Odds and Ends: CSeries timeline; KC-46A roll-out; China’s new airplane

CSeries timeline: Bombardier last week announced a third delay in the CSeries program, this time for as much as a year.

This probably should have been expected. BBD originally planned a five year period between program launch and entry-into-service. As we saw with the Boeing 787, launched with a four year timeline, even five years was too ambitious.

CSeries Timelines. Leeham Co Chart

CSeries Timeline. Leeham Co Chart

The EIS period for the 787 turned out to be the standard seven years, almost eight–and even then, the EIS was anything but smooth.

Airbus’ launch-to-EIS for the final A350 version is somewhat more than eight years. Even though BBD is a sub-contractor on the 787 program and said it benefited from lessons learned, it’s clear officials were far too ambitious.

KC-46A roll-out: Boeing’s first tanker for the USAF based on the 767-200ER will roll out this summer. The Everett Herald has this story. The airplane is a somewhat revised 767-200ER called the 767-2C. In addition to upgrades with the airframe, the Pratt & Whitney PW4000 engines will have upgrades which improve fuel consumption.

China’s new airplane: China isn’t just developing the ARJ21, C919 and some military airplanes. It’s also developing the world’s largest amphibian.

Outsourcing focus of Boeing report, but misses bigger picture; IAM vote aftermath; Boeing’s 2013

A long article (10 pages when printed) discusses the pitfalls Boeing had by outsourcing so much work on the 787. This much is not new. The point the article raises–transferring technology and the potential decline of US aerospace dominance–isn’t especially new, either; we’ve written about this in the past.

What the article, however, overlooks is that Boeing isn’t alone in doing this. To certain degrees, Airbus, Bombardier and Embraer also are guilty–as are a number of other OEMs and suppliers. CFM International, for example entered into a joint venture with the Chinese that would help them develop an modern commercial jet engine. Fortunately, CFM pulled back on this over concerns of technology transfer.

Airbus has an A320 assembly line in Tianjin, China, and Embraer had an ERJ-145 assembly line in the PRC. McDonnell Douglas had an MD-80/MD-90 line in Shanghai.

Bombardier contracts with Chinese companies to produce the Q400 and CSeries fuselages, the latter with the advanced aluminum-lithium metals.

The airframe OEMs will tell you that final assembly represents a small portion of the airplane and the risk of technology transfer is minimal. But it’s probably no coincidence that the COMAC/AVIC ARJ21 looks the the MD-80 (but sized like the DC-9-10) or that the C919 looks an awfully lot like the A320.

The article points out that Mitsubishi, which builds the wings for the Boeing 787, is now using this experience to design and build the MRJ-90. True enough, though it should be noted that having experience the composite wing issues associated with the 787, Mitsubishi abandoned plans for a composite wing for the MRJ and is proceeding with metal instead.

Suppliers are basically extorted by China: if you want to sell us your goods, you have to be prepared to transfer technology. Suppliers can’t ignore this huge market, but try to mitigate the blackmail by transferring “yesterday’s” technology or at least developing tomorrow’s technology today while transferring today’s technology to China.

It doesn’t stop with China, of course. Boeing and Airbus have Russian ties with engineers. Bombardier is planning a Q400 assembly line in Russia. Indian engineers work on Airbus and Boeing airplanes and now plan their own turbo-prop.

The days of the Big Two Duopoly are numbered. And it’s not just Boeing that is guilty of aiding and abetting the new competition.

Boeing’s Good Year in 2013

Set aside the disruptive and embarrassing ground of the 787 in January through April, Boeing had a very good year in 2013. It posted a record rate of deliveries, besting Airbus for the second year in a row. It’s order book was the best since 9/11. Here is the press release.

Airbus announces its 2013 production and delivery results on January 13.

Boeing-IAM vote: After-thoughts

We can’t go by this week without a short commentary on the Boeing-IAM vote on Friday, but we’re not going to spend a lot of time on this—we’ve analyzed this issue a number of times and there is little more to say except this:

It was a very tough vote for the union members of IAM 751. Giving up benefits won in previous hard-fought battles is always tough. But the Boeing 777X will be assembled in Washington State, and the composite wings will be built in Washington, too. Our view is that having 80% of something (benefits) is better than 100% of nothing (the 777X).

Boeing, of course, will return to the State and the union for more tax breaks and concessions when the 757 and 737 replacements are designed and a decision is needed about where to build these airplanes. Boeing is now in a position to seem more concessions from labor during a contract that’s in place to September 2024, and the union can’t strike. It’s been significantly weakened, losing leverage ion addition to benefits as a result of Friday’s contract vote.

But this enables Boeing to tell customers the threat of delivery disruptions from strikes is gone, and this will reassure them, which may or may not help sales—thus providing more work for IAM members.

Boeing faces a huge morale problem for the members who feel they’ve been had in this process. IAM members have long, long memories. Although there is no option to strike, members can “work to the rules” or find other ways to decrease productivity. Boeing has some real fence-mending to do. We’ll see whether it makes any effort to do so.

Labor isn’t content with the narrow yes vote, however. Some are calling for a third vote, arguing the January 3 election date was set to deliberately disenfranchise a large number of union members who likely would have voted No. Turnout last week was lower than the November 13 vote because many members were still on vacation from the Christmas and New Year’s holidays.

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.

