Odds and Ends: China trojans; China is the biggest threat; EADS ponders own bank

China trojans: we’re not talking about condoms, either. This item from Defense Tech is pretty alarming. And while this piece is also pretty alarming, though it isn’t about China. Or maybe it is. The chips are made by the same company, sourcing them in China.

China is the biggest threat: So says Jim Albaugh, CEO of Boeing Commercial Airplanes. Aviation Week has this article about an Albaugh appearance in the UK.

EADS ponders its own bank: This would give it access to low-cost funds and protect against the Euro, officials say. Here’s an article. Our first thought: since the WTO ruled Airbus launch aid was illegally structured because of below market rates (but did not rule the aid itself illegal), this returns EADS/Airbus to the low-cost funding access. Clever. Wonder what Boeing thinks about this?

Odds and Ends: Airbus Innovation Days, CSeries, SC-787-1 first flight

Airbus Innovation Days: Thursday wraps up the annual Airbus press briefings. All stories are embargoed until 5pm Toulouse time Thursday. That’s today. Or tomorrow. Depends on what time zone you’re in and right now we’re still pretty confused about that. Meantime:

Republic Airways suggests plan for CSeries: CEO Bryan Bedford, whose comments in the last year have done Bombardier no favors, seems to have an intriguing idea, outlined in this story. The airplane is too big to operate for US carriers with Scope Clauses, but the economics provide a highly efficient aircraft for LCCs. So Bedford suggests operating one aligned with alliances.

Southwest, Delta and Boeing Capital: By now readers probably saw the news of a plan for Southwest Airlines to sublease the Boeing 717s from the AirTran fleet to Delta Air Lines. Most of the 88 planes are leased from Boeing Capital Corp by AirTran. This deal has been bandied about almost from the day Southwest agreed to buy AirTran. It’s entirely in keeping with the Delta management (nee Northwest Airlines management), who like to acquire cheap, older aircraft to keep cap-ex costs down.

SC-787-1 First Flight: South Carolina’s first 787 made its first flight yesterday. Or was that today? (We’re still confused by the time zone.) See this story.

Odds and Ends: KC-787 unlikely; Qatar on A380, A350 and CSeries; more Airbus-Boeing bickering

KC-787?: Defense News has this article quoting Jim Albaugh that the prospect of a KC-787 is unlikely.

Qatar on Airbus, Bombardier: Qatar’s Akbar Al-Baker says he won’t take the Airbus A380 without a permanent fix for the wing L-brace cracks. In the same story, Al-Baker comments on the redesign of the A350. Al-Baker also said talks for the Bombardier CSeries are on hold for 6-12 months. Details in this story.

More Airbus-Boeing bickering: It’s tiresome enough that Airbus and Boeing publicly bicker over the A320 v 737, neo v MAX and 747 v A380. Now they are in a public pissing match over the 737 BBJ and the Airbus ACJ business jets. Both sides need to act like the world-class companies they are.

Here’s to flying British Airways: No comment necessary.

PW to dual-source neo engine manufacture

Pratt & Whitney will dual source manufacture of the A320neo GTF engine so there is no single point of failure, an official said at the PW Media Day in Hartford.

Tom Mayes, general manager of the company’s Middletown (CT) facility, also said that a decision hasn’t been made for a production location of the GTF version for the Mitsubishi MRJ. PW is assembling the Bombardier CSeries version at Montreal Mirabel Airport.

PW CEO David Hess said the GTF, offered on the A320neo, the CSeries, MRJ and the Irkut MC-21, will drive PW’s revenues from $12.7bn last year to twice that by 2020. Over the life of the program, Hess estimates the GTF will produce $325bn in revenues.

There currently is a backlog of more than 2,600 GTFs.

Ground and flight testing is validating promises about GTF performance, Hess told the international media: 16% better fuel consumption vs today’s engines, lower noise and on-target maintenance forecasts.

