Odds and Ends: Delta’s small jet deferral and other things

  • Delta Air Lines deferred the highly anticipated order for the 100-150 seat airplane due to worries about taking on too much debt in the current economic environment. Multiple sources say Bombardier’s CSeries had been favored over the Embraer E-195.
  • Delta’s RFP from Boeing didn’t include the re-engined airplane because at the time of the RFP, the 737RE didn’t exist. But we are 99% certain conversion rights will be in the final contract.
  • The Airbus A321neo does have its promised EIS until 2017, and Airbus was unlikely to be able to offer production slots for this model until 2019. Delta wants all aircraft delivered by 2018 and Airbus couldn’t meet this with the A321 Legacy, either. Plus the price was higher.
  • At 10:50am PDT our readership YTD exceeded all of 2010.

Delta to order 737-900s, small airplane order deferred

Bloomberg News just tweeted Delta Air Lines is to order 100 Boeing 737-900s. WE have three sources saying the same, though without the number.

Boeing won the deal over the Airbus A320/320neo due to earlier delivery positions and price, we are told.

Update, 9:50am PDT: We heard last week that Delta may defer ordering the 100-150 seat airplane and while we’ve been working to confirm this, Flightblogger beat us to it.

UPDATE 12:46 PM ET: CONFIRMED – Delta will order 100 737-900ER aircraft, the largest single order for the type. Further, industry sources confirm that a selection of a smaller narrowbody that pitted the CSeries against the Embraer E-195 has been delayed, as the airline does not see the same level of urgency to replace its 757s starting in 2013. The airline’s aircraft evaluations excluded consideration of the re-engined narrowbodies from Airbus and Boeing. FULL STORY SHORTLY

Embraer ponders new, 2,000nm airplane

 

 

Embraer is pondering a new, 2,000nm airplane in the 130-150 seat class. Here is the Flight Global story.

The interesting thing about this is that Bank of America’s Ronald Epstein characterizes the CSeries as having too much range with 2,950nm, which gives it US trans-continental operations. In fact, Bombardier offers two versions: the 2,950nm range XT and the 2,200nm standard.

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Analysts opine on Embraer, Bombardier

Goldman Sachs and JP Morgan issued notes this week that give some opinions on rivals Embraer and Bombardier:

Goldman Sachs: Embraer

July 31: We believe Embraer remains the best, yet most ignored, story in our commercial aerospace coverage. We highlight the following key incremental takeaways from the EPS report and conference call: (1) 2H regional jet new orders could equal or surpass 1H (even though 1H was a record) which would mean full-year 2011 book-to- bill would surpass 2.0X. We think demand for the E-190 right now is stronger relative to current supply than any aircraft in the world. (2) Tone on business jet was noticeably more positive for the first time in a while, with particular strength noted on the Phenom 300. We think ERJ can close to triple its business jet revenue between now and 2015. (3) Defense opportunities are occurring faster than expected. We continue to see very large upside potential in ERJ’s Defense segment given initiatives around the World Cup and Olympics and how large the KC-390 program will be. (4) Management sounds confident it can continue to expand margins despite the Real, and possibly meaningfully if the Real were to reverse. (5) Next-gen product   strategy decisions are likely made by year-end, and it sounds like one of either a clean sheet or E-195 stretch / re-engine will occur (we believe the case for the latter increasingly makes sense).

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American is the launch customer for 737RE–but not the launch operator

American Airlines is the launch customer for the Boeing 737 re-engine, but it’s not the launch operator.

As American’s 10Q SEC filing revealed the day the order was announced, AA won’t take delivery of the first 737RE until 2018. EIS is planned for 2016 or 2017.

We asked American about this. Sean Collins, director of financial communications for the airline, confirmed American doesn’t want to be the first operator of the aircraft.’

“We don’t like to be the first in line for a new airplane,” he said. “There is a learning curve to be worked out. We like to let that process work its way out. That’s the approach we’ve taken.”

American’s status as the launch customer but not the launch operator is somewhat ironic. Bombardier came under a great deal of criticism for having launch customers but not launch operators for its CSeries (a point rectified at the Paris Air Show, with an unidentified network carrier placing an order to become the launch operator). In fact, Boeing’s Nicole Piasecki, VP of Business Development and Strategic Integration, made the same criticism toward BBD in Boeing’s pre-Paris Air Show press briefing.

While BBD’s critics point to the facts that the CSeries is an entirely new airplane, using new materials, production techniques and suppliers, the 737RE is intended to be a reasonable straight-forward derivative of a well-established airplane. That American is sufficiently wary of being the launch operator is a statement of some kind.

