Jan. 3, 2017, © Leeham Co.: Airbus, Boeing and Bombardier look toward 2017 as a bit of a punk year, as detailed in our Look Ahead for subscribers only. Not so by Embraer.
In an exclusive interview, John Slattery, the president of Embraer Commercial, said EMB will gain “momentum” this year. This is at a time where sales at the other three of the Big Four OEMs are expected to slow off an already slow 2016.
“We are working hard to close deals early in the new year,” he said. “Customers are now considering securing the inventory they want on the skyline and that’s also creating a good dynamic. I expect the pace of activity will continue to grow in these early quarters of 2017. This time next year I hope we’ll reflect accurately on 2017 as one of momentum across all programs. That also very much means the E1s.”
Slattery said that Russia’s S7 airline is taking delivery of a large fleet of E170s, growing their regional market.
“Don’t underestimate that move,” he said. “China will also play a major role in our activities again in 2017, including transactions with new and existing customers, hopefully. The US will likely be our biggest market in 2017 and our teams are working hard to continue to win the mandates both for replacement of older equipment of our competitors, but also some opportunities for the larger E2 members in that market.”
“Launch [operators] for all E2 models are all identified, and will be announced between now and end of March,” Slattery said. “The E190-E2 on schedule for 1H2018. It’s on budget and on spec.”
He said the E195-E2, with planned entry-into-service in 2019 is also on time, budget and spec. The E175-E2 EIS was pushed back one year, to 1H2021, “perfectly timed for the next round of Scope discussions.”
The US Scope Clauses limit the weight, passenger count and number of aircraft regional airline partners can fly on behalf of Legacy airlines. The E175-E2, and the Mitsubishi MRJ90, are too heavy under current Scope regulations.
Slattery said that supply-and-demand for used E-Jets have finally balanced, after a spurt of more supply than demand.
“Almost every single E170 and E190 that was available in 2016 is now committed with existing and some new operators. GECAS and NAC in particular played leadership roles in achieving this,” he said
“I could describe a strong pipeline of transactions in the mix,” Slattery said. “There have been multiple changes in our sales organization, both in the leadership and on the ground, mostly executives progressing from being marketing engineers into sales executives. A new chief commercial officer also demonstrates we are very focused on sustainability at Embraer, as we are always planning our bench strength.”
Slattery said deliveries in 2016 were “robust and in line with our guidance. Whilst we have not given guidance for 2017, I can only say the ‘valley’ some OEMs experience in advance of new technology has not in any meaningful way manifested for us.
“It’s starting to feel like oil is likely to continue on its upwards trajectory and this again reinforces the decisions of airlines to schedule deliveries of the most fuel efficient aircraft in each segment.”
Slattery said that in the 70-130+ sector, “that’s the EJet platform.”
Embraer will deliver the 1,400th EJet this year. This puts “the program on a robust setting in terms of operator base and residual values,” he said.
The period between Christmas and New Year, when LNC was on vacation, finished with a couple of news items from Airbus, Sukhoi and Delta Air Lines.
Emirates Airline earlier in the year groused about Rolls-Royce engines for its current order of A380s failing to meet specifications. These “PIPed” (Performance Improvement Packages) Trent engines weren’t quite up to promises when EK placed the order. EK president Tim Clark telegraphed he might not take delivery.
Airbus announced that six A380s will be deferred from 2017 to 2018 and six from 2018 to 2019 in a three-way agreement between EK, Rolls and Airbus.
Airbus reaffirmed previously announced plans to reduce production of the A380 to 12/yr beginning in 2018. The deferrals from this year appears to reduce the planned deliveries from 20 to 14. Airbus said it will accelerate cost-cutting to minimize potential losses to the program.
The Russian government announced on Christmas Day that the Sukhoi SSJ100 was grounded after inspections discovered metal fatigue in one airplane in the tail section. The grounding was lifted a few days later for aircraft that had been inspected.
While the SSJ100 has apparently operated well in service, the program has been troubled from the start. Production is slow. Delivery delays were extended. Russia’s standing in the international community casts doubt over the after-market service.
It’s news Sukhoi didn’t need, and it further dents Russia’s industrial efforts for rebuild its commercial aerospace industry following the collapse of the Soviet Union in 1991.
In a move that should be a surprise to nobody, Delta Air Lines and Boeing announced the cancellation of 18 787-8s that DL had continually deferred since inheriting the order when it acquired Northwest Airlines in 2008. NWA was the US launch customer for the airplane, placing the order in 2005.
It was well known in industry circles that Delta’s management didn’t like the 787-8 and all the design, production issues and performance shortcomings of the airplane.
It was also well known in industry circles that relations between Delta and Boeing were poor, and this didn’t help. Delta repeatedly deferred delivery of the airplane.
Then Delta ran a competition between Airbus and Boeing for wide-bodies. Airbus won in November 2014 with the A330-900 and A350-900. Boeing offered a combination of the 777 and 787-10. The 787’s future at Delta looked as bleak as ever.
Delta has a large order of 737-900ERs, some of which were placed during roughly the same period. Market Intelligence indicated to LNC then that this was connected to the deferral, and eventual cancellation, of the NWA order.
Ten of the 787s are listed by the Ascend data base for delivery in 2020. One is listed for 2021 and the remainder in 2022.
LNC believes that some of the 12 787-9s ordered by China Southern Airlines in October are 2020 Delta delivery positions. CSA takes delivery from 2018-2020.
For some reason, although the order was announced by CSA and Boeing, they wound up in Boeing’s Unidentified 787 customer tally.