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737-7X, 737-10 studies illustrate Boeing weakness in single-aisle market

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Introduction

April 27, 2016 © Leeham Co.: News that Boeing plans to develop a “737-7.5” MAX, following on the prospect of a “737-10” stretch of the 737-9 illustrates just how weak its single aisle product strategy has become.

The Wall Street Journal revealed last week that Boeing is planning the airplane, which is larger than the current 737-7 but smaller than the 737-8. Jon Ostrower, the reporter, dubbed the plane the 737-7.5. Internally, it’s called the 737-7X.

Summary

The 737-7 MAX has proved a sales dud. There are just 60 orders from two established airlines, Southwest and WestJet, and one start-up carrier that ordered just five.
Bombardier appears on the cusp of landing an order from Delta Air Lines for up to 125 CS300s, the direct competitor to the 7 MAX, but this is only one element in Boeing’s consideration to grow into the “7.5.”
Rather than being a growth of the 7 MAX, the 7.5 will be a shrink of the 737-8. This is a less costly and more efficient method for Boeing, but shrinks are never the best solution for the operator.
LNC reported in February that Boeing had decided to recommit to the 7 MAX after nearly losing an order to Bombardier for the C Series. Instead, UAL ordered the 737-700 at an unusually low price and other considerations. Ray Conner, CEO of Boeing Commercial Airplanes, called the deal a blocking move to BBD. The 7.5 appears to be the course Boeing has chosen.
Pursuit of a 737-10, a stretch of the 737-9 that may include a new wing, larger engines and other changes, is an acknowledgement the 737-9 is losing the battle for this size aircraft to the Airbus A321neo. But Boeing’s challenges to develop a 737-10 are vexing. More than a year ago, LNC outlined these.

Pontifications: Earnings week for Airbus, Boeing, Bombardier and Embraer

By Scott Hamilton

April 25, 2016, © Leeham Co.: Airbus, Boeing, Bombardier and Embraer having their first quarter earnings call this week. Bombardier also has its Annual General Meeting concurrent with its 1Q earnings on Friday.

The big anticipation will be with Bombardier.

Earlier this month, The Wall Street Journal reported Delta Air Lines was going to order 75+50 C Series from BBD. Delta, on its 1Q earnings call, said it had nothing to announce but would have more to say at its investors day. This is May 16.

But at the same time, BBD postponed its AGM and 1Q call from the 28^th to the 29^th. Delta’s board of directors meets on the 28^th. Previously, BBD postponed by one day its year-end earnings call to coincide with Air Canada, which announced an order for 45 C Series, plus options.

Is Bombardier’s rescheduling another harbinger of the Delta order, or will Delta hold off any announcement until that May 16 investors day?

Or could Delta announce the Bombardier order Friday and the widely reported, expected order for 30-37 Airbus A321ceos?

The world aviation geeks wonder.

90 Comments

Posted on April 25, 2016 by Scott Hamilton

Airbus, Boeing, Bombardier, CSeries, Delta Air Lines, Embraer, Pontifications, Pratt & Whitney

737-7, 737-7.5, A320NEO, A321ceo, A350, Airbus, Bank of America Merrill Lynch, Boeing, Bombardier, C Series, Credit Suisse, Embraer, GTF, Pratt & Whitney, Ron Epstein, Ron Spingarn

Can Bombardier extend CS300 to a CS500? Part 3.

By Bjorn Fehrm

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Introduction

April 25, 2016, ©. Leeham Co: We will now finish our series where we look into how big an undertaking a CS300 stretch to a 150 seater would be for Bombardier.

The C Series existing models, the CS100 and CS300, were designed with the CS300 as the main family member. That makes a stretch to a CS500 a pretty straight-forward job from a wing perspective, only minor adjustments are needed.

The problem area for the stretch is the fuselage. The C Series is a five abreast aircraft and at 150 seats the aircraft will have more than 30 seat rows. The resulting long fuselage limits the available rotation angle at takeoff.