Odds and Ends: Why aircraft are late; catching up to Boeing

Why Aircraft Are Late: Boeing 747-8, 787, Airbus A380, A400M, A350, Mitsubishi MRJ, Comac ARJ-21, Sukhoi Superjet and probably Comac C919, Bombardier CSeries and Irkut MS-21–all late. It’s the new normal. Ernie Arvai at AirInsight takes a look at why.

Catching Boeing: Airbus may well have trailed Boeing through the Farnborough Air Show in terms of orders, but it may also be on the way toward catching up. The big PAL order for 54 aircraft was announced this week. A 100-airplane order out of China is due to be announced shortly. Another 100 airplane order from AirAsia appears to be pending. Year-to-date, Boeing has 701 net orders and Airbus has 270 net orders. These three orders still leaves Airbus well short of Boeing, and Boeing has more 737 MAX commitments to convert this year. We expect Boeing to finish the year in first place. It will be interesting to see how close Airbus can come.

NEO firm order wrap: Aviation Week has this detailed recap of NEO firm orders. We expect some of the A320neos to be converted to A321neos as time goes on, just as we expect 737-8 MAX orders to be swapped with 737-9 MAX positions.

Odds and Ends: Price vs Price in Indian contest; China theat; 787 financial impact on Boeing

Price vs Price: More on the price war between Airbus and Boeing in the A320 v 737 contest. Dominic Gates of The Seattle Times has this analysis of hot contest to win an order from India’s Jet Airways, hitherto an exclusive Boeing customer. He takes a larger look at the troubled Indian airline industry.

Finalizing Orders: Norwegian Air Shuttle finalized its order for 100 Airbus A320neos, breaking Boeing’s monopoly here. NAS was also a launch customer of the 737 MAX.

China threat: Maybe, maybe not. Jim Albaugh, CEO of Boeing Commercial Airplanes, cites China as the biggest emerging threat to Boeing and Airbus. Reuters, in Beijing for the IATA AGM, has this article saying, not so fast. The article takes a close look at the ARJ-21, China’s first effort at a modern jet. Although this is a regional jet and not competitive with Airbus or Boeing, it’s a “makee-learn” effort that leads the way to the Comac C919, which is directly competitive with the A320 and 737 class. Implications of the ARJ-21 are also discussed in the article.

LionAir and the 787: Confirming news reports this week, LionAir announced it has committed to the Boeing 787, agreeing to buy five. We’re told these are from the so-called “terrible teens,” those early 787s that required an enormous amount of rework and which were rejected by the original customers. Transaero and Rwanda Air are said to also be taking some of these early aircraft.

EADS Bank: More information on the reports EADS is considering getting a banking license.

Boeing economics and the 787: Jon Ostrower at The Wall Street Journal has an excellent piece today talking about the milestone of 787 #66 and the implications for cost reduction. Unfortunately, the full article is available only for paid subscribers. Contained within the article is this key data:

The losses don’t show up on Boeing’s bottom line, because accounting rules let the company spread the Dreamliner’s costs over years—effectively booking earnings now from future Dreamliners that it expects to produce more profitably. With previous models, Boeing initially spread its costs over 400 planes, but with the Dreamliner it is distributing the costs over 1,100 planes—a number it says reflects unprecedented demand. Boeing already has 854 Dreamliner orders from 57 customers.

Boeing reported that first-quarter profit at its Commercial Airplanes division more than doubled to $1.08 billion from a year earlier. But the company acknowledges that accounting for the costs of each individual plane would have resulted in a first-quarter loss of $138 million—a drop UBS analyst David Strauss says is almost entirely attributable to the Dreamliner.

The Dreamliner’s drain on cash is balanced by strong sales of the profitable single-aisle 737 and long-range 777 models. And analysts estimate Boeing is reducing the losses per Dreamliner by about $10 million each quarter. But maintaining the pace of cost reduction gets harder as the simplest problems are solved. Meanwhile, Boeing aims to increase production of Dreamliners to 10 per month at the end of 2013, up from 3.5 per month today—meaning the losses per plane will be magnified, but will also be tempered by the decreasing cost of each jet.

Some analysts believe Boeing’s target for cost reduction on the Dreamliner could be too optimistic. Mr. Strauss of UBS says the company appears to be assuming it can reduce its cost 50% faster than it did with the 777. If instead the pace of cost reduction matches the 777, says one of UBS’s models, the estimated $20 billion hole could double.

Odds and Ends: ARJ-21, C919, MAX, 777X

There are several stories of note today:

Aviation Week: China’s turboprops exports lead the way.

Aviation Week: Plan for C919 hits snags.

FlightGlobal: Caution welcomed on Boeing’s 737 MAX.

FlightGlobal: Emirates presses Boeing for better 777.

Seattle Times: WA State has to keep 737 MAX.

 

 

 

 

China’s Western aviation recuitment alarming

The news that China’s AVIC is recruiting Western executive talent for its aerospace subsidiaries is alarming.

Long-time readers of this column and our main website know that we’re concerned about Western technology transfer by Airbus, Boeing, Bombardier and Embraer to China, Japan and Russia as the Big Four pursue outsourcing. We’ve seen each of these countries produce regional airliners and China and Japan announce plans for a 150-seat jet.

None of the regional airliners are likely to be commercial successes, but we think China’s ARJ-21 and Japan’s MRJ are probably proving grounds for the larger jets. Japan’s Heavy Industry that are industrial partners to Boeing’s 787 program openly said they are using 787 wing technology they developed for the MRJ and the planned 150-seat jet.

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