Market, other factors emerging, creating Boeing 787 concern

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Introduction

Jan. 4, 2017, © Leeham Co.: Despite a rosy picture painted by Boeing about the future of the 787 and the ability to recover more than $29bn in deferred production

Boeing photo.

and tooling costs, there are signs that cause concerns over the next 3-5 years.

Summary
  • Near-term production outlook solid, weakness begins in 2020, big gap in 2021.
  • Boeing doesn’t see wide-body sales recovery until next decade.
  • Company foregoes increasing 787 accounting block; sales won’t support it.
  • Market talks about deferring 787s.

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2017: the year ahead

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Introduction

Jan. 3, 2017, © Leeham Co.: The New Year is here and it doesn’t look like a good one for commercial aerospace, if measured against previous outstanding years.

There are some troubling signs ahead, piling on to a slowdown in orders from last year that didn’t even reach a 1:1 book:bill.

This year looks to be worse than last. Airbus and Boeing will give their 2017 guidance on the earnings calls this month and next. Bombardier and Embraer earnings calls are a ways off, when each will provide its guidance.

But LNC believes the Big Two in particular will be hard pressed to hit a 1:1 book:bill this year and may even struggle to match 2016 sales.

Boeing’s year-end order tally comes Thursday. Airbus’ comes on Jan. 11.

Summary
  • Wide-body sales remain weak.
  • Narrow-body backlogs and low oil prices continue to inhibit sales.
  • China, Middle East concerns emerging.
  • United Aircraft MC-21 and COMAC C919 begin flight testing.
  • Airbus A330neo, Boeing 787-10, Embraer E195-E2 and Mitsubishi Aircraft MRJ-70 roll-out and begin flight testing.
  • Airbus A321neo and Boeing 737 MAX 8 EIS.

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Airbus, Boeing Top Customers mix of stable, risk and reward

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Introduction

Dec. 22, 2016, © Leeham Co.: When it comes to comparing backlogs of Airbus and Boeing, the latter likes to point to what it calls a better quality of customers.

The fact is, both companies have large orders with airlines that may be characterized as less than top quality, or which appear to have over-ordered.

Summary

  • Airbus is more risk-reward oriented than Boeing.
  • Airbus appears more aggressive in emerging markets.
  • Airbus and Boeing share risky and quality customers.
  • Many of the shared top customers are roughly balanced between Airbus and Boeing.

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Boeing faces prospect of China’s political wrath thanks to Trump

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Introduction

Dec. 12, 2016, © Leeham Co.: “China Inc.,” the combined group of airlines and lessors directed or controlled by the government, is Boeing’s largest customer, an

China is Boeing largest single customer. Campaign rhetoric of Donald Trump could prompt the Chinese government to retaliate against Boeing, favoring Airbus for orders instead. Rendering via Google images.

analysis of the company’s’ backlog at Dec. 5 shows.

Boeing’s website lists “China” with 292 orders in backlog. Fifty of these appear to by Unidentified orders. LNC arrived at this figure by viewing the Chinese customers in Boeing’s identified list, which amounts to 242 orders. Some believe the number of Unidentifieds attributable to China may be higher.

The data shows just how much Boeing has at risk with the so-far unpredictable foreign trade policy espoused by President-Elect Donald J. Trump.

Summary

  • Boeing’s long history of supplying airliners to China began with President Nixon’s historic trip.
  • China was a reliable customer through global economic downturns.
  • But China doesn’t hesitate to use Boeing (or Airbus) as a pawn in geopolitical politics.
  • Airbus now at parity in China airplane sales.
  • Can Jim McNerney educate Trump?

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Norwegian, others have vision; US airlines don’t

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Introduction

Dec. 5, 2016, © Leeham Co. Last weeks’ approval by the US Department of Transportation of a license for Norwegian Air Shuttle to operate long-haul, low-cost service to and from the US drew immediate fire from labor unions over anticipated US job losses.

Iceland's Loftleider Airlines, one of the first trans-Atlantic low-cost carriers. Photo via Google images.

Iceland’s Loftleider Airlines, one of the first trans-Atlantic low-cost carriers. Photo via Google images.

But their view is too narrow.

It means more jobs for Boeing and its supply chain, which are also heavily unionized. It means benefits to US exports.

But overlooked is the next evolution in long haul travel that starts next year.

Summary
  • Legacy airlines always object to new competition. It doesn’t matter when or from where.
  • Open skies and free market is a great concept—until someone actually takes advantage of it.
  • The 737 MAX and A321neo present new threats to US airlines.
  • Lack of vision and foresight are the US airlines’ own worst enemy.

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Resurgence for ERJ-145

Note: Nov. 24 and 25 are Thanksgiving Holidays in the US. Our next post will be Monday.

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Introduction

Nov. 23, 2016, © Leeham Co.: The 50-seat regional jet market is dead.

That’s the conventional wisdom.

Well, not quite.

Embraer ERJ-145 is finding new life with regional airlines.

Embraer ERJ-145 is finding new life with regional airlines.

Piedmont Airlines, a unit of American Airlines, is adding the 50-seat Embraer ERJ-145 to its fleet. Eleven joined so far and next year the company plans to add 24 more.

