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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Looking ahead to 2014

Here’s what to look for in 2014 in commercial aviation.

Airbus

A350 XWB: The high-profile A350 XWB program continues flight testing this year. Entry-into-service has been a sliding target. The program is running about 18 months behind original plan and EIS was intended for mid-year following initial delays. Even this has slipped, first to September and then to “the fourth quarter.” Currently first delivery is scheduled in October to launch customer Qatar Airways, which is slated to get four A350-900s this year. Emirates Airlines is listed as getting two of the total of six scheduled for delivery.

A320neo: Lost in the shadow of the A350 program is the A320neo. Final assembly of the first aircraft is to begin in the spring and first flight, followed by testing, is scheduled for this fall. The Pratt & Whitney Geared Turbo Fan is the initial variant. First delivery is scheduled in the fall of 2015.

Others: Airbus continues to evaluate whether to proceed with developing an A330neo. Based on our Market Intelligence, we expect a decision to proceed will come this year. Concurrently with this, we expect most if not all of the remaining 61 orders for the A350-800 to be upgraded to the A350-900 and the -800 program to be officially rescheduled if not dropped. The -800 is currently supposed to enter service in 2016, followed by the A350-1000 in 2017. But recall that as delays mounted on the A350-900, Airbus shifted engineers to the -900 and the -1000 at the expense of the -800. Salesmen have consistently shifted orders from the -800 to the larger models. We long ago anticipated the -800’s EIS would be rescheduled to 2018, following the -1000. The -800’s economics aren’t compelling enough just justify the expensive list price. So we expect Airbus to upgrade the A330 to a new engine option, using either or both of the Trent 1000 TEN and GEnx with PIPs (Performance Improvement Packages) or with some modifications. EIS would be about 2018. This precludes Pratt & Whitney from offering a large version of the Geared Turbo Fan, which wouldn’t be ready by then.

We also expect Airbus and the engine makers to look at re-engining the A380, driven by desires of Emirates Airlines to see a 10% economic improvement. Emirates announced an order for 50 A380s at the Dubai Air Show but instead of ordering the incumbent engine from Engine Alliance for these, Emirates left the engine choice open. This leaves open the possibility the A330neo and the “A380RE” could share an engine choice.

Boeing

After many years of turmoil, 2014 should be quiet for Boeing (now that the IAM issues have been resolved—see below).

787: Barring any untoward and unexpected issues, Boeing seems at long last to be on an upward trajectory with this program—but we’ve said this before. There are still nagging dispatch and fleet reliability issues on the 787-8 fleet to resolve, but flight testing of the 787-9 appears to be going well. Certification and first delivery should come without trouble this year, to launch customer Air New Zealand.

737: Nothing to report on the Next Generation program except ramp-up to a production rate of 42/mo is to take effect this year. Development continues on the 737 MAX.

Others: The 777 Classic is humming along. Now that the 777X is launched, we’ll be closely watching sales for the Classic; Boeing has a three year backlog but six years to 777X’s EIS. How is Boeing going to fill this gap, and what kind of price cuts will be offered to do so?

The 747-8 continues to struggle, barely holding on. Boeing says it thinks the cargo market will recover this year, boosting sales of the 747-8F. We’re dubious.

The 767 commercial program continues to wind down. The 767-based KC-46A program ramps up.

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Odds and Ends: MC-21 to be renamed; Boeing buys land; seat wars ahead?

MC-21 to be renamed: After creating a brand for the Russian Irkut MC-21, authorities have decided to rename the airplane the Yak 242, according to this article in Flight International.

The article is too brief to explain the reasons behind this, other than to indicate the MC-21 evolved out of a design that was designated Yak-242. The MC-21 is somewhat larger than the 242 and it is a direct challenger to Airbus and Boeing in the 150-210 seat sector.

Among our activities, we engage in branding. We don’t think this is a particularly smart move on Russia’s part. Returning to the Yak name is a throwback to the old Soviet Union and the history of Soviet airliners that left a lot to be desired. The “Irkut MC-21″ name creates some distance to this history in the effort to sell the airplane outside the old Soviet political sphere.

The Sukhoi Superjet SSJ100, which has had some success selling beyond the sphere, nonetheless reinforces the history of troubled Soviet airliners. Production has been painfully slow and in-service reliability difficult.

We think the Irkut name should be retained, a move toward the future, not one toward the past.

Boeing buys more Charleston land: The US government shutdown delayed the land purchased by Boeing of federally property around the Charleston (SC) airport. Now that the government is open again, the purchase has moved forward, according to the Charleston Post and Courier. According to reports, Boeing now owns or has under contract slightly more land at Charleston than it owns at Everett.