Having discussed the different actions that can be taken to handle this problem in Part 2, we will now check the implications for the takeoff field length with our performance model. The model will also show if the engine takeoff thrust needs to be increased.

Finally, we will use the model to estimate the fuel consumption and the range of a CS500 derivative.

Summary

A CS500 derivative made from the CS300 is a pretty straight-forward stretch project.
Special care has to be taken with the risk for tails strikes from a longer fuselage.
With the discussed actions in place, the field performance of a CS500 is still very good, even though it can’t compete with a CS300.
The range would be less than a CS300 but the aircraft would still be capable of five hour missions.
Fuel consumption would be higher per trip but lower per seat than a CS300. It would give existing 150 seaters strong competition on efficiency.

1 Comment

Posted on April 25, 2016 by Bjorn Fehrm

Airbus, Boeing, Bombardier, CSeries, Pratt & Whitney, Premium

737-7, A319neo, Airbus, Boeing, Bombardier, CS300, CS500, CSeries, Pratt & Whitney

Can Bombardier extend CS300 to a CS500? Part 2.

By Bjorn Fehrm

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Introduction

April 20, 2016, ©. Leeham Co: Last week we started our analysis to see whether Bombardier could stretch their C Series aircraft program from two members covering 100 to 135 passengers (in two class configuration) into a three aircraft family that would cover up to the main segment of the present single aisle market, the 150-160 seat segment.

We found that the main problem area seems to be the margin for rotation at take-off with a longer CS500 fuselage, a similar problem that affects the Boeing 737 MAX 9. There are several ways to attack such a problem in an aircraft like the C Series. We will now investigate the different options and what influence these would have to the cabin capacities for such an aircraft.

Summary

To create a CS500 that would cover the main single aisle seating segment (that of 150-160 seats two class), Bombardier would have to do rather modest changes to the present CS300.
The stretch would introduce a longer fuselage but the wing could stay pretty much the same.
The longer fuselage brings some challenges. The C Series has the wing and therefore main landing gear in a forward position for efficiency reasons. This limits the rotation angle for a longer CS500.
We go through the options for handling this problem and its consequences for the CS500 cabin capacity.

Read more

Bombardier’s Delta deal looking good, but don’t celebrate yet

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Introduction

Air Baltic will be the first operator of the Bombardier CS300. Source: Bombardier.

April 18, 2016, © Leeham Co.: Bombardier, if it didn’t dominate the news cycle in commercial aviation last week, must have come close. Consider:

The Wall Street Journal, and then Bloomberg, reported that BBD was near to winning a big order for 75+50 from Delta Air Lines for its C Series.
Reuters reported that BBD rejected demands from the Canadian federal government in Ottawa as conditions for investing US$1bn in the company. (Officials tried to walk this back some, saying talks continue.)
The head of corporate strategy for BBD came forward to forcefully argue for the investment as good for taxpayers, breaking what largely has been a cone of silence over the perceived merits of a deal
The US$1bn the Quebec provincial government agreed to invest last year remains unfunded.
BBD stock, which last year dropped to less than C$1, threatening the listings on the Canadian exchanges, jumped to C$1.75 at one point in anticipation of a Delta order.

While on balance, it seems likely Delta will order the C Series, Bombardier has been down this road before. Only a few months ago, the market and others were excited over the prospect that BBD was close to landing an order from United Airlines, only to see Boeing swoop in and grab the deal.

Summary

This is the second try at a major contract with Delta Air Lines.
The primary competition is against Embraer, not Airbus or Boeing.
We revisit our Skyline Risk Assessment, dormant for the extended period in which BBD had no sales of the C Series.

Pontifications: Airbus, Boeing, Bombardier and export credit support

By Scott Hamilton

April 18, 2016, © Leeham Co.: Export Credit for airliners was back in the news last week, with the US taking aim at the prospect of Canada’s agency supporting sales of the Bombardier C Series to the US and France and Germany suspending export credit support for Airbus airplanes.

