Leeham News and Analysis
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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.
How much life is left in the Boeing 737 MAX after recertification?
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By Scott Hamilton
Introduction
June 29, 2020, © Leeham News: As Boeing narrows in on recertification of the 737 MAX, one of the questions that is unanswered, but forward-reaching is, how much life is left in the airplane?
In this context, the question is not about “useful life.” This is the length of time an airplane can economically be in service before passenger carriers retire the aircraft. Then there is the potential as a cargo conversion airplane. The useful life may equal or exceed the useful life as a passenger airplane.
How much life is left in the MAX in this context means how long will it be before Boeing pursues a replacement design—and how long will MAX remain in production?
Summary
- 737NG program launched in November 1993. EIS: December 1997. Production ended late 2019.
- 737 MAX program launch, July 2011. EIS: May 2017. Boeing contract with Spirit Aerosystems for fuselages extends to 2033.
- A321XLR, MAX grounding killed NMA.
Restoring capacity with the A330ceo or A330neo, Part 2
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By Bjorn Fehrm
Introduction
June 25, 2020, © Leeham News: Last week, we started looking at the Airbus A330-200 market and whether to hold on to one’s A330-200 or restoring capacity after the COVID-19 shut-down with the newer A330-800.
We looked at the history of the A330-200, the reasons it sold 642 units to date, and why the sequel, the A330-800, is not selling well.
We dig deeper into the replacement question today. In a post-pandemic world, is holding on to or even leasing an A330-200 for long-range operations the better alternative, or should we take delivery of a new A330-800?
Summary
- The A330-200 was Airbus’ best aircraft for long and thin routes.
- As the A330-300 and later A330-900 grew its range, the A330-200 and A330-800 market shrunk.
- For long and thin routes, is keeping/leasing an A330-200 or taking delivery of an A330-800 the better alternative?
Looking ahead for 2020 and 2030 decades: Boeing
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Second in a series.
By Scott Hamilton and Vincent Valery
Introduction
June 24, 2020, © Leeham News: “Airbus’ widebody strategy is a mess.”
This is what Kostya Zolotusky, then a VP with Boeing Capital Corp., said a few years ago on the sidelines of a major aerospace conference.
Today, it may be going too far to say there is increasing opinion in the industry that Boeing’s product strategy is a mess. But it’s fair to say it’s seriously challenged.
Even setting aside the 737 MAX grounding, Airbus clearly outpaced the MAX with the A320neo family. The A321LR and XLR thrust Airbus into dominance in the single-aisle, 150-220 seat sector.
Airbus fell into a winner with the acquisition of the Bombardier C Series. Boeing’s 737-7 MAX has captured fewer than 100 orders since the program launch in 2011. Demand for the 777X is weak.
Boeing critics, and there are many, see little but doom and gloom ahead. Even before the COVID-19 crisis, Boeing faced years of recovery from the MAX grounding.
There’s no doubt Boeing has a deep hole to climb out of, exacerbated by the COVID crisis. The question is, what does Boeing do after the MAX is returned to service and the virus crisis is over?
Summary
- Airbus is clear leader in single-aisle sector.
- Boeing’s product strategy for New Midmarket Airplane, Embraer role is over.
- Former CEO Jim McNerney said, “no more moonshots.” But is this just what Boeing needs to regain its position?
Regional Jet Retirements
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By Vincent Valery
Introduction
June 22, 2020, © Leeham News: Last week, LNA analyzed the narrowbody aircraft retirements. We now turn our attention to the regional jet market.
LNA analyzes retirement prospects for Embraer’s E-Jet and ERJ, the ex-Bombardier CRJ100/200 and CRJ700, Fokker 70/100, BAe 146/Avro RJ, Sukhoi Superjet 100, and Comac ARJ21.
Summary
- Four families dominate the market;
- Heavy geographical concentration;
- Challenges for old and small regional jets;
- Retirement trends in the two largest regions;
- Regional breakdown for the oldest types in service.
Restoring capacity with the A330ceo or A330neo, Part 1
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By Vincent Valery
Introduction
June 18, 2020, © Leeham News: The Airbus A330-200 has been a commercial success, with 642 deliveries since 1998. The Boeing 777-300ER and Airbus A330-300 are the only twin-aisle variants with more deliveries than the A330-200.
Despite the A330-200 commercial success, its successor, the A330-800, isn’t selling well. The variant officially has 14 orders: eight from Kuwait Airways, two from Uganda Airlines, and four unidentified. Air Greenland did not firm its commitment for a single unit yet. The A330-900 has 319 firm orders.
Airbus did not deliver a single A330neo since February due to the COVID-19 outbreak. Once passenger demand recovers, airlines will have the option to receive delivery of A330neos on relatively short notice. Carriers will weigh the benefits of taking delivery of new A330neos, keep their older A330ceos flying, or source the latter from lessors.
We will compare the Economic performance of both A330ceo and A330neo variants with our aircraft evaluation model. We will start with the A330-200 and A330-800.
Summary
- A330-200 impact on market after entry into service;
- Capitalizing on Dreamliner delays;
- Twin-aisle market slowdown before COVID-19 outbreak;
- A330-800 suitability for a route network.
Looking ahead for 2020 and 2030 decades: Airbus
First in a series of reports.
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By Scott Hamilton and Vincent Valery
June 17, 2020, © Leeham News: Airbus was riding high in February.
The A321XLR was a clear winner. An important order was won from United Airlines, up to then an exclusive Boeing narrowbody customer. American Airlines selected the XLR. An order was expected from Delta Air Lines.
Each order was another that made it impossible for Boeing to launch the New Midmarket Airplane (NMA).
In one of his first actions, Boeing CEO David Calhoun, taking office Jan. 13, put the NMA on indefinite hold, pending a complete review of Boeing’s product strategy.
The Boeing 737 MAX remained grounded by regulators, with no return to service in sight.
The Airbus A321XLR. This 9-hour capable airplane helps fragment routes–and soften demand for widebody aircraft. Source: Airbus.
Things couldn’t be going better for Airbus.
And then in mid-March, the COVID crisis became a global pandemic. Air transportation fell up to 95%. Airlines required government bailouts. Airbus CEO Guillaume Faury said the very existence of Airbus was threatened.
Summary
- COVID’s impact.
- A320 family ‘s commanding lead over Boeing.
- A220 commands low-end of single-aisle sector.
- A330neo is the weak link.
- Looking ahead in product strategy.