Odds and Ends: Taking airplanes in on trade; Q400 scores

Taking airplanes in on trade: Much is being made of Boeing taking five Airbus A340-600s in on trade to secure an order for 20 777-300ERs from China Eastern. While trade-ins are not common, neither are they unknown. Boeing has done this before, including what was then a particularly controversial deal: taking brand-new A340s off the hands of Singapore Airlines even before they had been delivered as part of a 777 deal. Those A340-300s went straight to Boeing from Airbus, much to the consternation of John Leahy at the time.

The OEMs don’t like to take airplanes in on trade; after all, they are in the business of selling new airplanes, not used ones, but Airbus, Boeing and Bombardier all have active used airplane units to remarket aircraft they have in their own portfolios–usually originating from their customer financing.

Bombardier wins Q400 deal: WestJet of Canada will order 20 Q400s and option 25 more in what was a hotly contested deal between ATR and Bombardier. Although many believe this was a slam-dunk for Bombardier, the competition was intense; WestJet sent the parties back to re-price the deal late in the game.

This order gives BBD 28 firm and 45 options for the Q400 so far this year, compared with a mere seven in 2011.

The Russians Are Coming, the Russians Are Coming! Boeing imports Russian engineers to work in the Seattle area, much to the consternation of SPEAA, Boeing’s engineer’s union. Now the practice has caught the attention of a US Senator.

Outsourcing is a sore point for Boeing’s unions. While Boeing says it does so to reduce costs and to offset work in exchange for sales, there is a larger issue: the US simply doesn’t produce enough engineers to meet demand, and 50% of Boeing’s engineers reach retirement age in the next five years or so. We don’t like Boeing using Russian or Chinese help to produce airplanes–after all, these two countries are developing competitors to Boeing aircraft and it strikes us as pretty silly to help your competitor (why not hire French or German engineers, for Pete’s sake?). But the USA’s failure to place a high priority on developing engineers is a national disgrace and Boeing has to find the help where it can get it.

ISTAT Part 3: Lessors Panel: GECAS, ILFC, AWAS, Air Lease Corp

The final panel at the ISTAT meeting is the much-anticipated lessors’ panel consisting of:

Jeff Knittle, president of CIT Aerospace, moderator;

Henri Courpron, Chairman of ILFC;

Ray Sisson, CEO of AWAS;

Norman Liu, CEO of GECAS; and

Steve Udvar-Hazy, CEO of Air Lease Corp.

Paraphrasing:

HC: All hell broke loose in Europe and upended aviation. Looking at consolidation in Europe. America now had a lot of stability and discipline, and we’ll see that happen in Europe. More fuel efficient aircraft will be required in Europe. I see a lot of opportunity and challenges to come in Europe.
NL: Asia has been by far our most active market, with 70% of our airplanes going there. You have to look at different parts of Asia–you can’t generalize. LCCs in Japan. Always something going on in China. SE Asia, good organic growth. Philippines and Indonesia very interesting. South Asia has had travails.
SUH: North America is going through an interesting time. Canada is a duopoly situation with new Asian and Middle Eastern carriers entering the market. The US is very mature having gone through a lot of trial and tribulation, more disciplined [than before]. After 9/11 there was a slow-down in US carriers taking new airplanes. We have a bow wave of a requirement for new fleeting.
RS: Latin America is under-appreciated. We see rapid growth there. By 2015 may be 17%, 20% of our fleet. There is a remarkable amount of demand and opportunities for lessors.

ISTAT Part 2: BBD, EMB, Sukhoi, ATR

Chet Fuller, SVP Commercial, Bombardier

Luiz Chiessi, Director of Marketing Strategy of Embraer

Mark Neeley, VP-Marketing, ATR

John Buckley, VP Business Development, Sukhoi Superjet International

Fuller

  • CSeries weight validated and will be on spec at EIS.
  • Aluminum Lithium is better on fatigue than normal aluminum, much better on corrosion. Combine with composites, D check goes to 15 years. C check improved by 15%.
  • 787 first airplane with All-digital architecture, CSeries is second.
  • Last all-new narrowbody was A320 family.
  • Only aircraft with a 12:1 by-pass ratio; A320neo is 10:1, not sure what ratio Boeing will wind up with on MAX.
  • CSeries has better trip costs than E190, with seat costs of A3320neo. There is no magic here, there is just physics.
  • BBD has on order: 66 CS100, 72 CS300; 124 options, 10 purchase rights, 45 LOIs.

