CSeries program mount up.
  • A source familiar with the CSeries flight testing program thinks the flight testing should resume in August.

Bombardier and Russia: More from Russia: The Toronto Globe and Mail reports that Bombardier’s plan to open a Q400 assembly line in Russia has stalled over the crisis in Ukraine.

Boeing and Russia: Boeing has close ties to Russia for its commercial aircraft division, relying on Russia as a large supplier of titanium. The Ukrainian fighting was already affecting the supply chain. The Puget Sound Business Journal has this explanation.

MH370: While the world is focused on Malaysia Airlines flight MH17, Runway Girl Network has an intriguing piece about MH370, the Boeing 777 that disappeared five months ago. She has a video about access to the electronics bay on the 777, a topic that we discussed at the height of MH370’s disappearance. RGN’s article explains the concern as well.

Regional Airline pilot sickout: A campaign is underway to have a US pilot sick-out Sept. 1-5 for regional airlines.

Analysts split on Boeing 2Q earnings

Aerospace analysts split in their reaction to Boeing’s second quarter earnings. Many were upbeat on the commercial aircraft results, while others didn’t like the higher-than-expected, continued deferred expenses for the 787 program and a big charge on the KC-46A program.

Bloomberg News was quick to point to the KC-46A program charge and the implications that this is yet another costly new airplane program for Boeing.

Traders didn’t like the news, either, with stock falling more than $3 despite higher profits for the period and higher profit guidance going forward.

The Bloomberg article cites several analysts who didn’t like elements of the earnings report.

Here are initial notes, pre-earnings call, based on the press release:

 

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Odds and Ends: Hawaiian orders A330-800, drops A350-800; A330neo market potential; Engines and Airbus

Hawaiian Air’s A350-800s: Hawaiian Airlines July 22 ordered six Airbus A330-800s and simultaneously dropped its order for six A350-800s. HA also took six purchase rights for the A338. Deliveries begin in 2019.

The A338 is slightly smaller, nominally at 252 seats, and has somewhat less range at  7,600nm than the 276-seat, 8,250nm A358, but only Hawaiian knows how much it needed the extra range. Losing the extra seats does give HA a hit to revenue potential, however. For wide-body airplanes, Airbus says each seat has the revenue potential of $2m/yr.

Offsetting the revenue loss is a far lower capital cost for the A338 vs the A358. Our economic analysis, based on technical specifications estimated before the Farnborough Air Show and before Airbus revealed data for the A338, showed the A338 pretty close to the A358 on a pure operating cost basis, not including adjustments for capital cost.

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Odds and Ends: Some FAS leftovers–a big CSeries order?; EMB lands 60; and more

Farnborough Air Show leftovers:

Big CSeries order coming? Flight Global reports that lessor Macquarie Airfinance is about ready to sign a deal for 50 Bombardier CSeries. If true, this would be a major departure for the lessor, which historically hasn’t placed speculative orders–and it would be a major boost for Bombardier. The Flight Global report doesn’t say if this would be 50 firm or a combination of firm and options. BBD and MAF didn’t comment for Flight. We reached out to MAF and received this response:

“The Flightglobal release was concocted on a rumour and we don’t comment on rumours. You know how it is with lessors. We’re constantly considering every aircraft type that could provide us with value-adding opportunities.”

Bombardier has been selling the CSeries in small numbers, often to second or third tier, and even start-up carriers, a path Boeing took in the early days of the 737-200 program. Airbus relied heavily on lessors for early A320 orders. Boutique lessor LCI was a launch customer for the airplane, and Falko Regional Aircraft Leasing became a customer at FAS.

BBD now has 513 orders and commitments for CSeries.

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Airbus A330-800 and -900neo, first analysis, part 3: performance

In our first two parts of the analysis of the Airbus A330neo launch at the Farnborough Air Show, we have gone through the information provided by Airbus and Rolls Royce and provided comments on what these really mean from a practical point of view.

Areas we wanted to verify with our independent model have been how the A330neo would perform versus the A330ceo, especially on shorter ranges, than the Airbus example of 4,000nm and how it would stack up against the Boeing 787.

We give the first answer to these questions with data from our proprietary, independent model. This is first-cut data and we bring it forward in time as there is some confusion on what Airbus has said about the shorter range performance of the A330neo. Continue reading

Ukraine claims Malaysian airliner shot down over air space–(Update)

Update, 1:10pm PDT: Jon Ostrower of The Wall Street Journal Tweeted that US intelligence officials confirm a SAM was fired at MH17; details to follow at The WSJ.

Photo via CNN, apparently showing MH17 falling from the sky.

Malaysian Airlines Boeing 777 (flight MH17) has crashed in Ukraine and government officials claim the airplane was shot down. As yet, this appears to be unconfirmed.

We’ve already been asked for our reaction. Here’s our statement.

“It’s hard to have a reaction within minutes of the first reporting. Reports claim the airplane was shot down, but has this been confirmed? Reports say the airplane was at 10,000 meters (roughly 33,000 ft), and cruising altitude, in-flight break-ups due to something wrong with the airplane are highly, highly unlikely, certainly suggesting an “outside force” may have been involved. But until a shoot-down is confirmed, the only reaction can and should be prayers for the victims.”

Here’s what will happen next, aside from the emergency response to the crash site:

  • Given the allegation of a shoot-down, efforts will be made to confirm this as soon as possible.
  • Flights may be rerouted as a precautionary measure until the shoot-down is affirmed or discounted.
  • Investigators will consider (in no particular order):
  1. Shoot down;
  2. Sabotage;
  3. In-flight break up due to structural issues;
  4. Mechanical issues;
  5. Weather conditions; and
  6. Crew condition, among other things.

These are, except for #1, standard areas of investigation.