Leeham News and Analysis
There's more to real news than a news release.
Airbus Group 3Q results; Increase of A320 production to 60 a month
By Bjorn Fehrm
Oct. 30, 2015, ©. Leeham Co: Airbus Group announced its increase of the production rate for the best-selling A320 range to 60 a month in conjunction with its 3Q
2015 results. The rate increase shall be seen against a backdrop of ever-increasing backlog for the A320neo, now at over 4,300 aircraft. The sales bonanza of the A320 is continuing with another 100 aircraft committed at Chancellor Merkel’s visit to China in October.
Airbus Group booked solid results for the third quarter, with order intake for Airbus for the year already secured in 3Q at 815 aircraft (791 3Q 2014). Noteworthy are the A330 bookings of 87 aircraft which have also continued in October with another 30 aircraft committed by China.
Revenue was up 6% to €43bn (€40bn 3Q 2014) and core operational EBIT was up 6.5% to €2.8bn compared to €2.59bn 3Q 2014. Free Cash Flow (FCF) was better than 3Q 2014, with €-1.8bn instead of €-2.1bn4. Airbus group expect FCF to be breakeven for the year.
Given the strong results Airbus Group has decided to buy back €1bn of shares before June 2016.
Details from the Airbus programs are:
Bjorn’s Corner: Aircraft programs
By Bjorn Fehrm
30 October 2015, ©. Leeham Co: There has been dramatic news this week around Bombardier’s (BBD) CSeries program. I wrote a subscribers article about what to expect in terms of the cash flow problem that the BBD management has been wrestling with. The announcements yesterday and the following earnings call confirmed the financial modelling I did with our aircraft modelling tool.
Having watched experienced Wall Street analysts being hard pressed to understand what has happened with the CSeries, I thought I could use this week’s corner to explain the overall economical flow of an aircraft program like the CSeries (there will be details in a follow up subscriber article). I will also put it in context with how it affects a company like BBD and what one must think about when it comes to timing of such projects.
To give the timing aspect more colour, I will also compare with Embraer and their E-Jet E2 project and Boeing’s 787 program. The three programs are very different and they demonstrate in an illustrative way the challenges of making a new civil airliner and that one must adapt the project to the company’s position and its strength and weaknesses.
Bjorn’s Corner: Increasing an aircraft’s range, further considerations
By Bjorn Fehrm
23 October 2015, ©. Leeham Co: In last week’s Corner, we went through how Airbus can offer an Ultra Long Haul (ULH) aircraft to Singapore Airlines by increasing the Maximum Take-Off Weight of its A350-900, increasing the tankage and lower the payload. There are a couple of other considerations when extending the range of an aircraft that we did not touch upon. For completeness, we go through them here.
When increasing the allowed weights (really, masses) of a certified airliner, there are a few things that need to be re-evaluated and perhaps modified. First of all, the airframe needs to withstand the higher loads caused by the higher weights. Secondly, the aircraft’s field performance will be affected by higher weights. Required take-off field length must stay within usable limits, as must landing performance.
If the increase in flying weights are significant, it will also require a check on what happens to the aircraft’s flight profile when fully loaded. A heavier aircraft will cruise at lower flight levels and the One Engine Inoperative (OEI) service ceiling will diminish.
We now go through these additional areas and evaluate their impact on overall aircraft performance in general and on an A350-900ULR in particular.
Pontifications: 50% of something or 100% of nothing: something to consider at Bombardier
By Scott Hamilton
- On Sunday, The Seattle Times had a long article about whether the Boeing 787 will ever record a profit. Leeham Co’s Bjorn Fehrm is quoted extensively.
Oct. 19, 2015, © Leeham Co. Bombardier is dominating the aerospace news lately, given the reports of talks with Airbus about selling a stake of the CSeries program to the European company; a report that it planned to approach Embraer for a business tie-up; and on Friday, a long analysis by Reuters about BBD’s financial challenges.
Last week I chronicled Bombardier’s history predicament of how it got to where it is today, a very deep hole that the new management—which only got on the scene last February and which has spent much of the year reorganizing the company and hiring a new team—has to dig out of. It’s not an easy task and it won’t come overnight.
Let’s take yet another look at things, given the continued headlines last week.
Do the Boeing 787 sums add up?
By Bjorn Fehrm
Subscription required.
Introduction
Oct. 19, 2015, ©. Leeham Co: Boeing presents its Q3 2015 results on Wednesday. This is a hotly awaited presentation, as analysts then will get another data point in their quest to understand if the 787 program will ever turn a profit.
We believe it is pretty clear that the program will not record an overall profit with the cost of development as well as production costs included. With a development cost of close to $20bn, this is to ask for too much. The question is if the production over the first 1,300 units can turn a profit. This is also under scrutiny.
Boeing employs program accounting for the production phase of an aircraft program and now, 25% into the accounting period for the 787, the accumulated deferred costs are such that it is questionable if future deliveries can compensate.
We take a look at the present state and what Boeing has said about the future. Based on this information, we can deduce if it is probable that Boeing can turn $32bn of deferred cost for the 787 into a profit by 2022.
