Leeham News and Analysis
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Looking ahead for 2020 and 2030 decades: Mitsubishi
Sixth in a Series
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By Scott Hamilton
July 23, 2020, © Leeham News: The Mitsubishi Aircraft (MITAC) SpaceJet program is in limbo.
MITAC parent Mitsubishi Heavy Industries (MHI) suspended development of the M100 SpaceJet in the wake of the COVID-19 crisis. Customers are
suppliers are in the dark about this program’s future.
MHI continues to complete certification of the M90 SpaceJet, which is simply the rebranded MRJ90. But, as LNA previously wrote, the M90 is at an economic disadvantage to the competing Embraer E-Jets.
The planned entry-into-service for the M90 is next year. However, certification process by the Japanese regulator is slow. The impact by COVID on the certification process and EIS remains to be seen.
Summary
- M100 program on hold at least until next year.
- What’s next for MHI?
- Strengths, Weaknesses, Opportunities and Threats
Restoring capacity with the A330ceo or A330neo, Part 6, Wrapup.
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By Bjorn Fehrm
Introduction
July 23, 2020, © Leeham News: Over the last four weeks, we analyzed the venerable Airbus A330, to see if the present low fuel and lease prices make the recent A330neo version less attractive than an older ceo version.
As airlines are cash injection driven in the present COVID-19 crisis, taking delivery of a new aircraft and then do a sell, lease back deal injects fresh cash to the airline. The order deposit and the Pre-Delivery-Payments, PDPs, then flows back to the airline. This is why we see airlines take new aircraft despite not really needing them right now.
The A330 has seen phenomenal growth in capability as the Gross Weight has gone from 212t to 251t over the years. We now wrap the series by looking if there is potential for another stretch in the A330? Could it grow to a true Pacific-Ocean crosser, and if so, what changes should be made?
Summary
- The A330neo now has a 251t Maximum TakeOff Weight (MTOW). Is this enough or could the aircraft gain from another MTOW hike?
- We go through the gains and the areas that need changing should the business case be there to stretch the payload-range curve further for the A330neo.
As federal aid comes to end, small suppliers see “blood bath”
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By Scott Hamilton
Introduction
July 20, 2020, © Leeham News: As the Payroll Protection Plan of the US government nears expiration, a blood bath among small suppliers is all but certain unless an extension is approved by Congress.
This is the dire forecast by William Alderman of Alderman & Co. Alderman specializes in representing small suppliers and aftermarket companies wanting to exit the business. Small, in this case, is defined as revenues up to $100m.
Alderman told LNA that some of his clients don’t see business recovery for 10 years. This is a different metric than the one most often cited: air traffic returning to pre-COVID levels in 2023-24, by most accounts.
Summary
- Small companies need PPP extension.
- Small companies need working capital, fast.
- If neither is forthcoming, exiting the business in the other alternative.
Restoring capacity with the A330ceo or A330neo, Part 5
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By Vincent Valery
Introduction
June 18, 2020, © Leeham News: In the previous articles, we outlined Economic factors that determine whether the older A330ceo or newer A330neo is a better choice for airlines. We summarize those findings and broaden the discussion.
Summary
- Economic summary;
- The case for keeping older aircraft;
- And purchasing newer ones;
- A further factor in favor of more modern airplanes;
- Potential A330neo enhancements.
Looking ahead for 2020 and 2030 decades: UAC
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Fifth in a series.
By Bjorn Fehrm
Introduction
July 15, 2020, © Leeham News: UAC stands for United Aircraft Corporation, and is the name of the group owning the Russian aircraft industry.
After the fall of the Soviet Union, the multitude of individual companies and design bureaus could no longer survive on their own. The Russian state, therefore, gathered them all in UAC to introduce necessary consolidation and reform.
While UAC has done much with the support of the Ministries of Industry and Defense, the changing political situation for Russia has made it harder for the Civilian aircraft side to achieve sales outside captive Russian markets for its jets.
Summary
- UAC is the holding company of the Russian aircraft industry since 2006. The UAC management has stopped pointless infighting and consolidated the industry, latest to a civilian and military side.
- But it’s ambitions on the civil side outside Russia is at mercy to state politics and the Kremlin has shown that world politics is more important than the development of its industries.
- This, and the rise of arch-rival and cooperation partner China, clouds the future for UAC civil aircraft.
Restoring capacity with the A330ceo or A330neo, Part 4
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By Bjorn Fehrm
Introduction
July 9, 2020, © Leeham News: Last week, we started the analysis of restoring capacity with the Airbus A330-300 or the A330-900 when reopening international traffic after the COVID-19 lockdown.
As we did with the A330-200 versus the A330-800, we fly them side by side between Paris Charles de Gaulle and Sao Polo’s Guarulhos airports. It’s a 13-hour flight with maximum freight in the cargo bays to gain revenue in addition to our part full cabin.
