Jan. 21, 2016: United Airlines elected to order 40 Boeing 737-700s instead of the Bombardier CS100, it was announced today. It’s a huge blow to Bombardier, which was hoping to land this order to give a big boost to the CSeries program.
The reasons are obvious, even to an outsider, and don’t speak to the attributes of the CSeries, which remain compelling.
Here’s what we believe was behind the United decision:
- The price of oil, now approaching $20/bbl, makes purchasing the CSeries less compelling in a present-day analysis. While the long-term perspective continues to argue for the CSeries, capital cost is also a factor–which brings us to…
- The price of the airplane. The 737-700 is now a cheap airplane for Boeing to produce and the CSeries is not. Even though we estimate that BBD’s write-off of $3.2bn in development costs enables BBD to lower the price of the CSeries by about $5m, to the upper $20m, Boeing has a fully amortized 737-700 and can still undercut the price. We’ve already heard that the price may have been in the low $20m, which we think may be aggressive, but whether it’s mid-$20m or lower, we believe Boeing would have had no problem undercutting BBD.
- Commonality was a Boeing advantage.
- Boeing is a known factor to United. BBD’s product support for a new fleet type is an unknown. At $120 fuel, this may not be much of an issue. At $25 fuel, it is a factor.
- Boeing could go back to existing UAL orders and offer new discounts or concessions. Bombardier can’t.
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A big blow to BBD lets see if Delta go the same way
Probably, I don’t see Anderson the least bit truthful and anything he says.
He dissed it a while back, then he lauds it, same thing on the 787, not buying it.
BBD may have to take losses to get some traction.
I wouldn’t take Mr. Anderson’s views too seriously.
He has been known to say some strange things.
http://skift.com/2015/02/16/delta-ceo-associates-gulf-carriers-with-911-terrorists-in-open-skies-fight/
I guessed CND$ at ~68cents would have given BBD an edge…
Not that much since many suppliers are from the US. Moreover, the central fuselage is manufactured in China and the wing in Belfast, Northern Ireland. Only the front fuselage and the final assembly are realized in Quebec.
737-700 over CS100 is an odd, apples to oranges choices, no? Why not the CS300?
Surely, at some stage, Airbus and Boeing will be unable to keep the CSeries out of the market any more. All it takes is the recognition that low-priced fuel is not permanent and that the waiting line for NEO and MAX is too long for some important airlines. However, if BBD doesn’t authorize a win-at-all-costs campaign soon then CSeries may go the same way as Fairchild Dornier’s 528/728/928.
IMHO, the CSeries falls between two stools – too large for regional scope at most US airlines and too small for mainline.
The larger CS500 is a fantasy that’s very unlikely to materialise.
MAX and neo are filling a different market segment.
You cite a very good point, the long wait for new frames from Boeing and Airbus. However, Embraer seems to have a good customer base for the E170-195 series and with the E2 coming on line shortly, I think it will eat Bombardiers lunch. It seems the delay in EIS has done permanent damage to the viability of the CS-100,CS-300. We wait and see.
I think Dalta will do the same unless BBD decrease its price.
I guess nobody ever got fired for buying Boeing. 😉
It’s looking increasingly as though BBD is heading to a very dark place. One wonders how much cash the Canadian Government is willing to pump in to try and save them.
Not only bad news for Bombardier but also Embraer. It’s peculiar to take the 737-700 when my impression was they were upgauging from the E145. A 737-700 is bigger than than even the E190/5. Pity, because I would like to see the CS100/300 program succeed. Which of course the duopoly would not.
Notably UA ordered 737-700, not 737-MAX7. Older tech, quicker delivery, lower price. I assume B still had some gaps in the NG order book, and UA really didn’t care about the advantages of the MAX (let alone the CS100/CS300).
For a 737-700 route the 3000 miles plus range is not an advantage. Fly with tanks half full or less.
