Can Bombardier extend CS300 to a CS500?

By Bjorn Fehrm

Subscription required

Introduction

April 14, 2016, ©. Leeham Co: Bombardier is working hard to get additional mainline airline customers for its C Series project. The latest discussion is whether Delta Air Lines would replace its fleet of Boeing MD-88s with the C Series.

CS300

Figure 1. C Series largest model, CS300. Source: Bombardier.

In this context, it’s also discussed if the largest model, the CS300, Figure 1, is large enough for Delta. This aircraft seats 135 passengers in a two class configuration and up to 160 passengers in an all economy high density version.

The question is whether this is sufficient for Delta and other mainline customers, or if a still larger version is needed in the program, the oft-discussed CS500. We decided to use our proprietary aircraft model to see if a CS500 would be straight forward for Bombardier to develop, should Delta or any other customer ask for a three model C Series program.

Summary

  • The C Series aircraft program was developed with the CS300 as the main model. The wing, engine and landing gear were dimensioned with the CS300 in mind.
  • The CS100 is a shrink of the CS300, and not vice versa (the CS300 a stretch of the CS100).
  • A tentative CS500 stretch if therefore a first stretch of the program’s main model and not a double stretch of a CS100.
  • This is evident when one starts to analyze how a CS500 would be designed. There are rather modest changes that need to be done to create an extended model that seat up to 180 passengers.

Read more

Why Boeing won’t take a charge on 787s

Subscription Required

Introduction

Boeing 787-9. Source: Boeing.

April 11, 2016, © Leeham Co.: Boeing has $29bn in deferred production costs and another $3bn in deferred tooling costs for its 787. The accounting block, for its program accounting, is a record 1,300 aircraft. Many Wall Street analysts are skeptical whether Boeing will ever recover the huge deferred numbers.

Boeing insists it will.

Still, taking a charge of some number—as it has done twice for the 747-8 and twice for the 767-based KC-46A—is something Boeing repeatedly insists it doesn’t need to do.

Why not?

There are a few key reasons, say Wall Street analysts who follow Boeing: revenue, cash flow and the stock price.

Summary

  • Bank of America Merrill Lynch estimates Boeing needs to post a profit of $30m on each of the remaining 900 787s to be delivered to recover the deferred costs. LNC figures this number is higher.
  • Pricing pressure from Airbus makes it difficult to obtain this profit.
  • The deferred costs limit Boeing’s ability to price down to meet Airbus’ offers to customers.
  • Credit Suisse figures Boeing can recover only some $22bn of $29bn in deferred production costs.
  • Boeing warns in SEC filings a forward loss might be required.
  • But no forward loss is likely unless revenue falls short.

Read more

Boeing has lost neo/MAX battle; time to refocus goals

Subscription Required

Introduction

April 4, 2016, © Leeham Co.: Boeing should forget about competing with Airbus for market share.

The Airbus A320neo. Airbus has won the single-aisle battle between the neo and Boeing 737 MAX. Boeing needs to refocus its goal. Photo via Google images.

Airbus already has won the neo/MAX battle. This is a battleground Boeing will not retake for the lives of these airplanes.

Airbus has led Boeing in wide-body, passenger airplane sales for most of the past several years. (Boeing smashes Airbus in wide-body cargo aircraft sales.) This sector will remain competitive.

Instead, Boeing should concentrate on profit margin and roll the dice on a clean-sheet, new single-aisle airplane as its best hope of recovering the dominance it long held over Airbus.

Summary

  • Airbus has won the single-aisle competition with the A320neo family. Boeing has no hope of catching up in the next 10 years.
  • Airbus is competitive in wide-body sales (excluding freighters). This is the new battleground.
  • Boeing should “maintain” 737 market share and focus on margin across the 7-Series instead.
  • Boeing’s hope to regain the leadership in the single-aisle sector is the next generation aircraft.

Read more

Dreamliner cash positive or not?

By Bjorn Fehrm

Subscription required.

Introduction

31 March, 2016, ©. Leeham Co: Boeing will present its first quarter 2016 results in about three weeks. One area which will be carefully scrutinized by the aerospace analysts will be the progress of the 787 program towards making money instead of consuming it.

Boeing gives the detailed information about the health of the 787 program in the comments by Boeing’s CFO, Greg Smith during the quarterly conference call. In the last call, he puzzled the analysts (and us) by saying that the 787 program was cash positive in 4Q2015 yet the program increased its deferred production and tooling costs by $191m. This means it still pushed about $5m per aircraft into the balance sheet as production loss.

At the time we assumed that the 787-9 was cash positive whereas the 787-8 was negative. This was most probably correct but not the whole picture. With some further poking around we think we are the elusive loss making cash positive on its tracks.

It has to do with the peculiarities of program accounting.

Summary:

  • It’s important for the 787 program to start amortizing the $32b in deferred production and tooling costs that has been amassed.
  • The 787 production should be cash positive yet Boeing does not expect the deferred costs to be going down before 3Q
  • We explain how something can be cash positive yet still defer costs. The answer is to find in how program accounting defines what is the cost of goods sold.

Read more

Sales slowing for larger, Airbus, Boeing twin-aisle jets

Subscription Required

Introduction

Boeing 777. Photo via Google images.

