Leeham News and Analysis
There's more to real news than a news release.
Rolls-Royce and Safran, major European engine OEMs with different fortunes.
By Bjorn Fehrm
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July 30, 2015 © Leeham Co. Rolls-Royce and Safran, the parent company of CFM partner Snecma, released their Q2 and first half 2015 earnings today. It is interesting to compare these companies as they are in different strategic situations in their dominant business segments, civil turbofan engines.
Civil turbofans constitute 52% of Rolls-Royce total business whereas it makes 54% of Safran’s turn over. Rolls-Royce’s focus has been widebody engines to the point where it exited its part of International Aero Engines, which makes the single aisle V2500 engine, three years ago. Safran on the other hand is heavily invested in the single aisle market through its 50% part in CFM through its Snecma subsidiary.
The present situation and the future outlook for these two companies are intimately aligned with this strategic difference. We look at why and how this will affect their immediate future.
Summary:
- Rolls-Royce is experiencing migration problems in its widebody turbofan business. Its bread and butter Trent 700 engine is on its way out and it takes until 2018 for the replacement, Trent 7000, to kick in.
- Other programs are only growing slowly: the Trent 1000 for Boeing’s 787 or Trent XWB for the Airbus A350.
- Safran civil turbofan business Snecma is enjoying record sales and deliveries through its CFM joint venture with GE.
- Despite sharing its revenue 50:50 with GE, the business turnover is the size of Rolls-Royce turbofan business today and larger tomorrow. Profit margins are three times higher.
Fancher takes on KC-46A; FAA investigating Allegiant Air
July 30, 2015: Scott Fancher, regarded as the person to come in and take over troubled programs at Boeing, has been named to take over the KC-46A program.
Scott Fancher. Source: Boeing.
Fancher originally came to Boeing Commercial Airplanes from the Boeing defense unit to take over the 787 program at a time when development and design issues were rampant and the plane had yet to be delivered to a single customer.
After that was straightened out, Fancher took over new airplane programs and then moved to oversee development of the 777X, which is Boeing’s response to the Airbus A350 XWB. Although the 777X is a derivative, Boeing’s 747-8 derivative was two years late (in no small part due to the knock-on effects of the 787 program problems). Fancher’s charge with 777X was to be sure it comes in on time and on budget.
Spirit Aerosystems: Higher profits on lower revenue
July 29, 2015: Spirit Aerosystems, whose principal business is a major OEM supplier to Boeing but which also makes fuselage panels for the Airbus A350, reported 
lower revenues but higher profits for the FY2Q2015.
The press release is here.
Revenues were down because the company sold its Gulfstream wing sector and lower revenues were recognized from the Boeing 787 program.
“Preparing for aircraft rate increases is a key focus for us this year. Near term, we are capitalizing to increase the production rate of the 787 to 12 shipsets per month and the 737 to 47 shipsets per month, as well as the higher production rates on the A320 and A350 programs,” said Larry Lawson, CEO.
Wells Fargo has this initial reaction:
Triumph Group disappoints, cites decreased aircraft production
July 29, 2015: Triumph Group reported lower FY1Q2016 earnings below analyst expectations, citing in part decreased production of the commercial Airbus A330
program as well as lower production of the Gulfstream G450/550 and Boeing C-17 and 747-8 airplanes. It’s previously taken large write-offs of the Boeing 747-8 program on its poor sales.
Triumph said in its press release:
The Aerostructures segment reported net sales of $611.8 million in the first quarter of fiscal year 2016 compared to $612.2 million in the prior fiscal year period. Organic sales for the quarter declined fourteen percent primarily due to decreased production on the C-17, 747-8, A330 and G450/G550 programs. Operating income for the first quarter of fiscal year 2016 was $66.0 million, compared to operating income of $68.8 million for the prior year period and included $1.9 million of pre-tax costs related to initial facility consolidation actions. The segment’s operating results for the quarter included a net favorable cumulative catch-up adjustment on long-term contracts of $1.3 million. The segment’s operating margin for the quarter was eleven percent. Excluding the 747-8 program, the segment’s operating margin for the quarter was thirteen percent.
Triumph’s Top 10 programs are mostly Airbus and Boeing commercial airplanes. Boeing makes up more than 10% of Triumph’s 1Q revenue. The earnings call presentation is here. Slide 15 outlines the Top 10 programs.
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Introduction
July 28, 2015: © Leeham Co. Trying to decipher what the airframe Original Equipment Manufacturers (OEMs) are going to do is a sporty game that is often analogous to Kremlin watching, especially when it comes to Airbus and Boeing.
The OEMs are naturally circumspect about most everything they do: product development, aircraft pricing, sales campaigns, etc.
They also often are like lawyers when it comes to promoting their products in the public domain: cherry-pick the data that supports your product and which puts your competitor’s product in the worst possible light.
