Airbus Group: the old Airbus haunts the new

By Bjorn Fehrm

February 24, 2017, ©. Leeham Co: Airbus Group (“Airbus”) presented results for 2016 in line with guidance. The Airbus CEO Tom Enders said, “This is the best Airbus, ever.”

Yet everything was not as expected; most of the press conference was spent on how the sins of the old Airbus still haunt the present company.

The problem areas, A400M and A380, both stem from the same time period, 2000-2003.

This was when the old, non-integrated Airbus wanted to show the world it could build the largest, most capable aircraft. The resulting lighthouse projects, A400M and A380, are still not out of the woods. Read more

Ryanair: cheapest and most profitable airline in Europe

By Bjorn Fehrm

February 22, 2017, ©. Leeham Co: Ryanair is Europe’s airline with the lowest fares. And it’s the most profitable, despite growing faster than even the Middle East carriers (growth needs money).

It’s time to dive deep in this locomotive. I even flew their business class before writing the report, to understand what is going on. Read more

Assessing the SSJ100 future

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Introduction

Feb. 20, 2017, © Leeham Co.: Sukhoi is Russia’s attempt at reentering the commercial airliner business. The SSJ100 regional jet is, by most accounts, an attractive

SSJ100 in CityJet colors. CityJet is one of two Western operators for the Russian-made airplane. Photo: Superjet International.

and efficient aircraft.

But it’s hampered by erratic production and questionable product support (largely due to the overhang of the Putin politics).

The aircraft was grounded briefly in December when a fatigue issue was found in the tail section during a routine inspection.

Summary
  • Nearly 100 SSJ100s are in service.
  • Two key Western customers.
  • Small customers base.
  • Captive Russian customers.

Read more

ExIm Bank still at risk despite Boeing effort with Trump

US Sen. Richard Shelby of Alabama.

Feb. 20, 2017, © Leeham Co.: Boeing may have won over President Trump about the virtues of ExIm Bank (it’s not entirely clear), but he’s the wrong target.

It’s US Sen. Richard Shelby (R-AL) who’s been holding up appointments to the ExIm Board of Directors, blocking a quorum needed to approve aircraft financing guarantees on anything more than $10m.

Shifting support

Shelby was the chairman of a key US Senate committee which had direct authority over ExIm Bank appointments. Shelby blocked appointments under President Obama, claiming ExIm is an agency of corporate welfare, of which Boeing was the principal beneficiary.

However, Shelby was once a supporter of ExIm. After Obama was elected, the rise of the so-called Tea Party (largely to oppose all things Obama) targeted ExIm as a wasteful government agency. (Never mind that ExIm returned a surplus to the Treasury since its Depression-era inception though its fees.)

More to the point: Boeing rival Airbus selected Mobile (AL) for a new assembly site, first for the planned US Air Force tanker, the KC-330 based on the Airbus A330-200. The contract award was vitiated after it was determined the USAF treated Boeing unfairly.

Boeing won the re-bid. Airbus then chose Mobile as its US assembly site for the A320 commercial jet family.

As LNC reported in November, it’s hardly a coincidence that Shelby—a supporter of Airbus in Mobile—blocked the ExIm appointments ever since.

New position, same blocking action

With the elections last year, Shelby moved on from his chairmanship of the Senate committee oversight of ExIm.

But he still will block ExIm Board appointments, an Alabama city official who knows Shelby told LNC.

Under US Senate rules, a Senator can put a “hold” on nominations for any reason that require Senate approval.

Shelby appears ready to continue his hold.

Ironically, Boeing is a big employer in Alabama—but in defense, not commercial aerospace.

Pontifications: Boeing’s long-term message doesn’t resonate

By Scott Hamilton

Feb. 20, 2017, © Leeham Co.: Boeing’s long-term messaging that all is well isn’t resonating with a number of industry analysts and observers.

To be sure, today and in the short-term, Boeing’s stock is on a steady upward trajectory.

But aerospace analysts are not buying into the long-term message.

Neither did three speakers at last week’s annual Pacific Northwest Aerospace Alliance (PNAA) conference in Lynnwood (WA), including me.

