Podcast: 10 Minutes About China’s Commercial Aviation Industry

Jan. 19, 2021, © Leeham News: Today’s edition is 10 Minutes About China’s commercial aviation industry.

China has one airliner in service, a second in flight testing and a third on the drawing board. Production is still a challenge.

We discuss how viable the airliners are and a bit about production–all in 10 minutes.

Outlook 2021: Russia and China

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By Bjorn Fehrm

Introduction

Jan. 14, 2021, © Leeham News: China and Russia are both developing a single-aisle domestic airliner in the A320/737 MAX class, a regional turboprop in the ATR 72 class, and is jointly working on an A330neo/787 widebody competing airliner.

While these are similar development programs, the countries are in very different positions in their markets and industries. China is a five times larger market for airliners than Russia, and its airlines are on the way back from COVID riddled passenger numbers. It has the fastest recovery from COVID-19 of any country and its civil airliner industry is on the rise.

Russia on the other hand has a stagnant market, still hit by COVID-19, and its market and industry have become introverted after a decade of flirting with Western markets and technology.

Summary
  • China and Russia drive almost identical civil airliner projects to replace Soviet-era and Western airliners.
  • While similar in their projects, they are different in their markets and state of industries.
  • China is on the way up (albeit from a low state) to eventually compete on the world market, whereas Russia is falling back to a Soviet-style all Russian state-controlled model.

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Pontifications: Outlook 2021 Series begins today

By Scott Hamilton

Jan. 4, 2021, © Leeham News: Beginning today through next week, Leeham News presents its annual Outlook series for the coming year.

We’ve been doing this for years. In recent years, the Outlook reflected continued growth in commercial aviation. The industry had the longest upward tick in the more than three decades I’ve been involved in the sector.

Not this year. As I wrote before the Christmas-New Year’s holiday period, 2020 was the worst year for commercial aviation I’ve ever seen in 41 years.

This year is the beginning of the end of the COVID crisis. Yes, the vaccines began distribution in December, but large spikes in COVID cases began simultaneously and are predicted to climb higher through the first quarter.

Over the coming days, as LNA provides its Outlook for 2021, readers will see what we believe will happen.

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HOTR: Boeing hopes for break in China order drought after electors vote for Biden:

By the Leeham News Team

Nov. 30, 2020, © Leeham News: Boeing hopes the three-year order drought from China may come to an end next month.

The order, according to market intelligence, would be a boost for the slow-selling 777X. It could also mean new orders for the 787. Orders for the latter dropped significantly enough to prompt Boeing’s decision to shutter the Everett 787 production line next year. Production for the 787 will be consolidated in Charleston (SC).

Dec. 14 is when US presidential electors meet to cast their votes for Joe Biden or President Donald Trump, making official the projected winner. Biden won 306 electoral votes to Trump’s 232 in projections by all the major media. With almost all votes counted—and in some cases, recounted—Biden has 51.1% of the vote to Trump’s 47.2%. Biden received 80.1m votes to Trump’s 73.9m. The margin was nearly 6.2m.

China hasn’t ordered a Boeing airplane since 2017. Trump launched a trade war with China that escalated several times. He charged, without evidence, that China interfered with the US presidential election.

Boeing hopes for a major order from China as early as December. Included would be a sorely needed order for the 777X. (Shown: Boeing 777-300ER.) Photo source: Boeing.

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Pontifications: The risk of closing China to aerospace suppliers

By Scott Hamilton

Nov. 30, 2020, © Leeham News: The Trump Administration this month indicated it might expand its ban on doing business with certain Chinese companies.

The Administration says the additional companies have ties to the military. Included in the listing is COMAC.

Reuters reported the move Nov. 13.

If the Administration follows through during its remaining lame-duck time in power, and if the new Biden Administration doesn’t reverse or modify the plan, the long-term effect could hurt the US aerospace supply chain.

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Pontifications; Does the pandemic change the airliner market dynamics?

By Bjorn Fehrm

October 19, 2020, ©. Leeham News: Airbus and Boeing have dominated the world’s airliner market over the last 30 years. In the next 30 years, will this change?

Before the COVID-19 pandemic, the answer was no. The only viable competitor, the Chinese aircraft industry, would need more time to catch up. But the pandemic has changed the dynamics in the world.

