How much did the CSeries cost Bombardier?

By Bjorn Fehrm

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Introduction

February 20, 2020, © Leeham News: As we wrote in last week’s article about the A220 flying the Montreal to Toulouse route, the stakes are high in the civil airliner business. If you don’t have a very strong balance sheet you shouldn’t enter the business.

Bombardier learned this the hard way. Its follow up project to its successful CRJ regional jets, the CSeries, brought Bombardier to the brink of bankruptcy and it had to sell the project to Airbus at a fraction of its value. The project cost more to develop and produce than planned despite not running off the rails during development like Boeing’s 787 or Mitsubishi’s MRJ.

We analyze why it cost so much and at what fraction Airbus got the program.

Summary:

  • The CSeries nearly doubled its development costs despite being void of major hiccups. What was the cause?
  • Airbus picked up the program when Boeing forced Bombardier to sell. How much of a bargain did Airbus get?

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Airbus 2019: an operationally good year hit by compliance costs

February 13, 2020, © Leeham News in Toulouse: Airbus presented its results for 2019 today in Toulouse. Operationally, the company made a profit of €6.9bn but heavy fines (-€3.6bn) to settle a long-running bribery case and contingencies for A400M development cost coverage brought the net result to a loss of €1.3bn.

The Commercial aircraft division delivered 8% more aircraft 2019 (863 units vs. 800 2018). The mix of aircraft changed towards higher-margin single-aisle types like A321neo and A321LR whereas widebody margins peaked during 2019. The helicopter business is flat in a tough market and the profits of the Defense and Space division declined 40% on flat revenues.

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Airbus buys Bombardier’s share in A220,  now sole owner together with the Government of Quebec

By Bjorn Fehrm

February 13, 2020, © Leeham News in Toulouse: The news this morning that Airbus is now the sole owner of the A220 (75%) together with the Government of Quebec (25%) is good news for the A220 and for Quebec.

Bombardier is a company in trouble and it was forced to try and save cash in the A220 partnership rather than invest in the future. This potential limitation on the A220 program is now resolved. Airbus gets sole responsibility for future plans and it has in the Government of Quebec a partner that will be positive to the growth of the A220 as it means more business for the Quebec aeronautical industry.

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Could A220 fly Air Canada’s Montreal to Toulouse route? Part 2

By Bjorn Fehrm

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Introduction

February 13, 2020, © Leeham News: We continue our analysis if the Airbus A220 is a credible long-range aircraft. We started looking at the limitations of the aircraft last week and how these could be lifted.

Now we continue with an analysis of the economics of the A220 compared to established long-range aircraft like the Airbus A330 and A321LR/XLR. Is a higher frequency A220 route competitive with an A330 or A31LR/XLR operated route? We also examine how Breeze air will operate its A220s on long-range routes.

Summary:

  • By virtue of its size, the A330-300 has good economics when it can be filled to a high load factor.
  • The A321LR comes close in operating costs to the A330-300 on these types of routes.
  • The surprise is the competitiveness of the A220-300 on a route type it wasn’t designed for.

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Could Airbus’ A220 fly Air Canada’s Montreal to Toulouse route?

By Bjorn Fehrm

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Introduction

February 6, 2020, © Leeham News: Air Canada announced in August 2019 it will start a five weekly route between Montreal and Toulouse from the 4th of June. It connects two growing, French-speaking cities with strong aeronautical clusters. The route will also connect Airbus headquarters and production in Toulouse with its new A220 aircraft development and production center in Mirabel outside Montreal.

Air Canada announced it will fly the route with its 292 seat Airbus A330-300 but the question has been raised “Could route be served with the smaller A220, then with an increased frequency”? We use our airliner performance model to find out.

Summary:
  • Montreal to Toulouse is on the range limit for an A220, especially when flying the return route against winter winds.
  • We look at different means to increase the range of the A220 to make the route possible without fueling stops when going West.

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Air Canada inaugurates A220-300 service today

Jan. 16, 2020, © Leeham News: Air Canada inaugurates Airbus A220-300 service today, becoming the second North American carrier to operate the A220. Delta Air Lines was the first, with the A220-100 last year.

