Key events Dec. 10-12: Boeing, EADS, Air Canada

There are some key events to follow today through Thursday:

December 10: The Requests for Proposals for the site selection of the 777X are due into Boeing today. Media will be trying to find details, but Boeing certainly won’t be talking. Nor do we expect states to be doing much talking, either.

Boeing says there will be a decision early next year; we are hearing the end of January, but this information is very soft.

December 11: EADS, parent of Airbus, begins two days of its Global Investors Day briefings.

Air Canada’s Board of Directors is to meet to decide on replacing its large, aging fleet of Airbus A320/321s. Airbus and Boeing are bidding. Flight Global earlier reported staff had selected the Airbus, but Air Canada denied a decision had been made. But, as with all denials, this could be carefully crafted: the Board hadn’t approved a deal, so no “decision” had been made.

We understand, but are not 100% certain, that the fleet renewal for the 100-149 seat sector remains open. This means Bombardier and its CSeries could still win a deal–or Air Canada may decide to retain its Embraer E-190 fleet.

December 12: EADS’ investors day continues, with guidance and information about the next 12 months and beyond for Airbus.

Doug Harned of Bernstein Research issued a note Monday listing a series of questions for EADS’ officials; we couldn’t sum it up better:

  1. What is the A350 development and production outlook?
  2. How large are A350 losses likely to be in 2015? [NB: EADS/Airbus writes off development costs in the year incurred, unlike Boeing which uses program accounting to spread costs. Editor.]
  3. Will Airbus hit its goal of 10% margins, ex-A350, in 2015?
  4. Can Airbus grow and sustain the A380 production?
  5. When will Airbus take up rates on the A320neo?
  6. What is the outlook for A330 deliveries?

Odds and Ends: Attempts to bring Boeing, IAM together; Bombardier changes gears;

Boeing/IAM attempts: Efforts are underway to bring Boeing and IAM 751 back to the table, reports The Everett Herald. The news is not unexpected; we wrote upon the IAM’s rejection of the Boeing contract offer in connection with the 777X site location that efforts were sure to come. The Herald reports who is trying to bring the parties back to the table, and has some details about the attempt.

But as yet, Boeing is not coming back, although 751 leaders are willing to return, The Herald reports. Notably in the article, Alex Pietsch, director of Washington  State’s aerospace department, is “not optimistic,” but only “hopeful.”

Efforts by other states to win Boeing’s business are accelerating. Bloomberg neatly summarizes this part of the story.

Bombardier changes gears: Bombardier changed gears yesterday when it pushed Chet Fuller out as head of sales for CSeries and replaced him with the head of its business aircraft division. The Montreal Gazette has a series of reactions to the move.

Meanwhile, a conditional order for up to 30 CS100s may be in jeopardy. The Toronto City Council appears ready to reject a request for an early decision on whether to extend the runway at the downtown Billy Bishop Airport and alter restrictions to commercial jet traffic, reports the Toronto Globe and Mail. Porter Airlines, the dominate carrier at the airport, made the request and placed the order, conditional on Toronto and the federal government agreeing to changes at the airport and its regulatory controls.

Aviation Week reports on why CSeries has flown fewer flights than other test programs, as well as the timing to reevaluate the entry-into-service.

Odds and Ends: Pilot’s view of Dreamlifter event; Ethiopian 787 repair; more on IAM; Billy Bishop Airport

A pilot’s look at Dreamlifter incident: A pilot provides some perspective how the Atlas Air crew may have landed the 747 Dreamlifter at the wrong airport in Wichita (KS) last week.

Ethiopian 787 repair: Aviation Week reports that Boeing is about 60% complete with the repair of the Ethiopian Airlines 787 damaged by fire earlier this year.

More on IAM: A Tacoma News Tribune columnist takes an analytical look at the IAM 751 vote rejecting the Boeing 777X contract.

The Missouri Times reports that IAM District 837, which represents workers at Boeing’s St. Louis plant, is maybe considering the same labor pact IAM 751 (Seattle) rejected.

Toronto may delay City Airport decision: The Toronto City Council may delay approving the Porter Airlines request to extend the runway at Billy Bishop Airport, aka City Airport. There are several reasons, including the fact that the Bombardier CSeries flight testing is still in its early stages. Porter has a conditional order for up to 30 CS100s, but the condition is that Toronto change its rules to allow commercial jets at the airport and extend the runway. The CS100’sa noise footprint is a critical issue, and this won’t be certified until at least May, according to The National Post. The deputy mayor of Toronto nonetheless urges a vote next month.

Humpback Whale: It’s not aviation, but this YouTube video of an encounter (not ours) of a humpback whale is extraordinary.

