Tomorrow’s Bombardier earnings call: trying to be upbeat in the midst of a tornado

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Introduction
As the market prepares for Bombardier’s 2014 year end earnings call tomorrow, CEO Pierre Beaudoin has his work cut out for him to restore confidence among the airlines and lessors who have ordered the CSeries and who might.

The abrupt departure last month of yet another aerospace sales chief, Ray Jones, is the third top executive to leave within a short time. Gary Scott resigned as CEO of the Aerospace unit for personal reasons. Chet Fuller, Scott’s successor, left after his three year contract wasn’t renewed. Jones followed Fuller out the door after 13 months. Guy Hachey, president of the aerospace unit, left in a corporate reorganization of the unit.

Key people is sales and marketing also departed after Jones took over. Philippe Poutissou, VP-Marketing, was unceremoniously ousted as Jones wanted his own team. Rod Sheridan, Vice President Commercial Aircraft Customer Finance, left and joined Nordic Aviation as vice chairman. There has been turnover in the sales force as well.

Summary

  • Customers bewildered by events.
  • Confidence in CSeries remains, but uncertainty swirls.
  • CSeries EIS seen slipping to 1Q2016.
  • Customers worry about lack of “relationships.”

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Regional operations with the Turboprop, prop-jet or Jet

By Bjorn Fehrm

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Introduction

08 Feb 2015: Passenger traffic is growing the world over on a regional, domestic and international level. For domestic and international airlines the choice of mainline transport aircraft is clear today: there are only two vendors, Boeing and Airbus, and they produce similar products.

For regional transportation there is more choice. First of all, one can chose typeleehamlogo copyright 2015 small 210_87 pixels of aircraft, turboprop or jet. Within jet, there are several OEMs that are active. The choice in turboprop is more restricted. In practice, the choice stands between the classical turboprop with ATR and a faster type from Bombardier, the Q400 “Prop-Jet” as it is called, as its speed lands between the classical turboprop and regional jet.

The question is, what are the real differences between them in terms of design, passenger comfort and economics and what is the right choice for a market segment? We will take a deeper look into this by analyzing the ATR72 as the classical turboprop, the Bombardier Q400 as the Prop-Jet and CRJ700 as the regional jet.

Summary:

  • The ATR72-600, Bombardier Q400 and CRJ700 are all about the same size, around 70-80 seats single class or 60-70 seats dual class.
  • They offer different comfort levels, and it is not all about speed.
  • In developing the economics in two steps we seek the crossover points between the different types.

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Areas of investigation of TransAsia GE235 accident

A TransAsia ATR 72 crashed yesterday on take off from downtown airport.

Investigators will look at the following:

  • Because the reported Mayday call indicated engine flameout, there will be initial focus on the engines and with it, anything that contributes to flameouts, such as fuel contamination, bird or other foreign object ingestion, and mechanical issues;
  • They will look at why the airplane didn’t climb out under power of one engine, as airplanes are designed to do;
  • Did only one engine flame out or did both;
  • What caused the airplane to drop off dramatically on one wing to a perpendicular position as it crossed the highway–did the plane fall off on one wing due to flight conditions or did the pilot, believing he was going to lose the plane, bank sharply in a desperate attempt to avoid crashing into the city;
  • Pilot actions in handling the flameout and subsequent actions in flying the airplane;
  • Did the pilots deliberately head for the river to avoid crashing into buildings;
    The mechanical history of the airplane; and
  • The history of the pilots.

Recovery of the flight data recorder and cockpit voice recorder should provide information quickly to answer many of the questions above but the full investigation typically takes a year or more.

Turboprops’ future is OK but not great as ATR corners market

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Introduction

Jan. 5, 2015: Conventional wisdom suggests that turboprops are making a bit of a comeback because these remain far more efficient for routes up to 400 miles than jets, particularly at high fuel prices.

Even though oil prices have plunged to a seven year low, few expect that long-term prices will remain at today’s levels. While fuel between $50-$60bbl breathes new life into aging regional jets, there remains efforts in several corners to develop a new generation of turboprops.

  • Summary
    ATR wants to launch a new, 90-100 seat turboprop.
  • Bombardier launched a high-density, 86, seat version of its Q400 but appears cool to a new design.
  • China offers its indigenously built turboprop.
  • India and Indonesia are exploring a new design.
  • Pratt & Whitney, GE, others are developing the next generation engine.

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The challenges in bringing a new turboprop to market

By Philippe Poutissou
Special to Leeham News and Comment
Introduction
Dec. 15, 2014: The market for turboprop aircraft has been strong for nearly a decade, yet there has been limited new product development in the segment. This has some regional airlines getting nervous about their future, in particular those who specialize in serving smaller markets with 30- to 50- seat turboprops built in the 1980s and 1990s. Which aircraft will replace the robust, but not indestructible, Bombardier DHC-8, Saab 340 and Embraer Brasilias?

