Republic Airways Holdings, a launch customer for the Bombardier CSeries with 40 orders and 40 options for the CS300–the order that prompted Airbus to proceed with the A320neo program, which itself forced Boeing into the 737 MAX–once again raised doubts about the future of its order.
In its 3Q2014 earnings call Oct. 29, on the eve of Bombardier’s own 3Q call on Oct. 30, Republic CEO Bryan Bedford said two carrier certificates would be needed for Republic to operate the CSeries. Republic is moving toward one certificate from multiple certificates to cut costs and simplify operations.
In a transcript of the earnings call prepared by Seeking Alpha, Bedford addressed the CSeries in response to an analyst question:
Special to Leeham News:
From Collateral Verifications
Vice President – Commercial Aviation Services
With the EIS of the Airbus A320NEO and Boeng 737MAX around the corner, we are always asked about our thoughts on the Last-Off-The-Line aircraft and how they will depreciate vs the existing fleet. Based on these requests, we have looked at a few aircraft to see how they depreciated over the last 10-15 years. CV compared a 1999 Boeing 737-400 vs a 1999 737-800 as well as a 2004 Boeing 757-200 vs a 2004 Airbus A321-200. We felt the 757 would be an interesting aircraft to review as there really has not been a direct replacement for the aircraft as of yet.
As you will see from the chart below, the last 737-400 depreciated at a much faster pace than the 737-800. For the 737-400, the average year over year depreciation rate was around 12%. For the 737-800, the year over year depreciate rate has been 5.5% which is more in line with normal deprecation expectations. For the 757-200, the average annual depreciation rate was around 8.5% vs 5.5% for the Airbus A321-200 over the last 10 years.
A350 batteries: Flight Global has a detailed story about the Airbus approach to lithium-ion batteries in the A350. The approach is more conservative than Boeing’s for the 787.
A350 Version 1.0: A blog called A350 XWB News has a retrospective on the A350’s original proposal (which we call Version 1.0, because the design went through so many iterations). It’s got the original brochure reproduced. It’s an interesting recollection, and one to compare with the A330neo. Boeing dismisses the A330neo as A350 V 1.0, but it’s really not when you compare.
A350 Final version: A350 XWB production is tracking to plan, first A350 after Qatar’s initial 8 (MSN6 to 13), MSN14 to Vietnam Airlines is going to ground tests (Station 30) after getting wings and empennage in Station 40 at the Airbus Final Assembly Line (FAL) in Tolouse. We are following this program carefully since start and the roll out of the latest XWB from wing join was within days of our prediction 6 months ago, thereby the A350 ramp to three FAL starts by end of year is tracking so far.
A380 downed by mops: Aviation Week has the story on how Qantas cleaners got the water flowing in their A380s when it should not. The incident is old (80 gallons of water flowing around in the fittings of the A380 when climbing out of LAX to Melbourne, first time in June) but one has now found the cause; the cleaners mops were getting the water couplings in a galley unlatched. Small things having big impact.
Boeing record: Qatar airways took delivery of three 787 and one 777 in one day this week; here the Flightglobal version of the Boeing announcement. Airline CEO Al Baker says ““Never in the history of an airline have so many aircraft been taken in just one day.”
Southwest schedule: Southwest Airlines adjusted its schedule two months ago to improve its on-time performance, and revealed that the new times are working.
Southwest, once boasting of being #1, 2 or 3 in on-time ratings among US major carriers, saw a steady decline in recent years as it ramped up service in congested airports, expanded in regions that were more prone to weather delays, added larger airplanes (the Boeing 737-800) to its schedule. After acquiring AirTran, Southwest tightened the schedule in an effort to cut turn-times. But AirTran’s traditional hub operation vs WN’s largely point-to-point didn’t lend itself to the tighter turns Southwest scheduled. It didn’t take a lot of insight to understand why delays were showing up on the AirTran fleet. Southwest’s OT performance is still not where it once was–it’s currently at 78.9% when it used to run in the 80s–but it’s better.
By Bjorn Fehrm
Part 3 of 3
In Part 2 of our three-part 757 Replacement analysis, we took a close look at Airbus’ new 97 tonne take-off weight A321neo, revealed in a world exclusive by Leeham News and Comment October 21. We analyzed the A321neoLR’s capabilities and limitations when compared to Boeing 757-200W and we saw that it could do the international flights that the 757-200 does with about 25% better efficiency. In this final Part 3, we will now compare the 757 and A321neoLR against what can be Boeing’s reaction, a clean sheet New Single Aisle, NSA, or New Light Twin Aisle, (NLT). First the conclusions from Part 2:
- When using the United Airlines-configured 757-200W international as benchmark, we came within seven seats of the 757 capacity for an A321neoLR. It covered the same range and had trip fuel costs that were 25% lower.
- The per seat fuel costs gave a 22% higher efficiency, which was within 2% of Airbus own figures.
