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Turboprops’ future is OK but not great as ATR corners market

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Introduction

Jan. 5, 2015: Conventional wisdom suggests that turboprops are making a bit of a comeback because these remain far more efficient for routes up to 400 miles than jets, particularly at high fuel prices.

Even though oil prices have plunged to a seven year low, few expect that long-term prices will remain at today’s levels. While fuel between $50-$60bbl breathes new life into aging regional jets, there remains efforts in several corners to develop a new generation of turboprops.

Summary
ATR wants to launch a new, 90-100 seat turboprop.
Bombardier launched a high-density, 86, seat version of its Q400 but appears cool to a new design.
China offers its indigenously built turboprop.
India and Indonesia are exploring a new design.
Pratt & Whitney, GE, others are developing the next generation engine.

Odds and Ends: AirAsia 8501, PNAA Conference, FWIW

Jan. 2, 2014: AirAsia 8501: Our friend Geoff Thomas has an interesting commentary about the AirAsia 8501 story. Also, an Airbus A330 pilot for a major US airline, offered these observations about QZ8501. A Linkedin profile suggests this pilot flies for Delta Air Lines.

We are now beginning to see more and more “conclusions” about what happened to 8501 from people who are being described as “experts.” Some of these are people we’ve never heard of, although this isn’t necessarily indicative that they don’t know what they are talking about–but we don’t think they do.

Since the airplane hasn’t been confirmed as found (searchers only think they’ve found it, but bad weather and bad seas have, at this writing, prevented confirmation), nor have the black boxes been recovered, the conclusions being set forth are interesting theories but that’s all they are.

Most of these possibilities are precisely what we’ve reported as areas of investigation and questions to be asked and answered. They way these “experts” are positioning possibilities is actually pretty embarrassing.

Treat these reports with the skepticism they deserve.

One thing we are surprised at: how quickly one of the few victims recovered has been buried. We thought an autopsy would take longer, and an autopsy would be the first clear indication of what happened: whether the victims died by blunt force trauma (i.e, impact with the water) or from decompression (suggesting an inflight fuselage rupture or mid-air break up).

Sixteen bodies are now reported to have been recovered (at 8:30pm PST Jan. 1).

41 Comments

Posted on January 2, 2015 by Scott Hamilton

AirAsia, Airbus, Boeing, Embraer, Pacific Northwest Aerospace Alliance

AirAsia, Airbus, Boeing, Embraer, Kent Fisher, Leeham Co., Randy Tinseth, Richard Aboulafia, Scott Hamilton, Simon Pickup, Spirit Aerosystem

Looking ahead in 2015 in commercial aviation

Here’s a visualization of events to look for in commercial aviation in 2015.

Click to enlarge for crisp view.

20 Comments

Posted on December 26, 2014 by Scott Hamilton

Airbus, Boeing, Bombardier, CFM, China, Comac, CSeries, Embraer, GE Aviation, Mitsubishi, Paris Air Show, Pratt & Whitney, Rolls-Royce

767-2C, A320NEO, A350-1000, A350-900, A380neo, air force tanker, Airbus, Boeing, Bombardier, CFM, CSeries, E-Jet E2, Embraer, GTF, KC-46A, LEAP, MC-21, Mitsubishi, MRJ, Pratt & Whitney, Qatar Airways, Rolls-Royce, Trent XWB

Boom times leads to looming cash flow shortfall across OEMs

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Introduction

Dec. 16, 2014: There have been record aircraft orders year after year, swelling the backlogs of Airbus and Boeing to seven years on some product lines, Bombardier’s CSeries is sold out through 2016, Embraer has a good backlog and the engine makers are swamped with new development programs.

So it is with some irony that several Original Equipment Manufacturers (OEMs) are warning of cash flow squeezes in the coming years.

Summary

With so many development programs in the works, the prospect of new airplane and engine programs are being trimmed.
Most airframe and engine OEMs under pressure.
The full impact of the pending cash flow squeeze hasn’t been appreciated by the markets yet.

5 Comments

Posted on December 16, 2014 by Scott Hamilton

Airbus, Boeing, Bombardier, CFM, CSeries, Embraer, GE Aviation, Irkut, Mitsubishi, MTU, Premium, Rolls-Royce

787-10, A320NEO, A330neo, A350, A380, A380-900, A380neo, A400M, air force tanker, Airbus, Boeing, Bombardier, C-17, CFM, Comac, E-Jet E2, Embraer, GE Aviation, GE9X, GTF, Irkut, KC-390, KC-46A, LEAP, Mitsubishi, MTU, Pratt & Whitney, Rolls-Royce

The challenges in bringing a new turboprop to market

By Philippe Poutissou
Special to Leeham News and Comment
Introduction
Dec. 15, 2014: The market for turboprop aircraft has been strong for nearly a decade, yet there has been limited new product development in the segment. This has some regional airlines getting nervous about their future, in particular those who specialize in serving smaller markets with 30- to 50- seat turboprops built in the 1980s and 1990s. Which aircraft will replace the robust, but not indestructible, Bombardier DHC-8, Saab 340 and Embraer Brasilias?

