Leeham News and Analysis
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“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?
Airline assets and lessor assets: Bombardier and Embraer
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Part 2. Part 1 may be found here.
Introduction
Bombardier invented the regional jet. Despite some sales these days, the CRJ was eclipsed by the Embraer J-Jet. Bombardier photo.
Oct. 10, 2016, © Leeham Co.: Regional aircraft are much riskier assets for lessors than mainline aircraft.
Until recently, Bombardier and Embraer were the only two regional jet Original Equipment Manufacturers (OEMs).
Today, the Sukhoi SSJ100 and the Mitsubishi MRJ90 join BBD and EMB in this arena.
Summary
- Bombardier’s regional jets CRJ series enjoyed a good life with airlines and lessors, but fell into disfavor as fuel prices spiked.
- BBD’s CSeries was ordered by four lessors, but two of them have question marks.
- Embraer’s E-Jet found good homes with lessors, but some worry about supply-and-demand in the secondary market.
Airbus’ Eccleston talks about reorganization and WTO
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Introduction
Oct. 6, 2016, © Leeham Co.: Airbus’ reorganization continues to unfold, with key components to be revealed, including key personnel appointments.
LNC sat down in Seattle with Barry Eccleston, president of Airbus Americas, at the conference Tuesday organized by the British American Business Council Pacific Northwest to talk about the moves. We also discussed the recent decision by the World Trade Organization (WTO) upholding an appeal by the US Trade Representative (USTR) in the 12-year old illegal subsidy cases between the US and European Union over government aid to Airbus and Boeing.
A decision on the EU appeal against the US and Boeing is expected to be issued after the first of the year.
Summary
- Reorganization eliminations duplications.
- Desire is to become more agile, flexible and competitive.
- No comment on whether the EU will appeal the WTO decision handed down last month.
- Two cases against Boeing (the US and Washington State) will see decisions next year.
Pontifications: Hypocrisy and illegal subsidies at the WTO
By Scott Hamilton
Sept. 26, 2016, © Leeham Co.: There are two airplanes under development that are in the 150-220 passenger space.
Both are under development by companies that get state aid and make no bones about it. The aid would likely be found in violation of World Trade Organization (WTO) rules.
But the most vociferous opponent to illegal subsidies hasn’t said a peep about it.
Neither has the opponent’s rival—although this company publicly recognizes the irony of it all.
I call it hypocrisy.
44% supplier shortfall for GTF now showing impact
Sept. 6, 2016, © Leeham Co.: It was a stunning admission, one that produced the biggest headlines at the United Technologies media days in June: 44% of the suppliers on Pratt & Whitney’s Geared Turbo Fan engine weren’t performing to the UTC/PW standards.
The impact of this was seen today when Bombardier announced it will deliver only half the anticipated 15 C Series this year because of engine delivery issues by PW for the GTF powering the new airplane.
Bombardier and PW pointed the finger at its supply chain for the delays in delivering engines.
Pontifications: Mitsubishi ramping up flight testing for MRJ
By Scott Hamilton
Aug. 15, 2016, © Leeham Co.: Mitsubishi Aircraft Corp. (MAC) is about to dramatically ramp up its flight testing of the MRJ-90.
Media has been alerted to an all-day event next month, complete with a tour of the Moses Lake (WA) facility, where test airplanes will be based.
The program is two years behind schedule for the brand new design, the first commercial airliner produced by Japan since the YS-11 turboprop more than 50 years ago.
Bjorn’s corner; Runway safety systems
By Bjorn Fehrm
August 11, 2016, ©. Leeham Co: I recently wrote about the need for Synthetic Vision and other aids to increase the situational awareness of commercial pilots. I asked the OEMs what their plans were for such aids.
One OEM answered that the system will take time until it gets offered as the additional training for the pilots to use the system is not popular with the airlines. It’s hard to monetize a concrete operational benefit for Synthetic Vision systems.
Figure 1. Embraer’s E190-E2 currently under flight test. Source: Embraer.
I have now got a slightly different answer from Embraer. Here is what they say. Read more
Embraer books 1H2016 loss and lowers guidance
By Bjorn Fehrm
August09, 2016, ©. Leeham Co: Embraer presented its second quarter and first half 2016 results on July 29, posting a loss and lowering guidance for the year.
The company is in a bridge period on its commercial aircraft side, with sales and deliveries focusing on the scope clause optimized E-Jet 175 while the company readies the upgraded E-Jet E2 series.
Figure 1. Embraer’s best-selling E175 regional jet. Source: Embraer
At the same time, the company’s buoyant Business Jet side has started to feel the slump that has hit this market since 2014. Combined with a domestic Defence and Security market which is dependent on Brazil’s economy, it’s been a first half of 2016 which has been a bit tougher than Embraer planned.
The company judges that the slow Business jet sales will continue and has therefore lowered its full year guidance. Read more