Assessing ATR future

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Introductions

Feb. 27, 2017, © Leeham Co.: ATR today holds an almost monopolistic position in the large turbo-prop market with 87% of the backlog at YE2016. Bombardier, once the dominant turbo-prop manufacturer, has a mere 13%.

China and Russia are not included above.

ATR had a backlog of 212 aircraft vs Bombardier’s 31. In addition, ATR had options for more than 400 aircraft and LOIs for about 70 more. BBD had options for just 12 Q400s at the end of last year.

Summary
  • Low fuel prices favor regional jet, high fuel prices turbo-props.
  • No new, clean-sheet design to replace Q400 or ATR in foreseeable future.
  • Indian, Indonesia talk turbo-props but outcome unlikely.
  • China’s MA-60 feeds home market, but airplane has reliability issues.

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CSeries trans-Atlantic capability

By Bjorn Fehrm

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Introduction

February 23, 2017, © Leeham Co.: We previously described how new generation engines make the Boeing 737 MAX 8 a trans-Atlantic aircraft. The MAX 8 is smaller than the Airbus A321LR, but not the smallest single-aisle with trans-Atlantic capability. This distinction goes to the Bombardier CSeries.

We wrote about the CS100 capability to cross the Atlantic from London City Airport last year. After the article, we received new and improved data from Bombardier. The CS100 can now fly directly to US East Coast on the difficult westward leg with a business cabin of 42 seats. The updated article is here.

When we look at the improved capabilities of the CS300 (announced at Farnborough Air show last summer), this aircraft can also cross the Atlantic with a full cabin of 130 passengers.

Bombardier arranged so we could discuss this deeper with the VP CSeries program, Rob Dewar.

Summary:
  • We use our aircraft performance model to compare the CS300’s suitability for long-haul to the Airbus and Boeing competition.
  • The aircraft have similar range and seat mile costs. The smaller aircraft have lower trip costs.
  • With Rob Dewar, we explored the potential for additional capability for the CS300.

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Assessing the SSJ100 future

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Introduction

Feb. 20, 2017, © Leeham Co.: Sukhoi is Russia’s attempt at reentering the commercial airliner business. The SSJ100 regional jet is, by most accounts, an attractive

SSJ100 in CityJet colors. CityJet is one of two Western operators for the Russian-made airplane. Photo: Superjet International.

and efficient aircraft.

But it’s hampered by erratic production and questionable product support (largely due to the overhang of the Putin politics).

The aircraft was grounded briefly in December when a fatigue issue was found in the tail section during a routine inspection.

Summary
  • Nearly 100 SSJ100s are in service.
  • Two key Western customers.
  • Small customers base.
  • Captive Russian customers.

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Norwegian’s risky fleet expansion

By Bjorn Fehrm

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Introduction

February 15, 2017, © Leeham Co.: In our review of Norwegian Air Shuttle last week (Norwegian from now on), we pointed out the company’s relatively weak balance sheet. It’s considerably weaker than its direct competitors.

At the same time, Norwegians’ fleet expansion is the most aggressive outside of boom markets like India or Indonesia.

Norwegian ordered 200 narrow body aircraft in 2012. It ordered 100 Boeing 737 MAX 8s in January and 100 Airbus A320neos in June.  This compares to a narrow body fleet of 70 at the time and a fleet of 100 today (mainly 737-800s). In addition, Norwegian has 30 Boeing 787 long haul aircraft on order on top of the 12 it operates today.

How much risk do these 230 incoming aircraft pose to Norwegian?

Summary:
  • Presently, Norwegian absorbs 50% of incoming single aisle aircraft for own needs (Boeing 737-800 and later MAX 8).
  • The other 50% (deliveries of Airbus A320neo) are leased to external operators.
  • The financing need for incoming aircraft, be it for own or other’s use, is $15bn over the coming years.
  • With a balance sheet of of only twice that size and 10% own equity, the going can get rough if the market weakens.

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Assessing the MC-21 future

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Introduction

Feb. 9, 2017, © Leeham Co.: Russia’s Irkut designed a mainline jet to compete with the Airbus A320 and Boeing 737 families that, from a passenger experience

Irkut MC-21 at roll-out. Photo via Google images.

viewpoint, is the best in class.

The MC-21 has a wider fuselage than the A320 (which is wider than the 737). Seats and the aisle are the widest in the class. The overhead bin space is plentiful.

But the airplane is hampered by its environment: Russia itself.

Summary
  • EIS planned for next year, but first flight hasn’t happened yet.
  • Few orders, small customer base.
  • Russia itself presents an overhang to the MC-21 program.
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Trans-Atlantic for $75, does it work?

