Looking ahead for 2020 and 2030 decades: Embraer

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Fourth in a series.

By Bjorn Fehrm

Introduction

July 8, 2020, © Leeham News: All airliner OEMs have a disastrous 2020, but for Embraer, the year has been even worse. After spending a year and over $200m to carve out the Commercial Aviation division to merge it into Boeing, the Joint Venture Agreement (JV) was stopped by Boeing at the last moment.

The Executive Jets and Defense side were not affected, but now Embraer was organized as two companies instead of one. The company must now re-merge the organizations to save costs in a COVID-19 environment where limiting cash outflow, and lowering costs are necessary for survival. At the same time, it’s arch-rival on the world market, Airbus A220 has gone from strength to strength through basket selling with the popular A320.

How does Embraer come back from the Boeing pass up and regroup in a regional market that is no longer a fight of equals? Embraer competes with Airbus that in 2019 was 11 times larger in airliner deliveries and 29 times in airliner revenue.

Only in the below 100 seat market is it saved from the giant, who doesn’t have a model in the segment. And it seems the below 100 seat competitor, Mitsubishi, might fold its entry.

Summary
  • The botched JV with Boeing came at the worst possible moment for Embraer, just when the COVID-19 pandemic stopped airliner deliveries.
  • The planned JV had held back sales and deliveries, waiting for the JV to complete.
  • In addition, it cost Embraer $200m, pushing it into the red for 2019.
  • Embraer must now find another fix to the Airbus problem while wrestling with a worldwide COVID crisis.
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HOTR: Aircraft lease rates, values continue to plunge in virus environment

By the Leeham News Staff

June 30, 2020, © Leeham News: Fifteen year old aircraft values and leases plunged compared with six month ago, according to the latest analysis by Ishka.

Ishka is an aircraft appraisal and consultancy.

The aircraft are assumed off lease and immediately available. Mid-life maintenance status is also assumed. Rates and values will continue to decline, Ishka believes. Aircraft on-lease have higher values and lease rates.

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How much life is left in the Boeing 737 MAX after recertification?

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By Scott Hamilton

Introduction

June 29, 2020, © Leeham News: As Boeing narrows in on recertification of the 737 MAX, one of the questions that is unanswered, but forward-reaching is, how much life is left in the airplane?

In this context, the question is not about “useful life.” This is the length of time an airplane can economically be in service before passenger carriers retire the aircraft. Then there is the potential as a cargo conversion airplane. The useful life may equal or exceed the useful life as a passenger airplane.

How much life is left in the MAX in this context means how long will it be before Boeing pursues a replacement design—and how long will MAX remain in production?

Summary
  • 737NG program launched in November 1993. EIS: December 1997. Production ended late 2019.
  • 737 MAX program launch, July 2011. EIS: May 2017. Boeing contract with Spirit Aerosystems for fuselages extends to 2033.
  • A321XLR, MAX grounding killed NMA.

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Pontifications: Recertification flights for Boeing 737 MAX appear close

By Scott Hamilton

June 29, 2020, © Leeham News: Boeing may be set to begin recertification flights of the 737 MAX as early as today, The Seattle Times reported last week.

Testing will take three days, if all goes well. But Boeing still has a lot of work to do to fully satisfy regulators.

According to The Times, Transport Canada and Europe’s EASA require additional modifications to enhance safety on the MAX. The additional changes may not be required for certification but must be done within a year, the paper reports. The MAX 10 must have the changes before it is certified.

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Looking ahead for 2020 and 2030 decades: Boeing

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Second in a series.

By Scott Hamilton and Vincent Valery

Introduction

June 24, 2020, © Leeham News: “Airbus’ widebody strategy is a mess.”

This is what Kostya Zolotusky, then a VP with Boeing Capital Corp., said a few years ago on the sidelines of a major aerospace conference.

Today, it may be going too far to say there is increasing opinion in the industry that Boeing’s product strategy is a mess. But it’s fair to say it’s seriously challenged.

Even setting aside the 737 MAX grounding, Airbus clearly outpaced the MAX with the A320neo family. The A321LR and XLR thrust Airbus into dominance in the single-aisle, 150-220 seat sector.

Airbus fell into a winner with the acquisition of the Bombardier C Series. Boeing’s 737-7 MAX has captured fewer than 100 orders since the program launch in 2011. Demand for the 777X is weak.

Boeing critics, and there are many, see little but doom and gloom ahead. Even before the COVID-19 crisis, Boeing faced years of recovery from the MAX grounding.

There’s no doubt Boeing has a deep hole to climb out of, exacerbated by the COVID crisis. The question is, what does Boeing do after the MAX is returned to service and the virus crisis is over?

Summary
  • Airbus is clear leader in single-aisle sector.
  • Boeing’s product strategy for New Midmarket Airplane, Embraer role is over.
  • Former CEO Jim McNerney said, “no more moonshots.” But is this just what Boeing needs to regain its position?