With the 737 NG FAL fully amortised, the ability of Boeing to offer hard-discounting has just proven to be beyond reach to Alain’s team. But I am puzzled that John has chosen to stay put, for had he elected to meddle into this affair, the A319 would little doubt have made the same favorable impression upon Ron Baur. Remains to be seen how United Express are going to manage the escalation from their 50-70 seats modules currently, to 132-138 seats with 737-700 already from 2017 ? The increment seems rather steep, unless the people over there decide to fit temporarily their 737-700 as as many H37QR (110-115 seats), for smooth and grand’fatherly growth in the markets ?
These are to be United mainline flown jets. If as currently configured by United, they will apparently have 118 seats.
Remember that UAL is leasing in 42 used A319ceos via aerCap.
The A319s are a bigger capacity plane in United service.
737-700 118 seats
A319 128 seats
The switch to a higher seat count will done through frequency, 4 to 5 ERJ-145-ER-170 flights to 2 or 3 737-700 flights.
CS100/300 is sick a beauty. I hope Airbus come back (with a more frugal offer) if the program doesn’t improve and incorporate it into their offering at the lower end. It would be ao sad to see if drift away.
(such a beauty)
I think you had it right the first time. I just hope the new team will find the propre remedy. 😉
I’m struggling to see the up-side for Airbus. If they’d been in the slightest bit interested, they would have negotiated on price. They didn’t, they just said “No, thanks.”
Correct. And now they would also have to negotiate with Quebec government for the 50% of the program that BBD sold to them.
It wont be easy for the politicos to justify to their voters that the investment they made by paying X amount of $ to BBD will be sold to Airbus for a fraction of that.
What I find a lot more worrisome though is the current backlog.
At best I estimate that less than a third of that has a good chance of actually being delivered and getting payed for it.
The lessors for starters need to have customers lined up to take delivery and no such deal has been announced yet.
There is no way that they will pay BBD for white tales and then store them in Mojave.
Adding Ilyushin Finance Co. to that whose order stands a worst chance that a snowflake’s in Hell and you got 92 frames.
Add to that number Republic’s 40, Odyssey’s 10. SaudiGulf’s 16, Iraqi’s 5 and you got another 71.
Then you also got Malmö Aviation (so and so financial situation) and airBaltic who’s future Russian investor might be highly inclines to order SSJ’s instead totaling another 20.
Swiss, Korean, Gulf Air and the two smaller PrivatAir and Falcon av. services are left on the solid column
At 20-30$bbl the C-Series starts to look like a solution in search of a problem.
And it is a damn shame cause it is a beautiful looking bird with ideal proportions.
Got to make the deal for a few hundred to Southwest to custom design the CS500 for 150 seats.
Southwest will need the edge of cabin comfort by wider seats and fewer middle seats as they compete for market in the coming decades.
The CS500 is a pipe dream. I’ll be amazed if it ever sees the light of day.
They should have started with the CS500.
It makes too much sense capacity and economics wise not to order it for a great number of airlines IF it was available.
And the rest of the CS line could see better sales success because of it.
Lets hope it is not a day late and a dollar sort.
I’d think it would have to be REALLY compelling for Southwest to go with an aircraft not in the 737 family.
Compelling for Southwest is that they have to chase business travelers, or an upper end of the market. A section of 2-2 on the CS500 is a good option. The 737 is at the end of the line. Time to transition. Buy 400 MAX, yes, 800, no.
As it stands, the C300 is good for 150+ seats ULCC configuration.
I think in this case your analysis is misplaced. The fact is, BBD will be a long way off in being able to deliver 40 CS300’s maybe 2019 at the EARLIEST. United needs the planes ASAP. You guys are gonna look pretty fuelish (pun intended) when UA also orders come CS100s and a bunch of options for CS100/300. the 737 NG was a bridging order.
Good point, if they are taking the -700 its for short term delivery slots and low prices. Even at low prices BBD could not offer them the slots needed for 40.
If it is simply bridging, why not a lease?
Maybe cause they got a screaming deal?
Thats more 737-700s than have been ordered in total since about 2010.
A bigger factor may have been the slim chance the 737-7max going into production.
