Leeham News and Analysis

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

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

Odds and Ends: C919 EIS in 2020, says consultant; Qantas goes on diet; BBD tables Russia; Swiss not Cseries launch operator

C919/ARJ21: Aviation Week reports that the COMAC C919 might fly be the end of next year and that EIS may be in 2018.

However, Michel Merluzeau, of G2 Solutions in Kirkland (WA), predicts the EIS won’t happen until 2020. Speaking last week before the British American Business Council-Pacific Northwest unit conference in Seattle, Merluzeau said that after a recent trip to Shanghai, where COMAC is, he now sees EIS in 2020, some four years late and 12 years after the program was launched. The C919 competes with the Airbus A320/321 and the Boeing 737-800/8 and 737-900ER/9.

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 22 Comments

 Posted on November 3, 2014 by

 Airbus, Airlines, Boeing, Bombardier, CFM, Comac

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Republic Air once again raises doubts about CSeries order, on eve of BBD’s 3Q earnings call

Republic Airways Holdings, a launch customer for the Bombardier CSeries with 40 orders and 40 options for the CS300–the order that prompted Airbus to proceed with the A320neo program, which itself forced Boeing into the 737 MAX–once again raised doubts about the future of its order.

In its 3Q2014 earnings call Oct. 29, on the eve of Bombardier’s own 3Q call on Oct. 30, Republic CEO Bryan Bedford said two carrier certificates would be needed for Republic to operate the CSeries. Republic is moving toward one certificate from multiple certificates to cut costs and simplify operations.

In a transcript of the earnings call prepared by Seeking Alpha, Bedford addressed the CSeries in response to an analyst question:

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 10 Comments

 Posted on October 30, 2014 by

 Airbus, Boeing, Bombardier, CSeries

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CASM Paradigm: Lower Seat Mile Cost or Higher Yield; Evaluating the GOL competition

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Introduction

As Brazil’s budget airline GOL reportedly evaluates whether to acquire 20 Boeing 737-7s or Embraer E-195 E2s, the principal of the “CASM Paradigm” is a concept worth examining.

Leeham logo with Copyright message compactThis head-to-head evaluation of the E-195 E2 and the 737-7 MAX is a rarity. Typically the head-to-head involves the Bombardier CS300 and the Airbus A319neo. All three have the same seating capacities. The E-195 E2 has slightly fewer passengers than the 737-7 with similar seat pitch.

The competition is also what might be seen as a contrary competition. Airframers agree: the airline industry is upgauging. Capacity discipline, long elusive until after the global financial collapse of 2008, has been driving load factors higher. But lowering unit costs, or the Cost per Available Seat Miles (CASM) has long been the principal measure by which airlines, OEMs and aerospace analysts measure efficiency.

Although Trip Costs of aircraft operating over a route is important, the trend toward upgauging at all levels clearly is the driving force.

It's an age-old debate: the cost per available seat mile (CASM) vs trip cost. CASM typically wins, and the airline industry is migrating toward larger aircraft. Embraer, not surprisingly, thinks this has gone too far. Graphic: Embraer, reprinted with permission.

Figure 1. It’s an age-old debate: the cost per available seat mile (CASM) vs trip cost. CASM typically wins, and the airline industry is migrating toward larger aircraft. Embraer, not surprisingly, thinks this has gone too far. Graphic: Embraer, reprinted with permission. Click on image to enlarge.

Embraer takes a different view, arguing that trip costs and a smaller airplane should trump the CASM obsession. A smaller airplane will mean higher yields, EMB says. A larger airplane provides lower trip costs but drives yield lower.

We visited Embraer’s headquarters earlier this month and received a full briefing on what EMB calls the CASM Paradigm. In our report today, we detail the presentation and discuss other considerations beside CASM vs Trip Costs that drive the size of the aircraft acquired.

Summary

  • The CASM Paradigm becomes a vicious, circular cycle, driving airlines to larger aircraft but lower yields.
  • Extra seats on larger aircraft mean lower unit costs but at the cost of profits.
  • Scope Clauses remain an issue in the US.
  • Connecting traffic, pay scales also are issues.
  • We analyze the operating costs of the E-195 E2 vs the 737-7.
  • We discuss the GOL competition.

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 Posted on October 26, 2014 by

 Airbus, Boeing, Bombardier, CFM, CSeries, Embraer, Leeham News and Comment, Pratt & Whitney, Premium

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E-Jet, the project that shaped Embraer

By Bjorn Fehrm

Introduction

In a recent visit to Embraer in Brazil we got a thorough brief on the background and decision making around the E-Jet and E-Jet E2 programs. We have written about these programs before but we will now cover how they came about, what was the program objective when the decision was taken and how it panned out. Both programs have had and will have a profound influence not only on Embraer but the whole civil aviation segment between 70-150 seats. It is worth looking into how Embraer, once an also-ran in the regional market, rose to the top three spot in civil aviation after Airbus and Boeing and how EMB intends to stay there.