Setting aside the technical challenges of developing and certifying a new aircraft type (of which there is ample evidence), the market challenge for smaller turboprops comes down to a question of limited revenue potential. Due to overall pressure on aircraft prices and demand that is highly fragmented, the business case for an aircraft OEM becomes risky and difficult to justify.

Summary

  • High-yield regional routes are increasingly rare and harder to protect.
  • Turboprop acquisition costs must remain in line with those of larger jets on a per-seat basis.
  • The 30- to 50- seat turboprop market is a highly fragmented, replacement market with limited potential for large volume orders.

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Assessment of Lessors in Airbus and Boeing backlogs, narrow- vs wide-body

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Introduction

Nov. 30, 2014: Airlines now lease about 50% of their aircraft under a variety of mechanisms: operating, finance, leveraged and Islamic leases, just to name a few.

There are operating leasing, special purpose and “house” companies. There are leasing units of investment banks, insurance companies and a host of others.

Ireland is a popular leasing venue because of favorable tax laws.

The Big Four airframe OEMs have long sold aircraft directly to lessors, and the emerging airframe OEMs, COMAC and Irkut, have seen orders placed by emerging lessors in their home countries. ATR, the turbo-prop OEM, also has received orders from lessors.

Today we look at the lessor relationships with Airbus and Boeing.

Summary

  • Lessors represent a significant, but still a minority, part of the Airbus and Boeing backlogs.
  • Widebody airplanes constitute a small portion of lessor orders.
  • Boeing has more widebody lessors orders than Airbus.
  • Airbus has a larger lessor order book than Boeing.

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Odds and Ends: Rescuing a polar bear cub; new turbo-prop, sort of

Rescuing a polar bear cub: Long-time readers of this column know we’re fascinated with polar bears, so when we received the following press release, we couldn’t help but share the story with you.

Mi-26 saves polar bear cub

The crew of a Russian Mi-26 military helicopter from the Eastern Military District Army Aviation airbase saved a baby polar bear from starving to death in the Arctic, after the young bear became separated from its mother.
Polar bear cubThe Mi-26 was carrying out a routine transport flight in the Arctic zone, delivering goods from Anadyr to Wrangel Island, when one of the crew spotted a lone polar bear cub wandering along the Chukotka shore. The crew carried out several sweeps of the area, but there was no trace of the cub’s mother. The decision was therefore taken to pick up the polar bear cub.

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“We need more than one family,” says Embraer COO

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Now open to all Readers. (Nov. 29, 2014)

Introduction
Oct. 15, 2014: Embraer had the opportunity to design a clean-sheet airplane as a successor to the E-Jet to respond to the Bombardier CSeries, with the 100-110 seat CS100 a direct competitor to the E-190/195.

But after Airbus and Boeing launched the A320neo and 737 MAX families, including the small A319neo and 737-7 MAX, officials chose the more conservative play to re-engine the E-Jet at an estimated cost of $1.7bn. An entirely new airplane meant up-sizing to be directly competitive with the CS300 and the Baby Airbus and Boeing. This would have been a crowded field that didn’t make sense.

That said, this is an industry that requires long-term planning. Luis Carlos Affonso, SVP of Operations and COO Commercial Aviation, says Embraer needs more than one family of airplanes. The question is, what becomes the next family.

Summary

  • Re-engining the E-Jet was the best bet for Embraer.
  • Strong customer base provides ready market for the E-Jet E2.
  • Another family of airplanes could be a turbo-prop, taking advantage of Bombardier’s weakeness; or
  • Another family would mean up-gauging into the 130-150 seat or higher sector, the traditional domain of Airbus and Boeing.

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Bombardier woes go beyond CSeries

The news last week that Bombardier reorganized its business units, laid off another 1,800 employees and saw the retirement of Guy Hachey, president and CEO of the aerospace division, was viewed by some media and observers as an indictment of the CSeries program. While it’s certainly true that delays in the program weigh heavily on BBD, the problems don’t stop with CSeries.

Bombardier has 203 firm orders and 310 commitments for CSeries. This delivery stream doesn't include any potential rescheduling as a result of the grounding of the Flight Test fleet from May as a result of the engine incident.

Bombardier has 203 firm orders and 310 commitments for CSeries. This delivery stream doesn’t include any potential rescheduling as a result of the grounding of the Flight Test fleet from May as a result of the engine incident.

Slow sales of the CRJ, Q400 and business jets–as well as program development issues with a new corporate jet–all combined to drag down financial performance and bleed cash. Bombardier doesn’t have the balance sheet strength of Boeing or Airbus, nor strong sales of other airplane family members, to weather the challenges of new airplane development programs.

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Farnborough Air Show, July 17: Orders summary, reflections of the show

Orders continued to trickle in as the Farnborough Air Show winds down (there could be others not listed here).

  • Airbus: Transaero, LOI for 12 A330neos and eight A330ceos; Hong Kong Aviation Capital firms up an order for 40 A320neo and 30 A321neo aircraft, announced at the Paris Air Show last year. Here is the Airbus wrap up press release.
  • Boeing: Summarizes its performance at FAS with this press release; 201 orders and commitments.

Items of interest:

Overall reflections:

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