Odds and Ends: MC-21 to be renamed; Boeing buys land; seat wars ahead?

MC-21 to be renamed: After creating a brand for the Russian Irkut MC-21, authorities have decided to rename the airplane the Yak 242, according to this article in Flight International.

The article is too brief to explain the reasons behind this, other than to indicate the MC-21 evolved out of a design that was designated Yak-242. The MC-21 is somewhat larger than the 242 and it is a direct challenger to Airbus and Boeing in the 150-210 seat sector.

Among our activities, we engage in branding. We don’t think this is a particularly smart move on Russia’s part. Returning to the Yak name is a throwback to the old Soviet Union and the history of Soviet airliners that left a lot to be desired. The “Irkut MC-21” name creates some distance to this history in the effort to sell the airplane outside the old Soviet political sphere.

The Sukhoi Superjet SSJ100, which has had some success selling beyond the sphere, nonetheless reinforces the history of troubled Soviet airliners. Production has been painfully slow and in-service reliability difficult.

We think the Irkut name should be retained, a move toward the future, not one toward the past.

Boeing buys more Charleston land: The US government shutdown delayed the land purchased by Boeing of federally property around the Charleston (SC) airport. Now that the government is open again, the purchase has moved forward, according to the Charleston Post and Courier. According to reports, Boeing now owns or has under contract slightly more land at Charleston than it owns at Everett.

Boeing has been shifting work from Washington to Charleston, and the trend toward purchasing land means this will continue. We continue to believe that when clean-sheet airplanes come out of the Boeing shop to replace the 737 and 777, production of these will be at Charleston. Hopefully the demand for the 737 replacement will be high enough that production will be split between Washington and Charleston. We can foresee a scenario where Boeing has a more equal split between the two locations, such as Airbus has with Hamburg and Toulouse.

But the immediate question is whether the 777X derivative will be built in Washington or Charleston. We’ve heard both scenarios but don’t have enough information to know which is correct.

Seats Wars pending? Airbus has called for an industry standard for 18-inch wide seats in coach. Plane Talking has an analysis of this. We’ll point out that Embraer already has 18-inch seats as standard in its E-Jets and Bombardier has 18-inch window-and-aisle seats plus a 19-inch middle seat for its CSeries. This makes the E-Jet and the CSeries the most comfortable domestic airplanes available, with the middle-seat bonus for the CSeries.

We haven’t flown coach internationally for years, but we do so domestically and have been crabbing about the 17 inch seat on the Boeing 737 for a long time. With the Airbus A330 and Boeing 777 nine-abreast essentially the same width, we believe airlines and their drive toward cramming as many seats in as possible to the total disregard of passenger comfort certainly merits international standards at 18 inches.

But we’re not deceived that this proposal is altruistic on the part of Airbus. Boeing’s ability to accommodate one more row of seats with a slightly wider standard than Airbus, reducing CASM in the process, is clearly the motive. When Boeing compares today’s 777 against the A350 in sales campaigns, it uses 10 abreast in coach vs nine abreast for the A350 and argues superior CASM costs. Customers tell us this indeed reduces the CASM advantage the A350 has at an apples-to-apples 9 v 9 (the A350 continues to maintain a trip cost advantage).

We agree with Airbus on the principal. But far chance it will happen.

Odds and Ends: Boeing’s MAX to China; Airbus sees no order bubble; Boeing’s wide-body dominance; BBD’s risk

Boeing’s MAX to China: The absence has been conspicuous, but no more: China will take 200 737 MAXes, according to Reuters. It will be interesting to see what delivery slots becoe available. Boeing always holds open some slots for key customers, but the real opportunity is boosting production, as Boeing CEO Jim McNerney alluded to on this week’s earnings call and which we reported back in June. We’re looking for 737 rates to hit 47/mo by the time the MAX enters service in 2017 and 52/mo two years later. This will open slots for China and other customers that otherwise aren’t available until 2020.

Airbus sees growth: Fabrice Bregier sees no order bubble because the company expects annual passenger growth of 5%, reports USA Today. The comments come on top of Airbus’ USA suppliers conference.