By Bjorn Fehrm

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Introduction

February 9, 2017, © Leeham Co.: Norwegian will start trans-Atlantic flying between Edinburgh and New England for $75 one-way in late spring when it gets its Boeing 737 MAX 8.

The introductory price will be $69. CEO Bjorn Kjos says the operating costs of the 737 MAX 8, “which is very low,” will make this level of ticket pricing possible.

We were the first to point out (November 2014 in this article) the re-engined MAX 8 would be a trans-Atlantic enabler at a new cost level. We didn’t put the passenger ticket at $75 at the time. Time to check if it’s possible to make money with such fare prices.

Summary:
  • We use our aircraft performance model to generate the operating costs between Scotland and New England/upstate New York.
  • We then compare the total costs for the trip versus revenue. What is the average ticket price to break even?
  • We use an aggressive cabin, the same as for the European traffic.
  • Is it OK to travel at that comfort level for the seven hours over the Atlantic?
  • For $75, you bet it is.

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Assessing the future of COMAC programs

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Introduction

Feb. 6, 2017, © Leeham Co.: China’s effort to become a viable commercial aerospace alternative was filled with rocky fits and starts for its two signature airliner programs, the AVIC ARJ-21 and the COMAC C919.

COMAC, a spin off from AVIC and yet another government-controlled entity, is already casting eyes on a 250-seat, twin-aisle design, the C929—ostensibly in a joint venture with Russia’s United Aircraft Corp.

The ARJ-21 regional jet finally entered service after delays of eight years. The C919 target EIS is now 2019, six years after the original date. The first flight hasn’t even taken place.

Chinese officials set a target EIS for the C929 of 2026.

A rough road remains ahead for each program.

Summary
  • Exceedingly slow delivery ramp up for the ARJ-21.
  • First flight of the C919 planned this year.
  • Wide-body C929 will challenge the Airbus A330 and Boeing 787.

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Assessing Embraer’s EJet future

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 Introduction

Feb. 2, 2017, © Leeham Co.: Embraer’s new E2 jet faces a major challenge: the US pilot Scope Clause that limits the number, seats and weight of aircraft that can by operated by regional airlines on behalf of the US legacy carriers.

The E175 E2 exceeds the 86,000 lb weight limit in the Scope Clause. Unions declined last year to adjust this limit upward. The next round of contract talks begins in 2019.

Summary
  • Trans States Airlines has options and letters of intent for 50+50 E175 E2s.
  • Skywest is listed by EMB with “firm” orders for 100 E175-E2s and options—but in reality, these are conditional orders.
  • Embraer professes confidence in building the bridge between the E1 and E2.

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Assessing Bombardier commercial programs

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Introduction

Jan. 30, 2017, © Leeham Co.: Bombardier hopes to land a major, blue-chip order for its CSeries this year but otherwise isn’t counting on significant orders for its flagship airliner.

Officials don’t have available delivery slots until 2020, bar a few here and there, to attract sizeable orders.

The future of the aging CRJ could get a boost from recalcitrant Us labor unions who refuse to alter the 86,000 lb aircraft weight limit under the Scope Clauses. These make the Embraer E175-E2 and Mitsubishi MRJ90 too heavy for the regional airlines providing contract flying for the US majors.

The future of the Q400 turboprop looks bleak.

Summary
  • The CSeries delivery stream appears sufficient to match production ramp up through 2019.
  • There is a big production gap in 2020 at the target rate of 10/mo.
  • More than 50 firm orders have indefinite deferred delivery dates.
  • The backlog for the CRJ “falls off the cliff” next year, as does the Q400.

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Assessing A330, A350 production futures

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Introduction

Jan. 26, 2017, © Leeham Co.: Airbus A350 production rates are solid at 10/mo through 2022 but can’t support increasing them to the oft-discussed 13/mo, based on LNC’s analysis of the current backlog.

Airbus A330-900 and A350-900. Source: Airbus.

The backlog currently falls off sharply in 2023. At six years out, there is plenty of time to fill the production gap—in theory. The dearth of wide-body orders through the end of the decade could make this challenging.

The A330 is a near-term challenge.

According to an analysis of its backlog, only three-quarters of the delivery slots are filled in 2019 and fewer in 2020. The backlog begins to fall sharply in 2021.

Summary
  • A350, like Boeing 787, is not achieving 1:1 book:bill.
  • Like the 787, the A350 production is currently living off the backlog.
  • A330neo sales are focus at Airbus this year. Delivery schedule falls off in 2019.

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