Tomorrow’s Bombardier earnings call: trying to be upbeat in the midst of a tornado

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Introduction
As the market prepares for Bombardier’s 2014 year end earnings call tomorrow, CEO Pierre Beaudoin has his work cut out for him to restore confidence among the airlines and lessors who have ordered the CSeries and who might.

The abrupt departure last month of yet another aerospace sales chief, Ray Jones, is the third top executive to leave within a short time. Gary Scott resigned as CEO of the Aerospace unit for personal reasons. Chet Fuller, Scott’s successor, left after his three year contract wasn’t renewed. Jones followed Fuller out the door after 13 months. Guy Hachey, president of the aerospace unit, left in a corporate reorganization of the unit.

Key people is sales and marketing also departed after Jones took over. Philippe Poutissou, VP-Marketing, was unceremoniously ousted as Jones wanted his own team. Rod Sheridan, Vice President Commercial Aircraft Customer Finance, left and joined Nordic Aviation as vice chairman. There has been turnover in the sales force as well.

Summary

  • Customers bewildered by events.
  • Confidence in CSeries remains, but uncertainty swirls.
  • CSeries EIS seen slipping to 1Q2016.
  • Customers worry about lack of “relationships.”

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Odds and Ends: CSeries; Mitsubishi MRJ; Air France; Saving airlines

CSeries: Bombardier provided a short update from program head Rob Dewar in advance of its 2014 earnings call Thursday. The flutter test has been completed, CS300 is moving toward joining the flight test fleet and the fleet has completed 900 hours of the 2,400 required toward certification.

  • BBD today revealed the identify of the customer for 24 CRJ-900s, announced Dec. 30: it’s American Airlines.
  • Luxair plans to order some Q400s to replace its Embraer E145 jets.

MRJ90: The Mitsubishi MRJ is Japan’s first commercial airliner since the YS-11 turboprop in the last century. It’s a bold project intended to break into a highly competitive market sector. Air&Space magazine of the Smithsonian Institute profiles the MRJ.

Air France: Aviation Week has a dark opinion of the future of Air France. It’s worth a read.

Saving airlines: While Aviation Week has a dim view on the future of Air France, The Wall Street Journal has a piece about how private equity saved airlines. (Subscription may be required).

 

Regional operations with the Turboprop, prop-jet or Jet

By Bjorn Fehrm

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Introduction

08 Feb 2015: Passenger traffic is growing the world over on a regional, domestic and international level. For domestic and international airlines the choice of mainline transport aircraft is clear today: there are only two vendors, Boeing and Airbus, and they produce similar products.

For regional transportation there is more choice. First of all, one can chose typeleehamlogo copyright 2015 small 210_87 pixels of aircraft, turboprop or jet. Within jet, there are several OEMs that are active. The choice in turboprop is more restricted. In practice, the choice stands between the classical turboprop with ATR and a faster type from Bombardier, the Q400 “Prop-Jet” as it is called, as its speed lands between the classical turboprop and regional jet.

The question is, what are the real differences between them in terms of design, passenger comfort and economics and what is the right choice for a market segment? We will take a deeper look into this by analyzing the ATR72 as the classical turboprop, the Bombardier Q400 as the Prop-Jet and CRJ700 as the regional jet.

Summary:

  • The ATR72-600, Bombardier Q400 and CRJ700 are all about the same size, around 70-80 seats single class or 60-70 seats dual class.
  • They offer different comfort levels, and it is not all about speed.
  • In developing the economics in two steps we seek the crossover points between the different types.

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Single-aisle values, lease rates stable; smaller mainline jets struggle

Special to Leeham News and Comment

By Gueric Dechavanne
Collateral Verifications

Feb. 8, 2015: Apart from a few unfortunate events, the industry has been moving along quite nicely so far in 2015. Used single-aisle aircraft values and lease rates have remained somewhat stable for the most part whilst new aircraft continue to be in demand which means a competitive landscape for those looking to invest in the types. On the in-production front, Airbus A319s, A330-200s, and Boeing 737-700s continue to struggle to find homes as many operators look to their larger siblings for lift. Airbus A320s, 321s, 330-300s, A350-900, Boeing 737-800s, 777-300ERs, and 787s continue to be the aircraft of choice, which in turn has stabilized and even strengthened values and lease rates for most. We are starting to see some softening in 777 values, which we believe is due to the competitive nature of some of the Boeing campaigns to fill the order book until the 777X enters service.

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Odds and Ends: KC-390 first flight; A400M; AirAsia 8501; Bombardier credibility

KC-390 first flight: Embraer’s largest airplane ever built, the KC-390 tanker/transport, made its first flight today.

We profiled the airplane last October following our visit to Brazil.

The airplane fulfills needs for Brazil’s vast geography to supply its population and to serve as a military platform. It also gives EMB valuable experience in developing large aircraft. The cross-section is about the size of a Boeing 767. It’s slightly larger than a Lockheed Martin C-130 but smaller than the Airbus A400M.

Speaking of A400M: Tom Enders, CEO of Airbus Group, had some comments about this problem child at Airbus in his annual press conference dinner in Paris. Aviation Week reports.

AirAsia 8501: Reuters reported last week two unidentified sources said the captain was out of his seat cutting power to two computers, working a flaw, when AirAsia flight 8501 went out of control and crashed into the Java Sea. Now there’s a report disputing this.

