Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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CSeries effect on Airbus, Boeing product strategies
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Introduction
Nov. 6, 2017, © Leeham Co.: Boeing took a pass on assuming ownership of the Bombardier CSeries, according to a report in the Toronto Globe and Mail—the same deal rival Airbus took.
In doing so, Boeing passed on acquiring a new airplane program at pretty much zero risk, no cash investment and no research-and-development cost. The market demand ranges from 4,000 to 6,000, depending on whose study you believe.
Rival Airbus wouldn’t have a response and, given its current turmoil, would have been unlikely to pursue a response.
Instead, Boeing may embark on a risky, high-cost development of the New Midrange Aircraft for which market demand remains a controversy, suppliers are reluctant to take risk-sharing positions and which will almost certainly provoke a response from Airbus.
Artist concept of Boeing 797-7. Source: fs2000.org.
Summary
- Boeing says it’s not worried about Airbus stake in CSeries program; it remains satisfied with its product strategy.
- But 100-160 seat sector won’t be covered by a 737 replacement. Airbus has this covered with CSeries.
- New Midmarket Airplane figures into CSeries impact.
50% increase in CSeries sales forecast–but what does this mean?
Nov. 1, 2017, © Leeham Co.: For years, Bombardier forecast the 20-year market demand in the 100-150 seat sector as between 6,000 and 7,200, depending on the 
year of the forecast.
Airbus in 2014, the last year the OEM segmented the sector in its 20-year forecast, predicted a demand of 4,363 aircraft.
Boeing, which hasn’t publicly segmented the sector, is believed to have forecast a demand between 4,185 and 6,275 in 2013, based on information revealed during various executive presentations. The mid-point was 5,230.
In announcing the acquisition by Airbus of 50.01% of the CSeries program, Airbus CEO Tom Enders cited a 20-year demand of 6,000 aircraft.
Bombardier consistently claimed it would capture 50% of the demand it saw, or 3,000 to 3,600 aircraft, over 20 years.
But the numbers don’t match up.
Suppliers conference in Mobile focuses on US aerospace sector in Southeast
Click on image for an enlarged, crisp view.
Oct. 31, 2017: A new event, the Southeast Aerospace and Defence Conference (SADC) scheduled for June 25-27 in Mobile (AL), will examine the commercial, defense, space and corporate aerospace sectors in the US Southeast.
The conference is organized by Airfinance Journal and Leeham Co., the first joint venture between the two companies.
The US Southeast is a growing aerospace center. Defense and space clusters have decades-long histories in the Southeast. Corporate and commercial clusters are more recent developments, albeit in some cases now well within a second decade.
Airbus’ A320 family Final Assembly Line in Mobile opened in September 2015. The FAL is producing 3.5 A320s per month and will reach its initial target of 4/mo by year end, slightly ahead of schedule. There is land capacity to expand to 8/mo.
Earlier this month, Airbus and Bombardier announced that their new venture will establish an FAL in Mobile.
Aviation journalist Ben Sandilands passes
Ben Sandilands
Oct. 31, 2017: Ben Sandilands, the cranky, crusty curmudgeonly writer of Australia’s Plane Talking (Crikey), died Friday after a long illness. He was 73. Cancer was the cause of death.
We only met Sandilands on a couple of occasions but avidly followed his blog for years.
He was controversial in Australia. Sandilands was a long-time critic of the Australian Transportation Safety Board and of Alan Joyce, CEO of Qantas Airways. His persistent criticism won him no friends in officialdom.
But having writing aviation for 60 years, Sandilands had sources through Australian aviation and often wrote penetrating pieces about whatever topic he happened to be pursuing at the time.
Bombardier’s “fatal error” in trade dispute
Oct. 30, 2017, © Leeham Co.: Bombardier made a fatal error in the Boeing/US trade dispute that almost certainly precludes a negotiated settlement and which the Airbus-CSeries joint venture is highly unlikely to cure, an expert trade lawyer says.
