Leeham News and Analysis
There's more to real news than a news release.
Delta shoots down Boeing’s CSeries dumping claim
May 23, 2017, © Leeham Co.: Delta Air Lines shot down Boeing’s claim that Bombardier “dumped” the CSeries order, in testimony last week before the US International Trade Commission.
Boeing filed a complaint April 27 that Bombardier sold the CS100 to Delta for $19.6m, well below its production cost, a price that constitutes “dumping.”
Bombardier CS100.
Boeing seeks tariffs of nearly 80% on the importation of the airplanes to Delta.
Boeing’s complaint is that the Delta deal made it impossible for Boeing to offer the 737-700 at a competitive price.
Paris Air Show Preview
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Introduction
May 22, 2017, © Leeham Co. The Paris Air Show begins June 17, and few in the industry expect much in the way of orders this year.
The order cycle is on the downward side of the bell curve. Sustaining the 2,000, 3,000 or nearly 4,000 gross orders announced 2011-2013 simply couldn’t be achieved. The “order bubble” had to break, and it did. Last year, Airbus and Boeing reported some 1,400 orders between them.
Airbus guides that it will tough to achieve a 1:1 book:bill this year. Boeing is running about 1:1 book:bill so far but it also guides conservatively. Still, LNC thinks Boeing might surprise this year–and some of this could be at the Paris Air Show.
Leeham Co.’s new publication, Commercial Aviation Report, provides a Focus Report on the Air Show. This encompasses the expectations for Airbus, Boeing, Bombardier, Embraer, COMAC, Irkut, Mitsubishi, CFM, GE Aviation, Pratt & Whitney and Rolls-Royce into one easy-to-read package.
The pre-airshow press briefings by the OEMs begin next week. We don’t expect any earth-shattering news from these and we wanted to get our views out ahead of these briefings.
Summary
- Boeing wants to launch the 737-10 MAX at the Paris Air Show. This could spur a group of orders that would give Boeing a rare win in the headlines vs Airbus on the latter’s home ground.
- Mitsubishi plans to have its MRJ90 at the Air Show. One airplane entered the paint shop for ANA colors–this might be the one making the appearance.
- Embraer expects to have its KC-390 there. Will the E195-E2 also make an appearance?
Regional aircraft for US Scope clause operations. Part 3.
By Bjorn Fehrm
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Introduction
May 18, 2017, © Leeham Co.: In the second article about the US regional aircraft market, we looked at the cabins for the regional aircraft we examine. We started with looking at the typical classes and their seat ratios for the mainline aircraft the regional aircraft are feeding to/from. Then we mimicked that on the regional aircraft.
We filled the cabin with domestic First-class seats, then Premium economy and finally Economy until we got 76 seats or the cabin said stop.
Now we complete the picture by comparing the economics of the aircraft after which we summarize our findings.
Summary:
- The benchmark aircraft for the US scope clauses is the E175 from Embraer. It was designed for the scope clause market.
- It’s larger dimensions means the operating costs are slightly higher than the CRJ900.
- A scope clause-bound operator can compensate the Bombardier CRJ900’s tighter cabin with more seat pitch. It has the longest cabin of all compared aircraft.
- The MRJ70 and CRJ700 are too short for scope clause flying with 76 seat cabins and the MRJ90 is too heavy for the 86,000lb maximum weight limit.
Regional aircraft for US Scope clause operations. Part 2.
By Bjorn Fehrm
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Introduction
May 11, 2017, © Leeham Co.: In the first article about the US regional aircraft market, we described the special rules that apply for outsourced regional airlines, operating for a mainline carrier. The mainline pilots limit the outsourcing via Scope clauses in their Union agreements to aircraft with 76 seats and 86,000lb Maximum Take-Off Weight (MTOW).
We identified potential aircraft that fit these restrictions in the first article. Now we examine their load carrying capability.
The MTOW limit sets a hard limit on how large aircraft can be used to house 76 seats. The mainline carriers want the regionals to mimic their domestic cabin classes in their aircraft. There shall be no disruption for a First class or Premium economy passenger whether on a mainline flight or on a feed flight to/from the hub.
The challenge is to accommodate the seating standard in the aircraft that come in question.
Summary:
- Mainline airlines want to replicate their three class cabins for all sectors of a network.