Will the payload-range of the A330-300 or A330-900 be sufficient to load the aircraft for maximum revenue on the route? We use our airliner performance model to find out.
Summary
- The A330-300 has gradually got more range as the Maximum TakeOff Weight (MTOW) has grown. The example highlights the limitations that still exits in this model of the A330.
- The A330-900 adds another nine tonnes MTOW over the highest MTOW A330-300. To what extent does it fix the A330-300 limitations on this route?
Looking ahead for 2020 and 2030 decades: Embraer
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Fourth in a series.
By Bjorn Fehrm
Introduction
July 8, 2020, © Leeham News: All airliner OEMs have a disastrous 2020, but for Embraer, the year has been even worse. After spending a year and over $200m to carve out the Commercial Aviation division to merge it into Boeing, the Joint Venture Agreement (JV) was stopped by Boeing at the last moment.
The Executive Jets and Defense side were not affected, but now Embraer was organized as two companies instead of one. The company must now re-merge the organizations to save costs in a COVID-19 environment where limiting cash outflow, and lowering costs are necessary for survival. At the same time, it’s arch-rival on the world market, Airbus A220 has gone from strength to strength through basket selling with the popular A320.
How does Embraer come back from the Boeing pass up and regroup in a regional market that is no longer a fight of equals? Embraer competes with Airbus that in 2019 was 11 times larger in airliner deliveries and 29 times in airliner revenue.
Only in the below 100 seat market is it saved from the giant, who doesn’t have a model in the segment. And it seems the below 100 seat competitor, Mitsubishi, might fold its entry.
Summary
- The botched JV with Boeing came at the worst possible moment for Embraer, just when the COVID-19 pandemic stopped airliner deliveries.
- The planned JV had held back sales and deliveries, waiting for the JV to complete.
- In addition, it cost Embraer $200m, pushing it into the red for 2019.
- Embraer must now find another fix to the Airbus problem while wrestling with a worldwide COVID crisis.
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The future of regional jets is limited by choices, Scope Clause
By Judson Rollins
Introduction
July 6, 2020, © Leeham News: The fallout from COVID-19 is beginning to intersect with the beginning of a wave of regional jet retirements globally. However, the market for smaller commercial jets today stretches the meaning of “regional” as most aircraft still in production have 100+ seats and can fly more than 2,500nm.
In the critical US market, both Embraer’s E175-E2 and Mitsubishi’s remaining M90 are too heavy to comply with the Scope Clause limits imposed by pilot labor agreements. These clauses restrict regional carrier flying to 76 seats and 86,000 lbs MTOW, while also capping the number of regional jets that can be flown by each carrier.
Delta Air Lines is limited to a total regional fleet of 450 aircraft, while American Airlines is capped at 75% of its single-aisle fleet and United Airlines is limited to 255 aircraft plus 90% of single-aisles in service. Earlier this year, American accelerated the retirement of some EMB-140s to maintain compliance with its limit.
Summary
- Regional jet utilization will be lower in the near term due to higher unit costs and US Scope Clause fleet limits.
- There will still be some replacement demand for regional jets over the next decade.
- Scope Clause relief is unlikely to happen in the coming round of US pilot contract negotiations.
- Lack of Scope relief will extend the life of Embraer’s E175-E1 through the 2020s.
Restoring capacity with the A330ceo or A330neo, Part 3
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By Vincent Valery
Introduction
July 2nd, 2020, © Leeham News: In the previous section, we saw that low lease rates on Airbus A330-200s could hurt demand for the newer and more fuel-efficient A330-800. Sell-lease back transactions can counterweight this at times as this gives the airline a cash injection during these difficult times.
We will now turn our attention to the other variants of the A330 family, the -300 and -900.
Summary
- From barely trans-Atlantic;
- To fully-fledged long-haul aircraft;
- Mixed A330-900neo commercial success;
- A330neo succeeding on one aspect;
- A330-900 versability.
Looking ahead for 2020 and 2030 decades: COMAC
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Third in a series.
By Bjorn Fehrm
Introduction
July 1, 2020, © Leeham News: COMAC stands for Commercial Aircraft Corporation of China, Ltd. It was spun off from the equally state-owned military and civil aeronautical giant AVIC in 2008. COMAC’s charter is designing, producing, and supporting civil airliners for China and, ultimately, world markets.
It presently runs three airliner programs, the 90 seat ARJ21, the 160 seat COMAC 919, and the Chinese part of the Joint Venture 280 seat CR929 widebody. Russia is the Joint venture partner for the CR929.
Summary
- COMAC’s strength is a large captive home market and unwavering support from its owner, the state.
- Its weakness is lack of experience in designing, certifying, producing, and supporting airliners.
- It will learn in all these areas when delivering to its captive market, China’s state airlines.
- When ready and with a next generation of aircraft, it will become a force to reckon with on the world market.