Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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Bombardier sees more C Series orders this year
Our coverage of the Farnborough Air Show begins today with an interview with Fred Comer, president of Bombardier Commercial Aircraft. There will be paywall and freewall posts throughout the FIA16 this week.
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Introduction
July 10, 2016, © Leeham Co., Farnborough Air Show: Winning major orders from Air
Fred Comer, president of Bombardier Commercial Aircraft.
Canada and Delta Air Lines earlier this year and the entry into service of the CS100 this Friday with launch customer Swiss International Air should give Bombardier’s bet-the-company gamble a boost for more orders this year.
This is the prediction by Fred Comer, president of Bombardier Commercial Aircraft.
During an interview with LNC on a media demo flight of the CS100 at the Farnborough Air Show, Comer said the smaller BBD can compete with the behemoths Airbus and Boeing for orders in the 125-150 seat sector.
Summary
Comer says:
- Boeing’s prospective 737-7.5 still won’t be competitive.
- The CS100 is better than the Embraer EJet-E2.
- Embraer’s complaints of unfair competition because of Canadian government investment are unfounded.
Read more
Bombardier’s CS100 media flight demonstrates quiet
July 10, 2016, (c) Leeham Co.: Our coverage of the Farnborough Air Show (#FIA16 on Twitter) begins today, with a media flight on the Bombardier CS100. The day was rainy and somewhat turbulent until the flight got above the clouds. Some videos are jumpy as a result.
There are several videos about the flight and some with interviews following the page break.
Quiet taxi
The first video is intended to demonstrate the quiet Pratt & Whitney engines during taxi.
Pontifications: Airbus CXLs A320, A350 August vacations
By Scott Hamilton
June 20, 2016, © Leeham Co.: Airbus officials canceled the annual August vacations in Europe for the A320 and A350 production lines.
The A320neo and A350-900 are backing up on the delivery lines because of supplier issues with the Pratt & Whitney GTF for the former and galley and lav issues from Zodiac for the latter.
Qatar Airways Airbus A320neo awaiting new-production Pratt & Whitney GTF engines with fixes incorporated. Photo via Google images.
The delays and issues are well documented in the press and for aerospace analysts.
“I cannot confirm that rumor for you,” an Airbus spokesman wrote LNC in an email. “I can tell you that we are putting in place extra resources to deliver on our 2016 commitments and objectives in terms of deliveries, but we are not going into detail on what that looks like at this stage.”
Wells Fargo sees reasonable, risky production rates
June 7, 2016: Single-aisle production rates of 57/mo at Boeing and 60/mo at Airbus are
reasonable when achieved in the near term but more problematic in 2019. Wide-body production rate hikes are risky.
This is the conclusion of a short research note issued June 1 by Wells Fargo Securities.
“Higher Rates Sustainable,” WFS writes. “Aircraft deliveries have historically been cyclical, yet Boeing and Airbus have had flat-to-rising deliveries for 12 years–and both forecast higher near-term deliveries. The bottom line is that the OEMs’ forecasts can be reasonable in our view, assuming aircraft retirement levels and/or traffic growth are above historical rates. Therefore, we expect higher deliveries over the next several years, but think it is unlikely that the full 35-40% A320/737 production increase currently envisioned by the OEMs will be achieved by 2020.”
UTC media day 1: UTAS, twice the size of any other aerospace systems company
Note: United Technologies Corp (UTC) is holding its annual Media Days today and tomorrow. We’re providing reporting from the event. This is the first time in our long participation that UTC Aerospace Systems is presenting. UTAS is a major supplier and service provider to all the airframe OEMs.
June 6, 2016: UTC Aerospace Systems is just four years old, following mergers with
Dave Gitlin, CEO of UTC Aerospace Systems (UTAS).
Hamilton Sundstrand and Goodrich–the largest in aerospace history, says Dave Gitlin, president of UTC Aerospace Systems.
UTAS provides electrical power and bleed air systems, engine, starters, power systems, all the circulating fans on the Boeing 787, monitoring systems and much more. Evacuation slides, the Ram Air Turbines, landing gear, flaps and slat control systems, brakes and thrust reversers.
Pontifications: The Bottom Line isn’t always about The Bottom Line
By Scott Hamilton
June 6, 2016, © Leeham Co.: Sweetheart deals to win strategic aircraft orders are nothing new in commercial aviation.
John Leahy, COO-Customers for Airbus, last week poked Bombardier for its order from Delta Air Lines. Citing a reported airplane sales price of $22m, which Leahy estimated cost BBD $7m per airplane, Airbus’ chief salesman—known for his barbs and quips—said if BBD sold more C Series faster, the company would go out of business quicker.