Boeing’s wide-body dominance: Boeing has for decades dominated the wide-body market in its rivalry with Airbus, but this has narrowed to parity this year. Aspire Aviation has a long analysis (best printed out) concluding that Boeing’s dominance depends on the success of the 777X.

Bombardier’s risk: CEO Pierre Beaudoin gives his thoughts about the risk BBD is taking with the CSeries, in this interview in Maclean’s.

Future for the 777, A330 as 777X nears launch, A350 nears EIS

With the launch of the Boeing 777X expected to be approved this month by the Boeing Board of Directors, followed by the public launch at the Dubai Air Show next month, the future sales of the in-production 777 will be closely watched by the industry as well as by Boeing itself.

It is conventional wisdom that sales will fall off as entry-into-service nears for the 777-9X, said to be “late this decade” by Boeing but more likely 2020 or even 2021, according to customers.

 

Sales of the Airbus A320ceo and Boeing 737NG families have, so far, held up surprisingly well despite the launch in 2010 of the A320neo and in 2011 of the 737 MAX families. Most of the neo and MAX orders have been combined with the current generation aircraft. This has been viewed as a way to keep the production lines full in advance of the EIS of the new airplanes.

 

Further, Airbus and Boeing plan an overlap of production of the two generations of about two years. This contrasts with Boeing’s decision to cease production of the 737-300/400/500 concurrent with the launch of production of the 737NG, a move Boeing today says was an arbitrary choice.

 

Boeing plans to begin building the MAX on a third line in its primary Renton (WA) factory before phasing out the NG. Airbus hasn’t specified how it plans to integrate the production of the ceo and neo.

 

What will happen for the current Airbus A330 and Boeing 777 lines as the A350 and 777X come on line?

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Lion Air’s massive orders continue to raise doubts

The news that Asia’s Lion Air might be planning an order for the Bombardier CS300 energized the media and those that follow the OEM. If Lion Air follows through, this would be a major defection from Airbus and Boeing, which have large backlogs with this Low Cost Carrier.

It would be a major breakthrough for Bombardier.  But there are key questions about the prospective order.

  1. How big will it be? Lion Air’s president was quoted as saying up to 100, but this leaves a huge spread of 10 to 100, presumably in a combination of orders and options. Ten wouldn’t mean much in the all-important momentum/image battle. Fifty would. One hundred would be great. But…
  2. How can Lion Air, a carrier that has spotty financial results and a safety record that earned it banishment from flying to Europe and a raft of accidents within Asia, afford, support and staff another order?
  3. How can Lion Air, with 550 Airbus and Boeing A320 and 737 family jets on order, absorb yet another fleet type?

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Odds and Ends: Airbus to rethink A380 strategy, says Reuters; Boeing B-29

A380 Strategy: Airbus may rethink the near-term strategy of the A380, with an eye toward reducing production rates, reports Reuters. Earlier this week, Boeing announced a rate reduction for the 747-8. Very Large Aircraft (VLA) continue to be a tough sell. YTD, Airbus has net orders of minus three for its VLA, although a Memorandum of Understanding for 20 was signed at the Paris Air Show and is expected to be firmed up by year end and possibly at the Dubai Air Show next month.

Still, the VLA market is very tough. Boeing sold five 747-8s this year and had cancellations of five. Airbus hasn’t met its annual sales target for the A380 for a couple of years.

787-9 Video: In a change of pace, enjoy this video that is nothing but a relaxing visual.

[youtube=http://www.youtube.com/watch?v=eUZmTzPyR-A&w=560&h=315]

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Boeing B-29: Here’s a sight not seen much anymore: take off and landing of a B-29. As interesting as this is, the weather and the photography is pretty cool, too.

[youtube=http://www.youtube.com/watch?v=3-r8p97vPt0&w=560&h=315]

Boeing earnings call: 787 accounting block boosted to 1,300

Boeing announced today that the accounting block for the 787 program has been increased by 200 to 1,300.

Introduction of the 787-10, boosting the production rate from 10 to 12 to 14 between now and the end of the decade, and production investment to increase efficiency are among the reasons. The accounting block is the break even in accounting terms, though the program on a cash basis will be positive much sooner.