Summary

  • American Airlines was part of changing history in regional jets, long before in single aisle.
  • E-jet started as a product program and soon put Embraer on a steep learning curve how to support an E-jet in the market above 50 seat regional jets.
  • Embraer today rates their support second only to Boeing and Airbus.
  • The requirements for the mid-life update of their E-jet, the E2, is all about delivering a mature product. This has shaped all aspects of the program, from cooperation with suppliers to how testing and qualification is done.

KLM E-jet

Figure 1. KLM Cityhopper E-jet taking off. Source: KLM

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 6 Comments

 Posted on October 20, 2014 by

 Airbus, American Airlines, Boeing, Bombardier, CSeries, Embraer, Embrarer, GE Aviation, Pratt & Whitney

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Mitsubishi rolls out MRJ90

Mitsubishi rolled out its MRJ90 regional jet, the first passenger airliner to be produced in Japan since the YS-11 turbo-prop in 1962.

The MRJ90 challenges the Embraer E-175/190 and E2 and the Bombardier CRJ900. The smaller MRJ70 won’t be developed until after the MRJ90 is well on its way. The MRJ90 faces six months of ground testing before the first flight test. Entry into service is now scheduled for June 2017, some four years late.

The MRJ90 is a 2×2 configuration with 18 inch wide seats and aisle, making it nearly as wide as the E-Jets, which are fractionally wider. The MRJ will have better passenger comfort than the CRJ, a ground-breaking airplane in its day but increasingly outmoded when it comes to passenger comfort.

The Mitsubishi is a clean-sheet design, but Embraer claims its new E-Jet, with a new wing, the same Pratt & Whitney GTF engines, a new fly-by-wire system, a smaller tailplane, and aerodynamic improvements, will nonetheless beat the MRJ’s economics.

Regardless, we believe the MRJ and Embraer will dominate the 70-99 seat market. BBD’s share of this sector continues to decline. The Sukhoi SSJ100, while posting reasonably good orders, is and will remain handicapped by its Russian lineage and overhang of Russian politics. Production and delivery rates haven’t lived up to promises.

Mitsubishi, while discovering that being an airplane integrator is much more difficult than being a supplier (it designed and built the wings for the Boeing 787, which produced challenges in its own right), should in the end produce a solid airplane.

The company has been looking into this long enough. We recall that at least 15 years ago Mitsubishi made the rounds of US regional airlines getting input about what a new airplane might be. At that point, the 50-seat market was still viable. We were retained by a consultant to Mitsubishi to facilitate a meeting with a regional airline–so we know how far back this goes, and what Mitsubishi was asking. (We thought at the time Mitsubishi needed to go “up,” rather than do a “me too.”)

Mitsubishi has already talked about an MRJ100, but there are no firm plans.

 8 Comments

 Posted on October 20, 2014 by

 Boeing, Bombardier, Embraer, Mitsubishi, Pratt & Whitney, Sukhoi

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Indigo order raises questions of demand in India, elsewhere

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Introduction

The Indigo order announced this week for 250 Airbus A320neos raises once again questions of whether Indian airlines in particular and the greater Asian region in general are over-ordering airplanes.

We’ve written in the past that we believe Asia and India are dicey markets for which a shakeout is yet to come.

The USA entered deregulation in 1979/80. There was a proliferation of new airlines that started service–by some counts, more than 200. Nearly all failed through a combination of poor business plans, under-capitalization, mergers, economic and travel collapses due to Middle Eastern wars, fuel price hikes and other factors.

Even legacy airlines collapsed. Eastern Airlines, Pan Am, TWA and Braniff–all storied names in US commercial aviation–are gone. (The new Eastern Airlines hopes to start service this year, 23 years after the original one ceased operations.) Northwest Airlines and Western Airlines merged out of existence.

The US airline industry is down to American, Delta and United as the holdovers from a by-gone era. Southwest Airlines now carries more domestic passengers than any of these legacies. Alaska Airlines remains. jetBlue, Spirit Airlines and Frontier Airlines are a new breed of Ultra Low Cost Carriers (ULCC).

In Europe, a shakeout of airlines has occurred but arguably it has hardly gone far enough. During our trip last week to Brazil to visit Embraer, officials pointed out that there are 40 airlines in Europe serving a market similar in size to the USA, where essentially there are 10 carriers.

In Asia and India, the shakeout is only beginning.

Summary

  • Shakeout of airlines in US has occurred.
  • Shakeout in Europe has occurred, but it hasn’t gone far enough.
  • Shakeout in Asia is only just beginning.
  • “LCC Evolution” is shrinking.
  • ASEAN region is over-ordered.

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 25 Comments

 Posted on October 17, 2014 by

 Airbus, Airlines, Boeing, Bombardier, Embraer

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Embraer becomes #3 commercial aircraft company on E-Jet families

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Introduction
Embraer is now the #3 commercial airplane manufacturer, after Airbus and Boeing and supplanting Bombardier, capturing 50% of the orders and 60% of the deliveries in recent years.

We examined the relevancy of the 100-149 seat sector Monday. Embraer is playing an increasingly important role in this sector.

The Brazilian company entered the regional jet field after Bombardier, designing its ERJ (Embraer Regional Jet) to go up against the BBD CRJ (Canadair Regional Jet), at a time when the latter created an entirely new market.