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Pontifications: Deferrals, bankruptcies continue; order recovery far off

By Scott Hamilton

June 22, 2020, © Leeham News: Although more passengers are flowing through airports and airlines are adding back service, airplane order deferrals continue.

Airline bankruptcies do, too.

LEVEL’s short haul operation went into bankruptcy last week. LATAM Argentina ceased operations. Lufthansa said it may seek administration if shareholders don’t agree to the government bailout negotiated by the airline.

New orders dried up. And, so far, there is no telling when there might be some placed.

Boeing announced just a handful of new orders last month. Airbus didn’t announce any orders in May.

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Restoring capacity with the A330ceo or A330neo, Part 1

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By Vincent Valery

Introduction  

June 18, 2020, © Leeham News: The Airbus A330-200 has been a commercial success, with  642 deliveries since 1998. The Boeing 777-300ER and Airbus A330-300 are the only twin-aisle variants with more deliveries than the A330-200.

Despite the A330-200 commercial success, its successor, the A330-800, isn’t selling well. The variant officially has 14 orders: eight from Kuwait Airways, two from Uganda Airlines, and four unidentified. Air Greenland did not firm its commitment for a single unit yet. The A330-900 has 319 firm orders.

Airbus did not deliver a single A330neo since February due to the COVID-19 outbreak. Once passenger demand recovers, airlines will have the option to receive delivery of A330neos on relatively short notice. Carriers will weigh the benefits of taking delivery of new A330neos, keep their older A330ceos flying, or source the latter from lessors.

We will compare the Economic performance of both A330ceo and A330neo variants with our aircraft evaluation model. We will start with the A330-200 and A330-800.

Summary

  • A330-200 impact on market after entry into service;
  • Capitalizing on Dreamliner delays;
  • Twin-aisle market slowdown before COVID-19 outbreak;
  • A330-800 suitability for a route network.

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Looking ahead for 2020 and 2030 decades: Airbus

First in a series of reports.

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By Scott Hamilton and Vincent Valery

June 17, 2020, © Leeham News: Airbus was riding high in February.

The A321XLR was a clear winner. An important order was won from United Airlines, up to then an exclusive Boeing narrowbody customer. American Airlines selected the XLR. An order was expected from Delta Air Lines.

Each order was another that made it impossible for Boeing to launch the New Midmarket Airplane (NMA).

In one of his first actions, Boeing CEO David Calhoun, taking office Jan. 13, put the NMA on indefinite hold, pending a complete review of Boeing’s product strategy.

The Boeing 737 MAX remained grounded by regulators, with no return to service in sight.

The Airbus A321XLR. This 9-hour capable airplane helps fragment routes–and soften demand for widebody aircraft. Source: Airbus.

Things couldn’t be going better for Airbus.

And then in mid-March, the COVID crisis became a global pandemic. Air transportation fell up to 95%. Airlines required government bailouts. Airbus CEO Guillaume Faury said the very existence of Airbus was threatened.

Summary
  • COVID’s impact.
  • A320 family ‘s commanding lead over Boeing.
  • A220 commands low-end of single-aisle sector.
  • A330neo is the weak link.
  • Looking ahead in product strategy.

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Embraer’s Slattery named CEO of GE Aviation

By Scott Hamilton

June 15, 2020, © Leeham News: John Slattery, the CEO of Embraer Commercial Aviation, was named CEO of GE Aviation, it was announced today.

John Slattery

Arjan Meijer is the new President and CEO succeeding Slattery. Slattery succeeds David Joyce, who is retiring. Slattery’s appointment is effective July 13.

Slattery devoted much of the last year trying to win approval of the proposed Boeing-Embraer joint venture, Boeing Brasil-Commercial. Boeing terminated the agreement April 25, claiming Embraer failed to meet all required terms and conditions. Embraer claims it met the conditions. Both took the dispute to arbitration.

Slattery had been designated CEO of Boeing Brasil. After the deal’s collapse, his departure from Embraer was expected.

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Narrowbody Aircraft Retirements

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By Vincent Valery

Introduction  

June 15, 2020, © Leeham News: Last week, LNA analyzed the accelerating widebody fleet streamlining by airlines. We now turn our attention to the narrowbody market.

Numerous airlines, including American and Lufthansa, announced the early retirement of single-aisle aircraft since the beginning of the COVID-19 outbreak. However, the retirement of entire narrowbody types has been a rarer occurrence among carriers.

LNA analyzes retirement prospects for Airbus A320, Boeing 737, 757, and MD80/90/717 family aircraft.

Summary
  • A market dominated by two types;
  • More variety among older aircraft in service;
  • Streamlining on core narrowbody fleets;
  • Regional breakdown for the oldest types in service.

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