Boeing has been shifting work from Washington to Charleston, and the trend toward purchasing land means this will continue. We continue to believe that when clean-sheet airplanes come out of the Boeing shop to replace the 737 and 777, production of these will be at Charleston. Hopefully the demand for the 737 replacement will be high enough that production will be split between Washington and Charleston. We can foresee a scenario where Boeing has a more equal split between the two locations, such as Airbus has with Hamburg and Toulouse.

But the immediate question is whether the 777X derivative will be built in Washington or Charleston. We’ve heard both scenarios but don’t have enough information to know which is correct.

Seats Wars pending? Airbus has called for an industry standard for 18-inch wide seats in coach. Plane Talking has an analysis of this. We’ll point out that Embraer already has 18-inch seats as standard in its E-Jets and Bombardier has 18-inch window-and-aisle seats plus a 19-inch middle seat for its CSeries. This makes the E-Jet and the CSeries the most comfortable domestic airplanes available, with the middle-seat bonus for the CSeries.

We haven’t flown coach internationally for years, but we do so domestically and have been crabbing about the 17 inch seat on the Boeing 737 for a long time. With the Airbus A330 and Boeing 777 nine-abreast essentially the same width, we believe airlines and their drive toward cramming as many seats in as possible to the total disregard of passenger comfort certainly merits international standards at 18 inches.

But we’re not deceived that this proposal is altruistic on the part of Airbus. Boeing’s ability to accommodate one more row of seats with a slightly wider standard than Airbus, reducing CASM in the process, is clearly the motive. When Boeing compares today’s 777 against the A350 in sales campaigns, it uses 10 abreast in coach vs nine abreast for the A350 and argues superior CASM costs. Customers tell us this indeed reduces the CASM advantage the A350 has at an apples-to-apples 9 v 9 (the A350 continues to maintain a trip cost advantage).

We agree with Airbus on the principal. But far chance it will happen.

Production wars coming: Airbus v Boeing

If some industry observers are concerned about the prospect of over-production now, the current state of affairs may only be the tip of the iceberg.

Airbus CEO Fabrice Bergier says he expects to boost production of the A320 and A350 families over the next few years, overtaking Boeing by 2018.

Airbus currently produces the A320 at a rate of 42 per month. The A330 rate is 10/mo and the A380 at 3/mo. Production of the first customer-destined A350 is to begin by the end of this year, with a targeted delivery in the second half of next year. Ramp-up to an initial production target of 10/mo is planned over a four year period, but the wing factory in Broughton, Wales, has a capacity for 13/mo, inferring a greater rate is already planned. Airbus is considering a second A350 production line, largely focused on the A350-1000.

Boeing currently produces the 737 at 38/mo, going to 42/mo next year. The 777 rate is 8.3/mo and the 747-8F/I rate is 1.75/mo. The 767, driven by the USAF tanker, is 1.5/mo. The 787 is ramping up to 10.mo, with a target by year end, but we believe this will be more likely in Q12014.

Boeing has notified the supply chain to consider higher rates for the 737, 767 and 787. We posted the chart below last June, reflecting the higher planning rates.

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Odds and Ends: MAKS summary; Airbus look; A350 launch aid; slow freighter sales

MAKS Air Show Summary: This account summarizes the orders placed at the Moscow Air Show, known as MAKS. It appears only Bombardier among Western OEMs made any commercial deals.

Looking at Airbus: Aspire Aviation takes a long look at Airbus.

A350 Launch Aid: Airbus and Germany are at odds over more than 600m Euros of a 1.1bn Euro loan for development of the A350 XWB. The sticking point: job allocation. Why Airbus needs or wants this government-sponsored launch aid remains a mystery to us. Get the governments out of its knickers and be a true commercial company.

Slow freighter sales: This report details slow freighter sales for Boeing and Airbus. This is reflected in the poor sales of the Boeing 747-8F and the Airbus A330-200F.

Irkut makes 10% fuel advantage claim over NEO, MAX for MC-21

Russia’s Irkurt claims its MC-21 mainline jet, a direct competitor to the Airbus A320/321neo and Boeing 737-8/9 MAX, will be some 10% more economical. Irkut claims the MC-21 will be up to 23% more efficient than the current engine-powered Airbus and Boeing products.

Thanks to a reader who is at the MAKS air show, we received this photo from a slide presentation. Although others may have seen this information before, this is the first time we have.

MS21_FuelBurn

Other MAKS news:

  • Sukhoi inked orders for some more Superjet 100s.
  • Still no announcements from Airbus, Boeing or Embraer.
  • Ilyushin Finance Corp and Bombardier announced that the first Russian operator of the CSeries CS300 will Vim Airlines. IFC ordered 32 with 10 more options at the Paris Air Show.

