Bombardier upbeat on CSeries deal, but Moody’s sees higher risk of debt default

Oct. 26, 2017, © Leeham Co.: Bombardier and Airbus put a positive face on the former’s acquisition of 50.01% of the CSeries program, but Moody’s credit rating service wasn’t impressed.

The agency downgraded Bombardier’s already poor credit rating and changed the outlook to Negative from Stable.

Moody’s changed the “Corporate Family rating (CFR) at B3 from B2, its probability of default rating to B3-PD from B2-PD, and its senior unsecured rating to Caa1 from B3. The company’s speculative grade liquidity rating is affirmed at SGL-2. Bombardier’s rating outlook has been changed to negative from stable,” it announced Tuesday.

“The downgrade reflects our expectation that Bombardier’s leverage will remain high through 2019 and its ability to generate positive cash flow in that year has headwinds related to the potential delay of C Series plane deliveries,” said Jamie Koutsoukis, Moody’s analyst.

The press release may be found here.

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Bombardier admits shortfall on Q400, CRJ, vows comeback

Sept. 13, 2017, © Leeham Co.: Bombardier wasn’t “fully at the top of its game for focus and messaging on the Q400 and CRJ,” a top official admitted Tuesday. But the company is “turning that around” and initial results were seen at last summer’s Paris Air Show with a spurt of orders for the turboprop airliner.

Colin Bole, SVP Commercial made the remarks at BBD’s media day at its Mirabel CSeries/CRJ production site.

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Pontifications: JADC 20-year forecast: VLA, NMA and other data

By Scott Hamilton

July 24, 2017, © Leeham Co.: The Japan Aircraft Development Corp (JADC) just published its 2017-2037 jet and turboprop forecast. JADC forecasts a demand for 33,336 jet airliners and some 2,000 turboprops.

JADC is partly owned by Mitsubishi, which is developing the MRJ70/90 and which is on several Boeing programs.

I like the JADC forecast because it segments the seating categories in more detail than Airbus and Boeing and somewhat differently than Bombardier and Embraer.

I also view JADC as having less of an axe to grind than the Big Four OEMs.

A couple of quick take-aways:

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Jet sales in 75-150 seat lag Airbus, Boeing

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Introduction

The Mitsubishi MRJ90 hasn’t recorded a sale in a year. Photo by Scott Hamilton.

July 13, 2017, © Leeham Co.: While analysts and reporters focus on the high-profile order competition between Airbus and Boeing, it’s time to look at Bombardier and Embraer, along with the 75-150 seat sector.

Boeing is doing better than expected this year, due largely to the launch of the 737 MAX 10. Airbus is struggling year-to-date, but received a big boost post-Paris Air Show with an agreement to sell 140 A320s and A350s to China. At this stage, it’s not a firm order, however.

How are Bombardier and Embraer doing in their core markets of 75-150 seats?

Just awful.

Sukhoi and Mitsubishi aren’t doing any better.

Summary
  • Few new sales in 2017 in the 75-150 seat sector.
  • Low fuel prices, Scope Clause and general order downturn converge.
  • Embraer’s Paris Air Show results boosted this OEM’s year-to-date performance.

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MRJ entering more stable phase

By Bjorn Fehrm

June 28, 2017, ©. Leeham Co: The Mitsubishi Regional Jet, MRJ, has been through troubled years. The aircraft, which should have entered the market 2013, will now be delivered to first customer, All Nippon Airways (ANA), in mid-2020.

The latest delay, announced in January 2017, was significant: from mid-2018 to mid-2020.We sat down with MRJ’s Program and Flight test management to understand what is going on. Read more

Mitsubishi and ANA show MRJ commitment

June 18, 2017, © Leeham Co.: Mitsubishi Heavy Industries (MHI) CEO Shunichi Miyanaga and the Vice Chairman of ANA Holidings, Osamu Shinobe, gave the full backing to the MRJ program today, when presenting an ANA liveried test aircraft at the Paris Air Show.

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A view around the Paris Air Show

June 17, 2017, (c) Leeham Co.: It’s surprising that many hall and chalet exhibits are still in a state of construction as LNC walked around the Paris Air Show Saturday, but we’ve noted this before.

