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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Boeing stock sell-off on United news appears misplaced

Nov. 16, 2016, © Leeham Co.: The market sell off yesterday of Boeing stock appeared on the surface to be a reaction to the news that United Airlines is deferring 61 737-700s and switching these to four larger 737-800s and the balance to either the 737-8 or 737-9.

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Figure 1. Boeing stock traded down on news that United Airlines is deferring 65 737s. The price stayed flat through early today. But stock for Spirit Aerosystems, which makes the 737 fuselages, recovered after a short dip (Figure 2). This suggests the Boeing sell-off was for other reasons. Click on image to enlarge.

Boeing’s stock today remains flat-to-down slightly.

An odd thing happened concurrent to Boeing’s stock decline.

After a short dip, stock of Spirit Aerosystems recovered to the level before the UAL news and remained there through the time of this writing. Spirit makes the 737 fuselages. If Boeing’s stock was hit by the United decision, then logic suggests Spirit’s stock should have been, too.

This suggests the Boeing’s sell off has other reasons.

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Airline assets and lessor assets: Bombardier and Embraer

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Part 2. Part 1 may be found here.

Introduction

Bombardier invented the regional jet. Despite some sales these days, the CRJ was eclipsed by the Embraer J-Jet. Bombardier photo.

Bombardier invented the regional jet. Despite some sales these days, the CRJ was eclipsed by the Embraer J-Jet. Bombardier photo.

Oct. 10, 2016, © Leeham Co.: Regional aircraft are much riskier assets for lessors than mainline aircraft.

Until recently, Bombardier and Embraer were the only two regional jet Original Equipment Manufacturers (OEMs).

Today, the Sukhoi SSJ100 and the Mitsubishi MRJ90 join BBD and EMB in this arena.

Summary

  • Bombardier’s regional jets CRJ series enjoyed a good life with airlines and lessors, but fell into disfavor as fuel prices spiked.
  • BBD’s CSeries was ordered by four lessors, but two of them have question marks.
  • Embraer’s E-Jet found good homes with lessors, but some worry about supply-and-demand in the secondary market.

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Boeing positioned to narrow market share gap

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Introduction

Figure 1 A320neo b 737 Max

Market sahre data from February–little has changed since–for sales of the A320neo vs 737 MAX families.

Sept. 22, 2016, © Leeham Co.: Early this year Boeing officials began a new message in pushing back against market data that show Airbus captured about 60% of the single aisle market in the A320neo vs 737 MAX sector.

There’s plenty of time, Boeing said, for the MAX to catch up to the neo. Just look, officials said. Southwest Airlines and Ryanair ordered only a fraction of the MAXes they need to replace the 737s they currently operate.

Airbus, on the other hand, has hundreds more neos ordered by the likes of new airlines such as AirAsia and Indigo.

The implication is that the AirAsia and Indigo orders are not as solid as the potential for Southwest and Ryanair.

It’s a fair point.

But it’s not the whole story.

Summary

  • An analysis of airlines that have not ordered the A320neo or 737 MAX families shows Boeing has more upside potential.
  • Boeing companies still have thousands of orders yet to be placed.
  • Forecasting ahead, Boeing has a solid prospect of narrowing the market share gap with Airbus—but probably not closing it entirely.

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Pontifications: “Sully” sullies NTSB

Hamilton ATR

By Scott Hamilton

Sept. 12, 2016, © Leeham Co.: Sully, the movie about the miracle of the successful water landing of US Airways 1549 on the Hudson River in New York City, sullies the National Transportation Safety Board.

Apparently not content with the gripping drama of the flight’s emergency itself and the dramatic rescue of all 155 souls on board, the movie gins up an NTSB out to hang Capt. Chesley Sullenberger (Sully) and co-pilot Jeffrey Skiles.

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Book review: Glory Lost and Found

Sept. 8, 2016Glory Lost and Found: How Delta Climbed from Despair to Dominance in the Post-9/11 Era is a ponderous title for a ponderous book.

But this is not a criticism.

Glory Lost is one of the best books I’ve ever read about the turmoil in the airline industry. Authors Seth Kaplan and Jay Shabat, two journalists, put together a book of nearly 450 pages that goes beyond just the focus of how Delta Air Lines spiraled into bankruptcy following 9/11, emerged and suffered through more travails after the 2008 financial market meltdown.

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Will United’s new president open door for Airbus?

Scott Kirby moves from president of American Airlines to president of United Airlines. Photo via Google images.

Scott Kirby moves from president of American Airlines to president of United Airlines. Photo via Google images.

Aug. 30, 2016, © Leeham Co.: Will Scott Kirby’s move from president of American Airlines to the same position at United Airlines lead to a major shift in fleet acquisition at the Chicago-based carrier?

This is an intriguing question that may take some time to answer.

Kirby spent 20 years with American CEO Doug Parker through their careers at America West Airlines, US Airways and American.

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Bombardier sees more C Series orders this year

Our coverage of the Farnborough Air Show begins today with an interview with Fred Comer, president of Bombardier Commercial Aircraft. There will be paywall and freewall posts throughout the FIA16 this week.

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Introduction

July 10, 2016, © Leeham Co., Farnborough Air Show: Winning major orders from Air

Fred Comer, president of Bombardier Commercial Aircraft.

Canada and Delta Air Lines earlier this year and the entry into service of the CS100 this Friday with launch customer Swiss International Air should give Bombardier’s bet-the-company gamble a boost for more orders this year.

This is the prediction by Fred Comer, president of Bombardier Commercial Aircraft.

During an interview with LNC on a media demo flight of the CS100 at the Farnborough Air Show, Comer said the smaller BBD can compete with the behemoths Airbus and Boeing for orders in the 125-150 seat sector.

Summary

Comer says:

  • Boeing’s prospective 737-7.5 still won’t be competitive.
  • The CS100 is better than the Embraer EJet-E2.
  • Embraer’s complaints of unfair competition because of Canadian government investment are unfounded.
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