[youtube=http://www.youtube.com/watch?v=SQBxGQKYqkE&w=560&h=315]

Odds and Ends: WA Gov chases Boeing, IAM; CSeries EIS; Yank

Pursuing Boeing, IAM: Washington Gov. Jay Inslee told KING5 News (NBC, Seattle) yesterday that he will ask Boeing and the IAM to go back to the bargaining table to reach a deal on the contract extension that would build the 777X in Washington. This verifies our prediction the night of the IAM vote rejecting the contract with a 67% result.

We believe other politicians, such as US Sen. Patty Murray, will do likewise.

We think this will be an uphill climb for Washington to wind up with this production. A former state Legislator thinks the state should stop ponying up incentives for Boeing.

On a related issue, we’ve previously reported that Washington’s proposed environmental protection of salmon threatened to make Boeing an endangered species in the State instead. Crosscut, a political web newspaper in the State, reports today that this issue apparently has been solved.

Standing by CSeries: Bombardier’s CEO brushes off skeptics of the CSeries and its small number of flight tests compared with other programs. The Toronto Globe and Mail reports. No surprise there. But did he give a hint on the entry-into-service date? The Globe writes:

On Thursday, Mr. [Pierre] Beaudoin stood by his forecast. He noted that the company has 177 orders so far and “we still have a good year to go before our first delivery.” (Emphasis added.)

BBD has always said EIS would be 12 months after first flight, which was September 16. Beaudoin’s remark suggests this schedule has now slipped at least two months and possibly more. Most analysts believe EIS will be in the first quarter of 2015 rather than late 2014, a timeline with which we agree.

A380’s future: The Economist has an analysis of the future of the Airbus A380. Separately, Airbus explains to AIN Online why it thinks A380 sales will pick up.

Wrong landing: That landing by a Boeing Dreamlifter, operated by Atlas Air, could have impacted the 787 program if the plane had been damaged and put out of service, reports The Tacoma News Tribune.

Yank: Every once in a while we get struck by an irreverency we just can’t resist. We noted a story in The Seattle Times about research by Bill Gates (yes, of Microsoft fame) into developing new condoms. One contestant (no kidding) remarked on developing a stronger condom, “I could yank all day and it won’t break.”

Odds and Ends: 777X Shell game; CSeries updates; EADS unions; More oops

777X Shell Game: TheStreet.com asks whether the Boeing 777X orders announced at the Dubai Air Show amounts to a massive shell game. By this, the column means whether these orders merely will come from other airlines as traffic is diverted from the legacy European, US and Asian airlines to the Middle Eastern carriers as the latter expand their services.

There is no question there will be a diversion of traffic. Boeing a few years ago pointed out the diversion, then at around an estimated 5%, as the Middle Eastern airlines–Emirates, Qatar and Etihad–rapidly expanded into markets. But this is what competition is about. And this is what has got Delta Air Lines of the US so exercised over the US Export Import Bank financing the likes of Emirates Airlines.

Air traffic growth will accommodate some of the competition.

There are more than 1,000 Boeing 747-400s and 777 Classics in operation or on order that will require replacement by the 777X and the Airbus A350-1000. Business Week raises the question, how will Boeing maintain sales of the 777 Classic now that the 777X program has been launched?

CSeries Updates: Bombardier is “mulling” a new program schedule for the CSeries, according to this story from AIN Online. BBD should announce any new timeline for its flight test program, and presumably entry-into-service, within a few weeks. Flight Global reports that the program will see the addition of the second flight test vehicle shortly, which will increase the frequency of flights. Flight Global also reports that BBD officials see more orders and better pricing starting to flow as more flight tests and data from the program comes forth.

Bombardier now has 419 orders and commitments for the airplane.

Here is a profile of BBD’s top official in China.

EADS unions: Lest one forget, Boeing isn’t the only aerospace company with union issues. Airbus parent EADS is facing a walkout next week by one of its unions. Reuters reports the walkout is to protest layoffs as EADS restructures its defense subsidiaries.

Speaking of oops: Yesterday we reported that a Washington State advertisement supporting the Boeing 777X used a picture of an Airbus airplane. This lit up Twitter and made news all over the country. Today we woke up to find Twitter and the news lit up with reports that a Boeing Dreamlifter landed at the wrong airport in Kansas.

DXB13 Day 3: Bombardier, Boeing, Airbus announce small orders

Bombardier, Boeing and Airbus each snared some orders at Day 3 of the Dubai Air Show:

Bombardier

  • A Letter of Intent from Iraqi Airways for 5+11 CS300s;
  • Abu Dhabi Aviation ordered two Q400ss; and
  • Nok Air of Thailand announced orders, options and purchase rights for 2+2+4 Q400s.

