Odds and Ends: AirAsia 8501; SkyMark Airlines bankruptcy; One year for MH370; Billy Bishop Airport; PNAA conference

Jan. 29, 2015: AirAsia 8501: The first report by the Indonesian government has been issued, per international rules, but the public portion is pretty uninformative if press reports are to be believed. At the same time, leaks indicate that the pilots may have turned off a key set of computers shortly before the airplane went out of control. There’s no apparent information yet why they might have done this. Were they responding to a malfunction, real or perceived? Was there some other reason? Is the leak on this even accurate?

Previous reports and statements from the government ruled out terrorism, bombs, and even the weather. We understand as well that there has not been a safety-of-flight issue. This leaves pilot actions and contributing factors as the likely focus. What series of events combined to lead to the accident remains to be determined. Read more

A350-1000 gets upgrade to 387 seats; we analyse the consequences

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By Bjorn Fehrm

Introduction

28 Jan 2015: Exactly one week after the first Airbus A350 started regular service between Doha and Frankfurt with Qatar Airways (on 15th of January), upgrades to the A350 capacity was announced by Airbus in a presentation to German investors.  The forthcoming upgrade was hinted to media at Airbus annual press conference two weeks ago by Didier Evrard, Airbus head of programs, but no details were given at the time.

leehamlogo copyright 2015 small 210_87 pixelsThe changes were now spelled out more in detail, including pictures of the changed sections of the cabin. Having known about these changes for some time, we can now present the goals of these changes and make a first assessment of how they affect the competitive positioning of the A350.

Summary:

  • The improvement program brings the Cabin-Flex lavatories to the A350 interior catalog, enabling smaller lavatory footprint and thereby increased seating densities.
  • Airbus has also reworked galleys around the third and fourth door pairs, thereby freeing up galley area in other parts of the cabin.
  • Taken together, Airbus claims an 18 seat improvement for the A350-1000, making it a 387 seater in a two class configuration.
  • We apply the changes in our cabin model and examines how this will change the competitive landscape between Airbus A350 models and Boeing’s 787 and 777 families.

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USAF picks 747-8 for new AF One, first delivery in 2018; end of program likely

The US Air Force has picked the Boeing 747-8 as the replacement for the 747-200-based Air Force One, reports Bloomberg News. The decision comes as absolutely no surprise.

The USAF selected the Boeing 747-8 as the next Air Force One, replacing the Boeing 747-200Bs used since the Bush 41 Administration.

The first of two 747-8s will be delivered in 2018, Bloomberg reports. The new airplanes won’t enter service until 2023. There are just 36 unfilled orders for the 747-8: 24 for the passenger model and 12 for the freighter. At the current rate of 18/yr, this is two years of backlog. At the reduced rate of 16/yr, this is 2 yrs 3 mos. Read more

Boeing earnings conference call: We’re in better and stronger position than ever, says McNerney

  • See here for initial analyst reaction before the earnings call.

Boeing is entering 2015 better and stronger than at any time in recent history, said CEO Jim McNerney at the start of the Boeing earnings call today on 2014 financial results.

“We’ve completed a comprehensive refresh” of the product line with the 737 MAX, 777X, 787-10 and 737 MAX 200, he said. McNerney said that from lessons learned, the company has de-risked product strategy going forward. Boeing has also obtained long-term labor contract stability.

“We are equally committed to breaking the cost curve” on new airplane development programs, McNerney said.

McNerney said the outlook for the commercial aviation business environment remains positive. Boeing now has an eight year backlog as present rates.

Despite today’s fuel price environment, McNerney sees a continued positive outlook for deliveries and new orders. A combination of growth and replacement will continue to drive orders. He continues to see 40-60 777 Classic orders per year to successfully fill the production gap to EIS of the 777X.

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Boeing 2014 earnings: $91bn in revenue

Jan. 28, 2015: Boeing issued its 4Q2014 and full year press release this morning; the conference call will be at 10:30am EST.

The closely watched 2015 cash flow guidance is more than $9bn. Revenue for 2014 was nearly $91bn and is forecast to pass $94bn this year.

Boeing will repurchase up to $12bn in stock over the next two-three years.

Initial analyst reaction:

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Muilenburg’s challenges as Boeing CEO

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Introduction
Jan. 27, 2015: Dennis Muilenburg has been the No. 2 at The Boeing Co. for a little more than a year. He was named vice chairman, president and COO in December 2013.

Jim McNerney

His boss, Chairman and CEO Jim McNerney, turned 65 last August. Sixty-five is the mandatory retirement age, but this has been waived before and McNerney is widely understood to want to stick around through Boeing’s 100th Anniversary in 2016.

The industry is buzzing with reports that McNerney might move up soon to

Dennis Muilenburg

non-executive chairman, with Muilenburg assuming the CEO title.