Buy now or miss out completely
At about 125 seats, should have chosen a DC-8. http://frequentlyflying.boardingarea.com/wp-content/uploads/2011/06/United-DC-8-52.jpg
While this shows Boeing still has a market for the 737 smaller than the -8, the -7 would be a better offering with a 5 frame stretch for several more rows.
Planespotters.net shows the average age of UA’s 40 700s to be 16.9yrs. How do we know UA isn’t replacing these old airframes, with exactly 40 new 700s?
They’re (ramping up to) making, what, 55 a month or so of these nowadays? Barring another train accident coming from Kansas it’s tough to see how Boeing can’t hit delivery targets cheaply for frames in this market over the next few years. Perhaps why they’re so bullish on more orders for the 737 line in toto for the next 5 or so years. Huge base, no substantive conversion/training costs, cheap to produce product that is within a point or two of the Airbus one, and 20-30 percent cheaper to buy than the BBD one. Cheap oil.
It would also be interesting to know/guess/speculate as to airlines hedging on fuel costs over the next 5 or so years, a la SWA from around 2010. For near term fleet renewal/ordering/extensions, capital can be borrowed/spent on fuel futures today I’d imagine at a very competitive rate vs. waiting 5-8 years on a new build Max/NEO/77x/787/A350 frame.
Keeping the 737 line fully operational even at a break even point is a plus for Boeing (ditto the 767 to FedEx)
They are only making 1 a month for Fedex plus 1.5 a month for USAF, not really a ‘break even’ sort of number. It helps that its a steady flow for next 5 years or so, but that leaves no room for extra orders and varying production rate is expensive.
You miss the point.
It does not matter in the transition if they make money or not. Its keeping the line fully hot capable of transition to more production when needed (which will be for the AF contract)
Boeing is running two lines of the 737 current and one of the 737MAX.
They are in a combined learning environment as people move back and forth, talk etc. It should result in a smooth cut in.
And as people keep noting on the A330, its infrastructure is all paid for, ditto on the 737 and 767 and all they need to do is break even.
Next, the 767-200MAX.
With current fuel prices? Maybe not such a bad thought, time to launch the 767NEO-MAX 200 MOM!
New engines, winglets and a bit of aerodynamic cleanup,. use the 787 flight deck from the 2C and off we go (shoot maybe the 2C period, big wing, small fuselage range of……
If you can do an A330NEO then ……..
@Stealth66
“The CS500 is a pipe dream.”
Perhaps it is, but it all depends what kind of stuff you put in your pipe. I recall the days when most British designers were smoking the pipe; many beautiful aircraft came out of the dreams they had: Spitfire, Vulcan, Harrier, etc. I could also mention the Comet, but I think in that particular case the guys were smoking crack(s). 😉
Normand: that is a bit sad for the loss of life that was incurred.
No they were not smoking cracks, just got caught in a poorly understood situation. Latter models of Comet went onto a good career if not in the number that would have made British industry one of the movers we have today.
I don’t know if the C series can dig itself out of the hole, its obvious that if BBD was going to do it they should have kept going and junked those other program now gone instead of the hiatus.
Boeing has shot itself in the foot the same way with not maintain the development work on the 777 (and replacing the 737)
Some years back in one of the downturns of the late 70s I took a class from Cummins Diesel company. The instructor said that they never skipped a beat on running and testing new and improved engines.
If the economy came back they were in good shape (and continue to be so to this day) if not, it did not matter, they were going down anyway.
Sometimes the investors have to take a back seat for the future of the company. Tail should not wag the dog. Products and employees make a company that can make money, investors are just feeding off their work.
In 1952 Pan Am placed an order for three Comets. Shortly afterwards they sent a team of three engineers to take a closer look at the aircraft. One of them asked Ron Bishop, the design director of de Havilland, how they could justify the use of such thin sheet metal skins on the Comet’s body, which were actually thinner than those on the DC-6B (a pressurized aircraft). The logic behind their question was that the Comet would have to sustain the higher cabin differential pressures of a jet aircraft flying at much higher altitudes. Bishop replied “Because we know how.” Obviously they didn’t. Perhaps less arrogance could have prevented a couple tragedies.