Chiessi

  • Mid-long-haul flights for 70-90 seats increasing in US and elsewhere.
  • 48% of EJet deployment is right-sizing by airlines. 26% for new market development.
  • Will maintain leadership in 70-120 seat segment, not enter into arena of Airbus and Boeing.

Buckley

  • SuperJet International responsible for world product support of Sukhoi for SSJ100.
  • Delivered seven aircraft, another in two weeks.
  • Expect to deliver 23 this year, 42 next year, 60 in 2014, 75-80 total current capacity but can be increased.
  • SSJ100 is only regional aircraft with 2×3, 5 in wider than MD80.
  • 10% less fuel consumption than direct competitor.

Neeley

  • ATR top turbo prop pick in Airfinance Journal investors poll.
  • We’re still making a 50-seat product. We have a family of airplanes.
  • Says ATR 72 has same fuel burn per passengers as A320.
  • One third of all passengers fly under 300 miles.

Republic’s Bryan Bedford emulates U-Turn Al

The CEO of Republic Airways Holdings seems to be vying to be America’s version of U-Turn Al, Akbar Al-Baker, the CEO of Qatar Airways.

Bedford appears to be engaged in a campaign to raise questions about the Bombardier CSeries, for which he has orders and options for 80 CS300s, much the same way U-Turn Al alternatively praises then complains about the Airbus A350, Boeing 747-8F (ordered by Cargolux, in which Qatar owns a third) and the Boeing 787. U-Turn Al has also alternative praised, condemned then praised the Airbus A320neo, Bombardier CSeries and the Pratt & Whitney GTF.

Keeping up with U-Turn Al’s about-faces has been a dizzying prospect.

Bedford praised the CSeries when ordering it but has become increasingly skeptical of the program once he ordered the A319neo (with CFM LEAP engines) in what was a financial bailout of his ailing company being dragged down by Frontier Airlines. The Airbus order raised questions whether Bedford would cancel the CSeries since the A319neo competes with the CS300. Bedford initially said the order would stand. More recently, he appears to be doing everything to cast a shadow over the program.

Read more

Odds and Ends: More on the Ex-Im funding renewal; Boeing studies 757 replacement

Ex-Im: Republicans continue efforts to shut down the Export-Import Bank, a move that would hurt Boeing Commercial Airplanes sales most but which also would hurt other industries as well. Delta Air Lines is the driving force behind the effort to cut off Ex-Im funding. As we’ve previously indicated, rules agreed to last year by Europe and the US changed the pricing model of the Ex-Im guaranteed loans to be market rates, solving a major objection of Delta.

Ending Ex-Im Bank funding would be a dumb idea. It would hurt American business and furthermore, fees generated a net $2bn for the US Treasury in the last five years.

757 Replacement: Boeing is already studying a replacement for the 757 with a loosely targeted EIS date of 2025-2026. This is called the New Airplane Study.

Qatar Airways: U-Turn Al-Baker has U-Turned his way out of the Bombardier CSeries. Although he continues to profess to be interested in the airplane, the first 2 1/2 years of production has now been sold out. Bombardier has moved on to customers it can rely on.

BCI Leasing: Principals of an obscure lessor were found guilty of fraud. This story explains. Here is the press release from the US Attorney’s Office.

WestJet: ATR and Bombardier are waiting for WestJet to make its decision between the ATR-72 and Q400 for the airline’s entry into turbo-prop markets. The Q400 is thought to have the advantage for the longer-range operational requirements. The order could be for up to 40 aircraft. If Bombardier wins, this would follow a recent order for up to 20 Q400s from Eurolot. After a dismal year last year in which BBD sold only seven Q400s (against a net of 119 ATR turbo-props), BBD appears headed for a very good year.