If and when Muilenburg becomes CEO, he faces a laundry list of challenges.

Summary

  • Strong competition from Airbus that is getting stronger;
  • Continued cost cutting;
  • Learning the Commercial Airplanes business;
  • Declining defense business and revenues, putting pressure on profits and cash flow;
  • Flight testing and development of the KC-46A;
  • Development of the 737 MAX and 777X and proving that delivering new airplane programs on time and on budget can be achieved again;
  • Selling enough 777 Classics to maintain production rates to the 2020 EIS of the 777X;
  • Dealing with labor unrest with its Seattle area unions and a new attempt to organize the Charleston 787 plant; and
  • Deciding whether to take that “moonshot” and launch new airplanes earlier than the 2030 EIS McNerney set as policy.

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Odds and Ends: BBD sale; MC-21 forecast; “A322″

Bombardier Sale: Financially pressed Bombardier sold its military training unit to Canadian supplier CAE for C$19.8m. It’s not a big cash infusion into BBD, but at this point every little bit helps.

Last week, before today’s CAE announcement, UBS issued an update on its BBD coverage, in which it wrote in part:

We continue to see BBD’s equity as over-valued, even after sell-off, given significant off-balance-sheet liabilities on top of also significant on-balance-sheet debt, pension deficit, and supplier/government advances. In all, we estimate BBD’s net debt to be greater than 8x EBITDA, problematic given our forecast for another three years of free cash outflows and big upcoming debt maturity in 2016.

MC-21 forecast: Irkut thinks it will sell 1,000 MC-21s over 20 years, according to this article.

“A322″ seen by pilot: A US Airways pilot sees Airbus building an “A322,” a true Boeing 757 replacement and long-range airplane, according to his special contribution to Aviation Week. A small stretch and a new wing, with other improvements, would truly give a long range, single aisle airplane with even more capability than the 757, he writes.

 

First analysis of Mitsubishi Regional Jet, MRJ

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By Bjorn Fehrm

Introduction

25 Jan 2015: Japan has not produced a commercial aircraft since 1973, when the last YS-11 twin engined turboprop rolled off the assembly line. The YS-11 was developed by a consortium of Japanese “heavies,” where two are also active in the creation of leehamlogo copyright 2015 small 210_87 pixelsthe MRJ, Mitsubishi Heavy Industries and Fuji Heavy Industries. This time Mitsubishi Heavy Industries is very much in command as they own 64% of the company set up to develop, assemble and market the aircraft, Mitsubishi Aircraft Corporation, Fuji Heavy Industries are working as design consultants this time.

MRJ engine run

Figure 1. Mitsubishi MRJ90 starting its Pratt & Whitney GTF engines for the first time. Source: Mitsubishi.

The first MRJ prototype has run its engines 10 days ago and is preparing for first flight later in the spring. It is therefore time to take a closer look at the first model, MRJ90, and compare it to its direct competitor, Embraer 175 E2.

Summary:

  • The MRJ90 and E-Jet 175 E2 are the same size, around 90 seats single class or 80 seats dual class;
  • Both aim for scope clause acceptance at 76 seats despite being to heavy; and
  • They are different in their fuselage packaging but surprisingly similar in their capabilities.

Read more

Rolls-Royce and the leasing market

By Bjorn Fehrm

22 Jan. 2015: When talking to leasing companies at the annual Growth Frontiers 2015 conference in Dublin, Rolls-Royce is the engine manufacturer that is perceived as the least desirable on their airplanes.

This has no reliability or performance background, Rolls-Royce has a good reputation for producing solid and reliable engines which serves their operators well. It is rather the success of Rolls-Royce’s after market program, TotalCare, which is the at the root of the Leasing companies problems with Rolls-Royce.

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Odds and Ends: AirAsia; Philippine Air, Russia defers

AirAsia: Group CEO Tony Fernandes made appearances on international news programs, providing his first interviews away from the direct events surrounding Flight 8501’s crash. Here is a transcript of his interview on Bloomberg News.

The interviews come as the first read-outs of the cockpit voice recorder and flight data recorder have been undertaken. Indonesian officials are quoted as saying the alarms overheard on the CVR were “screaming,” a description which has been criticized by some, who point out correctly that alarms don’t “scream.” This is certainly true, but we take a more charitable view about the term. This could be a reflection of English being a second language to the government officials and merely a translation issue.

Regardless, the data seems to confirm early reports that the flight was caught in massive up- and downdrafts that threw the airplane into a stall and out of control. Former NTSB crash investigator told us he believes the airplane went into a tight descending spiral and broke apart when it hit the water.

Philippine Air, Russia deferrals: PAL deferred 38 Airbus narrow- and widebody aircraft, according to this news report. Boeing is in talks to defer deliveries to Russian airlines, according to Bloomberg.