Setting aside the technical challenges of developing and certifying a new aircraft type (of which there is ample evidence), the market challenge for smaller turboprops comes down to a question of limited revenue potential. Due to overall pressure on aircraft prices and demand that is highly fragmented, the business case for an aircraft OEM becomes risky and difficult to justify.

Summary

High-yield regional routes are increasingly rare and harder to protect.
Turboprop acquisition costs must remain in line with those of larger jets on a per-seat basis.
The 30- to 50- seat turboprop market is a highly fragmented, replacement market with limited potential for large volume orders.

7 Comments

Posted on December 15, 2014 by Scott Hamilton

ATR, Bombardier, Embraer

ATR, ATR 42, AVIC, Bombardier, Brasilias, CASA, CN-235, Comac, Dash 8, Embraer, IPTN, Q400, Turboprops

New UTC CEO throws cold water on PW GTF growth

The new chief executive officer of United Technologies Corp., Gregory Hayes, threw cold water on hopes and dreams of Pratt & Whitney, a subsidiary, that the successful small- and medium-sized Geared Turbo Fan will grow into the wide-body market.

Aviation Week just published an article in which all three engine OEMs were reported to be looking at a 40,000 lb engine that would be needed to power a replacement in the category of the Boeing 757 and small 767. Hayes did not specifically rule out a 40,000 lb engine, leaving PW’s potential to compete for this business unclear.

Hayes has been CEO for two weeks. He was previously CFO. He made his remarks in a UTC investors event last night. The Hartford Courant has this report.

Hayes’ remarks were in response to a question from an analyst about research and development expenses. Here is his reply, from a transcript of the event:

44 Comments

Posted on December 12, 2014 by Scott Hamilton

Boeing, Bombardier, CFM, Comac, CSeries, Embraer, Irkut, Mitsubishi, Pratt & Whitney, Rolls-Royce

737 MAX, 757, 757 replacement, 767, 767 replacement, A320NEO, Alain M. Bellemare, Bombardier, C919, CFM, Comac, CSeries, E-Jet E2, Embraer, GE Aviation, Gregory Hayes, GTF, Irkut, MC-21, Mitsubishi, MRJ, Pratt & Whitney, United Technologies

Assessment of Lessors in Airbus and Boeing backlogs, narrow- vs wide-body

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Introduction

Nov. 30, 2014: Airlines now lease about 50% of their aircraft under a variety of mechanisms: operating, finance, leveraged and Islamic leases, just to name a few.

There are operating leasing, special purpose and “house” companies. There are leasing units of investment banks, insurance companies and a host of others.

Ireland is a popular leasing venue because of favorable tax laws.

The Big Four airframe OEMs have long sold aircraft directly to lessors, and the emerging airframe OEMs, COMAC and Irkut, have seen orders placed by emerging lessors in their home countries. ATR, the turbo-prop OEM, also has received orders from lessors.

Today we look at the lessor relationships with Airbus and Boeing.

Summary

Lessors represent a significant, but still a minority, part of the Airbus and Boeing backlogs.
Widebody airplanes constitute a small portion of lessor orders.
Boeing has more widebody lessors orders than Airbus.
Airbus has a larger lessor order book than Boeing.

MTU investors day: views of its engine programs, future airplane timelines; separately, Embraer COO interview

Figure 1. Technical milestones have been passed on PW GTF programs for the applications on Bombardier, Airbus, Mitsubishi and Irkut airplanes and are approaching for Embraer. Source: MTU Investors Day. Click to enlarge.

Nov. 30, 2014: MTU Investors Day: MTU is a major participant in engine development and supplies, participating on the GEnx, GTF and GEnx program. It’s also a member of the joint venture in International Aero Engines and it’s a major player in the aftermarket Maintenance, Repair and Overhaul (MRO) sector, providing a serious competitive alternative to the aftermarket contracts offered by the engine OEMs. Its held an investors day conference Nov. 25. Highlights included:

Milestones have been passed on the Pratt & Whitney Geared Turbo Fanengine for the Bombardier CSeries, Airbus A320neo family, the Mitsubishi MRJ and Irkut MC-21; and are on schedule for the Embraer E-Jet E2.
The success of the GTF is requiring huge production commitments.
The large number of airplane/engine programs require a major ramp-up of production during the next few years.
The major investment in new engines is largely over for now, leading to the expectation of long-term revenue from MRO.

