Leeham News and Analysis

There's more to real news than a news release.

There's more to real news than a news release.

Odds and Ends: CSeries and London City Airport; new life for BAe-146; SPEEA’s next step

It’s Christmas Eve but there is some news despite this being a slow day.

CSeries and London City Airport: The downtown airport is a highly challenging one. Aircraft have a challenging approach. The runway is short. British Airways operates the Airbus A318 to New York with a refueling stop westbound. Bombardier says its CSeries can do the trip non-stop. This article provides some detail.

New Life for BAe-146: This airplane didn’t have much to recommend it. In its original 3×3 configuration, it was a cramped airplane. It had four engines. The original engines were unreliable. But here’s a new life for them.

SPEEA’s next step: The Boeing engineers’ union takes another step to prepare for a strike, beginning Feb. 1.

Ed Colodny on US Airways mergers: He headed Allegheny Airlines and US Air for years, guiding the carrier through four mergers–including Piedmont Airlines, which critics widely considered that he screwed up, and PSA, which US did screw up. The Street gets his thoughts on the potential American Airlines merger.

GEnx PIPs slip a bit: The Performance Improvement Package program for the GEnx engine that powers the Boeing 787 and 747-8 has slipped a bit, according to this article.

 11 Comments

 Posted on December 24, 2012 by

 Airbus, Boeing, Bombardier, CSeries

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Odds and Ends: CSeries picks up; Air Canada’s Rouge; A380 v 747-8; Allegiant Air

CSeries picks up: Bombardier is ending the year with some upbeat news for the CSeries. First was an LOI for up to 30 CS100s from an unidentified customer. Next the wings arrived to be assembled onto FTV1 (Flight Test Vehicle 1). Then today it converted the MOU for 10+10 CSeries from AirBaltic to a firm order. BBD now has more than 350 orders and commitments for the aircraft. Update: Aviation Week has this item comparing early CSeries orders and E-Jet orders. CSeries stacks up pretty well.

Air Canada’s Rouge: Aspire Aviation has this column on the future of Rouge and the creation of WestJet’s Encore airline, and the impact on Canada’s aviation.

A380 v 747-8: AirInsight has this analysis comparing the Airbus A380 and Boeing 747-8. We discussed portions of this earlier, when the ad wars broke out between Airbus and Boeing, but this is more expansive.

Allegiant Air Acquires A320s: Allegiant Air is on a shopping spree again, this time acquiring nine Airbus A320s from Iberia Airlines.

 9 Comments

 Posted on December 20, 2012 by

 Airbus, Boeing, Bombardier, CSeries

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Odds and Ends: Bombardier lands Delta’s RJ deal; 787 events in perspective; Airbus/China; Enders victory

Delta Air Lines: Bombardier, in a welcome development, landed a major order with Delta for 40+30 CRJ900s, beating out Embraer’s E-Jet proposal. Delta has a large, installed base of CRJs and EMB wasn’t too optimistic, in management-analysts meetings last week, according to research notes. But BBD liked its odds, considering the CRJ is more fuel efficient than the E-Jet (being a small airplane), even if the E-Jet is far more comfortable.

For BBD, the order is important for two reasons. First, the CRJ backlog is shrinking. Deliveries begin 2H2013, and this illustrates the point. Second, with BBD sucking up cash in advance of CSeries first flight in 1H2013, the deposits, progress payments and delivery payments are welcome, indeed.

The next face-off between the two OEMs is American Airlines, where both have large installed RJ fleets of aging aircraft.

Boeing 787 events: Airworthiness Directive. “Emergency” landing. AirInsight puts things into perspective.

Airbus lands China orders: Hmm. EU suspends plans to impose ETS tax. Airbus lands orders for 60 A320s and 10 A330s. What do you make of that…

Enders now 1-1, sort of: Tom Enders, CEO of EADS, lost his bid to acquire BAE Systems due to German government interference. The merger would have reduced government meddling, balanced EADS commercial and military business, put EADS on a more equal footing with Boeing and positioned EADS better for US DOD contract bids. But Enders has now won a corporate governance restructuring that ends government meddling in daily operations. He still hasn’t achieved his other goals, but this one is so huge that we rate Enders’ won-lost record 1-1.

 11 Comments

 Posted on December 6, 2012 by

 AirInsight, Boeing, Bombardier, CSeries, EADS, Embraer

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Random thoughts about Airbus, Boeing and related issues

We’ve been traveling on business all week and naturally the conversation was all aviation. We spoke with lessors, aerospace analysts, hedge funds and private equity. In what amounts to a data dump, here is what is being discussed “out there.” This is in no particular order.