CommutAir, an operator for United Airlines, is adding the same aircraft type to its fleet. Forty of them.

Why the mini-resurgence?

Low fuel prices and cheap airplanes.

Summary
  • 50-seat regional jets were considered economically obsolete with high fuel prices.
  • Sustain low prices provided a boost to the Embraer ERJ-145.
  • Bombardier’s CRJ-200 hasn’t seen a similar resurgence.

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Airbus, Boeing deferrals may indicate slowing global economy

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Introduction

Boeing 737 flightline at Boeing Field: 737s awaiting delivery. Seattle Times photo via Google images.

Boeing 737 flightline at Boeing Field: 737s awaiting delivery. Seattle Times photo via Google images.

Nov. 17, 2016, © Leeham Co.: The deferral by United Airlines of 65 Boeing 737-700s announced Tuesday caused some observers to conclude this has a negative impact on the manufacturer, but this may well overlook a larger issue.

UAL is the latest “quality” airline to announce deferrals to reschedule capital expenditures or because of not needing the aircraft now.

Softening yields, particularly among US airlines, indicate over-capacity despite load factors of 85% or more, say industry observers.

While the backlogs of Boeing and Airbus remain solid today, do the actions of several major airlines indicate the leading edge of a global economy that’s beginning to soften?

Summary

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CSeries out of London City Airport, Part 2. UPDATED 2017.01.24

By Bjorn Fehrm

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Introduction

This article, which was published on the 14 November, has been updated with new information from Bombardier. The range of the CS100 from London City airport has increased due to improved performance from the aircraft and a new engine version with more thrust, the PW1535G engine.

November 14, 2016, ©. Leeham Co: In the last article about operating the Bombardier (BBD) CS100 from London City Airport (LCY), we could see that the runway is about half the length of an international airport’s runways. This will have a significant impact on the Take Off Weight (TOW) that can be used when commencing a route from London City.

aerial_view_of_london_city_airport_2007

Figure 1. London City airport, housed in the docklands of London’s east end. Source: Wikipedia.

The manufacturers have data in their aircraft brochures that state that one should be able to takeoff with e.g. the CS100 at Maximum Take Off Weight (MTOW) from a runway which is 1,463m/4,800ft long. London City Airport’s runway is 1,508m/4950ft long, so then things should be fine?

No, the figures from the OEMs is the planning figure for actual runway used and London City airports usable take-off Runway is given as 3,934ft. In addition there is 394ft stopping distance available.

To understand how this can be used required a bit of information that we did not have at the time of writing the original article. Some of the information we used was not up to date and we did not use the strongest engine available (PW1535G) when analyzing if an operator could fly direct between New York from London City.

Bombardier came to our help and we have now been able to update the data with which to feed our performance model. This shows among other things that it’s possible to operate a direct connection between London City airport and New York, given that the number of passengers (the payload) is restricted to around 50 passengers or below.

We have revisited the two cases, SWISS European operations from London City and how would a direct operation London-New York work. You find the updated article below.

Summary:

  • London City Airport puts special requirements on the aircraft serving it.
  • It puts stringent requirement for takeoff and approach/landing.
  • We use new information and our performance model to present what routes can be served with a CS100 from the London City Airport.

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Clouds overhang Bombardier ahead of earnings call

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Introduction

Nov. 9, 2016, © Leeham Co.: Bombardier reports its 3Q2016 and nine month earnings Thursday and as the year prepares to enter its last 45 days, disappointment hangs over the company and the stock.

Summary
  • Despite winning firm orders for the CSeries from Air Canada and Delta Air Lines early in the year, no other new orders have been announced.
  • Deliveries of the CSeries will only be about half those projected, due to engine delivery delays from Pratt & Whitney.
  • The $1bn investment from the federal Canadian government hasn’t been achieved, but an announcement may come as early as next week that an agreement has been reached.
  • Boeing revised the design of the 737-7 to sit “right on top of” the CS300.
  • Embraer (Brazil) is taking the government bailout of CSeries to the World Trade Organization (WTO) in inquiries, with the USA lending support.

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CSeries out of London City Airport

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Introduction

By Bjorn Fehrm

November 07, 2016, ©. Leeham Co: When we visited Bombardier (BBD) in Montreal recently, we learned new information about how the CSeries would operate from London City Airport. This unique airport served 4.3m passengers last year and have expansion plans for more passengers up to 2030.

Bombardier’s first CSeries operator, SWISS Airlines, configured all its CS100 aircraft to operate from London City. This requires special engine selections and certification of aircraft and crews. The certification of the aircraft, CS100 is ongoing and will be finished at the turn of the year.

aerial_view_of_london_city_airport_2007

Figure 1. London City Airport, housed in the docklands of London’s east end. Source: Wikipedia.

We take a look at what is required for London City and how far the CS100, appropriately configured, can serve destinations from this special airport. We will use a combination of Bombardier data and our own performance model to reach the conclusions.

Summary

  • London City Airport put special requirements on the aircraft serving it.
  • The CSeries will be one of the most potent types allowed at London City.
  • We use BBD data and our performance model to understand at what range destinations can be served.

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