In other news, Boeing and Canada’s WestJet announced a letter of intent for 65 737 MAXes: 25 MAX 7s and 40 MAX 8s. This will enable WestJet to expand and replace its 737 NG fleet. Delivery begins in September 2017, making WestJet one of the first operators.

Bombardier scores huge deal at Russian air show

Bombardier scored a huge deal at the Russian air show, MAKS, with a letter of intent for an order for up to 100 Q400 turbo-props.

The Q400 has been trailing rival ATR, which is half owned by Airbus parent EADS, for the ATR-72 turbo-prop, by a wide margin in recent sales. ATR recently obtained third-world, gravel runway certification for its airplane.

The BBD deal includes the potential of establishing a second Q400 assembly line in Russia. The BBD deal is for 50+50 and isn’t expected to be completed until next year.

Bombardier has been making a major effort in Russia, placing used CRJ regional jets there, previous orders for the Q400 and an order for 32 CSeries. It’s also signed an agreement to explore customer support services for the Irkut MC-21 150-212 seat mainline jet.

Other MAKS news:

  • Russia’s own Sukhoi announced orders for the Superjet, with 100 going to home-grown lessor Ilyushin Finance Corp.
  • Russia’s VEB Leasing converted an MOU for 20 MC-21s to a firm order. These are for lease to UTAir and Transaero.
  • Airbus, Boeing and Embraer have yet to announce any deals.
  • This is the first air show since the Soviet Union collapsed.

Odds and Ends: SuperJet 100; cell phones on airplanes; 787 real-time monitoring; Crikey

SuperJet 100: This airplane, which is basically the old Dornier 728 jet design, was supposed to be Russia’s leap to western standards. It hasn’t worked out that way, according to this article.

Cell Phones on Airplanes: There continues a debate over whether cell phones really have to be turned off for take-off and landing. This finally explains the technical issues of the cell phone and other electronic devices.

787 Real Time Monitoring: NPR (the national public radio in the US) has this report about Boeing’s real-time monitoring of the worldwide 787 operations.

Crikey: The ever-direct (and cranky) Ben Sandilands weighs in on the Airbus-Boeing advertising tiff.

Looking ahead to 2013 in Commercial Aviation

Last year yielded a few surprises in an otherwise predictable year.

Jim Albaugh shocked the aviation world when he retired unexpectedly at age 62. He was expected to remain in his position as CEO of Boeing Commercial Airplanes until mandatory retirement at 65.

EADS CEO Tom Enders unleashed a surprise merger proposal with BAE Systems. The deal didn’t work due to German government opposition, but he ultimately accomplished a governance restructuring—a key objective of the merger—that will reduce government meddling in the future.

Those were about it. Boeing’s much-anticipated Authority to Offer the 777X didn’t happen. ATO for the 787-10 was stealthily granted. Airbus and Bombardier, to no surprise, delayed the A350 and CSeries by a few months. Boeing came roaring back to become sales leader for the first time in about a decade, on the strength of 737 MAX sales.

What’s ahead for 2013? Here’s what we see.

Overview

With the spurt of 737 MAX sales over, narrow-body sales competition between Airbus and Boeing should return to normalcy. Will twin-aisle sales become the next growth market because of the first flight of the A350 and the program launch of the 7870-10? Will ATO of the 777X evolve into a program launch as well? Will Bombardier’s first flight of the CSeries and subsequent testing validate its claims for the new technology airplane and finally spur a large number of sales of the “show me” crowd?

Here’s our OEM-by-OEM rundown.

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Odds and Ends: E-190 v Superjet v BBD in Russia; China’s aviation; WestJet’s speed dating; Crandall speaks

E-190 v Superjet v Bombardier: With the finding that the pilot of the demo flight of the Sukhoi SSJ 100 Superjet simply flew into a mountain in Indonesia, rather than there being a problem with the airplane, the cloud has been lifted from the aircraft. So the direct match-up of the SSJ vs the Embraer E-190 can now be compared and this article does so. Bombardier’s CRJ-900 and CRJ-1000 also compete.

China’s Aviation: Airbus and Boeing think China pose the greatest threat in the future, but this analyst is less enthusiastic.

WestJet of Canada: The low cost carrier took a bold step to order up to 45 Bombardier Q400s to feed itself. Now it’s using speed dating to decide where to fly the airplanes.

Crandall speaks on AA-US merger: Former American Airlines CEO Robert Crandall weighs in on the merger between American Airlines and US Airways.