Well far from the first time arrogance and or stupidity have done that.
But the passengers on those aircraft were simply the rest of us trying to go about their lives.
I believe they tested the hull at several times working pressure and assumed they had fatigue proofed it. A case of tech leapfrogging science. At least BBD shouldn’t have that to face.
The Comet fuselage had indeed been immersed in water at twice the pressure it would be subjected to during a normal flight. But this was a one-time pressure test. For there were no high-cycle tests in those days, like the KC-135 was subjected to later on after a few spectacular Comet crashes. A case could be made that de Havilland should have proceeded with more caution in view of the fact that they were making a big leap into the unknown. They were so sure of themselves that they went straight into production without the benefit of a prototype aircraft. Yet they did not have access to a modern wind tunnel like Boeing had built during the war. The fact that the Comet wing is so straight shows how little they actually knew about high-speed aircraft, despite an early success with the Vampire. And the latter could have been partially responsible for the high degree of confidence they had in their capacity to produce the first jet transport. But there is often a price to pay to be the first, especially if you think you know it all.
Arent you re-writing history here Normand ?
The record shows that they used advanced aluminium alloys(DTD 546B) as the justification for thinner skins.
The problem arose because of the additional effect of wing loading on the pressure fuselage which wasnt anticipated – they were aware of fatigue and did do tests on a section of fuselage.
A quick check Normand will show that the Comet testing before production was very rigorous
” The entire forward fuselage section was tested for metal fatigue by repeatedly pressurising to 2.75 pounds per square inch (19.0 kPa) overpressure and depressurising through more than 16,000 cycles, equivalent to about 40,000 hours of airline service”
I dont know where you got the idea it was a ‘one time pressure test’, and the later testing which involved the whole fuselage and wings produced failure at just over 3000 ‘cycles’ ie much less than done before production started.
AS well the wing forward edge sweep was 20 deg compared with DC-8/707 30 deg. I think that was a reasonable choice at the time, after all the 757 which had its first flight 33 years later was 25 deg sweep.
Many is the compromises when designing a jet, multiplied 10 fold when you are first in the air. Ask the Wright Bros?
“The fact that the Comet wing is so straight shows how little they actually knew about high-speed aircraft, …?????>
A less highly swept wing will also give better runway performance, and the Comet flew at a higher altitude ( a bit slower) than its American rivals because of its lower wing loading.
It seems the Brits did know a thing or two about aircraft.
A CS500 would right in the cross hairs of Boeing and AB. The best they can hore for is the CS100 and CS300.
The CS500 would be right in the cross hairs of Boeing and AB. The niche of the CS100 and CS300 have the best chance of success.
The CS100/300 are already in A&B’s crosshairs. But the CS500 would be an entirely different story because it would be unstoppable. That’s why some people like to believe it’s only a pipe dream. It might still be only a dream for Bombardiers, but it is also a recurring nightmare for A&B.
BBD is a mess. Government bail-outs, stalled orders, probably only half the orders they have will ever be delivered.
There is no way on Earth BBD can do a CS500. No money and way too little revenue from the CS100/300.
It. Isn’t. Happening.
The five points developed in the above analysis are indisputable. But perhaps a minor one was overlooked: both United and Boeing are based in Chicago. You would think that since Air Canada and Bombardier are both based in Montréal it would help the case for the C Series. But unfortunately AC is not entitled to the favourable export loans that are available to Bombardier’s international customers.
Normand, workarounds are available… BBD sells the planes to a US lessor. That makes the transaction eligible to EDC financing. Then the US company leases the planes to Air Canada. Voilà!
A few day’s ago the President of Air Canada said that they looked at the CSeries but couldn’t make a business case to buy them. I suspect they came to this conclusion after the new Liberal government and new Transport Minister effectively killed the $2 Billion Porter Airlines order. Had Porter been allowed to proceed with the CSeries Air Canada had been on record saying that they would have operated CSeries jets from Toronto Island as well. It is sickening to think how much damage one dumb decision by a very stupid Marc Garneau and Justin Trudeau has done to Bombardier. I don’t know why the Quebec based employees of Bombardier aren’t rioting in the streets after the Liberals have willfully KILLED so many jobs at Bombardier.