  • The new outbreak of ad wars between Airbus and Boeing is viewed largely with eye-rolling and disdain that two world-class companies are behaving like two year olds.
  • Nobody, but nobody we talked with believes the public numbers advanced by either Airbus or Boeing.
  • Boeing will have virtually a new airplane with the 737 MAX by the time it’s done, similar to the design creep of the 747-8 and the magnitude of change between the 737NG and the 737 Classic.
  • Airbus pulled a coup with the NEO, forcing Boeing to do the MAX….
  • But there is some sentiment that Airbus and Boeing should have resisted doing a re-engine and stuck with the the current airplanes. Airbus should have let Bombardier proceed with the CSeries for the niche 100-149 seat market unchallenged, having bigger fish to fry.
  • Bombardier doesn’t know how to effectively sell the CSeries and it is unwilling to cut deals that would sell the airplane.
  • Operating leasing is a ticking time-bomb, largely (but not entirely) due to book values of the aircraft on the balance sheet far exceeding current market values.
  • Boeing claims the 787-10 will “kill” the A330-300. The market agrees–but only by the middle of the 2020 decade. Boeing can’t deliver enough 787-10s to make a dent in the global fleet before then. By then, the A330 will be about 30 years old and broadly at the end of its natural life cycle anyway. So what’s the big deal?
  • Airbus is doing a good job enhancing the A330 to keep it competitive with the 787.
  • There remains skepticism that the LEAP engine development is proceeding well. The buzz on the street is CFM still has a lot of challenges with the development.
  • There is some feeling the MAX will be late–not because of any concrete knowledge, but because of Boeing’s performance on the 787 and 747-8 programs.

Unrelated to Airbus and Boeing, our colleague Addison Schonland has this first-hand account of Isreal’s Iron Dome.

 66 Comments

 Posted on November 30, 2012 by

 Airbus, Boeing, Bombardier, CFM, CSeries

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Odds and Ends: To fly or not to fly–CSeries; Qatar’s A350s; A320 production rates

CSeries: Bombardier’s sales chief says the CSeries might fly earlier than the six month delay announced on the earnings call. See this Reuters report from China’s Zhuhai Air Show.

Qatar’s A350: Flight Global’s David Kaminski-Morrow reports Qatar switched 20 A350-800s to the larger -900, via Twitter. He was on the delivery flight of the Boeing 787 from Seattle to Doha.

A320 Production Rates: Airbus gives this assessment to Reuters at the Zhuhai Air Show.

A350-What’s the Fuss? CNN International gives this review of the A350.

CNN Travel: We’ve now started contributing to CNN Travel. Here’s our first report, the Qatar Airways Boeing 787 delivery. This writing is different than what we do here–lighter, and being travel-oriented, will trend more toward consumer and general audiences than the aviation geek world served here.

 29 Comments

 Posted on November 14, 2012 by

 Airbus, Boeing, Bombardier, CSeries

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Bombardier announces delay in CSeries first flight

Earnings Call Update:

  • We’ve made substantial progress. First flight will be by end of June 2013 with EIS for CS100 a year later. CS300 timeline still EIS YE2014.
  • BBD did not identify “major systems” that are taking longer to arrive for assembly. Delay won’t have an impact on cash assumptions of the business plan; contingency was already figured in.
  • What comfort can you give us June target is achievable? Answer: We’ve been working with customers with transparency and consideration that early delivery positions could have some variation. It was important for us to maintain a target date to get all suppliers a harmonized delivery schedule. It made no sense at all to give them a break. We feel the harmonized schedule is now the end of June. There is now a commitment by the suppliers, you see the aircraft coming together.
  • There will be some individual discussions for penalties from some suppliers.
  • The fear is that four or five months out will see another delay? Answer: There’s a lot of things that can happen, but we are more at execution phase. We know where the suppliers are at. We have more visibility than at design stage. Assembly of the parts we’ve done so far are extremely well. We are testing some versions of the software and when we go to flight we’ll have the latest version. We have more visibility now.
  • Potential customers are most impressed with the amount of testing we are doing up front.
  • There is no delay on the engine; it will be certified by the end of this year.
  • BBD was asked specifically if fly-by-wire was the reason for the delay. Answer: It is the most challenging.
  • Complete static testing expected in April.
  • Don’t anticipate much in the way of penalties for customers.
  • 160-Seat CS300 is a customer option. It’s a question of seating density; it’s not another model.
  • There are 55 Tier 1 suppliers and more than 300 more. Software is a big part of the challenge we have and software is everywhere in a product like this.

Our take: The aerospace analysts were remarkably and surprisingly sanguine about the delay. Media was much sharper in its questioning. Clearly, BBD’s telegraphing of the possible delay prepared the market for this.