William Perry, of the Seattle law firm Harris Bricken, focuses on anti-dumping and countervailing duty cases, the two issues at the heart of the Bombardier CSeries
William Perry. Photo via Google.
case. He previously worked for the US Department of Commerce on trade cases.
He also was an attorney for the US International Trade Commission, where Commerce’s decision to impose tariffs of 219% on the CVD element and 79% in the anti-dumping case goes for judgment.
Perry says flatly, Bombardier will lose at ITC.
Why?
Bombardier upbeat on CSeries deal, but Moody’s sees higher risk of debt default
Oct. 26, 2017, © Leeham Co.: Bombardier and Airbus put a positive face on the former’s acquisition of 50.01% of the CSeries program, but Moody’s credit rating service wasn’t impressed.
The agency downgraded Bombardier’s already poor credit rating and changed the outlook to Negative from Stable.
Moody’s changed the “Corporate Family rating (CFR) at B3 from B2, its probability of default rating to B3-PD from B2-PD, and its senior unsecured rating to Caa1 from B3. The company’s speculative grade liquidity rating is affirmed at SGL-2. Bombardier’s rating outlook has been changed to negative from stable,” it announced Tuesday.
“The downgrade reflects our expectation that Bombardier’s leverage will remain high through 2019 and its ability to generate positive cash flow in that year has headwinds related to the potential delay of C Series plane deliveries,” said Jamie Koutsoukis, Moody’s analyst.
The press release may be found here.
Boeing-Embraer venture in response to Airbus-Bombardier? Don’t count on it
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Introduction
Oct. 23, 2017, © Leeham Co.: With the tie-up announced last Monday between Airbus and Bombardier for the CSeries, speculation immediately turned to whether Boeing and Embraer will join forces in some fashion in response.
The speculation is natural. Boeing and Embraer have had several commercial agreements, mostly on the defense side but also in eco-research. But as yet, there hasn’t been a tie-up involving the successful E-Jet program.
Embraer E195-E2.
Don’t look for anything soon that would be a meaningful response to the Airbus-CSeries deal.
Summary
- Boeing needs a response in the 125-150 seat sector in which the 737-7 MAX languishes and with which the CS300 competes.
- Boeing has no product offering in the 100-125 seat sector. Embraer doesn’t need Boeing’s help here. The E175-E1 continues to sell and it meets US Scope Clauses.
- The Embraer E2 program’s first delivery is April next year.
- Embraer isn’t about to proceed with a new airplane program in the 100-150 seat sector, which is Boeing’s product gap.
From war to partner: Airbus and the CSeries
John Leahy
Oct. 18, 2017, © Leeham Co.: It was the annual media day in 2010 that Airbus declared war on the Bombardier CSeries.
Lufthansa Group in 2009 was the launch customer of the CSeries with an order for 30 CS100s and options for 30 more.
Bombardier had won a major order from Republic Airways Holdings, which then owned Frontier Airlines, an exclusive A319/320 operator. Republic ordered 40 CS300s and optioned 40 more. It was this order that spurred Airbus’ wrath. It was this order that would push Airbus into launching the re-engined A320neo family.
John Leahy, Airbus COO-customers, and Tom Williams, then EVP of programs, declared to the assembled international media that Airbus would aggressively compete against Bombardier.
Now, seven years later, Airbus and Bombardier are partners.
What has Airbus got in the CSeries?
By Bjorn Fehrm
October 18, 2017, ©. Leeham Co: Bombardier and Airbus changed the airliner landscape yesterday. Analysts say it’s the largest industry change since Boeing bought McDonnell Douglas in 1997.
So, what has Airbus bought for no money? A me-too, or a world-beater?
Assessing the Airbus-Bombardier deal
Oct. 17, 2017, © Leeham Co.: The Airbus-Bombardier transaction announced yesterday has implications well beyond the United States, which has been much of the focus of analysis post-announcement.
The analysis focused on the US is natural, given the Boeing trade complaint involving the CSeries sale to Delta Air Lines.
But it’s important to step back to see what this means for CSeries.