Farnborough Air Show, July 15: E-Jet program analysis

Embraer Monday at the Farnborough Air Show revealed its new interior designed the for E-Jet E2, the re-engined and re-winged airplane scheduled to enter service in 2018 through 2020 in the 195, 190 and 175 subtypes each year.

We had the opportunity to preview the prototype for this interior in May while visiting EMB’s Florida offices, but the viewing was put off the record in anticipation of the FAS reveal. We were impressed.

The YouTube video linked above shows the most notable feature at about 1:45: the staggered first class section. For anyone who has flown the current generation E-Jet, you will know that first class is 1×2, a reduction in the 2×2 coach seating. We’ve always complained that the overhead bin on the one-seat side was reduced to a fairly useless size (we joked that it barely could accommodate a water bottle). The design for first now allows for 2×2 seating.

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Farnborough Air Show, July 13: 737 program analysis

Michael O’Leary got his airplane.

Boeing today announced it will offer a 200-seat version of the 737-8, all but assuring that O’Leary, CEO of Ryanair, will become a customer of the MAX model. O’Leary has yet to order the MAX and has been pushing Boeing for some time to expand the capacity of the 737 to 199 passengers, one shy of the 200 that would require another flight attendant.

Just as Airbus previously announced revisions to the interiors of the A320 andA321 to push to 189 and 240 passengers respectively, Boeing had been studying similar changes.

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Farnborough Air Show, July 13: CSeries program analysis

The unexpected pre-Farnborough Air Show announcement by Bombardier for letters of intent for up to 24 CS100s is welcome news for the company and the program.

Although an announcement by Falko Regional Aircraft Leasing of a firm order would have been more welcome, history shows that LOIs tend to be converted into firm orders eventually, whether these are from Airbus, Boeing, Embraer–or Bombardier. With the Falko LOI, BBD now has 471 firm orders and commitments for the CSeries.

Hand-wringing headlines and stories over May’s engine incident in which a Pratt & Whitney P1000G Geared Turbo Fan during a CSeries ground test and the assumed hugely negative impact on the program these stories and headlines suggest are way overblown.

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Odds and Ends: GAO report on ‘Boeing’s bank;’ C919; Airbus widebody strategy

GAO report on ‘Boeing’s bank:’ The US Government Accounting Office, a non-partisan investigating agency, completed a study of the funding and guarantees provided by the US ExIm Bank, which is under criticism from Congressional Republicans, and concluded non-US airlines do benefit from what amounts to subsidies.

These put US competitors at a disadvantage, GAO concludes. The full 29 page PDF may be found here.

The study period covered the global financial crisis, during which a good deal of private capital funding dried up. Airbus and Boeing each relied more heavily on export credit agencies for customer financing–ExIm in Boeing’s case and collectively European Credit Agencies, or ECAs, for Airbus.

The GAO found that ExIm funded or guaranteed financing for 789 Boeing wide body aircraft while the ECAs supported 821 Airbus wide-bodies.

Parenthetically, this statistic alone should demonstrate to Congress the need for ExIm to continue to be available for Boeing airplanes.

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Next new, clean sheet airplane around 2030, says Airbus

Airbus currently is planning for the next new, clean sheet airplane around 2030 and now are focusing on incremental improvements to the existing product lines, officials said at the Innovations Days annual media briefing last week in Toulouse.

Fabrice Bregier, CEO of the Airbus commercial aircraft unit, said that “innovation is on a case3-by-case basis,” with a successor to the A320 family requiring an engine “with great benefit.” He did not define this, but previously Airbus indicated a successor needs a combined 30% airframe/engine improvement to make an entirely new airplane design worthwhile.

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Embraer’s enhanced E-Jet passenger experience

We flew in a new American Airlines (operated by Republic Airways) Embraer E-Jet E1 on our way to the Pratt & Whitney media day and noticed the difference immediately with the E-Jet” Classic.”

It’s the “passenger experience.”

The E-Jet Classic had overhead bins that were better than the Bombardier CRJ and Embraer ERJ but non as good as the Airbus A320, Boeing 737 or the forthcoming Bombardier CSeries. The bins could accept larger bags than could the CRJ and ERJ but not as big as the other jets. The port side bin in the E-Jet Classic was a narrow little thing that we joked could accept your water bottle and that was about it.

The new E-Jet E1 Enhanced bins are much better. While the port side first class isn’t as big as the starboard side, it now accepts briefcases, tote bags and small backpacks. The star board bin easily accepts roller backs sized for three nights away, though Airbus, Boeing and CSeries still have an advantage.

Logical conclusions: Airbus wide-body decisions

A330 programme. The long range programme presents no new challenges. However, managing the order book beyond 2016 becomes more challenging due to competition from A350 XWB and Boeing 787.

—From the Airbus Group 2013 Annual Report

We have written previously that Airbus faced a production gap, a major drop in backlog orders from 2016, with no orders at all from 2020 (excluding the 27 orders placed in March by China, for which we don’t currently have delivery data yet).  Back on December 29, we noted that the prospect of the A330neo was gaining traction–and it’s even more so today.

Market Intelligence from multiple sources indicate that Airbus will announce at the Farnborough Air Show that it will proceed with re-engining the A330 into a new engine option configuration, including sharklets similar to that on the A320 family.

This will give a needed boost to the A330 line. There have been a dearth of orders, in part, no doubt, to the industry waiting to see whether Airbus will proceed with the A330neo. Recall that there had been a drop in A320 family orders in the run-up to the launch of the A320neo.