Aerospace analysts, consultants and media (as well as the enthusiast) look anywhere and everywhere for information to discern what the OEMs are up to or how the airplanes are performing or whatever the soup de jour is.
There is more information in the public domain than you would think.
Options for Singapore Airlines to operate direct flights to the US, part 3.
By Bjorn Fehrm
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July 22, 2015 © Leeham Co. We will now finish our series around Singapore Airlines (SQ) need for an Ultra Long Haul (ULH) airliner by looking at what would be the technology and performance of the A350R that Airbus talked about as a possible future model at the launch of A350XWB in 2007.
The A350R as presented was quite different to the A350-900LR that we presented in the first analysis articles. Whereas the A350-900LR is essentially a new Weight Variant (VW) the A350R was an aircraft combining the wing, engines and main landing gear from A350-1000 with the fuselage of A350-900 to create an Ultra Long Haul aircraft (and a freighter variant).
Such an A350 variant could be an interesting aircraft for Singapore or other airlines with a need for a ULH aircraft. We will use our proprietary aircraft model to create the A350R and check its performance against the A350-900LR and Boeing’s 777-8X. This will give an understanding if it could be worth the development effort for Airbus.
Summary:
- A350R would have very high range and payload weight performance.
- It would be a true ULH aircraft with which Airbus could pick a fight with Boeing’s 777-8X on the routes that requires an ULH.
- Its capacity would be volume constrained on a lower level than the 777-8X with better economics per seat and aircraft mile.
- The question remains, given its lower seat count, would it find a market besides the -8X?
Qantas 32: cockpit resource management at work
July 25, 2015: This is a 45 minute Air Crash Investigation episode about the Qantas Airway Flight 32 Airbus A380 engine failure and the subsequent events. Aside from the interesting circumstances, this demonstrates Cockpit Resource Management. What especially caught our eye was at the end, when the Captain made comment of automation vs human crews. With discussion from time-to-time about having one pilot, no pilots or someone on the ground controlling the airplane (as with a drone), this is why we like having real people in the cockpit. Qantas 32 is a good example of of how pilots on the scene vs human monitoring on the ground is the much better way.
https://youtu.be/vbDqpD80_u0
Interior supplier sees 777, A330 production rates coming down
July 24, 2015: Interior supplier B/E Aerospace sees Boeing 777 Classic and Airbus A330ceo production rates coming down because Airbus and Boeing aren’t filling
the “bridge” between the old and new airplane derivatives.
In its second quarter earnings call this week, company officials said that demand in the short term for interiors isn’t materializing for the 777 Classic and A330ceo as B/E had hoped. This means production rates for these wide-body airplanes will have to come down.
“When you look at wide body, when you look platform per platform, we [see] A330 coming down, 777 coming down, 747-8 coming down,” said Werner Lieberherr, president and CEO of B/E.
“There is increasing uncertainty with regard to the A330 and B777 short flow programs as a meaningful number of opportunities that we anticipated have thus far not materialized,” said Amin Khoury, executive chairman.
Options for Singapore Airlines to operate direct flights to the US, part 2.
By Bjorn Fehrm
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July 23, 2015 © Leeham Co. After having looked at Airbus’ A350-900 and Boeing’s 777-200LR for filling Singapore Airlines (SQ) need for an Ultra Long Haul (ULH) airliner we now complement the analysis by including Airbus’ and Boeing’s up and coming A350-1000 and 777-8X.
Singapore Airlines has 70 A350-900 on order to replace 25 Boeing 777-200ER. There would also be place in that order to replace the 25 777-300ERs that Singapore operate, most likely with the A350-1000 (SQ has the right to change model).
The 777-8X is Boeing’s replacement aircraft for 777-200LR and direct competitor to A350-1000. It is interesting to compare these two types flying the Trans-Pacific routes non-stop from Singapore to US that we flew with A350-900LR and 777-200LR and to compare the per seat fuel consumption versus the smaller aircraft.
Summary:
- The 777-8X and A350-1000 are a sized larger than both 777-200LR and A350-900LR, and can therefore transport more payload.
- The 777-8X is designed as an ULH aircraft, the A350-1000 not. We explore what this means for the US missions.
- Flying to the US which of these four aircraft will be the most efficient? And carry an interesting payload?
Airbus A380neo not yet a project
Drilling down into the story and checking with Airbus, as well as going back to Bregier interviews at the Paris Air Show and one we did with him at the IATA AGM in early June, it’s clear the Sunday Times was somewhat exuberant in its headline.
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Posted on July 21, 2015 by Scott Hamilton
Airbus, Dubai Air Show, Emirates Airlines, Leeham News and Comment, Qatar Airways, Rolls-Royce
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