Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Impact to Boeing for MAX grounding assessed March 18, 2019
- Pontifications: 737 MAX events remind of Lockheed Electra story March 18, 2019
- Bjorn’s Corner: The Ethiopian Airline’s Flight 302 crash March 15, 2019
- Embraer presents weak 2018 results as the E-Jet E2 transition sets in March 14, 2019
- Cutting A220 costs is an ‘ongoing exercise’ for Airbus March 14, 2019
2019 Outlook: COMAC’s slow but steady progress
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Introduction
Jan. 4, 2019, © Leeham News: This is not the year where China’s COMAC will have break-out progress for the C919, its challenge to the Airbus A320 and Boeing 737.
Flight testing is slow and entry into service (EIS) is now targeted for 2021—a slip of five years from the original schedule.
The C919 launch-to-EIS is approaching the eight years record of the ARJ21.
But these delays don’t mean COMAC isn’t making progress.
Summary
- Boeing’s JV with COMAC for a 737 completion center opened last month.
- Despite delays, the C919 progresses.
- Progress continues on the JV with Russia for the CR929.
KKR invests $1bn in small lessor
Jan. 3, 2019, © Leeham News: The US private equity fund KKR agreed to invest $1bn in boutique lessor Altavair, a deal that includes taking a 50% stake in the company.
KKR may supplement the investment with additional commitments, the companies said.
Pontifications: Nordic quietly rises to #4 world lessor
By Scott Hamilton
Dec. 10, 2018, © Leeham News: In the world of commercial aviation, GECAS, Avolon, AerCap, Air Lease Corp and BOC Aviation are among the most recognizable names of lessors.
These companies make headlines with large orders of Airbus and Boeing aircraft. Air Lease is headed by Steven Udvar-Hazy and John Plueger, giants of the aircraft leasing business.
But one lessor quietly, below the radar, has become one of the largest lessors in terms of aircraft count pursuing regional aircraft, a product mostly shunned by the biggest lessors.
Nordic Aviation Capital Embraer E190-E2. Source: Nordic.
Nordic Aviation Capital last year ranked tied for fifth with asset manager BBAM, each with 404 airplanes in their portfolios, according to an Airfinance Journal 2017 survey. GECAS, AerCap, Avolon and SMBC Aviation Capital were bigger.
DAE Capital of Dubai, BOC Aviation, Air Lease Corp and Aviation Capital Group rounded out the top 10. Read more
Is Long-Haul LCC viable? Part 2
By Bjorn Fehrm
April 04, 2018, © Leeham News.: In the first article about Long-Haul LCC and if it’s a viable business, we looked at ticket pricing strategy used by airlines to maximize revenue on a route. Now we look at the cost side of the equation.
The cost level for a Long-Haul LCC is of utmost importance. A lower cost level than the Legacy carriers flying the same routes is the only way the company can compete. It’s seldom it offers origins or destinations not offered by other airlines. Its mission is to offer a popular air transport service at a lower cost.
Focus on NMA engines: all OEMs vying for Boeing’s approval
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Introduction
March 22, 2018, © Leeham Co.: As Boeing enters the final stretch whether to launch the New Midrange Aircraft (NMA, aka 797) market focus should shift to the 
engines more than the airframe and even the market demand.
It all comes down to this: no engines, no plane.
Monday’s post outlined some of the issues to consider.
But there are larger implications as well.
Summary
- Market sources are tossing about various scenarios about the future GE Aviation and CFM.
- Rolls-Royce won’t have its Trent 1000 problems fixed until 2021 or 2022, at great cost.
- Pratt & Whitney won’t have its Geared Turbo Fan final PIP packages for its problems sorted out until around 2021.
- Resources—both financial and with engineering—are stretched now.
- Sequencing current engine problems, and in the case, GE’s GE9X, are a factor, in the eyes of some.
Lessors and investors disagree on transparency
Special to Leeham News
By Jack Dutton
Jan. 25, 2018, © Airfinance Journal, Dublin: The opacity of the industry in regard to asset prices is one of the main challenges for aircraft lenders and investors, according to a panel of investors speaking at the 
20th Annual Global Airfinance Conference in Dublin.
“The lack of transparency on pricing is your biggest challenge as an aircraft lender or holder. The leasing companies were in the best position to hold good pricing information,” said David Andrews, managing partner of transport, Hudson Structured Capital Management.
20-year old ISTAT definitions “archaic”
Special to Leeham News
By Michael Allen
- ISTAT definition “quite archaic.”
- Appraisers says aircraft disparity in ABS transaction can be due to lack of information provided by the arrangers.
Jan. 25, 2018, © Airfinance Journal, Dublin: “We get asked to value a portfolio of 35-aircraft,” says Rikard de Jounge vice president – asset valuations at Avitas.
“No one tells you that the valuation is for an ABS transaction. They just ask for market and base values,” he adds.
Stuart Hatcher, head of intelligence at IBA Group, says it is still a “secretive market”.
“Providing that we are dealing with sellers, the information is generally good. The issue we tend to find is with the arrangers. And the communication can be quite sporadic,” he says.
The other issue is how much you are including into a valuation for a lease-attached aircraft.
Potential credit crisis in China would hurt aviation industry
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Introduction
Sept. 4, 2017, © Leeham Co.: China, now the world’s second largest economy, appears to be feeling the strains of its long, explosive growth.
The economy is slowing, there are concerns about capital outflow and increased debt by key companies.
HNA Group is one of China’s largest companies and a global investor. Indeed, it’s one of the largest in the world.
Its place in commercial aviation is known among those who are integral parts of the industry, but the depth of its reach may not be well understood.
Due to recent transactions, HNA now is owner of one of the largest aircraft leasing portfolios in the world, with nearly 600 aircraft. Another 253 airplanes are on order.
This includes the acquisition this year of CIT Aerospace, which added more than 300 aircraft to the Avolon portfolio.
Avolon was acquired by HNA in 2015.
However, HNA’s growth means debt, and according to several media reports, the Chinese government is now scrutinizing HNA under a general government “crackdown” on capital leaving the country.
Summary
- Widespread investment in airlines and a few in lessors.
- China’s cracking down on money leaving the country.
- Leverage also concerns the government.
History undermines Boeing claim of C Series impact: analysis
Analysis
Dec. 22, 2017, © Leeham Co.: Boeing blames a subsidized, price-dumped Bombardier C Series for the poor sales of the smallest member of the 737 family, the -700 and the 7 MAX, but history doesn’t support the claim.
The US Department of Commerce clearly ignored sales evidence that the 737-700 has been “done” for many years and the 737-7 MAX was an unattractive design
Boeing 737-7 MAX. Rendering via Google images.
that hasn’t been fixed with a redesign; airlines simply don’t want the airplane. Commerce levied tariffs amounting to 292% on C Series imported into the United States in the future.
The US International Trade Commission is currently awaiting post-hearing briefs from Dec. 18 testimony from Boeing, Bombardier, Delta Air Lines and other parties to determine whether Boeing suffered “harm” by the C Series deal with Delta and a near-miss with United Airlines.
If the ITC concludes Boeing suffered harm, the DOC tariffs stand. If not, the DOC action is moot. The loser at ITC is expected to appeal.
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Posted on December 22, 2017 by Scott Hamilton
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