Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Boeing unlikely to meet FAA’s 90-day deadline for new safety program April 18, 2024
- Focus on quality not slowing innovation, says GKN April 18, 2024
- Boeing defends 787, 777 against whistleblower charges April 17, 2024
- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
- Bjorn’s Corner: New engine development. Part 3. Propulsive efficiency April 12, 2024
Republic’s Bryan Bedford emulates U-Turn Al
The CEO of Republic Airways Holdings seems to be vying to be America’s version of U-Turn Al, Akbar Al-Baker, the CEO of Qatar Airways.
Bedford appears to be engaged in a campaign to raise questions about the Bombardier CSeries, for which he has orders and options for 80 CS300s, much the same way U-Turn Al alternatively praises then complains about the Airbus A350, Boeing 747-8F (ordered by Cargolux, in which Qatar owns a third) and the Boeing 787. U-Turn Al has also alternative praised, condemned then praised the Airbus A320neo, Bombardier CSeries and the Pratt & Whitney GTF.
Keeping up with U-Turn Al’s about-faces has been a dizzying prospect.
Bedford praised the CSeries when ordering it but has become increasingly skeptical of the program once he ordered the A319neo (with CFM LEAP engines) in what was a financial bailout of his ailing company being dragged down by Frontier Airlines. The Airbus order raised questions whether Bedford would cancel the CSeries since the A319neo competes with the CS300. Bedford initially said the order would stand. More recently, he appears to be doing everything to cast a shadow over the program.
In the March 12 print edition of Aviation Week, Bedford expanded on comments he made during the recent earnings call, comparing the CSeries to the Boeing 717. Boeing inherited this program after merging with the dying McDonnell Douglas Corp., which launched the airplane as the MD-95.
The comparison is misplaced. Here’s why.
- The MD-95 was an orphan, available in only one version. The CSeries is available in two versions, the CS100 and the CS300. BBD has announced firm orders for 69 CS100s and 89 CS300s, with options for 159 more. Boeing discontinued the MD-95/717 after 156 sales.
- The MD-11 was already on its last legs when MDC introduced the MD-95, further isolating the MD-95 and marginalizing MDC as a viable commercial aircraft manfacturer.
- Boeing never was truly committed to the MD-95. AirTran asked Boeing to develop a larger, longer range version of the airplane to allow Atlanta-West Coast flights. Boeing refused, preferring to sell AirTran the 737-700. This doomed the MD-95.
- The CSeries LR not only has two-thirds trans-continental range of other CS versions, it has a range of 2,950nm–enough for US trans-con. Virgin America noted that the CSeries could perform all missions contemplated but in the end VA stayed with the Airbus family already in its fleet.
- While Bedford and others point to “slow” sales of the CSeries, if you actually compare apples-to-apples (i.e, only the 100-149 seat market segment), CSeries sales have held up very well against Boeing and Airbus 737-700s and A319s. CSeries pre-EIS sales also are similar to the pre-EIS sales of the Embraer E-Jet, the original clean-sheet airplane in the 100-125 seat segment. Sales of the E-Jet ticked along at about the same pace as the CSeries and spikes within one year of EIS. For CSeries, this countdown begins around the end of this year.
The following charts show sales of the CSeries last year.
This chart includes orders for 20 737-700s from lessor Aviation Capital and 40 from Southwest; there were 64 737-700 orders recorded in 2011. However, ACG always orders the least expensive -700, allowing it to put down small initial deposits. ACG later converts the orders to the large, more expensive -800. Likewise, Southwest is now converting its -700 orders to -800s, so these 40 are likely to disappear.
Nonetheless, BBD orders held up quite well in the 100-149 segment. The perception issue BBD has is that pontificators and critics compare the CS100/300 sales with the entire family line of Airbus and Boeing single aisle airplanes–a truly apples-to-oranges comparison.
With the certainty that ACG will swap its -700s for -800s at a later date, per its history, but retaining the Southwest orders, the sales performance last year looks like the following chart.
Thus, we see CSeries is slightly behind the 737-700’s 44 orders (CSeries had 43) and well ahead of the A319.
But even this isn’t the whole story. When considering sales performance in the 100-149 seat market segment, none of the pontificators consider Embraer, whose sales last year of the 100-seat E-190 and 122-seat E-195 were by far and away the market leader.