- 737 MAX9 is not suitable for stretch to an international version, not because the wing is not good enough but because the MAX9 cannot bring the wing to an angle at take-off where it can work efficiently; the landing gear is too short.
For Part 3 we can summarize:
- A New Single Aisle (NSA) or New Light Twin (NLT) which would enter the market in 2025 would be sized at around 200 passengers with subsequent variants covering the 175-225 seat market, all numbers with OEM standard two-class seating. Figure 1 shows the fuselage cross sections we have used in our modelling of NSA and NLT to cover this market segment.
- In order to cover the market segment of the 737, A320 and 757 it would have a range in excess of 4,100nm. We will use 4100nm for our modeling to maximize the comparative efficiency information.
- Its efficiency would be higher than an A321neoLR, primarily due to better engines and a more modern wing.
- The New Light Twin (NLT) wins on comfort and ground turn-around time but pays with a larger fuselage cross section due to the extra aisle. This causes more drag and structural weight, net effect is a reduction in efficiency of around 2.5%.
Barry Eccleston, president of Airbus Americas, presented the Airbus outlook at the British American Business Council Pacific Northwest conference today.
- The A330 went on longer than we thought it would, and are going to nine a month from 10.
- He still sees a market for the A330ceo with airlines other than the long-sought China order.
- We’ve had unexpected success for the A321 as a replacement for the Boeing 757 and 767-200; 934 A321s orders and conversions from A320 in just the last two years. First airplanes from Mobile (AL) plant will be A321s, which had been planned for the A320.
- The A321neoLR brought to the market place just under two weeks ago and already have interest. There is a bit of wing strengthening, a bit of structural restrengthing.
- The A330 has become the bread-and-butter of the long range business. It has the largest operator based, 106, than any other wide-body.
- Our strategy is to take today’s product and improve it. We followed the A320neo strategy with the A330neo. A330neo has 95% spares commonality with A330ceo.
- Fundamental difference vs Boeing supply chain (in response to a question) that Boeing is out there with Partnering for Success program to drive down costs, it’s a very aggressive program. Our approach is we can’t deal with all our suppliers so we deal with Tier 1s, who we expect to deal with Tier 2 and they with Tier 3s. We are very open to looking at new suppliers. Our cost base is in Euros so we are looking for more dollar-based suppliers.
- Short-term answer about a Washington State engineering base (in response to a question) is no. We like the idea of coming to the US (Wichita, Mobile) and long-term could expand. However, A350 engineering demands are now behind us. So we are not looking for lots of engineers right now.
The British American Business Council-Pacific Northwest is sponsoring a conference today on the Advanced Technologies for Next Generation Aircraft in Seattle. We’ll have several reports, starting with this one.
Alex Pietsch of the Governor’s Office of Aerospace, kicked off the conference, saying that Boeing employees more than Microsoft, Starbucks and Amazon combined.
“No one should question Wasnhington’s place in aircraft production,” Pietsch said, noting the siting of the 777X assembly and wing production, a rate increase to 52/mo for the 737 and expansion by suppliers.
Thanks to the 777X, Washington will be the only location in the US where composite wings are built, Pietsch said.
Kourosh Hadi senior director of Boeing Airplane Product Development, said that trends in commercial aviation during the next 20 years indicate that single-aisle aircraft and demand remains the “fastest growing, most dynamic segment” in the industry. Traffic demand continues at 4%-5% per year, despite four recessions, two financial recessions, two Gulf Wars and other global factors.
Hadi indicated that “advanced designs” fall within the 2021-2030 timeframe and “future concepts” fall from 2031 and beyond. Advanced designs include advancements in aerodynamics, systems and propulsion. Future designs might include SST and other concepts.
Technology has to add value, Hadi says, for performance, cost, production rates, Cash Airplane Related Operating Costs (CAROC, a common Boeing term) and environmental issues are focus areas.
First flight of the 737-8 MAX is early 2016, with EIS with Southwest Airlines in July 2017.
Hadi said it was “mind-boggling” that Boeing is improving the 777 by 20% with the 777X, a plane he characterized as one of the finest aircraft ever produced.
Flight test of the 777X is slated to begin in 2019, with firm configuration next year and detailed design in 2016 and the production to begin in 2017.
- Our observation: Hadi detailed the 777 Classic, 777X and 787 families but only talked about the 737-8. FWIW.
- In a change from practice, and a refreshing one, Boeing compared its next round of aircraft with its own current and past generation aircraft rather than bashing Airbus at every opportunity.
Delta Air Lines is supposed to make a decision on its Request for Proposals for 50 wide-body aircraft before the end of this year, perhaps as early as next month. The competition is hot between the Airbus A330-900, the A350-900 and the Boeing 787-9.
Delta is understood to use the aircraft to beef up its growing Seattle hub across the Pacific; for its Detroit hub, also to Asia; and its New York JFK trans-Atlantic hub.
