Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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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 
Market 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.
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.
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.
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, 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.
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, 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.
Pontifications: From the sidelines of the ISTAT conference, Notes #2
March 13, 2015: More Notes from the sidelines at the ISTAT conference this week in Phoenix.
By Scott Hamilton
Boeing 777 production rates and advancing schedule
Randy Tinseth, Boeing VP-Marketing, predictably stuck to Boeing messaging Monday at the ISTAT conference when I asked him about the change in tone I described in my post Monday morning about the 777 Classic production rate to the entry-into-service of the 777X.
Waving a copy of my post in the Q&A session of Tinseth’s market update and saying I had transcripts of every Boeing earnings call and investors presentation in which the “bridge” question was posed since the 777X program was launched, I cited Boeing CFO Greg Smith’s response to orders in the March 5 JP Morgan investors’ day and asked Tinseth about it.
Production rates on single-aisles keep going up, up
Figure 1. Airbus and Boeing production rates for the A320 and 737 lines are going up as announced rates and rates under consideration go to lofty levels. Click on image to enlarge.
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Introduction
March 3, 2015: c. Leeham Co. Production rates for single aisle airplanes continue to go up for the Big Two, following the Airbus announcement last week that the A320 rates will go to 50/mo in 2017 and officials are considering going to more than 60/mo.
We’ve previously reported that Airbus already has notified the supply chain to be prepared to go to 54/mo in 2018.
Rate 50 will propel Airbus ahead of Boeing, which will briefly be ahead of Airbus when the 737 production rate goes to 47/mo next year, compared with the Airbus plan to take A320 rates to 46/mo next year. The two companies are at parity this year. (Figure 1.)
Summary
- Bombardier, COMAC and Irkut add to supply by 2020, but impact will be minimal.
- No 747-8 deliveries scheduled in 2018. We see program termination coming very soon.
- A330ceo production rate reduced, higher rate for 787 than announced.
- We see short-term Airbus advantage coming in wide-body production rates as A350 ramps up. We stick with our call that 777 Classic rates have to come down.
- We reduce A380 production rates in our estimates.
CS300 first flight Wednesday, direct challenge to 737-7 and A319neo
Feb. 25, 2015, c. Leeham Co. Bombardier’s direct challenge to the Big Two duopoly in the 125-149 seat sector is scheduled for its first flight Wednesday, weather and gremlins permitting.
Bombardier photo.
The CS300, challenger to the A319neo and 737-7, is to take to the skies as Bombardier’s flight testing program enters the final stretch. BBD still claims it will deliver the first CS100 by the end of this year, though most analysts (and we) believe it will slip into 1Q next year.
The CS300, 135 seats in two classes and 149 in standard one class, matches the 31-inch pitch configurations of the “baby” Airbus and Boeing products.
Bombardier claims large operating economic advantages over these competitors. Our analysis shows economics probably a bit closer than Bombardier would like.