The week before, Dennis Muilenburg, the CEO of The Boeing Co., testified before Congress that although the US ExIm Bank was reauthorized, Senate action—or more accurately, inaction—on confirming members of the ExIm Board of Directors has kept the agency shut down for new deals. There isn’t a quorum of members on the Board to approve new deals.

37 Comments

Posted on April 18, 2016 by Scott Hamilton

Airbus, Boeing, Bombardier, CSeries, ExIm Bank, Pontifications

737-7, 737-700, A319, Airbus, Boeing, Bombardier, C Series, Charlie Brown, CS300, Dennis Muilenburg, ExIm

Can Bombardier extend CS300 to a CS500?

By Bjorn Fehrm

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Introduction

April 14, 2016, ©. Leeham Co: Bombardier is working hard to get additional mainline airline customers for its C Series project. The latest discussion is whether Delta Air Lines would replace its fleet of Boeing MD-88s with the C Series.

Figure 1. C Series largest model, CS300. Source: Bombardier.

In this context, it’s also discussed if the largest model, the CS300, Figure 1, is large enough for Delta. This aircraft seats 135 passengers in a two class configuration and up to 160 passengers in an all economy high density version.

The question is whether this is sufficient for Delta and other mainline customers, or if a still larger version is needed in the program, the oft-discussed CS500. We decided to use our proprietary aircraft model to see if a CS500 would be straight forward for Bombardier to develop, should Delta or any other customer ask for a three model C Series program.

Summary

The C Series aircraft program was developed with the CS300 as the main model. The wing, engine and landing gear were dimensioned with the CS300 in mind.
The CS100 is a shrink of the CS300, and not vice versa (the CS300 a stretch of the CS100).
A tentative CS500 stretch if therefore a first stretch of the program’s main model and not a double stretch of a CS100.
This is evident when one starts to analyze how a CS500 would be designed. There are rather modest changes that need to be done to create an extended model that seat up to 180 passengers.

6 Comments

Posted on April 14, 2016 by Bjorn Fehrm

Airbus, Boeing, Bombardier, Comac, CSeries, Delta Air Lines, E-Jet, Embraer, Irkut, Pratt & Whitney, Premium

737, 737 MAX, A320, A320NEO, Airbus, Boeing, Bombardier, C919, Comac, CSeries, E-Jet E2, Embraer, MC-21, Pratt & Whitney

Alcoa lowers guidance, cites slowing jet sales, production ramp up

April 13, 2016, © Leeham Co.: Alcoa, a major supplier to Airbus and Boeing, lowered its 2016 guidance on anticipated lower demand for aluminum on lower orders for legacy commercial airliners and a slower than expected transition to new airplanes.

In a first quarter earnings call Monday, Alcoa didn’t specify which of the Big Two OEMs it was thinking of, or whether these might have been Bomabrdier and Embraer, for which it also is a supplier. But Sam Pearlstein, the aerospace analyst for Wells Fargo, believes it is Airbus and the A320/A350 programs.

“Alcoa reduced 2016 aerospace global sales growth guidance to 6-8% from 8-9% with large commercial aircraft growth now expected to be about 9% (vs. 15% previous forecast) largely due to lower orders for legacy models and a ”more careful” ramp-up of new models (which we presume means A320NEO and A350),” Pearlstein wrote in a note published yesterday.

8 Comments

Posted on April 13, 2016 by Scott Hamilton

Airbus, Boeing, Bombardier, Embraer, Pratt & Whitney

A320NEO, A350, Airbus, Alcoa, Boeing, Bombardier, Embraer, Geared Turbo Fan, GTF, Pratt & Whitney, Sam Pearlstein, Wells Fargo

Why Boeing won’t take a charge on 787s

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Introduction

Boeing 787-9. Source: Boeing.