Air Canada A220-300. Photo by Scott Hamilton.

It is the first North American airline to operate the -300 model. The new service begins on the Montreal-Calgary route.

Airline and Airbus officials paid homage to Bombardier at a celebration yesterday in an Air Canada hanger down the block from Bombardier’s world headquarters on the edges of Montreal Dorval Airport.

Bombardier designed the aircraft, originally called C Series, in a bet-the-company challenge to Airbus and Boeing.

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Embraer’s challenges

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By Vincent Valery

Introduction  

Jan. 13, 2020, © Leeham News: It is no exaggeration to say that 2020 is a pivotal year for Embraer. Whether the tie-up with Boeing materializes will determine its future.

As crunch time approaches for the creation of Boeing Brasil, LNA thought it relevant to study the company’s financial records since 1999. This is another in a series of financial analysis of leading aerospace companies and airlines.

From humble beginnings, the company achieved a dominant position in the regional market with the E-Jet family. After a slump in defense and security business revenues in the early 2000s, the company undertook significant programs. It also entered the business jet market to diversify its revenue streams.

So far, E2 E-Jet sales have been tepid. After years of significant development spending, the Commercial aircraft division is just above red ink, the Defense and Security division isn’t profitable and the Business jets are not adding anything to the bottom line.

Regardless of whether the tie-up with Boeing materializes, Embraer will have to take major strategic decisions, especially in the Commercial Aviation division.

Summary
  • From government project to world-class OEM;
  • Profitability challenges;
  • (Not so) diversified revenue sources;
  • Plans with Boeing;
  • And without it.

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Pontification: A320 production challenges may extend to 2022/23

By Scott Hamilton

  • Update of Boeing 737 NG Pickle Fork cracking issues.

Dec. 2, 2019, © Leeham News: Airbus sees struggles for A320 production continuing throughout next year, into 2021 and spilling into 2022/23 as the Air Space cabin is introduced on the A321XLR.

Executives also see lower margins than the target 15% for the A350 and losses on the A220 continuing into the middle of the next decade.

Even so, profit targets are expected to be met and officials still want to ramp up production rates on the A320.

This mixed picture was presented by Airbus CFO Dominik Asam during  series of investors meetings last month in Asia, arranged by Citi Research’s London office.

In a research note issued Nov. 22, Citi summarized the three days of meetings with investors in Australia, New Zealand and Tokyo.

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Can the DHC 8-400 compete with a CRJ550 for the 50 seat Scope Clause market?

By Bjorn Fehrm

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Introduction

November 14, 2019, © Leeham News: The US mainline airlines have large fleets of 50-seater regional jets that are getting old. The present Scope Clause limits on the number of aircraft with seating over 50 seats stop the mainlines from replacing these aircraft with larger aircraft. So there is a real need for an efficient 50 seater regional aircraft for the US market.

As there are no 50 seater jets in production, United is converting its 70 seater CRJ700s to 50 seaters to fill the gap and calls them the CRJ550. This is where de Havilland Canada sees a change for an adapted DHC 8-400 turboprop. It’s more efficient than a CRJ550 while offering the same comfort, says de Havilland. We check if this is correct and what chances a DHC 8-“550” have in this market.

Summary:

  • The US Scope Clauses allow the three mainlines to have more 1,000 50 seater jets, yet no new ones are available to replace the more than 600 in the market.
  • The in-production DHC 8-400 would be an alternative when looking at cabin size and dimensions.

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Europe’s Regional airlines meet in Antibes, Cotes d’Azur.

By Bjorn Fehrm 

October 9, 2018, ©. Leeham News, Antibes France: The European Airlines Association, ERA, gathered 44 of its 51 member airlines in Antibes France, today for the first day of its 2019 General Assembly meeting.

LNA participated in the event for the first time and we found an impressive gathering of airline and airport representatives, aircraft OEMs and support businesses discussing the challenges facing the European regional air transport market.

Norway’s Wideroe, the launch customer for Embraer’s E-Jet E2 is one of the airlines present.

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