26 Comments

Posted on November 30, 2014 by Scott Hamilton

Airbus, Boeing, Bombardier, CSeries, Embraer, GE Aviation, International Aero Engines, Irkut, Mitsubishi, MTU, Pratt & Whitney

757, 767, A320NEO, Airbus, Boeing, Bombardier, CSeries, E-Jet E2, Embraer, GE Aviation, International Aero Engines, Irkut, MC-21, Mitsubishi, MRJ, MTU, New Small Airplane

A320 v 737: the sales winner is….

It’s one of the bitterest rivalries in the industrialized world: Airbus vs Boeing.

Despite being world-class companies, executives at each often snipe at each other’s airplanes, claiming superiority in economics and passenger appeal. Like lawyers arguing a court case, data is typically selectively used to advance the claims.

One of the most hotly debated issues between the two companies is which is the best single-aisle airplane, the ones that fly the most routes in the world and which carry more passengers than any other type: the Airbus A320 or Boeing 737 families.

Boeing’s marketing and communications team has done a superb job of claiming its 737 is the best selling jetliner of all time and with 12,257 firm orders since the first program, the 737-100/200, was launched in 1964. The 737 edges out the A320 family’s 11,021 orders. (These figures exclude options and MOUs.)

But the A320 was launched in 1984, 20 years after the 737. A even-up comparison should begin in March 1984 comparing the A320 family with the 737 Classic from then to the end of the Classic’s production run; and with the 737 Next Generation from its program launch in November 1993; followed by the A320neo and the 737 MAX.

48 Comments

Posted on November 17, 2014 by Scott Hamilton

Airbus, Boeing, Bombardier, CSeries, Embraer

737, 737 Classic, 737 MAX, 737-100, 737-200, 737NG, A318, A320, A320ceo, A320NEO, Airbus, Boeing, Bombardier, CS300, CSeries, E-195 E2, E-Jet, E-Jet E2, Embraer

Odds and Ends: Goldman Sachs on CSeries; Embraer in China; A350 gets FAA certification;

CSeries: Bombardier presented to the Goldman Sachs Industrial conference this week. Goldman’s take:

CSeries test flight: BBD believes it can achieve the significant acceleration in flight test hours per month required to get to EIS because more aircraft are moving in to testing and because it did testing during the grounding. FTV4 is supposed to be in the air in weeks, and FTV5 in early 2015. BBD does not see any one or two major challenges remaining in flight test, rather just a need to get through total hours.
CSeries demand: BBD says it is on track for its 300 firm order by EIS target. When asked if anything could come from the current Zhuhai Air Show it said it is not a place for signing, and China tends to order in service jets.
CSeries impact on P&L: BBD says the CSeries is likely to be dilutive to the P&L as it ramps from unit 1 to full rate production, which could be a near three year process. Early aircraft would be more dilutive than later aircraft.
CRJ update: BBD believes they can maintain current CRJ production rates, but will clearly need success in current order campaigns to do so.

Goldman has a Sell rating on BBD.

Embraer in China: Embraer is shifting its sales strategy in China, failing to gain much traction with the mainline carriers, according to Bloomberg. Now it’s going to concentrate on start-up airlines.

EMB appeared at the same Goldman conference as BBD. Goldman’s take:

Overall Embraer continues to believe it can keep production relatively flat from current E-Jets to E2. It thinks 2015 and 2016 currently look solid. 2017 is a bit more of a question mark, but the timing of EIS of each E2 aircraft helps – largest E-Jet backlog (E175) has latest E2 EIS, and all aircraft are built on the same line. 2015 delivery mix will be similar to 3Q14 mix. Orders are likely to be in the 5-15 per range, or come from conversion of US options. ERJ says in the scenario where Bombardier does not refresh CRJ, E-Jets could become a substantial piece of the regional jet market, along with Mitsubishi (which it says is a solid aircraft).

Goldman has a Neutral (Hold) on EMB.

A350 certification: Airbus obtained certification for the A350-900 from the Federal Aviation Administration Wednesday.

8 Comments

Posted on November 12, 2014 by Scott Hamilton

Airbus, Bombardier, Embraer

A350, Airbus, Bombardier, CSeries, Embraer, Goldman Sachs

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Leeham News and Analysis

There's more to real news than a news release.

Leeham News and Analysis

Turboprops’ future is OK but not great as ATR corners market

Odds and Ends: AirAsia 8501, PNAA Conference, FWIW

Looking ahead in 2015 in commercial aviation

Boom times leads to looming cash flow shortfall across OEMs

The challenges in bringing a new turboprop to market

New UTC CEO throws cold water on PW GTF growth

Assessment of Lessors in Airbus and Boeing backlogs, narrow- vs wide-body

MTU investors day: views of its engine programs, future airplane timelines; separately, Embraer COO interview

A320 v 737: the sales winner is….

Odds and Ends: Goldman Sachs on CSeries; Embraer in China; A350 gets FAA certification;

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