Boeing nabbed an order from TUI Travel for two 787s. Turkish Airlines firmed options for three 777-300ERs.

Airbus announced that Air Serbia ordered 10 A320s and Air Algerie signed an MOU for three A330-200s.

Other headlines from the show:

Airbus considers boosting A320 production

Engine Alliance ponders A380 engine improvements

Bombardier launches high density Q400

Watch out, US airlines, the Arabs are coming

Emirates to compete engine supplier for 50 A380s

DXB13, Day 2: A350 Regional; New Libyan airline; 777X production timeline; More on IAM-777X issue

It looks like the big news of the Dubai Air Show has already come-and-gone. There was little order activity on the second day.

A350 Regional: Etihad Airlines’ order for Airbus A350s include a regional version, with lighter weight, lower range and lower thrust. Aviation Week has details.

Libyan start-up orders Airbus: A new airline in Libya has placed an order for Airbus A350s and A320s.

Boeing produced this slick video to introduce the 777-8/9. As you might expect, the quality is top rate. Boeing has some subtle digs toward the A350, cleverly done as they were.

[youtube=http://www.youtube.com/watch?v=Fop6Qu2CN0E&w=560&h=315]

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Headlines from the air show:

[youtube=http://www.youtube.com/watch?v=3O_QDOXrjEs&w=560&h=315]

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Bombardier may take the CSeries to Wichita (KS), where it has a facility, for flight testing if weather in Canada is poor.

Other News:

IAM 751-777X Vote

In Dominic Gates’ Seattle Times article taking a behind-the-scenes look at the IAM 777X contract fiasco,  Gates wrote:

Buffenbarger also raised a concern about the vote outcome. He said that the final vote tally Wednesday showed that 5,000 members hadn’t voted.

While he said he’s not alleging vote fraud, he said the absence of those votes leaves the outcome “questionable.”

“To have that big a number that didn’t vote stands out,” he said.

Buffenbarger needs to check his math. With 31,000 machinists, 5,000 “not voting” means 26,000 did. Sixty-seven percent rejected the contract, or 17,420, and 33% voted to approve it, or 8,580–a difference of 8,900. Even if all 5,000 had voted for the contract (a highly dubious prospect), it still would have lost by nearly3,900 votes. Buffenbarger’s comments to Gates (and we assume accurate reporting) further illustrates to buffoonery of IAM International in this entire mess.

Countdown to 777X site selection: Bloomberg News reports that Boeing will decide within three months where to build the 777X. This doesn’t leave a lot of time for the IAM to get its act together.

Bombardier CSeries in focus

Bombardier’s CSeries is one of three new or derivative airliner to take to the skies, along with the Airbus A350-900 and the Boeing 787-9. But its flight test program is going at a pace far behind the Big Two. Only a handful more flights occurred since its first one on September 16, with a full 27 days between the third and fourth flights.

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The latter occurred on October 30, the day before Bombardier’s third quarter earnings call. Thus it was with great anticipation that aerospace analysts who follow BBD, and the media, hoped for some clarity about the pace of the program and whether entry-into-service would be delayed.

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Those listeners and participants on the earnings call were disappointed. Pierre Beaudoin, president and CEO, said the testing program is what Bombardier laid out from the beginning and that the paucity of flights isn’t of concern or indicative of anything amiss.

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But aerospace analysts weren’t convinced. Stock traded down 10% and a few analysts downgraded the stock. It must be noted that there were other factors: aircraft and train deliveries were short of target, contributing to the disappoint. And Embraer, which reported earnings the same week, also missed targets and suffered similar stock declines and some analyst downgrades.

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Beaudoin continued to maintain the target for EIS is 12 months from the first flight. With 2,400 flight hours required, even with five CS100 and two CS300 Flight Test Vehicles, Bombardier will be challenged to meet this target.

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The CSeries Flight Test Vehicle #1 has had a dearth of flying compared with the Boeing 787-9 and the Airbus A350-900. So how does BBD, so far, believe it can stick to its entry-into-service timeline of 12 months from first flight on September 16?

Because it will have seven FTVs (five CS-100s and two CS-300s) in the flight test program instead of the five for Airbus and the initial plan of five or six for the Boeing 787. This, plus the ground time in the CIASTA iron bird.

Beaudoin left plenty of wiggle room for an EIS delay. He said conversations were underway with customers. He said some customers wanted to swap the 110-seat CS100 orders for the larger, 135-seat CS300. He said a program assessment in a few months would tell what the timing will be.

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Even before the earnings call, analyst consensus concluded that EIS will slip from September 2014 (the 12-month target) to 1Q2015 or later. We concluded several months ago that a first quarter 2015 EIS was likely.

