Odds and Ends: KC-46A update; A440M in the US; A320neo first flight; Southwest no longer an LCC

KC-46A update: Aviation Week has an update on the status of the Boeing KC-46A tanker. Among other things, first fight has now been moved from June to November at the earliest.

A400M in the US: Airbus thinks it’s possible to sell hundreds of its A400M to the US Armed Forces to replace the Lockheed Martin C-130 and Boeing C-17, according to this article by Reuters.

A320neo first flight: Is the Airbus A320neo first flight going to run behind schedule? Airbus won’t say but Reuters suggests that it might. So does Aviation Week, like Reuters, pointing to an issue with the engine.

Southwest no longer an LCC: Bloomberg writes that Southwest Airlines is no longer a low cost carrier, with Cost per Available Seat Mile now approaching the legacy carriers. Years ago we characterized Southwest as the first legacy LCC, as costs increased, low fares began to disappear (it’s often easier to find a low fare on a competitor today) and routes took it into big city airports previously eschewed.

Odds and Ends: Boeing leads net orders YTD; A320neo; ExIm Bank; Frontier Air

Airbus vs Boeing orders: Airbus reported its order tally through August and while it surpassed 1,000 gross orders, it’s net orders trail Boeing significantly. This article sums things up nicely, though it doesn’t include Boeing’s last four days of August. Boeing reports weekly and the latest report is due out today. Through August 26, Boeing trails Airbus slightly in gross orders but leads in net orders.

Update: Boeing just posted its weekly order tally: 1,004 gross orders (to Airbus’ 1,001) and 941 net orders, still well ahead of Airbus’ net orders.

A320neo first flight: Airbus will launch the first flight of the A320neo this month for the airborne test program. This is powered by the Pratt & Whitney GTF; the CFM LEAP A320neo is supposed to follow by about six months. Entry-into-service for the GTF neo is planned for October 2015.

ExIm Bank: Members of Congress are looking at a short-term extension of the ExIm Bank‘s authority (read: until after the November election).

Frontier Airlines: This carrier is rapidly converting to an Ultra Low Cost Carrier business model, a process begun several years ago and accelerated last year. Aviation Week has an article that takes a look.

Go Seahawks: The NFL season opens tonight with the 2014 Superbowl champs Seattle Seahawks hosting the Green Bay Packers. Go Hawks!

Focus on Bombardier after more executive changes

This report has been updated since it was issued to our E-subscribers last Monday to reflect our new estimate of the return to airborne status for the flight test program.

Bombardier two weeks ago made more executive changes to the CSeries program, replacing the vice president of marketing and other officials. The company said additional changes might be forthcoming—a clear signal that something more is afoot.

Bombardier has been stuck on 203 firm orders for the CSeries for the better part of this year, although the number of orders and commitments has swelled to 513 with a much better than expected Farnborough Air Show. Still, MOUs and LOIs aren’t firm orders with deposits and progress payments, and poor sales of the CRJ, Q400 and business jet divisions combine with the R&D costs of the CSeries to put a huge financial squeeze on the company. Layoffs and cost cutting, along with the management changes, add to the perception that BBD is a company in trouble.

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After-market support becoming key to winning engine orders

Maintenance and power-by-the-hour parts and support contracts are increasingly becoming the deciding factor in deciding which engines and which airplanes will be ordered—it’s no longer a matter of engine price or even operating costs, customers of Airbus and Boeing tell us.

Ten years ago, 30% of engine selection had power-by-the-hour (PBH) contracts attached to them. Today, 70% are connected, says one lessor that has Airbus and Boeing aircraft in its portfolio, and which has ordered new aircraft from each company.

“We’ve seen a huge move in maintenance contracts,” this lessor says.

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PW re-delivering GTF to Bombardier CSeries flight test fleet, airborne program likely next month

Pratt & Whitney has completed a design repair for the Pure Power 1500G used on the Bombardier CSeries Flight Test Vehicles (FTVs) and is re-delivering the engines, Leeham News has learned.

Flight tests are expected to resume in September, likely the first half, according to sources close to the situation. BBD will only say flight tests will resume “in the coming weeks.”

A PW spokesman was equally ambiguous. “We continue to work closely with Bombardier to return the CSeries to flight testing,” the spokesman wrote in an email. “I would also note that the fundamental architecture of the Geared Turbofan engine remains sound.”

The FTVs have been grounded since May 29, when a PW engine on FTV 1 suffered a failure in an oil seal, causing a fire and spewing engine parts into the composite wing of the airplane. The wing is undergoing repairs.

Details of the fix for the FTV engines have not been revealed. But one person familiar with the situation told us that the FTV engine repairs enable the test fleet to return to the air, and that the redesign of the affected area of the engine will be incorporated into a production redesign before the CSeries enters service. Bombardier continues to maintain that the CS100, the first of the two-member family scheduled to enter service, will do so in the second half of 2015. Some aerospace analysts believe BBD will be hard-pressed to meet this schedule, and EIS will slip into early 2016. The larger CS300 was scheduled to enter service six months after the CS100, and it’s unclear if this EIS will continue to have a six month gap.