In addition, Delta is phasing out the last 14 of its Boeing 747-400s inherited from its merger with Northwest Airlines by the end of next year.
The A330-900 is viewed as a trans-Atlantic airplane, while the others are viewed as largely, but not necessarily solely, trans-Pacific aircraft, according to our information.
But there could be another wrinkle. On Delta’s third quarter earnings call, CEO Richard Anderson made some intriguing comments that could raise another possibility: acquisition of used Boeing 777-200ERs.
To put this in context, recall that Anderson and Delta actively seek out inexpensive used aircraft which, while hardly competitive at high fuel prices when comparing operating costs vs new aircraft, provide low capital acquisition costs and low ownership costs.
Here’s the exchange on the earnings call, as recorded by Seeking Alpha’s transcript:
Oct. 28, 2009: five years ago today, Boeing announced 787 Line 2 goes to Charleston; then, now and the future
This is about eight pages when printed.
It was five years ago today that Boeing announced it would locate the second assembly line for the 787 in Charleston (SC).
The decision was expected and, some say, had actually been made months before–as early as the preceding February. We take a look back at the events leading up to Boeing’s decision to put the second line in Charleston, what’s happened since then and where Boeing will be in five more years.
As Brazil’s budget airline GOL reportedly evaluates whether to acquire 20 Boeing 737-7s or Embraer E-195 E2s, the principal of the “CASM Paradigm” is a concept worth examining.
This head-to-head evaluation of the E-195 E2 and the 737-7 MAX is a rarity. Typically the head-to-head involves the Bombardier CS300 and the Airbus A319neo. All three have the same seating capacities. The E-195 E2 has slightly fewer passengers than the 737-7 with similar seat pitch.
The competition is also what might be seen as a contrary competition. Airframers agree: the airline industry is upgauging. Capacity discipline, long elusive until after the global financial collapse of 2008, has been driving load factors higher. But lowering unit costs, or the Cost per Available Seat Miles (CASM) has long been the principal measure by which airlines, OEMs and aerospace analysts measure efficiency.
Although Trip Costs of aircraft operating over a route is important, the trend toward upgauging at all levels clearly is the driving force.
Embraer takes a different view, arguing that trip costs and a smaller airplane should trump the CASM obsession. A smaller airplane will mean higher yields, EMB says. A larger airplane provides lower trip costs but drives yield lower.
We visited Embraer’s headquarters earlier this month and received a full briefing on what EMB calls the CASM Paradigm. In our report today, we detail the presentation and discuss other considerations beside CASM vs Trip Costs that drive the size of the aircraft acquired.
- The CASM Paradigm becomes a vicious, circular cycle, driving airlines to larger aircraft but lower yields.
- Extra seats on larger aircraft mean lower unit costs but at the cost of profits.
- Scope Clauses remain an issue in the US.
- Connecting traffic, pay scales also are issues.
- We analyze the operating costs of the E-195 E2 vs the 737-7.
- We discuss the GOL competition.
Odds and Ends: MTU on A380; lessons learned; Alaska Air v Delta; GOL looking for airplanes; Boeing downgrade and upgrade
MTU on A380: The German company MTU, which is a key supplier on a variety of Airbus and Boeing engines, questions the potential market for an A380neo, according to this article from Reuters. Our Market Intelligence indicates Airbus is moving toward a re-engined airplane, although an Airbus official denied this to us this week. Reuters’ sources suggest work is ramping up.
Tapping lessons learned: The Puget Sound Business Journal has a somewhat different approach to the story earlier this week on the groundbreaking for the Boeing 777X wing factory. Steve Wilhelm focuses on Boeing’s tapping of lessons learned on the 737 and 787 programs.
Alaska Air v Delta Air: Months and months ago (almost a year), we were the first to write that hand-wringing over Delta Air Lines’ growth at Seattle, viewed as a major run at Alaska Airlines, was over-wrought. The growth was to support Delta’s growing international hub and while the growth came on many Alaska routes, Alaska’s dominance would prevail. A few months later, we pointed out that Delta’s growth was coming at the expense of Southwest and United airlines; Alaska was solidifying its position. (It also posted record 3Q earnings this week.)
The Puget Sound Business Journal has this story about how the three generations of the Boeing 737 is helping Alaska face off Delta.
GOL looking for planes: Brazil’s GOL is looking at the Boeing 737-7 and the Embraer E-195 E2 to renew its 737NG fleet, according to this Bloomberg report. Next week we’ll be taking another in our series of looks at EMB’s approach to the market with a discussion of the CASM Paradigm.
Boeing downgrade and upgrade: Credit Suisse yesterday downgraded Boeing from Outperform to Neutral (Buy to Hold) on the basis of 787 deferred costs and lower free cash flow. Wells Fargo reiterated its Hold rating. Zacks went from Neutral to Buy. Stern Agee reiterated its Buy.