Paris Air Show: Embraer

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Introduction

May 25, 2015, c. Leeham Co. The Paris Air Show this year isn’t expected to be a big venue for orders from Airbus, Boeing and Bombardier (although since ouir Airbus Preview, an official now says there will be a “significant number” of orders at the PAS).

Embraer isn’t expected to do much out of the ordinary. One of what we call the Big Four Airframe OEMs, EMB’s priority this year is garnering orders for the E-Jet E1 to fill out the production gap to the E2.

Summary

  • Filling the production gap between the E-Jet E1 and E2;
  • Firming up E2 commitments;
  • Revealing a new marketing campaign.

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Dissecting the United A319 deal: implications

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Introduction

May 19, 2015, c. Leeham Co. United Airlines and mega-lessor AerCap announced last week UAL will lease up to 25 Airbus A319s, with deliveries from 2016-2021. The aircraft are currently leased to China Southern Airlines. These are powered by the International Aero Engines V2500, the same engine that powers UAL’s current fleet of A319s and A320s.

UAL said it will use the A319s to replace 70-seat regional jets, freeing these to shift into 50-seat RJ markets. This represents a general up-gauging at the lower end of United’s fleet.

There are also more implications to this transaction.

Summary

  • Cheap fuel helps, but it’s cheap A319s that count more than anything else.
  • Bombardier hopes for CSeries order could be hurt.
  • E-Jet getting new role, while CRJs and ERJ are out.
  • Taking advantage of the market conditions.

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ISTAT Asia: Asian airline market update

Introduction

May 11, 2015, c. Leeham Co: We are participating this week in the ISTAT Asia conference in Singapore where IATA and different panels gave an interesting update on the Asian airline market. This is the fifth year that an ISTAT (International Society of Transport Aircraft Trading) conference is held in Asia and participation has virtually doubled from last year to 500 delegates.

IATA’s Conrad Clifford opened the event with the following overview about the Asian market for airline passenger travel:

  • The IATA 20 year forecast growth for the region is 4.9 % annual growth, making it the largest world-wide passenger market by 2030.
  • The domestic markets of China and India grew with 11% and 20% respectively in 1Q2015. The US market in comparison grew 3%.
  • The growth in the region makes China the world-wide largest domestic passenger market by 2030, surpassing the US with India in third place.
  • The highest growth markets are China, India and Indonesia. Countries like Thailand and Malaysia are struggling with low demand at present.

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Bjorn’s Corner: Bombardier’s and Embraer’s first quarter

 

By Bjorn Fehrm

By Bjorn Fehrm.

07 May 2015, C. Leeham Co: Last week we looked at Airbus first quarter result and compared its commercial aircraft unit with Boeing’s. Now with do the same with Bombardier and Embraer. As both have sizeable Business jet businesses we will include these in the analysis as they share many technologies and developments with the commercial aircraft.

Embraer reported their results last week and Bombardier today. Both reported quarters in the aerospace area which were a bit inferior to last years first quarter and for the same reason, the Biz jet market has gone soft.

Bombardier, who has a larger proportion of its turn-over in Biz jets, has managed this better, it has delivered more aircraft and generated slightly higher revenue and profits from the area but new orders has been slower.

Embraer does separate its business segments for revenue but not for profits. It reports that the lower revenue and profit for the quarter was mainly because the Biz jet area delivered fewer aircraft at less margin. Commercial aircraft deliveries were strong, with good efficiencies in the production and delivery of E-Jets. Read more

Paris Air Show Preview: Airbus

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Introduction

May 3, 2015, c. Leeham Co. The Paris Air Show is June 15-19 for the trade/industrial portion. Beginning this week, Leeham News and Comment will provide our Airbus_logo_3D_BlueMarket Assessment and insight about what to expect. We begin this weekly exercise by looking at Airbus. Future posts will look at Boeing, Bombardier, Embraer and other major players at the PAS.

Summary

  • First, an overarching look at what to expect;
  • What to expect for Airbus at the show;
  • The future of the A380neo;
  • Outlook for the A330ceo/neo; and
  • Outlook for the A321LR.

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United Airlines revises fleet plan

April 23, 2015: United Airlines announced its 1Q2015 earnings today (which will eventually be posted with commentary on SkyWriterAviation.aero). What caught our eye in the press release was the following. United will:

  • Complete the removal of more than 130 50-seat aircraft from its schedule by the end of 2015. UAL will remove additional 50-seat aircraft in 2016 and beyond as aircraft come off lease.
  • Exchange 10 787 orders with Boeing for 10 777-300ERs for delivery beginning in 2016. The new 777-300ER aircraft will provide attractive upgauge and range opportunities to the company at competitive economics.
  • Extend the life of 11 additional 767-300ER aircraft. The company now plans to extend the life of all 21 767-300ER through investments in winglets, reliability improvements and interior modifications, which will improve financial performance and make the aircraft more customer pleasing.
  • Reconfigure and transition 10 777-200 aircraft currently used in international markets into the domestic network, and position a number of its trans-Atlantic 757-200 fleet into the domestic and Latin markets, with the extension of the 767-300ER aircraft.
  • Acquire additional used narrowbody aircraft. The company is in final negotiations regarding the lease of 10 to 20 used narrowbody aircraft for delivery over the next few years. In addition, the company plans to continue to seek other opportunities to acquire used aircraft to meet its needs as market conditions allow.