Bombardier is preparing to resume the flight test program with the four FTVs that have been completed; three more are in assembly.

The Pure Power 1100G for the Airbus A320neo, scheduled to enter service in October next year, will incorporate the production redesign, says the source familiar with the situation. No delay is expected in this program.

Odds and Ends: Boeing discounting; A380 analysis; A320neo LEAP

Boeing discounting: Although Boeing alternately acknowledges it’s under price pressure from Airbus or it’s maintaining pricing on its aircraft, UBS aerospace analyst David Strauss concludes that discounting is increasing on the 737 and 777 but is somewhat better on the 787.

Strauss writes in an August 6 note that discounting on the 737 is around 59%. The 777 is now discounted at about 54% and the 787 trails at 46%. (He doesn’t bother with the 747-8.) These are for in-production models.

Strauss concludes that 737 discounting increased since the introduction of the MAX in 2011.

Current list pricing for the 737 is $78.3m for the -700, 93.3m for the -800 and $99m for the -900. The MAX list prices are $87.7m, $106.9m and $113.3m.

The list prices for the 777 are $269.5m for the -200ER, $305m for the -200LR, $330m for the -300ER and $309.7m for the -200LRF. The -8X comes in at $360.5m and the -9X at $388.7m.

The 787-8 lists for $218.3m, the -9 for $257.1m and the -10 for $297.5m.

We are hearing, however, of special cases in which the 787-9 runs for $135m or significantly less and the 787-8 for as low as $115m. We also hear of the 777-300ER being offered for as little as $128m in special circumstances. The calculated discounts UBS mentions for 737 fall within the pricing range that we hear in the market. Strauss writes that some discounts to list reached 65%, also within the range of what we have heard.

The discounting becomes increasingly important because Airbus says it can price the A330ceo and neo sharply below the 787, up to 25% less. Boeing has far less flexibility to discount the 787 than with the 737NG and 777 Classic. The former still isn’t making money while the latter have amortized production lines–just as the A330ceo line is fully paid for. Airbus has offered the A330ceo at steeper discounts to list than Boeing offers the 787, and the forthcoming neo will also see steeper discounts than the 787–unless Boeing becomes more aggressive in that pricing, which will only increase the time to profitability.

A380 analysis: Here is a good, detailed analysis about the Airbus A380 and its position in the marketplace.

A320neo LEAP: CFM’s LEAP-1A, for the Airbus A320neo, has entered production. Aviation Week has this article with the details.

Half time 2014 for Boeing and Airbus

The major OEM’s have published their half time 2014 results and we can make an analysis of their half year results together with orders / deliveries and the state of their product lines. We compare Boeing and Airbus on the high end and in a follow up article Embraer and Bombardier on the low end. To make orders and deliveries comparable we include the month of July as the OEMs collected business to be announced at Farnborough mid July.

Boeing had a strong first half 2014. Boeing Commercial Airplanes (BCA) business is now past the initial problems on the 787 program and delivered 48 units January to June 2014 (8 per month) which is the same numbers as for the 777 program. The 737 is now at rate 40 per month with a first half total of 239 deliveries. The 747-8 is at rate 1 with only 6 deliveries and the 767 has stopped as a commercial program with only 1 delivery during the first half year. The commercial deliveries of 342 aircraft drove a 4% increase in company overall revenue and a 5% increase in earnings compared to first half 2013 (both non-GAAP i.e. the core business performance), this despite a Defense, Space and Security side which was down 5% on revenue and down 15% on earnings.

777-9X, 787-9 and 777-300ER in ANA colours

777-9X, 787-9 and 777-300ER in ANA colors

The troubled unit is Boeing Military Aircraft (BMA) which is struggling with its 767 tanker program (KC46A charged BMA with $187 million and BCA with $238 million due to increased development costs) and it is also fighting to not have its major military airplane program, the F18, stop 3 years from now from lack of orders. The military aircraft order drought contrasts with BCA where first half orders was 783 aircraft, mainly 737 but also 777X, where Emirates and Qatar confirmed their orders for 200 777X. Continue reading

Airbus Group, first half results 2014

Airbus Group (before EADS) reported 1H 2014 results yesterday against the backdrop of an eye-catching cancellation (Skymark A380). Overall it was a report which showed solid progress in making the former EADS a homogenous, modern industrial group managed by market realities and not involved government’s politics.

Much has been achieved since the same occasion last year when then EADS announced the name change to Airbus Group and the merging of its Defense and Space side into one tighter knit division. These changes reflected market realities; civil aerospace is growing year over year whereas Defense budgets are shrinking. The yesterday announced group numbers shows gains in revenue and profitability (+6% each when EBIT is cleaned from sale of ex. Paris HQ) underlining solid progress in the undertaken structural changes. Continue reading

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 Boeing’s $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

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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