Pontifications: Planes nobody wants

By Scott Hamilton

Jan. 16, 2017, © Leeham Co.: Airbus and Boeing continue to offer planes that nobody wants.

Well, almost nobody.

The aircraft remain on the published price lists of both companies, for reasons that passeth understanding. Nobody ordered the aircraft for years.

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Aircraft list prices largely unchanged (Updated)

Update: Airbus Jan. 11 announced a 1% list price increase. The chart has been updated.

Jan. 10, 2017: Aircraft list prices are largely unchanged for 2017, the airline industry demand cools for new aircraft.

Sales in 2017 were down for the Big Two, Airbus and Boeing. Boeing announced orders for 688 aircraft, well off of last year, which also was a major decline from the year before.

Airbus announces tomorrow, with sales expected to be in a similar range.

Bombardier and Embraer announce later this month or next.

LNC compiled the current list prices from all the manufacturers, detailed in Figure 1 below.

Airbus and Boeing discounts typically range from 40% to 60%, depending on the customer, the airplane and the size of the order. BBD and EMB discounts may also be steep, depending on the campaign.

The balance of this article is for Subscribers only.

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Pontifications: Embraer, contrary to others, looks to momentum in 2017

By Scott Hamilton

Jan. 3, 2017, © Leeham Co.: Airbus, Boeing and Bombardier look toward 2017 as a bit of a punk year, as detailed in our Look Ahead for subscribers only. Not so by Embraer.

In an exclusive interview, John Slattery, the president of Embraer Commercial, said EMB will gain “momentum” this year. This is at a time where sales at the other three of the Big Four OEMs are expected to slow off an already slow 2016.

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2017: the year ahead

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Introduction

Jan. 3, 2017, © Leeham Co.: The New Year is here and it doesn’t look like a good one for commercial aerospace, if measured against previous outstanding years.

There are some troubling signs ahead, piling on to a slowdown in orders from last year that didn’t even reach a 1:1 book:bill.

This year looks to be worse than last. Airbus and Boeing will give their 2017 guidance on the earnings calls this month and next. Bombardier and Embraer earnings calls are a ways off, when each will provide its guidance.

But LNC believes the Big Two in particular will be hard pressed to hit a 1:1 book:bill this year and may even struggle to match 2016 sales.

Boeing’s year-end order tally comes Thursday. Airbus’ comes on Jan. 11.

Summary
  • Wide-body sales remain weak.
  • Narrow-body backlogs and low oil prices continue to inhibit sales.
  • China, Middle East concerns emerging.
  • United Aircraft MC-21 and COMAC C919 begin flight testing.
  • Airbus A330neo, Boeing 787-10, Embraer E195-E2 and Mitsubishi Aircraft MRJ-70 roll-out and begin flight testing.
  • Airbus A321neo and Boeing 737 MAX 8 EIS.

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Resurgence for ERJ-145

Note: Nov. 24 and 25 are Thanksgiving Holidays in the US. Our next post will be Monday.

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Introduction

Nov. 23, 2016, © Leeham Co.: The 50-seat regional jet market is dead.

That’s the conventional wisdom.

Well, not quite.

Embraer ERJ-145 is finding new life with regional airlines.

Embraer ERJ-145 is finding new life with regional airlines.

Piedmont Airlines, a unit of American Airlines, is adding the 50-seat Embraer ERJ-145 to its fleet. Eleven joined so far and next year the company plans to add 24 more.

CommutAir, an operator for United Airlines, is adding the same aircraft type to its fleet. Forty of them.

Why the mini-resurgence?

Low fuel prices and cheap airplanes.

Summary
  • 50-seat regional jets were considered economically obsolete with high fuel prices.
  • Sustain low prices provided a boost to the Embraer ERJ-145.
  • Bombardier’s CRJ-200 hasn’t seen a similar resurgence.

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UBS puts Sell rating on Embraer

Nov. 22, 2016: UBS resumed coverage on Embraer (NYSE: ERJ) today, rating the stock a Sell. It is the only Sell rating among seven analysts previously covering the company; six are Buys and one is Hold. UBS rated ERJ Neutral prior to suspending coverage.

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US, EU ignore Chinese, Russian subsidies

Nov. 15, 2016, © Leeham Co.: Government subsidies to commercial aircraft companies appear to be increasing despite the 12-year disputes before the World Trade Organization between Europe and the US over Airbus and Boeing aid.

Yet the US and Europeans appear to be doing little to try and curb the subsidies to new competitors.

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Clouds overhang Bombardier ahead of earnings call

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Introduction

Nov. 9, 2016, © Leeham Co.: Bombardier reports its 3Q2016 and nine month earnings Thursday and as the year prepares to enter its last 45 days, disappointment hangs over the company and the stock.

Summary
  • Despite winning firm orders for the CSeries from Air Canada and Delta Air Lines early in the year, no other new orders have been announced.
  • Deliveries of the CSeries will only be about half those projected, due to engine delivery delays from Pratt & Whitney.
  • The $1bn investment from the federal Canadian government hasn’t been achieved, but an announcement may come as early as next week that an agreement has been reached.
  • Boeing revised the design of the 737-7 to sit “right on top of” the CS300.
  • Embraer (Brazil) is taking the government bailout of CSeries to the World Trade Organization (WTO) in inquiries, with the USA lending support.

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Embraer 3Q2016 results: Stabilized situation

By Bjorn Fehrm

1 November  2016, ©. Leeham Co: Embraer reported slightly better than expected results for  3Q2016, with revenue up by 18% to $1,514m. Gross margin for the company is at a stable 19% (18% 3Q2015) and EBIT before one-off was $95m ($85m).

After one time charges, the result was a loss of $34m, attributable to a layoff program of $118m and additional charges in the Corruption affair the company has been involved in. The company reiterated its guidance for 2016, adjusted downwards in last quarters presentation.

The Commercial Aviation side delivered more aircraft than expected and Defense & Security increased revenue by 19%. The business jet side did not expand as planned.  Despite the certification of new models (Legacy 450), the delivery of new business jets is stuck at about 50% below what was expected, around 25 units per quarter instead of more than double that at the end of 2015.

embraer-175-plus-exterior

Embraer’s commercial aircraft best seller, the E175 being in Alaska livery. Source: Alaska Airlines.

While deliveries of commercial aircraft held up at 29 units, sales are not keeping pace with 17 aircraft sold in the quarter. Deliveries year-to-date are at 76 E-Jets while orders are at a low 51 for a book-to-bill of just 0.67.

Defense & Security stabilized with the KC-390 military transport program now progressing. The flight test program now has two aircraft.

Here the details of the financial results for the divisions and their aircraft programs: Read more

Less desirable aircraft for lessors

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Introduction

Part 3: Oct. 24, 2016, © Leeham Co.: Lessors select aircraft to add to their portfolios based on several basic criteria:

  • Is it a good airplane?
  • How are the economics?
  • Is there, or will there be, a broad customer base?
  • How “liquid” is the airplane?
  • How broad is the customer base?
  • Reconfiguration costs.
  • Commercial terms of the acquisition.

Lessors often conclude that while an airplane may be good technically and perfectly acceptable for airline use, failure to meet their specialized key criteria—notably liquidity and customer base—they may pass on the aircraft.

Summary

  • A surprising number of in-production jets and those in development don’t make a lessor’s list of desirable leasing assets.
  • The planes all are technically good aircraft.
  • Markets may evolve for some of the aircraft on the list.

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