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Next Gen turboprop R&D continues at Pratt & Whitney

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Introduction

Maria Della Posta, SVP Sales and Marketing, Pratt & Whitney Canada

April 5, 2015, c. Leeham Co. Pratt & Whitney Canada (PWC) continues to develop the next generation turbo prop engine despite little interest from Bombardier for a replacement for its slow-selling Q400 or from Airbus, 50% owner of ATR, dominant producer of this type of aircraft.

Maria Della Posta, SVP of sales and marketing, said PWC is confident demand will prevail over the current lack of interest to see a new airplane program launched as early as 2016 or 2017–though she hedges that this could slip a year or two.

Summary

  • In the meantime, PWC continues to undertake Performance Improvement Packages (PIPs) for its ubiquitous PW100 series that is now in its 38th iteration.
  • Emerging market ambitions could create new opportunities for PWC to put its next engine on new entrant turbo prop producers.
  • Airlines seek a new, larger turbo prop than the Q400 and ATR 72.

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Pratt & Whitney: Lean, automated manufacturing key to GTF ramp up

April 2, 2015: Lean principals and increased shifting to automated manufacturing are key to an aggressive ramp up for the Pratt & Whitney Geared Turbo Fan engine, according to officials.

The first production engines for the Airbus A320neo are scheduled for delivery to Toulouse in the second and third quarters of this year. The A320neo will be the first airplane to put the new GTF into service now that the EIS of the Bombardier CSeries has slipped to next year. The CS100, the first airplane for which the GTF was chosen to power an airliner, was originally supposed to enter service in late 2013. A series of delays now puts this in the first or second quarter of next year, barring additional delays. Read more

Bombardier sees solid future for CRJ

March 20, 2015: C. Leeham Co. Bombardier’s current challenges don’t end with the CSeries. The company has seen its once-dominate positions in the regional jet and turbo prop markets decline precipitously.

Ross Mitchell Fleigerfaust 2

Ross Mitchell, VP of Business Acquisition and Commercial Airplanes, Bombardier. Photo: Fleigerfaust.

The CRJ struggles in its sales against the Embraer E-Jet. The Q400’s market share of the turbo prop sector has declined to a mere 10% of the backlog vs ATR.

Still, Ross Mitchell, vice president of Business Acquisition and Commercial Aircraft for Bombardier, gave a spirited defense and upbeat outlook of both products during last week’s ISTAT conference in Phoenix. In a one-on-one interview the next day, we posed a series of questions about the CRJ and the Q400. We reported on the Q400 yesterday. Today’s report is about the CRJ.

CRJ’s future

Mitchell said the CRJ has a lower unit cost than the rival Embraer E-175 and E190, the direct competitors to the CRJ-700/900 used most in the USA, where labor Scope Clauses limit the size and number of airplanes that may be operated by the regional airlines on behalf of the legacy carriers.

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Rebuilding confidence at Bombardier

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  • This week the Malay government announced an order for 20 CSeries CS100s. for a new airline.

Introduction

March 17, 2015: c. Leeham Co. Turmoil at Bombardier, both financial and with the departure of several key personnel, caused a crisis in confidence among customers and shareholders. The stock price took a tumble and some Canadian aerospace analysts, and the few on Wall Street who also follow the stock, have become increasingly pessimistic. Leeham News and Comment published a long analysis after Ray Jones departed Bombardier Commercial Aircraft in a surprise move, the latest in a series of top-level departures at the unit. Market reaction was decidedly negative.

CEO Pierre Beaudoin stepped up February 12 to executive chairman, relinquishing the chief executive title of Bombardier to Alain Bellemare, a veteran of Pratt & Whitney whose appointment was generally well received.

Still, customers we talked with continue to be cautious. One has a wait-and-see about what Bellemare will be able to achieve, and how soon. This customer believes Bellemare has until the Paris Air Show in June to show some tangible progress.

Another customer was considerably more upbeat, viewing the appointment as a major change in the company for the better.

Canadian analysts were positive about the management changes, in part because the market has lost confidence in the Beaudoin management and in part because Bellemare and his PW experience are viewed as heavy-weight.

Ross Mitchell Fleigerfaust 2

Ross Mitchell, vice president of Business Acquisitions and Commercial Aircraft, Bombardier. Source: Fleigerfaust.

We sat down with Ross Mitchell, vice president of Business Acquisitions and Commercial Aircraft for Bombardier, at the ISTAT conference last week in Phoenix for a wide-ranging interview. Here is Part 1.

Summary

  • Bombardier needs to restore confidence in the market after all the turmoil. How will this be accomplished?
  • Will Alain Bellemare have the flexibility and freedom to do what needs to be done?
  • Organizational restructuring has already made some progress.
  • The financings are a positive.

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