Consider:

Read more

Bjorn’s Corner: Aircraft engines in operation, Part 5

By Bjorn Fehrm

February 17, 2017, ©. Leeham Co: In our journey of an airline engine’s life, we will now look at the maintenance which is necessary to keep it fit for flight.

An engine is only in top condition once in its life, at delivery. As soon as it’s operated on the aircraft, in-service wear of its different parts will reduce its performance.

Figure 1. Principal picture of a direct drive turbofan. Source: GasTurb.

The engine manufacturer’s prescribed maintenance is designed to keep the engine in good health during its life, despite all its hardship. Read more

Bombardier YE2016 results better than expected

Alain Bellemare, CEO of Bombardier.

Feb. 16, 2017: Bombardier today posted better than expected results (even on lower revenue) for the fourth quarter and full year.

Goldman Sachs was first out with reaction among the analyst reports LNC receives:

Bombardier (Neutral) reported stronger-than-expected 4Q16 operating results. Revenue is below consensus and our expectations, but adjusted EBIT is well ahead of our estimate on better operating margins. Free cash flow is a larger source of cash than we expected. 2017 guidance is unchanged. Post the quarter end, Bombardier announced the Government of Canada will provide the company $283mn over four years in repayable contributions related to the Global 7000 and 8000, and the C Series. This investment will be repaid through royalties upon aircraft delivery.

BBD’s press release is here. The financial presentation from today’s earnings call is here.

Read more

Singapore 777-9 order pressures, but does not kill A380

Feb. 16, 2017, © Leeham Co.: Last week’s order by Singapore Airlines for 20 Boeing 777-9s and 19 Boeing 787-10s immediately was viewed by some as the death

Boeing 777-9.

knell for the Airbus A380.

The 777-9 order would start the final spiral down for the A380, some contend.

This overstates the case and misunderstands the nature of the order.

The A380 is in trouble, there no doubt about that. The 777-9 is putting pressure on the A380. There’s no doubt about this, either. But the contention the Singapore 777-9 order sends the A380 on a death spiral is wild fantasy.

An Airbus official appears today at the annual conference of the Pacific Northwest Aerospace Alliance (PNAA) in Lynnwood (WA). Undoubtedly, he will maintain the party line that the future of the A380 is solid. This, too, overstates the case. There can be a future for the airplane, but some major decisions must be made.

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Norwegian’s risky fleet expansion

By Bjorn Fehrm

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Introduction

February 15, 2017, © Leeham Co.: In our review of Norwegian Air Shuttle last week (Norwegian from now on), we pointed out the company’s relatively weak balance sheet. It’s considerably weaker than its direct competitors.

At the same time, Norwegians’ fleet expansion is the most aggressive outside of boom markets like India or Indonesia.

Norwegian ordered 200 narrow body aircraft in 2012. It ordered 100 Boeing 737 MAX 8s in January and 100 Airbus A320neos in June.  This compares to a narrow body fleet of 70 at the time and a fleet of 100 today (mainly 737-800s). In addition, Norwegian has 30 Boeing 787 long haul aircraft on order on top of the 12 it operates today.

How much risk do these 230 incoming aircraft pose to Norwegian?

Summary:
  • Presently, Norwegian absorbs 50% of incoming single aisle aircraft for own needs (Boeing 737-800 and later MAX 8).
  • The other 50% (deliveries of Airbus A320neo) are leased to external operators.
  • The financing need for incoming aircraft, be it for own or other’s use, is $15bn over the coming years.
  • With a balance sheet of of only twice that size and 10% own equity, the going can get rough if the market weakens.

Read more

Huge win for Boeing in union vote

Feb. 15, 2017, (c) Leeham Co.: It wasn’t even close: 74% percent of the Boeing hourly touch-labor workers at the 787 plant in North Charleston (SC) voted against the International Association of Machinists to represent them.

It’s a humiliating defeat for the IAM that will have negative repercussions for IAM 751 in the Seattle-Everett (WA) area.

Boeing will be able to continue to hold non-union Charleston over Seattle’s IAM when it comes time to select the site for the New Mid-range Airplane (NMA) for the Middle of the Market sector. LNC calls this the 7M7.

Program launch for the NMA is widely expected next year. Site selection could come next year or in 2019.

Read more