March 16, 2017, © Leeham Co.: China’s evolving commercial aerospace and aviation industry has high-profile companies such as AVIC and COMAC, and its expanding supplier based, combined with joint ventures with Western companies is well known.
Less well known is the growth in the aircraft leasing business. Increasingly, Chinese lessors are showing up on the order lists of the Big Four aircraft manufacturers. Still, there remains a bit of a mystery about the lessors and dynamics within China.
LNC spoke with the newly appointed CEO of CDB Leasing during the ISTAT conference last week in San Diego.
Peter Chang has been in the Western leasing business for decades, employed in key positions with Aviation Capital Group, ILFC and Aircastle—usually with responsibility for China.
He was named CEO of CDB in December, a move that was announced during the January Dublin conferences of Airlines Economics and Airfinance Journal. More key personnel announcements were made during ISTAT.
In an exclusive interview, LNC asked Chang about the origins of CDB, other Chinese lessors, the current policy of restricting flow of Chinese cash outside the country, the Boeing 737-10 and the Bombardier CSeries.
Here is this interview.
A feature report.
By Bjorn Fehrm
March 15, 2017, ©. Leeham Co: Spirit AeroSystems is the world’s largest aerostructures supplier, with main facilities in Wichita (KS). I visited Wichita early March and was given a guided tour of the factories. It was a tour of contrasts.
In production hall two, the Boeing 737 fuselages are riveted together in much the same way as the Boeing B-29 Stratofortress was produced there during World War II. “Rosie the riveter” is replaced with a robot, but the hall still has a busy charm.
In another hall, the production is silent. The winding of the Boeing Dreamliner’s forward fuselage from rolls of tape is made with a swooshing sound. There are few people around; the machines rule. Everything is mega large; tape-layers, tools, autoclaves, the lot. Read more
March 8, 2017, © Leeham Co.: Bombardier CRJ-200s, rapidly being phased out of passenger service and consigned to the scrap yard, proved to be an unexpected success for freighter conversion company (Aeronautical Engineering Inc (AEI).
Converting the CRJ-200 from passenger to freighter as intended to be a bridge between the Boeing 737-400 and 737-800 P2F programs, Robert Convey, SVP Sales and Marketing, told LNC at the annual meeting of ISTAT in San Diego.
Rather than being a program for a handful of conversions, within three years, Convey landed 54 orders and counting.
March 7, 2017, © Leeham Co.: Representatives of the four major commercial engine
manufacturers have divergent views of the next round of engine development, either for the Middle of the Market/New Mid-range Airplane (NMA) or New Small Airplanes (NSA) coming in the next decade.
Officials of CFM, GE, Pratt & Whitney and Rolls-Royce appeared at the annual ISTAT conference in San Diego yesterday.
PW’s Rick Deurloo, SVP of Sales, Marketing Commercial Engines, had the added task of dealing with the highly-publicized teething issues surrounding its new Geared Turbo Fan engine on the Airbus A320neo.
March 6, 2017, © Leeham Co.: Boeing CEO Dennis Muilenburg wants the company to participate in the aftermarket aircraft services business and set a goal of $50bn in revenue in the coming years.
He looks at Boeing’s current business, the former Boeing Commercial Aviation Services (CAS), and sees a single-digit market share in a worldwide trillion-dollar market potential. Muilenburg understandably wants a greater share of this.
But LNC believes there is an additional driver: the intensely competitive commercial airliner business faces even greater competition in the coming years. Prices are under pressure today. China is developing its own aerospace industry, which will eat into sales by Boeing (and Airbus) in the home market. Russia has ambitions to renew its home-market airliner industry.
Boeing’s new Global Services unit is a hedge against the prospect of falling profits at Boeing Commercial Airplanes as these factors converge.
Feb. 27, 2017, © Leeham Co.: ATR today holds an almost monopolistic position in the large turbo-prop market with 87% of the backlog at YE2016. Bombardier, once the dominant turbo-prop manufacturer, has a mere 13%.
China and Russia are not included above.
ATR had a backlog of 212 aircraft vs Bombardier’s 31. In addition, ATR had options for more than 400 aircraft and LOIs for about 70 more. BBD had options for just 12 Q400s at the end of last year.
By Bjorn Fehrm
February 23, 2017, © Leeham Co.: We previously described how new generation engines make the Boeing 737 MAX 8 a trans-Atlantic aircraft. The MAX 8 is smaller than the Airbus A321LR, but not the smallest single-aisle with trans-Atlantic capability. This distinction goes to the Bombardier CSeries.
We wrote about the CS100 capability to cross the Atlantic from London City Airport last year. After the article, we received new and improved data from Bombardier. The CS100 can now fly directly to US East Coast on the difficult westward leg with a business cabin of 42 seats. The updated article is here.
When we look at the improved capabilities of the CS300 (announced at Farnborough Air show last summer), this aircraft can also cross the Atlantic with a full cabin of 130 passengers.
Bombardier arranged so we could discuss this deeper with the VP CSeries program, Rob Dewar.
Feb. 20, 2017, © Leeham Co.: Sukhoi is Russia’s attempt at reentering the commercial airliner business. The SSJ100 regional jet is, by most accounts, an attractive
and efficient aircraft.
But it’s hampered by erratic production and questionable product support (largely due to the overhang of the Putin politics).
The aircraft was grounded briefly in December when a fatigue issue was found in the tail section during a routine inspection.
Feb. 16, 2017: Bombardier today posted better than expected results (even on lower revenue) for the fourth quarter and full year.
Goldman Sachs was first out with reaction among the analyst reports LNC receives:
BRG, which agrees with other aerospace analysts that Boeing stock is priced on free cash flow, sees FCF falling beginning next year. Buckingham predicts 737 production rates—which Boeing wants to boost to 57/mo to support FCF—will be short-lived.
Buckingham sees 777 Classic delivery rates dropping from Boeing’s target of 3.5/mo to “bottom out” at 2/mo.
Weak orders for the 787 means Boeing won’t increase production rates for the 787 from 12/mo to 14/mo. BRG predicts that in 2019 Boeing will announce a rate reduction from the current 12.mo to 7/mo on one production line, and this line will be only in Charleston (SC).
Boeing VP-Marketing Randy Tinseth speaks tomorrow at the annual Pacific Northwest Aerospace Alliance conference in Lynnwood (WA). Tinseth is always the eternal optimist in his presentations. We’ll see if he addresses anything in BRG’s bearish report.