Original Post:

Bombardier today announced a six month delay in the first flight of the CSeries, which had been planned for next month. The delay had been telegraphed for months, with officials saying a three to six month delay would not be a surprise or indicative of program difficulties.

The company also acknowledged a month-for-month delay for entry-into-service from December 2013 for the CS100, the first of two models, but believes EIS of the larger CS300 by the end of 2014 is possible.

BBD identified issues in the supply chain, without specifying where or who. It’s been public that there are challenges with China’s Shenyang facility, which is building fuselage sections for the airplane. BBD began assembling the sections at its Belfast plant as a back-up.

It’s also been acknowledged by BBD that the fly-by-wire system developed by Parker Hannifin is also a challenge. But neither company was identified in the press release issued at 6am ET today.

BBD has an earnings call 10am ET. Although aerospace analysts and media have widely expected the delay, we expect the Q&A to drill down on the issue.

Here’s the press release.

Here’s a Reuters article.

 6 Comments

 Posted on November 7, 2012 by

 Bombardier, CSeries

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Odds and Ends: Germans withhold Loans on A350; CSeries; SPEEA update

A350 Loans: The German government is withholding repayable loans (aka launch aid) for the Airbus A350 in another one of its regular snits over work share. Airbus ought to forget these loans and either self-fund or go to the commercial markets. The German government scuppered the merger with BAE Systems. Forgetting government loans would give Airbus more freedom to do what it wants with less government interference. It would also get the US off its back.

Speaking of Corporate Welfare: Read this article about Boeing, others and Oklahoma.

CSeries: AirInsight has a 13 minute podcast with the head of the CSeries program, talking about the assembly of Flight Test Vehicle (FTV) 1 and the program’s status.

SPEEA Update: The engineers union at Boeing seems to be gearing up for a strike, according to this article.

Speaking of Unions: The IAM is back at Boeing’s Charleston plant with a union drive.

 16 Comments

 Posted on October 18, 2012 by

 Airbus, Boeing, Bombardier, CSeries

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Odds and Ends: Retrofit interior for 737, A320; CRJ200F; CSeries FTV assembly starts

Retrofit Interior for 737: Heath Tecna, an interiors firm, is offering a Boeing-like Sky Interior design for retrofit with a target market of more than 3,000 Boeing 737NGs. APEX magazine’s Mary Kirby (formerly of Flight Global) has this story. The photos show the Heath Tecna design is remarkably similar to the Boeing Sky Interior. The difference, Kirby quotes a company official, is this: “The biggest difference between the two interiors can be found in the bag capacity offered. With Project Amber, we can increase the amount of bags that can be stowed on a typical Boeing 737-800NG by 40%. And we’re able to do that because our patent pending design offers a little larger pivot bin in a unique configuration.”

When Boeing announced the Sky Interior in April 2009, we asked if a retrofit would be offered for the 737 fleet and the answer was that while technically it could be, there were no plans to do so. When we saw the same official at an event in August, we posed the question again and the answer was the same.

Heath Techna, a subsidiary of Zodiac, is an interior supplier. It’s also offering a modern, retro-interior for the Airbus A320.

CRJ200F: Cargo conversion company AEI Inc. is exploring a passenger-to-freight cargo conversion for the Bombardier CRJ200F. From the press release:

The CRJ200 LCD aircraft would provide operators with a freighter capable of hauling a maximum payload of 6.7 tonnes. The freighter would come equipped with an Ancra cargo loading system capable of hauling pallets, containers or bulk loaded material. The Main Deck Cargo Door will be 94” (2.39 m) wide by 77” (1.96 m) high and feature AEI’s proven hydraulic actuation and latching systems which has been installed on more than 370 freighters.
Additional features include:

  • Up to 6.7 tonne payload
  • Total Cabin Volume of 1864 cu ft (52.8 cu m)
  • 10,000 lb (4 536 kg) payload can be flown 1,735 nm
  • 15,000 lb (6 804 kg) payload can be flown 800 nm
  • Dual vent door system
  • Rigid 9G barrier
  • Main deck converted to Class “E” Cargo Compartment
  • Cabin windows replace with lightweight aluminum window plugs

CSeries Assembly: CSeries Flight Test Vehicle 1 (FTV 1) assembly has begun. The Wall Street Journal has this story about the compressed schedule. Reuters has this story. Bombardier hopes to meet its plan of first flight by the end of this year, but has been telegraphing a three-six month slip. A customer we talked with thinks first flight will be in April. Bombardier’s 3Q earnings call in November 4; we expect a schedule update then. Aviation Week has these pictures.