Set aside for the moment the numbers he cited as unknown quantities. LNC has different figures we’ve reported and in two posts on my column at Forbes, here and here, there are other aspects to the Delta deal that affect economics.
It’s undisputed that BBD took a US$500m charge against the Delta, Air Canada and AirBaltic deals. The second Forbes post explains why. It’s all about the learning curve. Airbus and Boeing know about this: the first A350s are being chalked up to big losses and the 787 has $29bn in production costs. But it’s not to their benefit to acknowledge this when criticizing the C Series deals.
All this is neither here nor there, however. Airbus, Boeing and McDonnell Douglas all have (had) done deals that don’t seem to make commercial sense when key, strategic transactions were necessary.
Pontifications: The crystal ball
By Scott Hamilton
May 30, 2016, © Leeham Co.: We at Leeham Co. and Leeham News and Comment take some risk when we make analyses, forecasts, projections and predictions. These often put us out on a limb, open us to criticism and even ridicule and as often as not really pisses off those companies that are the target of such predictions.
Some recent events and news stories caught my eye that validated something I predicted eleven years ago.
First, the set up.
How good is a MAX 7X and why would it replace the original?
By Bjorn Fehrm
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Introduction
May 9, 2016, © Leeham Co: Boeing is considering changing the 737 MAX 7 in a rather drastic way. The present model would be hitting the market as the last of the MAX models in 2019. It hasn’t been selling well. In fact, there are only two legacy airlines and a start-up that have ordered the MAX 7.
Right now, there are just 60 orders for an aircraft series which has garnered 3,100 orders in total.
Figure 1. Boeing’s 737 MAX 7 as presently defined. Source: Boeing
Sources have long told LNC that Boeing doesn’t really want to build the MAX 7. But Southwest Airlines needs the airplane for short-runway airports like Chicago Midway and Burbank (CA) and has resisted suggestions to up-gauge. The other airline that has ordered the MAX 7 is WestJet, which has thin markets in Canada that don’t justify a MAX 8. And there is a third customer, a start-up in Canada that has yet to begin operations.
With the C Series gaining momentum, the cancellation of the MAX 7 now seems off the table. Instead, Boeing is thinking about making it better, the MAX 7X project. What is it, and why would it be better than the original MAX 7? We use our aircraft model to answer the questions.
Summary
- The 737-700, and therefore MAX 7, was defined a continuation of the 737-300 at 126 passengers in a domestic two class configuration.
- Bombardier is offering 135 seats in a similar, but more comfortable, CS300 cabin with an aircraft which is lighter and more economical than the MAX 7.
- The already meager order book for the MAX 7 is therefore getting more pressure from a resurging C Series line.
- Boeing is now attempting to convince its customers that a larger MAX 7, based on MAX 8, would be a better aircraft for the customers (and for Boeing). We reveal why.
Embraer 1Q2016 results: Strong start to the year
By Bjorn Fehrm
3 May 2016, ©. Leeham Co: Embraer has made a good start to 2016. Group revenue for 1Q2016 was $1,309m compared to $1,056m 1Q2015, up 24% year on year. EBIT was $86m compared with $80m a year ago, giving a margin of 7.5%.
The major increase in revenue was for the Business jet side which delivered 23 aircraft compared to 11 1Q2015. Commercial aircraft increased with one aircraft to 21 deliveries.
Embraer’s commercial aircraft best seller, the E175 being delivered to United Express. Source: Embraer.
The commercial aircraft side sold 23 E175-E2 in the quarter giving a Book-to-Bill of 1.1. Sales for the Business Jets side was not publicized. Group order backlog was $21.9b compared to $20.4b for 1Q2015. The balance sheet is strong with $1,854m in cash and total debt of $2,389m.
The group’s only problem area is domestic state demand. Its KC-390 military transport program has stopped once for lack of Government payments and it risks being caught again in the problems of the Brazilian state economy.
Here the details of the financial results for the divisions and their aircraft programs. Read more
Pontifications: Big sigh of relief at Bombardier
By Scott Hamilton
May 2, 2016, © Leeham Co.: To say that the order from Delta Air Lines last Thursday for 75+50 CS100s with conversion rights to the CS300s was welcome news for Bombardier is an understatement.
Bombardier has a superb airplane in the C Series. The passenger seats are the most comfortable coach seats of any manufacturers, better than the Airbus A320 and way more comfortable than the Boeing 737. With apologies to Embraer, the C Series is even marginally better than the Embraer E-Jet, which is very good. Read more