Update, Oct. 24: We received this message from Boeing:

 

The program accounting quantity (or block) simply represents the number of airplanes for which we can reasonably estimate revenue and cost as we look ahead. It is not a breakeven number ( it wasn’t for 1,100 and isn’t for 1,300).

 

The profitability calculation is derived from the accounting quantity, not the other way around. As we line up more sales and have visibility of future costs for any airplane program, the block for that airplane will be extended and the margins adjust– it is not related to concepts of  ‘breakeven.’ And the program is profitable, so it follows that the accounting quantity can’t be ‘the breakeven number’ .

Continuing original post:

Here are the highlights from the third quarter/9 months Boeing earnings call:

Jim McNerney, CEO: JM

Greg Smith, CFO: GS

JM: Strong passenger demand means fewer deferrals, requests for acceleration of deliveries. Cargo market remains soft but the fuel efficient 747-8 remains well positioned when the market recovers.

  • On the strength for the growing 90-plane order for the 787-10 and growing order book for 787-8 and 787-9, we announced rate growth to 12/mo in 2016 and 14/mo before the end of the decade.
  • 777X continue to anticipate market launch this year. The 777-9 will be the only twin aisle, twin engine airplane available in the 400 seat market.
  • Demand forecast for 737 continues to place upward pressure on rates.
  • Defense unit still faces US budget issues and sequestration.
  • Delivered 98 787s to 16 customers YTD.
  • Improving dispatch reliability of 787 is at the top of priorities. We are making good progress at reducing reliability issues. We are not yet satisfied. At around 97% on fleet-wide basis.
  • Progress of development of the 787-9 is on track and progressing well.
  • 787 productivity gains proceeding.
  • 737 MAX started detailed design phase.
  • Third KC-46A entered production.
  • Delivered 223rd and final C17 to USAF, made tough but necessary decision to end production.

GS: Commercial airplane business increased 15% in third quarter.

  • We continue to have progress on productivity.
  • Accounting block increased by 200 units to 1,300 for 787 program on strength of 787-10 launch. Higher rates increases and production flow, along with deferred production balance will increase then begin to decline on a rapid basis.
  • Continue to cut costs at Defense unit.
  • Remainder for 2013: EPS forecast increased on unchanged revenue guidance. Still expect 787 deliveries to be greater than 60, BCA margin to be greater than 10% on improved performance, lower R&D ($3.2bn, $100m lower than previous guidance).

JM: With three strong quarters behind us, we remain committed to goals. Priorities: profitably ramp-up on commercial programs, execution, strengthen and reposition defense business with more international expansion, and providing value to shareholders and customers.

Q&A:

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Boeing’s third quarter/9 month profit; raises 787 production target

Boeing today announced its third quarter and nine-month financial results, repoting strong profits. It also announced plans to raise 787 production to 12/mo by 2016 and 14/mo before the end of this decade, confirming our report from last June. We have rate 14 beginning in 2019, after 787-10 EIS in 2018.

Here’s the press release.

Boeing’s earnings call is at 10:30 EDT and will be webcast here.

Odds and Ends: Repairing the Ethiopian 787; more on A350-1000 stretch; new RR engine study

Ethiopian 787: Dominic Gates at The Seattle Times has a detailed story about how Boeing is repairing the Ethiopian Airlines 787 damaged by a fire at London Heathrow Airport earlier this year. Boeing doesn’t comment for the story–nor for any others–but Gates’ detail in his piece makes for quite interesting reading.

Stretching the A350-1000: More on this topic from Aviation Week. Aside from the technical considerations for the airframe, Rolls-Royce would need to bump up the thrust of the engine to around 104,000 lbs, we’re told. Also: there is the matter of production. Airbus is considering a second production line for the A350, but no decision has been made.

Rolls-Royce studies new engines: Rolls-Royce is studying a new line of engines, according to this Bloomberg article.

Is tide ready to turn for CSeries?

CS100 first flight, September 16, 2013. Photo via Seattle Times.

Is the tide ready to turn for the Bombardier CSeries?