Embraer sales of this mature product today “owns” the 100-149 segment.
As noted, E-Jet sales showed a similar number to BBD in the run-up to one year from EIS. The proof for BBD will be how sales shape up beginning late in the fourth quarter.
Our final chart shows how well EMB has done in the 100-149 seat market since the E-190/195 was launched in 2003. Note that EMB has done very well, and it only competes up to 122 seats in Y-class configuration.
LUVs 737-700 orders are not “likely to disappear”. LUV is a traditional 737-700 operator, who has only just recently added -800s to their fleet. They are not engaging in a whole sale “up scaling” of their fleet plan. Quite the opposite, they are cautiously adding -800s for markets where they make sense. LUV’s whole business model has been based on operating only one type of airplane. They’ve somewhat drifted from that at times when they’ve had to, but tend to come back to it. For example, the 717s they got in the Air Tran merger are more likely to go away than the -700 orders they have in backlog.
As for Bedford, well there’s no real reason to cancel the CSeries order right now. Especially since it’s painfully obvious to anyone closely paying attention to the program that they are late. Late planes, mean compensation. No sense dumping that compensation, when you can always cancel the order at a later date (in part or whole), after getting the compensation check. It really makes no sense for Frontier to try to operate a mixed fleet. It’ll just add more cost and complexity to a system that can little afford it anyway.
In ordering the MAX, WN completely by-passed the -7 and selected only the -8 (though the contract has the flexibility to select the -7 at a later date).
With 51 737-700 orders coming from AirTran, we think it likely the 40 -700s ordered by WN this year will go away in favor of the -800. Still, with an element of uncertainty, you will note we did not calculate market share without WN as we did without ACG.
I am not so sure, Scott. WN still has something close to 90 options for the B-737-700, along with the order for 40, and 71 more B-737-800s (I believe they just got their first -800 last week). WN still has more than 155 B-737-300s and another 25, or so, B-737-500s all needing to be replaced within the next 5 years, or so. Yes, they have absorbed the FL’s fleet of 52 B-737-700s and their fleet of 88 B-717-200s, but wants to get rid of the B-717s.
I just don’t see any aircraft manufacturer handing out money for their product being late before they have delivered their aircraft. Despite what you seem to think, none of them fell off the turnip truck yesterday and they all know a thing or two about selling and delivering aircraft.
Any compensation will be applied after the aircraft are delivered, or the final price for each aircraft will be a bit less.
That depends entirely on the contract wording. Some may come as discounts on final delivered aircraft or further orders, some come as a payment toward interim replacements, some as release from progress payments, some as out right checks written. Totally depends on the contract.
I agree, I doubt Republic will cancel its C-Series order. The C-Series is much lighter than the A-319 and A-319NEO, and it does have the GTF engine, not the LEAP-1A. It sould get much better gas milage than the NEO.
Also, WN doesn’t need that many B-73Hs between now and when its B-737-8MAX arrives. They will kepp most of the B-73G order, if not all of them.
Don’t misunderstand me, I fully believe that Republic/Frontier will never actually take delivery of the CSeries. They would be stupid to do so. It completely screws up their fleet plan, increases maintenance and training costs, and adds complexity to an airline that can little afford it.
I think in the end those 40 orders are going to go away. I just think that they’d be stupid to do it right now. Why flush away free money?
They’ll eat up any “free money” with the contract cancellation penalties, I expect.
Speaking of “misplaced” comparisons… the E190/195 vs the A319 or 73G. Different market and dynamics with very different factors influencing purchasing. The attempt to draw a parallel between EJet sales pre-EIS to CSeries sales pre-EIS is a non-starter. For starters, the E-Jets are a 4-jet “regional” family that cost only $1-billion to develop with limited competiton. The CSeries is a 2-jet “mainline” family that is trying to break into a market with 2 very successful competitors with 3-jet families at the top end of the seating bracket and EMB at the low end. Not to mention the completely different market dynamics of E-Jets EIS vs CSeries EIS. I can go on and on. Overall not a very insightful commentary.
The reason they suddenly change their minds,is that they suddenly realise they’ve blown their bargaining position.cancel A350 in favour of B777x,Boeing can up the price,same with ruling out A330neo.Airframers will wise up in the end,just like Airbus & Ryanair.