We’ll leave it to analysts and observers to make their own interpretations.

But American’s decision leaves Boeing in the position of being able to offer initial delivery slots to Southwest Airlines and Delta Air Lines. Southwest launched 737 derivatives -300, -500 and -700 and has been agitating for two years or more for Boeing to upgrade the 737 or, preferably, proceed with a new airplane. Delta is currently deciding on the 757 replacement, evaluating the 737-900ER and the A321neo. A re-engined -900ER should change the dynamics of this competition a bit.

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For Boeing: when one door closes, another door opens

There’s a saying that when one door closes on an opportunity, another door opens. This is the case with Boeing’s decision to proceed with a 737 re-engine. We first wrote about this in a previous post. Max-Kinglsey Jones of Airline Business picked up the theme in his recent blog.

There’s no question Boeing’s march down the path to re-engining was driven by Airbus, it was embarrassing and it was messy. Having said that, the re-engine frees resources and money to concentrate on getting the 787-9 right, launching the 787-10 and deciding what to do with the 777-300ER to meet the competition of the re-defined A350-1000.

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US airlines ready orders

There has been a rash of articles this week breathlessly focusing on US carriers and the prospect they will order airplanes this year.

This is no revelation, nor is the prospect that Boeing customers might line up and buy from another manufacturer.

We’ve written about this in the past. It appears to be time to revisit the topic.

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The GE Powerhouse and how it wins deals

Those of us who are intimately familiar with commercial aviation will find this as no news. For those who don’t deal in this business every day, this will provide a better understanding of how deals are won in aviation.

This is the story of the GE Powerhouse and how family ties combine to enable GE Aviation and CFM International to win deals that might otherwise go to competing engines.

None of what we’re about to tell you is to suggest that the GE/CFM engines are inferior (though, obviously, some might dispute this), because they are superb engines. But a telling comment came from CFM’s Sandrine Lacorre, product marketing director, who said at a UBM Aviation conference, “What we can’t do technically, we will do commercially.”

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Odds and Ends, Post-Paris Air Show 2011

Here are our closing views of the PAS:

Boeing

Boeing did very well at the show. We know the headlines almost universally say Boeing had a bad show (which it didn’t) and was trounced by Airbus (which it was), but people easily overlook comparing Boeing’s performance vs. previous air shows.

Boeing announced more than 140 orders worth some $22bn–about equal to the 2009 Paris Air Show. By anyone’s standards, this ain’t shabby. Boeing often announces low numbers at air shows, claiming it doesn’t hold orders for the shows and Airbus does. We regard this as so much poppycock, because we know customers drive announcements and both Airbus and Boeing hold announcements for air shows at customer requests.

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Odds and Ends at the Paris Air Show, Day 4

Our final Odds and Ends as we head back to Seattle Friday.

  • Marc Birtel, one of the corp-com guys at Boeing, asked us what we were impressed by at the Air Show (this was Tuesday, before the Airbus landslide of NEO orders). We must be getting too jaded or too familiar with Air Shows, because we said, “nothing comes to mind.” On reflection, these impressed us: Boeing’s display of technology in the form of the two 747-8s, a 787, a 737-700 with the Sky Interior; the ever-impressive A380 flying display; the Breitling Constellation; the Bombardier “igloo” Pavilion (well, its contents, actually) was way-cool; and of course the impressive number of NEO orders.
  • We were also impressed by the laid-back, almost shoulder-shrugging at attitude of Airbus CEO Thomas Enders. We interviewed him shortly after the press conference summarizing the best Airbus Air Show ever and the historic AirAsia order, the largest ever in commercial aviation. He seemed suitably excited in the press conference but afterward he could have been ordering a cup of coffee. (He did consent to a glass of champagne). The orders were all well and good, he said, but now Airbus had to produce and deliver them. Today’s news was already yesterday, for Enders; there were other things to be concerned about.
  • We opined over at AirInsight about the increasing nasty battle shaping up between Airbus and Bombardier.
  • See this story about John Leahy dancing to seal the AirAsia deal. CEO Tony Fernandes was very funny when telling it and words can’t do it justice. But Leahy dancing is not a vision we want to have. But it’s better than the story of his old boss, Jean Pierson, dropping his pants to seal a deal. Now that’s not a vision to go to bed with.
  • The saying is “Paris in the springtime.” We can say, “Paris in June sucks.” It rained (sometimes heavily) for three of the four days at the air show. In 2009, it was two out of four.