European Regionals Face Hostile Operating Environment

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By Kathryn B. Creedy

Third in a Series. Previous articles:

Introduction

Aug. 31, 2020, (c) Leeham News: European regionals face far greater challenges than Covid and, sadly, much of what is happening to the industry is beyond its control. The result is similar to failures seen in the U.S.  Flybe’s recent loss resulted from pre-Covid problems which also led to the pre-Covid failures of such airlines as Flybmi and Cobalt.

The failures illustrate, however, the three reasons why European regionals are so fragile – low-cost competition, geography, and challenging government policy.

 

 

 

 

 

Flybe is just the latest of many regionals to cease operations owing to harsh conditions in Europe.

Summary
  • Government Policies Hardest on Regionals
  • LCC Competition Challenging
  • Consumer Protections Crushing
  • Turboprops Have Large Role

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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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Bjorn’s Corner: Why e in ePlane shall stand for environment, Part 13. Serial Hybrid.

March 13, 2020, ©. Leeham News: In this week’s Corner, we address an often forgotten aspect of Electric and Electric-Hybrid aircraft design.

The battery as an energy source, as the only or assisting source, has the same weight during the whole flight. A fuel (alternate, fossil, or hydrogen) consumes during the flight. You gradually fly a lighter aircraft. Let’s see how this affects the aircraft’s efficiency.

Figure 1. Embraer’s E175-E2, a latest-generation 88 seater jet used for our example. Source: Embraer.

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Embraer’s challenges

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By Vincent Valery

Introduction  

Jan. 13, 2020, © Leeham News: It is no exaggeration to say that 2020 is a pivotal year for Embraer. Whether the tie-up with Boeing materializes will determine its future.

As crunch time approaches for the creation of Boeing Brasil, LNA thought it relevant to study the company’s financial records since 1999. This is another in a series of financial analysis of leading aerospace companies and airlines.

From humble beginnings, the company achieved a dominant position in the regional market with the E-Jet family. After a slump in defense and security business revenues in the early 2000s, the company undertook significant programs. It also entered the business jet market to diversify its revenue streams.

So far, E2 E-Jet sales have been tepid. After years of significant development spending, the Commercial aircraft division is just above red ink, the Defense and Security division isn’t profitable and the Business jets are not adding anything to the bottom line.

Regardless of whether the tie-up with Boeing materializes, Embraer will have to take major strategic decisions, especially in the Commercial Aviation division.

Summary
  • From government project to world-class OEM;
  • Profitability challenges;
  • (Not so) diversified revenue sources;
  • Plans with Boeing;
  • And without it.

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Pontifications: There was other news in 2019 besides MAX. Really.

By Scott Hamilton

Dec. 23, 2019, © Leeham News: The Boeing 737 MAX crisis clearly dominated the news this year.

It’s felt like the aviation stories have been all-MAX, all-the-time.

Believe it or not, there was aviation news other than the MAX.

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Can the DHC 8-400 compete with a CRJ550 for the 50 seat Scope Clause market?

By Bjorn Fehrm

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Introduction

November 14, 2019, © Leeham News: The US mainline airlines have large fleets of 50-seater regional jets that are getting old. The present Scope Clause limits on the number of aircraft with seating over 50 seats stop the mainlines from replacing these aircraft with larger aircraft. So there is a real need for an efficient 50 seater regional aircraft for the US market.

As there are no 50 seater jets in production, United is converting its 70 seater CRJ700s to 50 seaters to fill the gap and calls them the CRJ550. This is where de Havilland Canada sees a change for an adapted DHC 8-400 turboprop. It’s more efficient than a CRJ550 while offering the same comfort, says de Havilland. We check if this is correct and what chances a DHC 8-“550” have in this market.

Summary:

  • The US Scope Clauses allow the three mainlines to have more 1,000 50 seater jets, yet no new ones are available to replace the more than 600 in the market.
  • The in-production DHC 8-400 would be an alternative when looking at cabin size and dimensions.

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Europe’s Regional airlines meet in Antibes, Cotes d’Azur.

By Bjorn Fehrm 

October 9, 2018, ©. Leeham News, Antibes France: The European Airlines Association, ERA, gathered 44 of its 51 member airlines in Antibes France, today for the first day of its 2019 General Assembly meeting.

LNA participated in the event for the first time and we found an impressive gathering of airline and airport representatives, aircraft OEMs and support businesses discussing the challenges facing the European regional air transport market.

Norway’s Wideroe, the launch customer for Embraer’s E-Jet E2 is one of the airlines present.

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Embraer’s E195-E2 or Airbus A220-300 under 150 seats? Part 3

By Bjorn Fehrm

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Introduction 

October 3, 2019, ©. Leeham News: We have the last two weeks analyzed what aircraft to choose for the segment 120 to 150 seats, comparing Embraer’s E195-E2 with Airbus’ A220-300.

The first week we looked at fundamental data and last week we compared the drag data and by it the fuel consumption of the aircraft. Now, we analyze the other operational costs for the aircraft.

Summary:

  • The fuel costs between the E195-E2 and A220-300 are close.
  • We now analyze the other operational costs; Crew, Maintenance and Airway/Airport costs to see how these differ.

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Embraer’s E195-E2 or Airbus’ A220-300 for the 120 to 150 seat segment?

By Bjorn Fehrm

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Introduction

September 19, 2019, ©. Leeham News: What aircraft to choose for the segment 120 to 150 seats, Embraer’s E195-E2 or Airbus A220-300? After discussions with Airbus’ Rob Dewar at the Paris Airshow, Head of A220 Engineering and Product Support, and a visit to Embraer last week for the E195-E2’s first customer delivery, we have collected some unique insights.

We also had the opportunity to talk to David Neeleman of Azul, Moxy and TAP Portugal when at Embraer, the only owner/operator which has bought both aircraft; E195-E2 for Azul and A220-300 for his Moxy project.

Summary:
  • We start with a detailed comparison of the aircraft in this first article.
  • While serving the same passenger capacity segment, they are surprisingly different in their design approach and, therefore, in their characteristics.

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Pontifications: Catching up on Odds and Ends-Alaska’s Airbus fleet, first E195-E2 delivery, Boeing’s MAX rebranding question

  • Take our Boeing 737 MAX rebranding poll at the end of this post.

Sept. 2, 2019, © Leeham News: It’s time to catch up on Odds and Ends.

Alaska Airlines

In its second quarter earnings call and 10Q Securities and Exchange Filing, Alaska Airlines said it was returning one Airbus A319 and two A320s off lease this year and next.

By Scott Hamilton

These airplanes are from its Virgin America acquisition, which introduced the Airbus family into the all-Boeing Alaska mainline operations.

Alaska officials have said several times they are evaluating whether to phase out all Airbuses and return to an all-Boeing fleet, or keep the Airbuses and operate a mixed fleet indefinitely.

I wondered if this was the start of the phase out.

“We are planning to return 1 A319 this year and 2 A320s next year at normal lease expiration,” Brandon Pederson, EVP and CFO of the company, wrote LNA.  “This is not part of a broader fleet  decision, nor a phase out of the smaller Airbus aircraft.  Leases on the remaining 50 A319/A320 aircraft in the fleet have varying maturities through 2025.”

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