- This means the regional aircraft cabins shall offer First class, Premium economy and Economy sections.
- Only the larger aircraft we study can offer a three class cabin with 76 seats.
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Pontifications: Bombardier’s challenges beyond Boeing complaint
By Scott Hamilton
May 8, 2017, © Leeham Co.: The fallout and speculation continues after Boeing filed a complaint April 27 over Bombardier’s deal for 75+50 CSeries with Delta Air Lines.
The complaint was filed with the US government and the International Trade Commission.
Our stories are here, here and here.
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Regional aircraft for US Scope clause operations
By Bjorn Fehrm
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Introduction
May 4, 2017, © Leeham Co.: The US regional aircraft market changed shape last year. Most players expected that the negotiations between mainline pilots and the airlines would allow larger and heavier aircraft going forward.
But no, the present limits of 76 passengers and a Max Take-Off Weight (MTOW) of 86,000lb remained. Next negotiation round will be 2019 (United Airlines) and 2020 (American and Delta Airlines). By now, most observers expect the present limits to stay beyond 2020.
Figure 1. United Express Embraer E175. Source: United Airlines.
The non-moving limits surprised manufacturers. They expected their new aircraft could fit under new rules, allowing heavier aircraft.
With the changed situation, we go through which aircraft fit the present rules and which does not. And what are the options, should the rules not change come 2020.
Summary:
- The present scope clause-compliant aircraft are the CRJ700 and CRJ900 from Bombardier and E175-E1 from Embraer.
- These aircraft will be joined by the new MRJ70 from Mitsubishi Aircraft Corporation at the turn of the decade. The MRJ90 will arrive as well, but is too heavy for Scope-restricted airlines.
- We use our performance model to dive into how these aircraft operate under present and future Scope clause rules.
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Pontifications: Boeing complaint against Bombardier no surprise
By Scott Hamilton
May 1, 2017, © Leeham Co.: The Boeing Co. filed a complaint with the US Commerce Department and the International Trade Commission charging the Bombardier “dumping” the CSeries in the US to the detriment of Boeing and its 737.
Brazil, on behalf of Embraer, another competitor to Bombardier and the CSeries, previously filed a complaint with the World Trade Organization over similar charges that the Canadian and Quebec governments improperly subsidized BBD when they bailed out Bombardier for the CSeries.
The federal and provincial governments provided about US$1.5bn in investments in a new company that segregated the CSeries from Bombardier. A quasi-government pension fund took an investment in BBD’s rail division, also for more than US$1bn.
Neither move is a surprise.
At the time, the Canadian investments in Bombardier and the CSeries pretty much transformed the CSeries into a government program, managed by BBD.
Boeing-Bombardier complaint could affect competition in coming Delta neo-MAX RFP
Commentary
May 1, 2017, © Leeham Co.: Boeing’s complaint against Bombardier’s CSeries transaction with Delta Air Lines, and a request for millions of dollars in antidumping and penalties might be coming at a bad time.
Was the Boeing 787 program marked by “launch customer pricing” or “dumping”? This may depend on program or unit accounting. Boeing photo.
“Boeing requests that the Department initiate an antidumping investigation and impose antidumping duties on Aircraft from Canada in an amount sufficient to offset unfair pricing above.”
If Boeing is successful in its request of the US government and International Trade Commission to impose duties before the first CS100 is delivered to Delta next year, the cost of the airplane will balloon from the $19.6m Boeing calculates (and which BBD denies) to at least $33m.
It’s unclear from the complaint who would pay this penalty—Bombardier, maintaining the price to Delta, or would Delta have to pay the reset price?
Regardless, this kerfuffle can’t be welcome news to Delta, which already has a ruffled relationship with Boeing due to its opposition to the ExIm Bank and orders for Airbus aircraft.
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24 Comments
Posted on May 1, 2017 by Scott Hamilton
Airbus, Boeing, Bombardier, CFM, CSeries, Delta Air Lines, Embraer, Leeham News and Comment, Pratt & Whitney
737 MAX, 737-10, 737-900ER, 787, 7M7, A320ceo, A320NEO, A321ceo, Airbus, Boeing, Bombardier, CFM, CS100, CSeries, Embraer, LEAP, Pratt & Whitney