Summary:
- We analyze Boeing’s information around its deferred production cost for the 787 and show how many analysts have misunderstood what has been said.
- Based on the Boeing information, we can deduce the present production cost level, learning curves and when production costs go below the assumed average in the accounting block.
- We also show what the delivery mix from 787-8 and 787-9 to 787-9 and 787-10 will mean for margins in the program.
- Finally, we judge whether Boeing will turn the corner on production cost and get the accounting block to a black zero (or better).
Bjorn’s Corner: Increasing an aircraft’s range
By Bjorn Fehrm
16 October 2015, ©. Leeham Co: Airbus announced this week how it made an Ultra Long Haul (ULH) aircraft out of the long haul A350-900. The resulting A350-900ULR (Ultra Long Range) enables Singapore Airlines to reopen the famous direct “Flight 21” to New York.
But Singapore’s press release also talks about US West coast destinations, the first being Los Angles. They released this picture:
Reading the many comments around how an aircraft like A350-900 can reach such longer range, it can be worth going through the basics on how different parameters affect range and what Airbus or any other OEM has to consider when they want to increase the range of an existing aircraft.
We will do that from a slightly different angle than normal. We will show how a pilot would think about how he can get an aircraft with more range. Pilots reason in a different way to design engineers. They are better served by thinking on the aircraft’s range performance as endurance, meaning how many hours can we stay aloft. This works better when one plans with the prevailing weather on the route.
We will now take it step-by-step and explain which parameters matters for the pilot and which do not and how he gets his ULH aircraft. Read more
Delta Air sees 777 surplus developing
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Oct. 14, 2015, © Leeham Co.: Delta Air Lines sees a major surplus of young Boeing 777s developing in the near term as key operators plan to let the aircraft go from
leases or retirements. The looming surplus makes it more likely that increased pressure on Boeing’s efforts to sell new 777s, and to sell them at reasonable margins, will become increasingly difficult.
Goldman Sachs, the investment bank, sees Delta’s comments as further evidence supporting the likelihood there will be a sharp production rate reduction as early as 2017, perhaps down to six/mo.
Separately, Bernstein Research’s aerospace analyst Doug Harned, also see 777 rates coming down to the equivalent of 6.5/mo in 2017, six in 2018 and five in 2019. The first 777X isn’t scheduled for delivery until 2020, when Harned predicts only five deliveries of the X.
Qantas robbed of longest flight by Emirates and then Singapore airlines
By Bjorn Fehrm
Oct. 14 2015, ©. Leeham Co: The planned “Flight 21” of Singapore Airlines between Singapore and New York would rob Qantas Airways of the title of flying the longest direct flight in the world come 2018.
Qantas operates today’s longest flight, the one between Sydney (SYD) and Dallas- Ft. Worth (TX) (DFW), using its Airbus A380. Emirates plans to take that crown next year with a Dubai (DXB) to Panama City (PTY) flight, Figure 1. It’s fractionally longer than the Qantas flight when comparing great circle distances (the 2015 and 2016 label).
Qantas CEO Allen Joyce just announced that the airline plans to take that title back when the Boeing 787-9 arrives in 2017. This aircraft enables direct service to London Heathrow (LHR) with flights from Perth (PER) in Western Australia, a flight of 7830nm or 18 hours, labeled 2017 in Figure 1.
Figure 1. Worlds longest flights 2015 to 2018. Source: Great Circle Mapper.
CSeries dilemma: a saga of missed opportunities, bad decisions, stiff competition
By Scott Hamilton
Oct. 12, 2015, © Leeham Co.: The news agencies, stock markets and aerospace analysts last week went wild when Reuters reported there were talks going on between Bombardier and Airbus whereby the latter would take a majority stake in the CSeries program.
Within hours, both companies said talks had ended. As could be expected, the stock went into another tailspin.
Then United Airlines said it wants pilots to approve a contract, and is dangling a 100-seat airplane order for mainline operations as an incentive. The CS100 fits into this category, as does the Embraer E195 E2.
It is worth recapturing reasons BBD finds itself in its current predicament.
Airbus A350-900ULR enables Singapore Airlines to reopen Singapore-New York
By Scott Hamilton and Bjorn Fehrm
The A350-900ULR enables Singapore Airlines to reopen the Singapore-New York “SQ flight 21” that was closed 23 November 2013. It was the world’s longest flight, using an Airbus A340-500 until SQ discontinued it during the more recent high fuel prices that rendered the flight uneconomic.
Update: Singapore has now released this picture through twitter:
It will also enable Singapore to restart direct flights to the US West Coast, something that the main competition, such as Cathay Pacific Airways, has been able to offer because of a better geographical position. The A350-900ULR now closes that competitive gap for Singapore Airlines.
Singapore has converted seven of its A350-900s to the -900ULR version, deliveries will start in 2018. The ULR will be in a custom premium configuration of 170 seats, about 60 more than used on the A340-500.
Read more
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Posted on October 13, 2015 by Scott Hamilton
Airbus, Airlines, Leeham News and Comment
A340-500, A350-900, A350ULR, Airbus, Cathay Pacific Airways, Singapore Airlines