2017, a tougher year for European airlines?

By Bjorn Fehrm

January 5, 2017, ©. Leeham Co: The last two years have seen increased profits for the airline industry. Lower priced fuel gave the industry time to breath and to finally earn a reasonable Return on Invested Capital (ROIC).

Earnings as a percent of revenue for the industry has been increasing from 5% on a worldwide basis in 2014 to around 10% for 2016, Figure 1.

Figure 1. Airline industry profits. Source; IATA presentation October 2016.

The US and European airlines have been topping the earnings with 18% on revenue for the third quarter of 2016. There are many signs this will not continue in 2017, especially for European airlines. Read more

Market, other factors emerging, creating Boeing 787 concern

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Introduction

Jan. 4, 2017, © Leeham Co.: Despite a rosy picture painted by Boeing about the future of the 787 and the ability to recover more than $29bn in deferred production

Boeing photo.

and tooling costs, there are signs that cause concerns over the next 3-5 years.

Summary
  • Near-term production outlook solid, weakness begins in 2020, big gap in 2021.
  • Boeing doesn’t see wide-body sales recovery until next decade.
  • Company foregoes increasing 787 accounting block; sales won’t support it.
  • Market talks about deferring 787s.

Read more

2017: the year ahead

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Introduction

Jan. 3, 2017, © Leeham Co.: The New Year is here and it doesn’t look like a good one for commercial aerospace, if measured against previous outstanding years.

There are some troubling signs ahead, piling on to a slowdown in orders from last year that didn’t even reach a 1:1 book:bill.

This year looks to be worse than last. Airbus and Boeing will give their 2017 guidance on the earnings calls this month and next. Bombardier and Embraer earnings calls are a ways off, when each will provide its guidance.

But LNC believes the Big Two in particular will be hard pressed to hit a 1:1 book:bill this year and may even struggle to match 2016 sales.

Boeing’s year-end order tally comes Thursday. Airbus’ comes on Jan. 11.

Summary
  • Wide-body sales remain weak.
  • Narrow-body backlogs and low oil prices continue to inhibit sales.
  • China, Middle East concerns emerging.
  • United Aircraft MC-21 and COMAC C919 begin flight testing.
  • Airbus A330neo, Boeing 787-10, Embraer E195-E2 and Mitsubishi Aircraft MRJ-70 roll-out and begin flight testing.
  • Airbus A321neo and Boeing 737 MAX 8 EIS.

Read more

Emirates feels low-cost, long-haul competition

Note: Nov. 24 and 25 are Thanksgiving Holidays in the US. Our next post will be Monday.

By Bjorn Fehrm

23 November 2016, ©. Leeham Co: Emirates Airline president Tim Clark says the carrier “has to change its approach to long-haul pricing to combat increasing competition” after presenting a half year 2016 profit which plunged 64% on 9 November.

The reason is that traditional mainline carriers are entering the low-cost, long-haul market in addition to the established LCC entrants: Norwegian Air Shuttle, AirAsiaX and Wow Air.

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Figure 1. Emirates long-haul A380. Source: Emirates.

Emirates will add new low-cost fares to keep its growing fleet of Airbus A380 and Boeing 777 filled. Clark states this is necessary and that the airline will not back down on its plans for additional aircraft. It will be a period “of fierce competition as more and more international network carriers are entering low-cost, long-haul,” declares the COO.

What has changed? Isn’t Emirates the Kings of competitive long-haul travel? Read more

Air Berlin, Europe’s ninth carrier, announces serious makeover

By Bjorn Fehrm

October 06, 2016, ©. Leeham Co: Air Berlin, Germany’s second airline and Europe’s ninth largest carrier by passengers carried, announced that it will wet-lease 40 aircraft to Lufthansa together with many European routes, concentrate all tourist operations into a new business unit before spinning it off and that it will reduce staff further.

airberlin

Figure 1. Air Berlin will focus on its long haul network. Source; Air Berlin.

This comes after combined losses of €1.7bn since 2010. Several restructuring programs have not stemmed the losses. Last year they rose to €0.45bn and they have continued on in 2016. Read more