March 28, 2016, © Leeham Co.: A downturn in the order cycle, low fuel prices and backlogs extending to 2020 and beyond combine to reduce the likelihood of much in the way of wide-body orders this year, say commercial aviation officials.

A preference for smaller twin-aisle jets could also hurt sales of larger twin-aisle airplanes, according to observers.

These factors spell challenges for Airbus and Boeing for the A350-1000, the 777-300ER and the 777X.

Summary

  • “Nobody’s talking about the A350-1000 or the 777X,” says the president of a leading lessor.
  • Preference indicated for the smaller Boeing 787-9 over the larger 777-300ER for new routes.
  • Low fuel prices reduce the need for new technology jets.

Read more

Aircraft programme cost

By Bjorn Fehrm

Subscription required.

Introduction

March. 21, 2016, ©. Leeham Co: There is quite a lot of talk about what a new aircraft program like Boeing’s Middle of the Market (MOM) would cost the airframe OEM to develop. Typical quotes are “it would cost them at least  $10bn.” When saying this, the person implies this is the program’s load on the company’s liquidity for that aircraft program.

This is not correct and we will now go through why. It might be true that the development of the aircraft cost $10bn. But the trouble is, this is not the only cost that will hit the OEM for this aircraft program.

Cost that one normally does not think about when talking about new aircraft programs can double the cash burden on the OEM.  Here’s why.

Summary:

  • What normally is labeled development cost is only to a part development.
  • About half of the cost is used to develop and manufacture the aircraft’s production tooling.
  • There is one major cost block that has been forgotten in a development cost discussion: initial production costs.
  • The initial production costs not covered by customer payments can double the cash burden for a company.

Read more

IRKUT MC-21 analysis, Part 4. Performance with PD-14

By Bjorn Fehrm

Subscription required.

Introduction

March. 14, 2016, ©. Leeham Co: In three articles we have been looking at the new Russian single aisle aircraft, Irkut MC-21, from United Aircraft and the new Russian engine that is being developed for the aircraft, the PD-14.

The PD-14, which is offered as an alternative to the base engine for the aircraft, the Pratt & Whtiney PW1400G, was analysed in our Part 3 article. We now mount the engine on the MC-21 and explore the difference in performance compared to the base engine.

Summary:

  • The PD-14, which is a new engine designed by the Aviadvigatel company, is a clear step forward for the Russian turbofan industry.
  • In our analysis in Part 3, we could see that it has a classical direct drive construction with a good level of technology in several parts.
  • Weight and installation dimension are similar to the competition but efficiency is a bit behind.
  • We now explore the performance of the MC-21 with the Russian engine.

Read more

MOMentum appears to be slowing for new Boeing airplane

Subscription required

Introduction

Model design and paint by Camil Valiquette. Photo via Google.

March 10, 2016, © Leeham Co.: MOMentum for the Middle of the Market aircraft seems to be slowing from last year, as potential buyers and Boeing struggle to define an aircraft that would be affordable to build, affordable to buy and fulfill different mission requirements for capacity or range.

Meantime, Airbus is content to watch Boeing’s predicament, secure in what it believes is the winning strategy.

Summary

  • Attendees at the ISTAT conference last week had no consensus about what the airplane should be, when or even if Boeing should launch the airplane.
  • Some customers want range, others want capacity.
  • “757 replacement?” Not really.

Read more

The A350-900 explore its longer range capability

By Bjorn Fehrm

Subscription required.

Introduction

March 7, 2016, ©. Leeham Co: Airbus signed an MOU with Philippine Airlines for six A350-900 with options for six more at Singapore Air Show. The deal is significant because the airline’s President & COO, Jaime J. Bautista, said that the aircraft’s range played an important role in the selection process.

The A350-900 was not designed as an especially long range aircraft, not more so than its main alternative, the Boeing 787-9. Yet in two recent selections, for Singapore Airlines and now Philippine Airlines, the range of the A350-900 has won the deal for Airbus. We explain why.

Summary:

  • The Boeing 787-9 has a standard range which is equal to the A350-900, around 7,600nm measured under equal conditions.
  • Yet the A350-900 comes out on top when Airbus and Boeing are asked to offer extended range versions of these aircraft.
  • We use our proprietary aircraft model to go behind the scenes and investigate what makes the A350 more adapted to stretches into the space of ultra-long-range aircraft than Boeing’s 787-9.

 

Read more

Airbus needs more vertical integration, says official

Subscription Required

Introduction

John Leahy

John Leahy, chief operating officer-customers. Airbus photo.

March 3, 2016, © Leeham Co.: Airbus may well have avoided the supplier-driven delivery delays on its A350s had the company brought some key work in-house and become more vertically integrated, says its chief operating officer-customers.

Airbus has been bedeviled by delays in business class seat and galley deliveries from supplier Zodiac, resulting in delayed deliveries of the A350-900 to several airlines.

John Leahy, in an interview with LNC at the International Society for Aircraft Transport Trading (ISTAT) conference Feb. 29-March 1 in Phoenix (AZ), said Airbus shouldn’t be at the mercy of suppliers of interiors. His wide-ranging interview also touched on several other topics.

Summary

  • Airbus should have become more vertically integrated 10 years ago.
  • Basic supply chain solid.
  • Speaks about PW GTF, CFM LEAP
  • Airbus considering higher production rate on A320 than the announced 60/mo.

Read more