For China COVID-19 is history. For the rest of the World not. China’s society and most noteworthy its travel industry are back to normal. September’s domestic flights were 103.5% of 2019 levels and passenger numbers were at 98% while the rest of the world is busy throttling back network plans from already low levels. We know that airlines in China are stimulating traffic with discounted fares, taking losses in the process. However, they have the backing of the government and it is traffic that ultimately drives demand for aircraft.

The Chinese system handles the crisis magnitudes better than the free world. Will the newfound Chinese self-confidence spread to bootstrapping the in-house air transport industry even further to capture the increased airliner demand?

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Lessors to Take Growing Share of Fleeting the Future

By Kathryn B. Creedy

Air Lease Executive Chair Steven Udvar Hazy expects lessors to play a larger role in aircraft fleeting in the future, according to comments made during yesterday’s Aviation Week Fireside Chat with the lessor.

“I don’t see lessors going below 40%,” he told Air Transport World Editor Karen Walker. “I see it creeping up to perhaps 50% or 55% and that includes operating leases and various other exotic mechanisms.”

Udvar Hazy pointed to the poor financial shape of the world’s airlines which have used all their current levers to increase liquidity to ride out the Covid 19 crisis.

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A lost decade for aircraft manufacturers, suppliers

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By Judson Rollins, Bjorn Fehrm & Scott Hamilton

Sept. 21, 2020, © Leeham News: Commercial aviation is facing a lost decade due to COVID.

Yes, most forecasts target 2024-2025 as returning to 2019 passenger traffic and aircraft production levels.

However, LNA in July published its own analysis indicating full recovery may not occur until 2028. Breathless headlines notwithstanding, it will take years for vaccines to be widely available and considered safe by enough of the world’s population. Growing concern about vaccine production and distribution capacity through 2024 underscores this view. Even Southwest Airlines CEO Gary Kelly said earlier this month that business travel might not fully return for a decade.

Indeed, the 2020s may well be a lost decade for aircraft manufacturers and their supply chains.

Summary

  • Debt-laden airlines will have little money to order new airplanes
  • Interest in re-engined 787, A350 likely nil this decade
  • Airbus, Boeing, Embraer have little interest in launching new programs
  • Engine makers too financially stretched to develop new designs
  • Engineering talent, knowledge will be decimated by inevitable job reductions
  • OEMs must “play the long game” at short-term cost to safeguard their futures

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Looking ahead for 2020 and 2030 decades: Embraer

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Fourth in a series.

By Bjorn Fehrm

Introduction

July 8, 2020, © Leeham News: All airliner OEMs have a disastrous 2020, but for Embraer, the year has been even worse. After spending a year and over $200m to carve out the Commercial Aviation division to merge it into Boeing, the Joint Venture Agreement (JV) was stopped by Boeing at the last moment.

The Executive Jets and Defense side were not affected, but now Embraer was organized as two companies instead of one. The company must now re-merge the organizations to save costs in a COVID-19 environment where limiting cash outflow, and lowering costs are necessary for survival. At the same time, it’s arch-rival on the world market, Airbus A220 has gone from strength to strength through basket selling with the popular A320.

How does Embraer come back from the Boeing pass up and regroup in a regional market that is no longer a fight of equals? Embraer competes with Airbus that in 2019 was 11 times larger in airliner deliveries and 29 times in airliner revenue.

Only in the below 100 seat market is it saved from the giant, who doesn’t have a model in the segment. And it seems the below 100 seat competitor, Mitsubishi, might fold its entry.

Summary
  • The botched JV with Boeing came at the worst possible moment for Embraer, just when the COVID-19 pandemic stopped airliner deliveries.
  • The planned JV had held back sales and deliveries, waiting for the JV to complete.
  • In addition, it cost Embraer $200m, pushing it into the red for 2019.
  • Embraer must now find another fix to the Airbus problem while wrestling with a worldwide COVID crisis.
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How much of International passenger flights can be paid by belly cargo? Part 2.

By Bjorn Fehrm

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Introduction

June 11, 2020, © Leeham News: As international passenger traffic slowly recovers, how much of the cost of flying passengers on the international routes can be paid by the freight under the floor?

We discussed the base parameters to answer this question in last week’s article. Now we calculate the revenues from passengers traffic and Cargo and compare them with the operational costs.

 

Summary:

  • The high freight prices make it possible to resume international passenger flights without losses on routes where there is substantial freight demand.
  • As belly freight capacity comes back to the market the freight prices will decline, but by then the passenger load factors should be on the way up.

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