Following a nine month delay, the CS100 Flight Test Vehicle #1 took to the air September 16. It’s flown only twice since and has been undergoing ground vibration tests and more software upgrades. BBD is pretty mum about the testing program, which causes speculation about whether some issue emerged during the three flight tests. But we’re told by a source familiar with the program, but who is not with BBD, that BBD is being conservative in its pace, counting on the fact that it will eventually have seven FTVs to bring entry-into-service on time. A few Canadian aerospace analysts think EIS will slip to 1Q2015.

Then there are the orders, just 177 firm, which is more than those for the Airbus A319neo and the Boeing 737-7 MAX combined, but which the market perceives as low and a slow-selling program. Bombardier points out that the firm sales are about on par with other new airplane programs at this stage, but the market–dazzled by the thousands of orders placed for the NEO and MAX–won’t make these distinctions.

But it’s possible the tide is ready to turn for the CSeries. Here’s why.

  • Potential customers have been waiting for the first flight and to see whether the program will be more or less on time with the new, implied schedule emanating from first flight. We believe a few more months have to pass before any conclusions are drawn on this score.
  • Likewise, a few months have to pass before Bombardier and Pratt & Whitney will know whether the economic promises will in fact be achieved.
  • There are some key sales campaigns for which decisions should be made in the coming months, both this year and into next, that if BBD wins will serve to build significant momentum.
  • Airbus is running out of delivery slots for the entire A320 family.  The VivaAerobus order announced October 21 includes deliveries beginning next year. The backlog goes to 2019-2020, and while John Leahy, COO-Customers, is adept at finding slots through juggling the skyline, there simply aren’t too many left mid-term. Bombardier is sold out into 2016 and is a better position to offer deliveries in quantity. This makes it difficult for Leahy to “buy” a deal, which he has done on several occasions, to under-price CSeries to a point where BBD can’t play in the sandbox.
  • Boeing remains more focused on the 737-8/9 than on the 737-7, leaving BBD to largely fight its war against the diminishing Airbus and the forthcoming Embraer E-190/195 E2, the latter with a planned EIS of 2018, a good three years after CS100 enters service.

It will likely be next year before solid trends are noticeable. BBD retains its goal of reaching 300 firm orders and 20-30 customers by EIS, at least a year from now. We think this is easily achievable.

Update, Oct. 22: The Iraq-Business News reports that the government has approved the purchase of five CS300s at $40m each.

A350 program update: EIS date set (sort of); ambiguity over -800; talk of a -1000 stretch

Airbus provided a program update Monday to the international media. Here are links to initial stories.

Airchive: Airbus sees shift toward 250-300 seat aircraft. Airchive reproduces some of the illustrations Airbus presented. Airchive reports the planned EIS for September 2014 (as does the headline Aviation Week article below) but adds that EIS could slide to November or December. (We have it for early 2015.)

Aviation Week: September 2014 EIS targeted.

Bloomberg: Airbus will eventually seek certification with lithium batteries.

Bloomberg’s story has a couple of important points:

  • While multiple -800 customers have moved to the longer A350-900, Airbus still has outstanding orders for 89 units and will build the plane if customers want it, Evrard said. He gave no indication when production of the -800 versions may begin. (Emphasis added.)
  • Evrard said stretching the A350-1000 by adding panels to make the fuselage longer for additional passengers would be perfectly feasible from a technical point of view.“Stretching further is possible, there are no show-stoppers, but today it’s still in the pre-concept phase” he said.

On the first point, we previously reported that a change in production sequence was likely coming. An Airbus spokesperson denied it, but the comments above at the briefing certainly infer otherwise.

On the second point, Evrard’s comments about stretching the -1000 are, in our view, significant. We reported last night in our interview with Airbus Americas Chairman Allan McArtor that Airbus was looking at this hypothetical, though no internal proposal had been made. Still, it’s clear to us that Airbus is giving solid consideration and we predict that eventually will proceed.

The Airchive report of a market shift toward the 250-300 aircraft is also significant. With continued trends toward upgauging, this will soon shift to 300-350 and then to 350-400. The corollary is that the Very Large Aircraft sector continues to shrink.