Major fleet decisions may not be positive for Airbus, Boeing

Pontifications is off this week.

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Introduction

March 20, 2017, © Leeham Co.: There are some major fleet decisions that will probably come down the pike this year at American, Delta and United airlines. Not all of them are going to be viewed positively by Airbus and Boeing.

There is also a serious warning sign emerging from the Middle East that could have serious, negative impacts on Airbus and Boeing.

Summary
  • American Airlines doesn’t want its Airbus A350-900s any more. Consolidation with US Airways appears to have made these surplus.
  • Delta Air Lines, which so far eschewed any orders for the Airbus A320neos and Boeing 737 MAXes, is understood to be readying a Request for Proposals to be issued this year.
  • United Airlines doesn’t want its Airbus A350-1000s any more. Picking up cheap Boeing 777-300ERs appear to have made these surplus.
  • Emirates Airlines, reacting to Brexit and Donald Trump’s travel bans, is undertaking a full business review in response to a sharp drop in bookings.

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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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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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Embraer sees broadening market in North America

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Introduction

Nov. 17, 2015, © Leeham Co. The chief commercial officer of Embraer sees US mainline carriers adding

John Slattery, Chief Commercial Officer, Embraer. Photo via Google images.

aircraft in the 100-plus seat sector that will open new opportunities for the largest E-Jets hitherto a limited interest in this region.

First among high profile possibilities: United Airlines, which was identified as a major prospect for Bombardier and its CS100. According to multiple news reports, UA is holding out an order for the CS100 as an inducement for some pilot contract revisions. According to Market Intelligence, the potential order is for an equal number of orders and options, well below 50 orders but one which would be a crucial win for struggling Bombardier.

But Embraer isn’t going to let this order go without a stiff fight. Through United Express partners, EMB has a large installed base of E-175s operating for United. This is viewed as a major advantage by EMB’s CCO, John Slattery.

Summary

  • United, JetBlue, Air Canada targets for CSeries sales.
  • Embraer has large, installed fleet of E-Jets at these airlines.
  • Broadened market potential seen with North American carriers for 100-plus seat airplanes.

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Pontifications: Fare and market share wars

Hamilton (5)

By Scott Hamilton

May 25, 2015, c. Leeham Co. Airline stocks took a dive last week when it appeared fare wars and eroding capacity discipline is beginning among US carriers.

Southwest Airlines said it will be adding capacity at the rate of 6%-7% compared with recent increases of 2%-3% and American Airlines said it will begin matching the prices of Low Cost and Ultra Low Cost Carriers rather than see its market share erode.

And the markets went into a tizzy.

I’m old enough to remember when American aggressively matched the low fares of the emerging new entrant airlines after deregulation in the 1980s. The matching spread and the 1980s became a bloodbath. Read more

Part 1–Boeing 757: An analysis of facts and myths

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By Bjorn Fehrm

Part 1 of 3

Introduction

The Boeing 757 was developed in the late 1970s as a replacement for Boeing’s popular 727 mid-range single aisle aircraft. Starting from the smaller 727, it ultimately grew to 180 to 230 seat capacity and US transcontinental range. With initial orders from Eastern Airlines and British Airways, the aircraft nonetheless had poor sales through most of the 1980s, picking up with a surge of orders in 1988-1990 when major deals were announced from American, Delta and United airlines.

Figure 1. Boeing 757-200 of launch customer Eastern Airlines.

Figure 1. Boeing 757-200 of launch customer Eastern Airlines.

 

Following the 1991 Persian Gulf War and recession, orders plunged until the mid-decade with a respectable resurgence. After 9/11, sales dried up and Boeing terminated the program.

Summary

  • The 757 program had slow sales in its first decade, robust sales for a few years then declining sales through most of the 1990s.
  • Sales were respectable in the late 1990s but dried up after 9/11.
  • Boeing efforts to boost sales with the 757-300 were a failure–only 55 were sold. 757F sales were a moderate success.
  • The 757-200 had strong engines for its time (especially the Rolls Royce equipped models), we dissect if this is still true.
  • With the 757 being the only narrow-body with trans-Atlantic range, what is missing from today’s Airbus A321 and Boeing 737 MAX9 to make the cut? What can be done with small changes will be answered in part 2.
  • How will a future clean sheet NSA perform compared to these three? How much of a game-changer will a clean sheet design be if it enters service 2025? We look at the answers in part 3.

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Airbus Group beats expections for first quarter results

Airbus Group beat expectations for its first quarter profit. Continuing research and development costs weighed on earnings before one-time charges. Earnings before interest and the charges were actually down slightly vs 2013 but were better than expectations.

Group still expects the A350 to enter service with Qatar Airways late this year. According to Ascend, there will be one airplane delivered in December (at one time we thought it would slip to January, so we may not be far off). Group continues to call the A350 program “challenging” and notes there could be more charges against earnings. Under European rules, Airbus writes off charges as they occur rather than using Boeing’s program accounting method that spreads charges across hundreds of airplanes.

Cash declined nearly 1bn euros year-over-year to 13.1bn euros.

Links to the PPT presentation and financial statements may be found here.

Separately:

  • Philippine Airlines is retiring its Boeing 747-400 fleet, replacing it with the 777-300ER.
  • Virgin America beat Southwest Airlines for two gates at Dallas Love Field. The gates were leased to American Airlines, which had to give them up as a condition of its merger with US Airways.

Update, 0800 PDT:

  • The prospect of an A330neo continues to gain momentum. Aeroturbopower has this recap from the Air Lease Corp earnings call. Boeing delivers its last passenger 767-300ER this week to Air Astana. Flight Global has this analysis, including thoughts on the A330neo. More intriguing is the possibility of the 767-300ER replacing the aging, and out-of-production, 757. Bloomberg News has this story about the A330neo, originating from the Airbus Group earnings call.

 

 

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