Meanwhile, here are a few photos:

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Paris Air Show Preview

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Introduction

May 22, 2017, © Leeham Co. The Paris Air Show begins June 17, and few in the industry expect much in the way of orders this year.

The order cycle is on the downward side of the bell curve. Sustaining the 2,000, 3,000 or nearly 4,000 gross orders announced 2011-2013 simply couldn’t be achieved. The “order bubble” had to break, and it did. Last year, Airbus and Boeing reported some 1,400 orders between them.

Airbus guides that it will tough to achieve a 1:1 book:bill this year. Boeing is running about 1:1 book:bill so far but it also guides conservatively. Still, LNC thinks Boeing might surprise this year–and some of this could be at the Paris Air Show.

Leeham Co.’s new publication, Commercial Aviation Report, provides a Focus Report on the Air Show. This encompasses the expectations for Airbus, Boeing, Bombardier, Embraer, COMAC, Irkut, Mitsubishi, CFM, GE Aviation, Pratt & Whitney and Rolls-Royce into one easy-to-read package.

The pre-airshow press briefings by the OEMs begin next week. We don’t expect any earth-shattering news from these and we wanted to get our views out ahead of these briefings.

Summary
  • Boeing wants to launch the 737-10 MAX at the Paris Air Show. This could spur a group of orders that would give Boeing a rare win in the headlines vs Airbus on the latter’s home ground.
  • Mitsubishi plans to have its MRJ90 at the Air Show. One airplane entered the paint shop for ANA colors–this might be the one making the appearance.
  • Embraer expects to have its KC-390 there. Will the E195-E2 also make an appearance?

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Regional aircraft for US Scope clause operations. Part 2.

By Bjorn Fehrm

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Introduction

May 11, 2017, © Leeham Co.: In the first article about the US regional aircraft market, we described the special rules that apply for outsourced regional airlines, operating for a mainline carrier. The mainline pilots limit the outsourcing via Scope clauses in their Union agreements to aircraft with 76 seats and 86,000lb Maximum Take-Off Weight (MTOW).

We identified potential aircraft that fit these restrictions in the first article. Now we examine their load carrying capability.

The MTOW limit sets a hard limit on how large aircraft can be used to house 76 seats. The mainline carriers want the regionals to mimic their domestic cabin classes in their aircraft. There shall be no disruption for a First class or Premium economy passenger whether on a mainline flight or on a feed flight to/from the hub.

The challenge is to accommodate the seating standard in the aircraft that come in question.

Summary:
  • Mainline airlines want to replicate their three class cabins for all sectors of a network.
  • This means the regional aircraft cabins shall offer First class, Premium economy and Economy sections.
  • Only the larger aircraft we study can offer a three class cabin with 76 seats.
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Regional aircraft for US Scope clause operations

By Bjorn Fehrm

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Introduction

May 4, 2017, © Leeham Co.: The US regional aircraft market changed shape last year. Most players expected that the negotiations between mainline pilots and the airlines would allow larger and heavier aircraft going forward.

But no, the present limits of 76 passengers and a Max Take-Off Weight (MTOW) of 86,000lb remained. Next negotiation round will be 2019 (United Airlines) and 2020 (American and Delta Airlines). By now, most observers expect the present limits to stay beyond 2020.

Figure 1. United Express Embraer E175. Source: United Airlines.

The non-moving limits surprised manufacturers. They expected their new aircraft could fit under new rules, allowing heavier aircraft.

With the changed situation, we go through which aircraft fit the present rules and which does not. And what are the options, should the rules not change come 2020.

Summary:

  • The present scope clause-compliant aircraft are the CRJ700 and CRJ900 from Bombardier and E175-E1 from Embraer.
  • These aircraft will be joined by the new MRJ70 from Mitsubishi Aircraft Corporation at the turn of the decade. The MRJ90 will arrive as well, but is too heavy for Scope-restricted airlines.
  • We use our performance model to dive into how these aircraft operate under present and future Scope clause rules.
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