Deciding that the ERJ was no longer competitive, EMB rolled the dice and in the 1990s designed a clean-sheet jet, the E-Jet, that brought mainline cabin standards to the 70-120 seat sector.

More recently, with its CRJs outclassed by the E-Jets, Bombardier took the gamble and designed a clean-sheet CSeries for the 100-149 seat sector, a decision that still draws controversy. With the E-Jet facing economic obsolescence by BBD’s move, this time Embraer decided to bypass a new design and went with an extreme makeover, the re-engined, re-winged E-Jet E2.

Summary

  • Embraer’s E-Jet E2 is less than 50% common to the legacy E-Jet.
  • EMB claims the E2 is as efficient as a clean-sheet airplane for a fraction of the cost to develop.
  • EMB has more than 500 orders and commitments for the new E2.
  • Airbus, Boeing are also-rans in the 125-149 seat sector.
  • Mitsubishi, Sukhoi gaining strength.

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 3 Comments

 Posted on October 15, 2014 by

 Airbus, Boeing, Bombardier, CSeries, Embraer, Mitsubishi, Sukhoi

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“We need more than one family,” says Embraer COO

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Now open to all Readers. (Nov. 29, 2014)

Introduction
Oct. 15, 2014: Embraer had the opportunity to design a clean-sheet airplane as a successor to the E-Jet to respond to the Bombardier CSeries, with the 100-110 seat CS100 a direct competitor to the E-190/195.

But after Airbus and Boeing launched the A320neo and 737 MAX families, including the small A319neo and 737-7 MAX, officials chose the more conservative play to re-engine the E-Jet at an estimated cost of $1.7bn. An entirely new airplane meant up-sizing to be directly competitive with the CS300 and the Baby Airbus and Boeing. This would have been a crowded field that didn’t make sense.

That said, this is an industry that requires long-term planning. Luis Carlos Affonso, SVP of Operations and COO Commercial Aviation, says Embraer needs more than one family of airplanes. The question is, what becomes the next family.

Summary

  • Re-engining the E-Jet was the best bet for Embraer.
  • Strong customer base provides ready market for the E-Jet E2.
  • Another family of airplanes could be a turbo-prop, taking advantage of Bombardier’s weakeness; or
  • Another family would mean up-gauging into the 130-150 seat or higher sector, the traditional domain of Airbus and Boeing.

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 4 Comments

 Posted on October 15, 2014 by

 Airbus, ATR, Boeing, Bombardier, Pratt & Whitney

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Leeham News launches Premium plan, companion to free content; engineer joins staff

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Leeham News and Comment (LNC) today launched a Premium subscription plan as a companion to free content.

LNC has provided news and commentary since February 2008, providing industry-leading information and insightful analysis, principally focuses on Airbus, Boeing, Bombardier and Embraer but also including emerging challengers to the Big Four OEMs, the leading engine manufacturers, suppliers and airline news.

LNC has been a leading resource of news and comment throughout the commercial aviation industry and its professional followers in the aerospace supply chain, investment analysts and the media.

Since the first of this year, LNC increasingly provided more and more technically-based content. This content is valuable and supplements the industry-leading news and reporting that has been provided since 2008. We are pleased to announce the addition to our staff, Bjorn Fehrm, who focuses on technical evaluation and complements the strategic expertise of Scott Hamilton, the founder of LNC and Leeham Co. consultancy.

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 15 Comments

 Posted on October 14, 2014 by

 Airbus, Airlines, Boeing, Bombardier, CFM, Comac, Embraer, Irkut, Mitsubishi, Pratt & Whitney, Rolls-Royce, Sukhoi

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Assessing the 100-149 Seat Sector

Introduction
Oct. 12, 2014, (c) Leeham Co.: The 100-149 seat market sector has long been criticized as irrelevant because of a string of poor-selling aircraft. Boeing officials even labeled this a Bermuda Triangle. The critics fail to recognize, however, that except for the Bombardier CSeries and the Embraer E-195 stretch based on a clean sheet design, there hasn’t been an airplane specifically designed for this sector since 1983. That was the British Aerospace BAe-146, which despite being powered initially by poor engines and having a cramped cabin, sold moderately well.

The early derivatives, the Boeing 737 Classic, and the McDonnell Douglas MD-80, did well. (The MD-80, while capable of seating up to 172 in shoe-horn configuration, was principally operated within the 130-150 seat layout.) But as fuel prices increased, derivatives began to lose their appeal because they weren’t optimized for the market. Engines then in use couldn’t keep up with the rising cost of fuel and airframes designed in the 1960s/70s/80s were no longer aerodynamically efficient as required for the changing fuel environment.

Summary
• Until the Bombardier CSeries and Embraer E-Jet, there hadn’t been an airplane specifically designed for the sector since 1983.
• Engine technology and airframe aerodynamics didn’t keep up with the demands of rising fuel prices for derivative designs.
• Airbus and Boeing are ceding the sector.
• Bombardier and Embraer will “own” the sector.
• There is a valid market for the 100-149 seat sector.

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 25 Comments

 Posted on October 12, 2014 by

 Airbus, Boeing, Bombardier, CSeries, Embraer

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