Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Solid start for stand-alone GE Aerospace despite cuts to LEAP output April 23, 2024
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- Better transparency needed on Boeing’s 1Q earnings call April 22, 2024
- Bjorn’s Corner: New engine development. Part 4. Propulsive efficiency April 19, 2024
- Boeing unlikely to meet FAA’s 90-day deadline for new safety program April 18, 2024
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.
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.
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.
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.
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’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
Seventeen new, derivative aircraft to see EIS through 2020
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Introduction
Delivery of the first Bombardier CS300, to AirBaltic, next week kicks off entry-into-service for 17 airplanes through 2020. Bombardier photo.
Oct. 20, 2016, © Leeham Co.: The past decade was a hive of activity as the Big Four OEMs launched new airplane programs and put the aircraft into service.
Airbus launched the A320neo, A330neo and A350 families. The A330neo is under production; the other two entered service early this year.
Boeing launched the 787 in late 2003 (outside the decade mark), rolled it out in 2007 and entered service with it in 2013. The 737 MAX was launched in 2011 and is in flight testing. The 777X was launched in 2013; components are in production.
Bombardier launched the CSeries in 2008; it entered service this year, after three years of delays.
Embraer launched the E-Jet E2 om 2013. Flight testing began this year.
New Entrants
These were supplemented by new entrants into commercial aviation: COMAC with its C919; Irkut with the MC-21; and Mitsubishi with the MRJ90. Of these, only the MRJ90 is flying. After more than two years of delays and several false starts, flight testing began in earnest this week at Moses Lake (WA) with FTA-1 (Flight Test Aircraft 1).
Development and new program launches have slowed, but the next decade is hardly going to be idle.
Summary
- Seventeen new aircraft or derivatives are scheduled to enter service through 2020.
- Five potential derivatives might see EIS through the same period.
- Three to five new or potential derivative aircraft might see EIS 2021-2025.
Pontifications: A good week for Boeing wide-bodies
By Scott Hamilton
Oct. 17, 2016, © Leeham Co.: Boeing had a very good week for wide-body orders last week. It recorded 42 orders for the 787 and 10 for the 777-300ER.
Thirty of the former and all of the latter came from Qatar Airways. There were 12 787 orders from “Unidentified,” which in this case was from China Southern Airlines. These were announced Wednesday but too late to show up on the weekly orders update posted Thursday.
787 Book:Bill
For the year, Boeing has 61 net orders for the 787, a healthy increase since the end of June, when the book-to-bill was a paltry 0.25 YTD. Even at 61, this is still a book:bill of just 0.42 for the 787, which has not had a book:bill of more than one since 2013. This means Boeing continues to burn off the backlog faster than it is booking new orders.
But it’s welcome news nevertheless in a year when there has been a dearth of wide-body orders.
Read more
“Scope clauses stop aircraft development”
By Bjorn Fehrm
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Introduction
October 16, 2016, ©. Leeham Co: “Scope clauses stop aircraft development.”
The words are those of Rodrigo de Souza, Marketing manager of Embraer Commercial Aircraft when we spoke at the sidelines of the recent ISTAT conference in Barcelona.
De Souza made the comment when we discussed how the new E-Jet E175-E2 would fit with US scope clauses. It doesn’t.
Figure 1. Embraer’s E175-E2, which gives an 11% improvement in fuel burn (the additional 5% is from 76 seats going to 80). Source: Embraer.
The problem is the limit on Maximum Take-Off Weight (MTOW).
“I can understand the other restrictions of a scope clause but not the Max Take-Off Weight restriction,” de Souza said. “It doesn’t make any sense; it just stops new and more efficient aircraft getting into the market. What relevance does it have in protecting mainline pilots from the regional operators taking over routes?”
Summary:
- The MTOW part of scope clauses hits all regional manufacturers.
- Embraer is not the worst hit; their present E175 is compliant and selling well.
- Mitsubishi is worse off. Its entire backlog of 240 MRJ90 is non-compliant. And some of its major customers fly for airlines with scope clauses.
- What is the solution? Why doesn’t scope clauses adapt to modern times?