We have now completed a comprehensive study about the business case for the A330neo and how competitive it would be vs. the Boeing 787-8 and -9, and what price Airbus has to offer to help make the airplane competitive. This proprietary study is based on our proprietary economic modeling which, along with our own Market analysis, concludes that there is a business case to proceed with the A330neo. We concurrently believe Airbus will discontinue offering the A350-800, although this announcement may not come for some time. Among the reasons: Hawaiian Airlines wants the A350-800 as offering the passenger capacity and the range it desires. The A350-900 is too big, officials currently believe. But an A330-300neo won’t offer the range Hawaiian wants (it will fall about 1,500nm short, according to our estimates). If Airbus discontinues the A350-800, Hawaiian may well re-issue its Request for Proposals that will give Boeing a shot at getting the 787-9 into Hawaiian. Given the planned production boost to the 787 line (12/mo in 2016, 14/m0 in 2018 or 2019), Boeing now has delivery slots to offer to match that of the A350-800 schedule.

But we don’t think Airbus is done once it launches the A330neo. We believe Airbus continues to look at the prospect of re-engining the A380, c.2020, given additional impetus from the large customer for the A380, Tim Clark of Emirates Airlines. This article in The Wall Street Journal is the latest on this topic.

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Odds and Ends: Boeing earnings; Shandong is a new 737 order; MH370; Boeing SkyInterior; Azul and Airbus; 186-seat A320

Boeing earnings: Boeing announced its 1Q2014 earnings today and they were better than expected on a per-share basis. David Strauss of UBS remains grumpy about the 787 deferred costs:

787 deferred production grew by $1.5B, in line with our forecast, with balance now at $23.1B as compared to BA’s ~$25B target. We estimate deferred production per unit at ~$50M, lower from $75-80M on positive production mix of nearly all 787-8s from Everett as problems continue on 787-9. We continue to believe that deferred production peaks at $30-35B as compared to BA’s $25B target.

Boeing’s earnings call is later this morning.

Shandong’s 737 order: Early this week, Chinese media announced that Shandong Airlines had ordered 50 737NGs and MAXes. Boeing’s statement the next day acknowledged the news report. With more than 600 737s listed in Boeing’s Unidentified customers, we asked if this was a new order or one from the Unidentifieds–Boeing told us this is new.

MH370: Flight Global’s safety expert reporter, David Learmont, doesn’t think the Boeing 777 that was Malaysian Airlines Flight MH370 will be found. We only found this story (pun intended) five days after it was posted. As Readers know, we wrote weeks ago that former NTSB investigator Greg Feith made this prediction.

Boeing SkyInterior: Boeing posted a video on its website about some of the thinking that goes into creating the SkyInterior, which is similar across the 787, 747-8 and 737 lines. Passenger experience has become an important part of Boeing’s product strategy (as with Airbus, Bombardier and Embraer as well), so in a departure from our usual practice of generally not linking “house videos,” we’re doing so on this one to give Readers a peek at what goes into some thinking at the OEMs.

Azul trans-ocean jets: Brazil’s domestic low cost carrier, Azul, will order Airbus wide-body jets for its planned trans-Atlantic service, according to Reuters.

A320 at 186 seats: Airbus is seeking certification of the A320 for 186 seats, just three short of the maximum of rival Boeing 737-800, according to this article in Aviation Week. (We had heard the effort was to 189 seats.)

No stress on the order backlog, says Airbus at ISTAT

Airbus doesn’t see any “stress” in its aircraft order backlog, or “skyline,” says Andrew Shankland, senior vice president of leasing markets from the European manufacturer.

Shankland spoke with us at the annual meeting of the International Society of Transport Aircraft Trading, held Monday and Tuesday this week in San Diego.

Persistent concerns are expressed about an “order bubble,” including during the ISTAT conference. Shankland told us in an interview that “we don’t see any stress; we meet every two weeks” in a process Airbus calls its “watch tower” (Boeing calls its process the “war room”).

“As long as we can move things around, and we have a pretty rigorous process to be sure every plane has a home,” Airbus doesn’t see any issue with its skyline, Shankland said.

Steven Udvar-Hazy, CEO of lessor Air Lease Corp, sees Asia as a high risk region where huge orders have been placed by carriers such as AirAsia and Lion Air, both big A320 customers. AirAsia just announced deferral of 19 A320s this year and next. AirAsiaX also has large orders for the A330 and A350, recently deferring some A330s “until the time is right.” Shankland wouldn’t discuss any individual customer, and only generally noted that Airbus and Boeing have successfully “manipulated” the skyline in the past when deferrals or even cancellations occur.

Shankland isn’t involved in Airbus’ analysis of whether to proceed with the prospective A330neo, but acknowledged that the business case for the airplane “remains to be seen.”

Odds and Ends: No 90-seat ATR for now; 777X work; JAL says A350 was ‘better;’

No 90-seat ATR: Aviation Week reports that for now Airbus Group, which owns 50% of ATR, won’t green-light a 90-seat ATR turbo-prop due to the adverse impact a development program would have on profits.

Competing for 777X work: Electroimpact is based near Paine Field in Washington and it supplies Boeing and Airbus. It’s interested in participating in the Boeing 777X work. The Everett Herald has this story focusing on the company. Meanwhile, Reuters has this story about the pressures the Airbus and Boeing supply chains are under to cut costs.

JAL: A350 was ‘better:’ Japan Air Lines says its choice of the Airbus A350 was made because the airplane was just “better” than Boeing’s offering. CNBC reports.

No highway in the sky: Just on the ground. See this series of photos to see what we’re talking about.