 15 Comments

 Posted on October 16, 2012 by

 Airbus, Boeing, Bombardier, CSeries

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Odds and Ends: A350 launch aid; strike at Bombardier biz jets; Embraer demand off; EADS-BAE

A350 Launch Aid: The US Trade Rep says it has the documents outlining $4.5bn in launch aid for the Airbus A350, according to a Reuters story. Predictably, Boeing and the USTR have gone in to overdrive. The A350 was excluded by the WTO from the long-running trade dispute because it wasn’t included in the original complaint filed in 2004–which is kind of obvious since the program didn’t surface until 2006. But Airbus contends that launch aid wasn’t ruled illegal in the WTO findings, just how it was implemented. Airbus contends that any launch aid for the A350 is structured in compliance with the WTO rulings of the 2004 case. The US contends launch aid itself is illegal. Whether it is or it isn’t, we don’t like launch aid or any other form of corporate welfare (see Boeing 787) and we don’t think a solvent company like Airbus (or Boeing) should be getting any.

Bombardier strike at Lear Jet unit: Machinists voted to strike at Bombardier’s Lear Jet unit. BBD hardly needs this. With cash flow demands peaking as the CSeries development enters the final stretch, and with demand for regional airliners off, this is an unneeded headache.

Embraer Demand: Wall Street analysts were pretty unhappy following the Embraer investors day last week. EMB gave no signs of willingness to cut production next year. There are 100 slots and only about 75 orders, with few in sight. Backlog is shrinking. EMB is hoping to land big orders from either Delta Air Lines or American Airlines for the E-Jet, but we’re not aware of any Delta campaign (and in any event, the airline favored the CSeries in the aborted campaign of a year ago). American is in such disarray there is no telling when, or if, it will pursue an order.

EADS-BAE: Bernstein Research doesn’t think this merger should happen. The excerpt from a note issued today:

We believe that it would be best for both companies if this proposed merger does not happen. But, we see the merger as worse for EADS than for BAE. Both companies describe scale as an advantage (e.g. better leverage of R&D), but we have never seen scale in itself as an advantage. Specific issues are:

– Shareholder interests. EADS shareholders typically own the stock as a play on commercial aircraft OE growth through Airbus. Increasing the scale of defense assets, with some in particularly challenging markets, is likely to take some investors out of the stock. We find BAE Systems shareholders as generally focusing on the high dividend. The combination with EADS, which does not pay a high dividend, places the current BAE Systems dividend level at risk in 2014. The disclosure of merger discussions also raises questions about the sustainability of cash flow and the divided, as we have found investors questioning why BAE would accept the EADS offer if its cash outlook were robust. BAE Systems CEO Ian King has countered this by stating (with EADS CEO Tom Enders) that this deal is “borne out of opportunity, not necessity”.

– Synergy potential. We view the potential synergies between EADS and BAE Systems as low given very little overlap between their businesses and restrictions in technology transfer from US programs. From an EADS standpoint, we expect that this combination would result in a stronger international marketing organization, provide some limited cost savings in indirect personnel and sourcing, and provide some improvement for the defense electronics portion of EADS’ Cassidian business (only about 2 billion euros in revenue). But, given the limitations in capturing these synergies and their relatively small size, we do not see them as justifying a merger of this scale. For EADS, this is particularly true, since it would pay a premium for BAE shares and be buying into some particularly difficult market exposure (e.g. US Army equipment, defense IT/services). In addition, we see disruption as inevitable in a deal of this size, as it could lead to a loss of some key personnel, changes in government relationships, and problematic integration steps (e.g. IT Systems), even though the overlap is relatively small.

 41 Comments

 Posted on October 8, 2012 by

 Airbus, American Airlines, Boeing, Bombardier, CSeries, EADS, Embraer

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Odds and Ends: Status of KC-46A; US Airways without AA; CSeries timeline

KC-46A: Aviation Week has this article on the current status of the Boeing KC-46A tanker and the management challenges. AvWeek also reports what we did earlier: the tanker gets nailed in sequestration. We have the specifications sheet here: KC46 Tanker Specifications.

US Airways without American: In case this merger doesn’t happen, US Airways is looking ahead, according to this Aviation Week article.

CSeries timeline: Aviation Week has this piece about the Bombardier CSeries timeline for first flight and EIS, comparing it with the Q400 and CRJ700 programs, which were both late.

BAE-EADS: EADS CEO Tom Enders calls this a perfect fit. The Financial Times has this story. Free registration may be required.

 36 Comments

 Posted on September 19, 2012 by

 Boeing, Bombardier, CSeries, EADS

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