I guess they need to move a line to Kansas and get the best of both worlds!
“Not only bad news for Bombardier but also Embraer.”
And even worse news for UA frequent fliers like myself! I was really hoping for that 5-abreast cabin with 18″ seats. This is just the latest stab in the back from UA in their airframe orders: 9-abreast 787s, what will surely be 10-abreast 777-300ERs, and now more of their horrid 737NGs. Ironically the most comfortable UA plane I’ve flown in recently is the (Skywest) E175.
United: “We’re not happy until you’re not happy.”
Not to forget getting your bags still thrown around by the old fashioned hand loading of baggage hold in 737 to continue.
if you don’t think your bags get hurled around just as much going into and out of the containers to be loaded onto a320s you’re smoking crack, throwers throw, that’s why they call them throwers.
On the Alaskan pipeline the mechanic made steel tool boxes. The baggage throwers could destroy them.
Often wondered if they did not drop them from 5000 feet.
You never beat the baggage people, just hope yours does not catch their eye.
Bilbo – when a container is used, the packing is done at an ergonomic ideal height and once in the container, is not touched again. In practice, any bag touching concrete is bound to be scratched.
In a non-container plane, there are many more touch points until the bag gets to the hold. Then you will find that due to the low ceiling of the hold, the bag is dragged into position as it is physically difficult to pick it up when you are bending. The reverse is true when unloading.
Other disadvantages of non-container – more opportunities for pilfering as it can be done away from camera’s. And delays while you wait for your bag at baggage conveyors or worse, when a bag has to be found and taken off board when there is a no-show.
And United is still holding out the carrot, I don’t know their record if its negotiation or real. Longer term the C Series would serve them exceedingly well with the 100, 300 and the 500 if it gets that far.
https://www.flightglobal.com/news/articles/united-still-considering-a-cseries-or-e2-order-421081/
And we see the shaking starting
https://www.flightglobal.com/news/articles/united-still-considering-a-cseries-or-e2-order-421081/
Not so happy Airbus, Boeing can sell the slots easily
And to add to BAs pool, the Thai A380s have RR engines
I’m a little surprised about the comments of Scott. Its not a big blow. Not at all. This order is absolutely not a disavowal for Bombardier. Let’s be realistic. We need the CSeries has been tested on at least 5 years by several airlines and provide enough data on its reliability. This is the same path followed in the past by Airbus and Boeing. Buy aircraft is a risk management. Currently, commissioning, maintenance, reliability and the degree of customer satisfaction are unknown. So, why panic? Why take away, why live disappointments with imaginary sales? The real big issue is the commissioning of the aircraft. Then the real poker game begins with the offer of an extensive range with a CS500 or CS700. The bulk of the costs of research and development for these two models are already committed. If their ad is delayed, it is due to two things: test the reliability of the CS100 and CS300 and that Boeing and Airbus are sufficiently advanced in the production of NEO and MAX. In the latter case, it is a done deal. Now, Bombardier can reveal his game and not be worried that either turn on their drawing boards! It may be that a patient who has been a great strategy once! Let us go in 5 years to fantasize about sales. Not before.
You can expect more disappointments like this until the CS Series enters service. The real total cost of ownership for the 737 NG, proven in the harsh light of daily operations is well known to United. We still don’t have that information for the CS Series. Especially considering we really don’t know how reliable the new P & W engines will be in actual service. All the efficiency in the world matters nothing if you can’t get the airplane away from the gate.
I really hope the CS makes it in the market.
Cheers, Ralph
While not a panic and United at least says its still in the long term running, BBD could use a good solid base of blue chip orders to allow them to relax and work on the aircraft instead of having to get distracted with the financial issues
40 x 737-700 does say there is a market for it.