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Should this timeline emerge to be correct-or even if it slips to 2Q2015-these delays will still be a far better performance than those of Airbus and Boeing on their A380, A350, 787 and 747-8 programs. But a slip to 2015 will narrow the advantage Bombardier had over Airbus with its New Engine Option, which was a direct response to Bombardier’s clean-sheet CSeries design.

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The Airbus A320neo, who is the next size up from the CS-300 and not truly a direct competitor, is planned to enter service in October 2015. The A319neo-which is the direct competitor to the CS-300-is slated to follow by six months. This, of course, assumes Airbus doesn’t have a delay on its NEO program, but nothing we’ve heard suggests one is in the offing.

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How serious a threat is the narrowing gap to Bombardier? We don’t believe it is much of one. Airbus and Bombardier are already sold out in the near-term, so customers are locked in. There have been on 45 A319neos ordered; we have to wonder whether customers will swap these for the larger A320neo. The A319neo, which is heavy for today’s standards, is a question mark whether it will be built. If so, will it be the next A318, a poor sales model that proved so unpopular that there is no secondary market for this sub-type and it’s already headed for the scrap heap.

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Nor is there much of a threat from Embraer’s E-Jet E2. The E-195 E2, which is sized midway between the CS-100 and the CS-300, doesn’t enter service until 2019 (if on time). The E-190 E2 is the first planned for EIS, in 2018, and this is somewhat smaller than the CS100.

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Nor is Boeing’s 737-7 MAX a threat, despite Bombardier’s EIS slip to date and likelihood for an additional one. The 7 MAX EIS is planned for 2019. Only a handful of these have been sold to two customers, WestJet and Southwest Airlines of the USA. Like the question looming over the A319neo, we wonder if the 7 MAX will be swapped for the larger 8 MAX, or whether the 7 MAX becomes Boeing’s 737-600, another poor-selling sub-type.

Odds and Ends: Lufthansa on Airbus plan; Lion Air; Boeing statement on IAM deal; CSeries test flights

Lufthansa on Airbus’ 18-inch seat plan: Nein! Runway Girl Network (Mary Kirby’s new venture) reports that Lufthansa’s fleet planner doesn’t think much of the Airbus campaign to make coach seat width an 18-inch standard for the industry.

Lion Air: Aviation Week has an article that falls short of a full profile of Lion Air but one which discusses some of the thinking of those huge airplane orders.

Boeing on IAM deal: In the crush and rush of the events yesterday, we didn’t see this Boeing statement on the tentative agreement for extend the IAM contract for eight years in exchange for building the 777X in Seattle.

CSeries: It looks like software upgrades, vibration and shimmy tests are done and flight testing in back on track. Yesterday Bombardier’s CSeries had its fifth flight and its sixth appears coming today, according to Fliegerfaust, a blog mostly dedicated to CSeries news.

Odds and Ends: Looking toward the South; Lion Air updates CSeries interest; 787 fuel advantage

Looking toward the South: As a follow-up to our previous post, Implications of the IAM-Boeing talks on 777X, here is a commentary from The Wall Street Journal about the migration of US industry to the South, were unions have a more difficult time.

Lion Air and CSeries: Indonesia’s Lion Air, which made news a few months ago with the prospect of a large order for the Bombardier CSeries, poured cold water on the prospect of placing one any time soon, according to this article in Aviation Week. Seeing actual flight test results from the larger CS300 is key, the airline’s head told AvWeek.

We previously raised our own doubts about the prospect of another large order because of the prospect of over-commitment of existing orders from Airbus and Boeing.

But Lion Air told The Wall Street Journal that an order for 50 CSeries could come by the end of the first quarter. A key piece of information in the AvWeek and WSJ articles is this, from the WSJ:

Mr. Kirana said Bombardier claims the larger of two CSeries models with 160 seats will be able to fly with the same economics as much larger Airbus A320neo jets, which carry around 160 to 180 passengers. He said the Bombardier CS300 jet’s range and economics makes it attractive for new longer international routes to smaller cities in China.

787 Fuel Advantage: In the never-ending war of words between Airbus and Boeing, readers know we always connect with airlines to cross-check what the OEMs say.

As readers also know, Boeing promotes its 787 as being 20%-25% more fuel efficient than today’s airplanes. With the (also) never-ending prospect of Airbus proceeding with an A330neo, the question arises over what the delta is between the A330 and the 787. We asked a fleet planner. The answer: 10% in favor of the 787, a gap that an A330neo could narrow considerably (but be unlikely to close altogether) with new engines and sharklets. So how about that 20%-25%? These figures compare with the 767 and A340 respectively, the fleet planner tells us.