Bombardier credibility: Ahead of the Feb. 12 year end 2014 earnings call, Bloomberg News has a story that focuses on Bombardier’s credibility issues with investors. CEO Pierre Beaudoin has his work cut out for him on the call to reassure investors.

Odds and Ends: AirAsia 8501; SkyMark Airlines bankruptcy; One year for MH370; Billy Bishop Airport; PNAA conference

Jan. 29, 2015: AirAsia 8501: The first report by the Indonesian government has been issued, per international rules, but the public portion is pretty uninformative if press reports are to be believed. At the same time, leaks indicate that the pilots may have turned off a key set of computers shortly before the airplane went out of control. There’s no apparent information yet why they might have done this. Were they responding to a malfunction, real or perceived? Was there some other reason? Is the leak on this even accurate?

Previous reports and statements from the government ruled out terrorism, bombs, and even the weather. We understand as well that there has not been a safety-of-flight issue. This leaves pilot actions and contributing factors as the likely focus. What series of events combined to lead to the accident remains to be determined. Read more

First analysis of Mitsubishi Regional Jet, MRJ

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By Bjorn Fehrm

Introduction

25 Jan 2015: Japan has not produced a commercial aircraft since 1973, when the last YS-11 twin engined turboprop rolled off the assembly line. The YS-11 was developed by a consortium of Japanese “heavies,” where two are also active in the creation of leehamlogo copyright 2015 small 210_87 pixelsthe MRJ, Mitsubishi Heavy Industries and Fuji Heavy Industries. This time Mitsubishi Heavy Industries is very much in command as they own 64% of the company set up to develop, assemble and market the aircraft, Mitsubishi Aircraft Corporation, Fuji Heavy Industries are working as design consultants this time.

MRJ engine run

Figure 1. Mitsubishi MRJ90 starting its Pratt & Whitney GTF engines for the first time. Source: Mitsubishi.

The first MRJ prototype has run its engines 10 days ago and is preparing for first flight later in the spring. It is therefore time to take a closer look at the first model, MRJ90, and compare it to its direct competitor, Embraer 175 E2.

Summary:

  • The MRJ90 and E-Jet 175 E2 are the same size, around 90 seats single class or 80 seats dual class;
  • Both aim for scope clause acceptance at 76 seats despite being to heavy; and
  • They are different in their fuselage packaging but surprisingly similar in their capabilities.

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Assessing turmoil at Bombardier: it doesn’t stop at CSeries

  • The Wall Street Journal takes a look at Bombardier.(Subscription required.)
  • ““We did not fully expect and prepare” for the competitive response, said a Bombardier executive. Its studies concluded re-engining the A320 and 737 made no economic sense and was unlikely to happen,” The WSJ writes.

This is an incredibly naive assessment by BBD. We co-wrote in a study in 2009 that concluded Airbus and Boeing had no choice but to reengine their A320 and 737 families, about 18 months before Airbus launched the A320neo and two years before Boeing launched the 737 MAX. The WSJ piece is a good look at the program and competitive situation. We take a critical look at the turmoil below.

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Introduction

Jan. 9, 2015: The sudden departure of the sales chief at Bombardier Aerospace, the second time in 13 months, underscores the continuing turmoil at the multimodal transportation company and the drag its commercial aerospace unit has been and continues to be.

Summary

  • Key sales people departed in 2014.
  • CSeries sales still anemic.
  • Q400 down to 10% market share.
  • CRJ struggling.
  • Falling oil prices gives reasons to put off committing to CSeries.
  • Airbus viewed CSeries as a threat.

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2015 a year of execution for Embraer commercial

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Introduction
Jan. 7, 2015: Embraer, the world’s #3 commercial airplane manufacturer, Leeham logo with Copyright message compactenters 2015 viewing this as a year of execution, says its chief commercial officer, John S. Slattery.

There are three pillars:

  1. Continuing to fill out the balance of the current generation orders and commitments in advance of the E-Jet E2 re-engined airplane scheduled for entry-into-service in 2018;
  2. Execution to continue to grow the commitments for the E2—there are already 590; and
  3. Execution for the next several years for the milestones of the E2 development.

Summary

  • Customer base goal by the end of 2017;
  • Customer support;
  • Barriers to entry for competitors.

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Odds and Ends: 737 MAX order breakdown; Airbus to top Boeing; Embraer to PNAA event

123114 MAX Totals

Click on image to enlarge into a crisp view. Source: Boeing.

Jan. 6, 2015: 737 MAX Orders: Boeing has broken down the 737 MAX orders for the entire program in response to our inquiry. The 737-8 has captured 87% of the program orders since launch in 2011. The MAX 8 includes the 100 MAX 200 orders for the high density version, placed by Ryanair last year. The MAX 9 has 11% and the MAX 7 just 2% (figures are rounded).

Airbus to top Boeing: It’s not really a surprise, because it seems to happen just about every year. Reuters is reporting that Airbus will top Boeing in gross and net orders when it reports its 2014 performance next week.

Embraer to PNAA: Embraer’s chief commercial officer, John Slattery, will speak at the Feb. 10-12 conference for the Pacific Northwest Aerospace Alliance. EMB has presented previously but this is the first time Slattery is joining the conference. Click on the banner ad above to go directly to the conference website.