Absolutely ! In fact, what is lacking also in the equation is the customer experience. Kelly of Southwest comes to evoke it today in its purchase of additional 737-8 decision : it has become an important factor. Also, what is missing from Bombardier, they are satisfied traveler market research. If one day they show that customers opt deliberately for the type of CSeries aircraft and if the fill rates are high, coupled with low operating costs and acquisition, we can see things differently .
Most flyers today give little if any thought to the type of aircraft the are they are on. Especially on short domestic flights where they endure the cattle car seating found on most airlines. Its not so much the aircraft, but what the airline does is packing seats beyond a comfortable limit.
I remember when AA had “MRTC” or more room throughout coach. A few inches in increased pitch made a big difference. Alas those days are gone forever.
In all my years of flying, I never heard a customer ask, ” what type of plane will I be flying on?
Steve, I ask that all the time as it is very important to me. I am slightly larger than normal at 88Kg and I know that if I fly during meal-times, then a 737 is not an option as it is impossible to eat when the plane is full due to the narrow seats. Similarly, when I have hold luggage, no 737.
Booking online is a blessing as you can see in advance what type of jet you are getting on and can alter or change depending on your preference.
When I need to fly long-haul, I search for a quad. I also avoid 9 abreast planes for any journey over 3 hours.
I think that’s a stretch. In the commuter line you tend to have a single choice if any these days, you take what you can get, not what you would like.
Customer choice is based on what you can afford not what you want.
And breaking news, Boeing cutting 747 to 1/2 a month.
Expected, hate to see it, I love that aircraft but if there are no sales there are no sales.
https://www.flightglobal.com/news/articles/boeing-announces-747-8-rate-cut-885m-charge-421092/
Bloomberg has announced that United’s move on 737-700 x 40 units is an hors d’oeuvre to United’s brewing fleet planning intents : at the low end of their fleet, United Express included, fleet unit size has been withheld, impeached by the infamed “Scope Clause”. The result is some 550 RJs in United Express, sized from 35 up to … 76 seats, full stop ! This nonsense corporative bullshit must come to an end. Pilot Unions must to be allowed to do United Express’ fleet planning. Ron Baur is buying his way onto recovery of fleet planning control for United Express from his Chicago office. Not from any APA or ALPA or whatnot’s offices. He’s putting those 40 737-700 with close-up delivery upon the table, asking : “you guys want to fly these ?” If the Pilots can be shown in denial, then United can pull an Exception. Down the line, in the pipe, there are hundreds of more orders to come. BBD nor Airbus haven’t said their last word. And to make the aircraft more pallatable to the mainline Pilot Unions – Scope Clause oblige – Baur can get a new dress tailormade for the A319 : H19QR ! It has some 110-125 seats all Y-class, but specially for United that’d drop to +/- 95 seats with a comfortable Premium 1+2+1 cabin section and 34″-pitched E+ ?
For reference, open the .pdf attachment presented c/o Flyprat, here :
http://forum.flyprat.no/showpost.php?p=1033227&postcount=528
The above refenced MCA .pdf showed som graphic misprints, so it has been updated … the new one is available here :
http://forum.flyprat.no/showpost.php?p=1033398&postcount=529
40 x 737-700s for an airline United at this stage, seems like a an opportunistic deal. UA needs capacity, Boeing needs to fill a NG gap, not a strategic shift. Obviously they preferred the -700 size and capability too for future flexibility. And overall: fleet commonality, simplicity of the deal. Same for the A319 lease.
Yes, keesje, and we’ll see more of this in the coming months. United want to come free of the Scope Clause. They will buy their way out of this nonsense. United says to their mainline Pilot Unions : I’m buying the aircraft that I can find, for when they are needed, sized as I think is best for United. You guys want to fly them ? Let’s make a deal … on we go, next batch of 40 units ! Baur can work his way through this loop ten times ? He’ll vacuum-clean the low end of the feeder supply. What he DOESN’T NEED is more 76-seater aircraft. No thank you ALPA (APA?), enough is enough !