April 11, 2016, © Leeham Co.: Boeing has $29bn in deferred production costs and another $3bn in deferred tooling costs for its 787. The accounting block, for its program accounting, is a record 1,300 aircraft. Many Wall Street analysts are skeptical whether Boeing will ever recover the huge deferred numbers.

Boeing insists it will.

Still, taking a charge of some number—as it has done twice for the 747-8 and twice for the 767-based KC-46A—is something Boeing repeatedly insists it doesn’t need to do.

Why not?

There are a few key reasons, say Wall Street analysts who follow Boeing: revenue, cash flow and the stock price.

Summary

Bank of America Merrill Lynch estimates Boeing needs to post a profit of $30m on each of the remaining 900 787s to be delivered to recover the deferred costs. LNC figures this number is higher.
Pricing pressure from Airbus makes it difficult to obtain this profit.
The deferred costs limit Boeing’s ability to price down to meet Airbus’ offers to customers.
Credit Suisse figures Boeing can recover only some $22bn of $29bn in deferred production costs.
Boeing warns in SEC filings a forward loss might be required.
But no forward loss is likely unless revenue falls short.

1 Comment

Posted on April 11, 2016 by Scott Hamilton

air force tanker, Airbus, Boeing, Bombardier, CSeries, Pacific Northwest Aerospace Alliance, Premium

747-8, 787, A330ceo, A330neo, A350-900, Airbus, Bank of America Merrill Lynch, Boeing, Credit Suisse, Dennis Muilenburg, Jim McNerney, KC-46A, Pacific Northwest Aerospace Alliance, Ray Conner, Richard Aboulafia, Rob Spingarn, Ron Epstein, Teal Group, The Seattle Times

PW Canada continues next-gen turboprop development despite airplane demand uncertainty

Pratt & Whitney Canada’s next generation turboprop. Source: PWC. Click on image to enlarge.

March 24, 2016, © Leeham Co.: Pratt & Whitney Canada (PWC) continues development of the next generation turboprop engine, even as low oil prices reduce the attractiveness of turboprop airplanes.

Few believe oil prices won’t creep back up over time, once again making prop-jets attractive once again. The ancillary question is what’s next for this type airplane? An entirely new, clean-sheet design? A 90-100 seat turboprop airplane? Or retrofitting this next-gen engine on today’s turboprop airliners?

Summary

PWC’s new engine could be fitted to a new airplane design or retrofitted to today’s Bombardier Q400 and ATR series airplanes.
The 20-year market is small.
The 20-year market for a 90-seat turboprop is smaller still.
Embraer is evaluating whether to reenter the turboprop market, 15 years after the last mass-produced Brasilia rolled off the assembly line.
GE is developing a turboprop engine and at least three countries have interest in this sector.

1 Comment

Posted on March 24, 2016 by Scott Hamilton

ATR, Bombardier, E-Jet, Embraer, Mitsubishi, Pratt & Whitney

ATR, Bombardier, ETP, Frederic Lefebvre, Japan Aircraft Development Corp., MA-700, Mitsubishi, MRJ, Pratt & Whitney Canada, PWC, Q400

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Leeham News and Analysis

There's more to real news than a news release.

Leeham News and Analysis

737-7X, 737-10 studies illustrate Boeing weakness in single-aisle market

Pontifications: Earnings week for Airbus, Boeing, Bombardier and Embraer

Can Bombardier extend CS300 to a CS500? Part 3.

Can Bombardier extend CS300 to a CS500? Part 2.

Bombardier’s Delta deal looking good, but don’t celebrate yet

Pontifications: Airbus, Boeing, Bombardier and export credit support

Can Bombardier extend CS300 to a CS500?

Alcoa lowers guidance, cites slowing jet sales, production ramp up

Why Boeing won’t take a charge on 787s

PW Canada continues next-gen turboprop development despite airplane demand uncertainty

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