Leeham News and Analysis
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Leeham News and Analysis
- Bjorn’s Corner: Air Transport’s route to 2050. Part 20. May 2, 2025
- Supplier Howmet exceeds expectations despite tariffs May 1, 2025
- Airbus 1Q2025 results: So far, so good, but US tariffs make future results unpredictable May 1, 2025
- Does an Airbus A220-500 need a new wing and engines? May 1, 2025
- Teamsters, Boeing have a new contract April 29, 2025
Embraer’s transition years, 2017 and 2018
By Bjorn Fehrm
December 29, 2017, ©. Leeham Co.: The past year was a transition year for Embraer. Their E-Jet was in its last year before deliveries of the new E2 version begins. The company labels 2018 as an additional transition year, as the ramp-up costs of the first E2 deliveries, the E190-E2, will keep profits down.
Strategically, 2017 has been a tumultuous year for Embraer. Boeing’s complaint to the US Department of Commerce for Bombardier’s CSeries sales to Delta at “dumping prices” drove the competitor aircraft into the hands of Airbus. This unexpected move saw Embraer and Boeing hold merger talks, plans which could be affected by the Brazilian government’s golden share in Embraer.
Post-hearing briefs in Boeing-Bombardier trade case
Dec. 28, 2017, © Leeham Co.: It’s not often that levity appears in briefing papers in US government trade cases, but Delta Air Lines managed to draw LNC’s chuckle in its post-hearing brief in the Boeing-Bombardier trade case.
Dec. 27 was the deadline for Delta, Bombardier, Boeing and other interested parties to file post-hearing (Dec. 17) briefs and exhibits.
Delta’s introduction was novel to say the least.
Bombardier’s bittersweet year
Dec. 28, 2017, © Leeham Co.: Two thousand seventeen had to be a bittersweet year for Bombardier.
Despite landing two good, blue-chip orders in 2016—Air Canada and Delta Air Lines—it hadn’t achieved the “commercial momentum” hoped for. At long last, Letters of Intent for 31+30 and 12+12 orders and options were announced this year for the CS100 and CS300 from an Unidentified European carrier and Egyptair respectively. Officials hope to firm these up by the end of this year.
No additional C Series orders were forthcoming for the rest of 2016 and none for 2017 when Boeing stepped up and puked all over the program.
In April, Boeing filed a trade complaint with the US government. Boeing would prevail with the US Department of Commerce, which preliminarily determined to levy a 300% tariff on each C Series imported into the US.
The US International Trade Commission took up the case Dec. 18; a decision is due next month. If ITC finds there was no harm to Boeing, the DOC decision goes away.
Boeing’s outstanding year
Dec. 27, 2017, © Leeham Co.: Boeing had an outstanding year.
For the first time since 2013, it booked more sales of the 787 than it produced, the so-called book:bill ratio.
The bridge for the 777 Classic to the 777X was all but filled, a point of controversy for the past several years.
Total net orders through November were 633, almost twice that of Airbus through the same period.
This excludes orders announced at the Dubai Air Show which have yet to be booked.
The only lump of coal, coming just before Christmas: Airbus won a major deal from Delta Air Lines for 100 A321neos plus 100 options.
Other events propelled Boeing to an outstanding 2017.
How Boeing, Embraer benefit from a combination
Analysis
Dec. 26, 2017, © Leeham Co.: Potential synergies exist between Boeing and Embraer which may be important to development of the next new, clean-sheet airplane for both companies.
E195-E2, Embraer’s largest airliner. A Boeing combination could lead to a new family of larger jets.
Last week, both firms acknowledged a Wall Street Journal report that talks have been held about a combination of some kind. No details were reported about what this would look like. The Brazilian president was quick to say the government, which holds veto power over any merger or acquisition of Embraer, won’t approve any deal that means EMB ceases to be a Brazilian company.
Joint ventures or minority ownership structure appears possible.
What are the potential benefits for Boeing and Embraer?
Airbus 2017 in review and 2018 Outlook
Dec. 26, 2017, © Leeham Co.: It’s been a miserable year for Airbus.
Corruption investigations. Delayed deliveries due to engine issues for the A320neo. Delayed deliveries due to interior supplier issues for the A350. A year’s delay for
the A330neo due to engine development issues.
Production reductions and doubts over the future of the A380. Continued cash drains and write-offs for the A400M. Internal turmoil as CEO Tom Enders dramatically changes responsibilities and reporting lines.
Getting walloped by Boeing at the Paris and Dubai air shows, losing the wide-body order race in a landslide and losing the narrow-body order race.
Next year will have continued challenges.
Holiday schedule
Dec. 22, 2017: By and large, LNC will be taking the period between today through Jan. 2 off for paywall and news reporting.
We will publish year-in-review and 2018 outlook articles throughout this period, which were prepared in advance.
There could be some action at the US Department of Commerce and the US International Trade Commission with respect to the Boeing-Bombardier complaints. There are some filing deadlines during this period that may warrant attention and reporting.
And, as always, if there is a major breaking news story requiring our reporting, we’ll be there.
Otherwise: Merry Christmas and Happy New Year.
Bjorn’s Corner: Aircraft drag reduction, Part 10
By Bjorn Fehrm
December 22, 2017, ©. Leeham Co: In the last Corner, we described how the Wright Brothers flew a manned aircraft for the first time, propelled by its own power.
Now we will disscuss what was known about what stopped so many projects from achieving the flight distances the Wright’s could do, the aircraft’s drag.
Figure 1. The Wright Flyer flies at Kitty Hawk, NC, at 17th December 1903. Source: Wright-Brothers.org.
US Commerce confirms tariff on C Series; parties await ‘harm’ determination
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Introduction
Analysis
Dec. 21, 2017, © Leeham Co.: To absolutely no surprise, the US Department of Commerce yesterday confirmed its preliminary finding that the Bombardier C Series is illegally subsidized and the company illegally “price dumped” the airplane into the US with the 2016 order for 75+50 to Delta Air Lines.
Bombardier told the trade commission this is a “partially assembled” aircraft: it has no interior, IFE, etc. It flies but it’s not a completed aircraft. Photo via Google images.
The DOC confirmed its proposed tariffs of nearly 300% on every aircraft or “partially assembled” aircraft.
The confirmation came the day after Boeing, Bombardier, Delta and other interested parties testified before the US International Trade Commission (ITC) over whether Boeing was harmed by the Delta deal and one with United Airlines that Boeing won.
If the ITC determines there was “harm” to Boeing, the tariffs go into effect upon importation. If the ITC finds no harm, the DOC’s case becomes moot and no tariff is imposed.
When Bombardier ships its wings from the Belfast plant to Canada–or to the US, once the Alabama plant is completed–does this qualify as a “partially completed” aircraft? Nobody at this stage knows. Artwork via Google images.
As LNC reported yesterday, Bombardier said its proposed final assembly line in Alabama will proceed regardless of the ITC ruling. BBD claims this FAL means the C Series becomes a US-produced product, immune to tariffs. Boeing claims the FAL’s purpose is to circumvent the tariffs and a circumvention tariff should be levied in that case.
Summary
- This case is “uncharted territory,” says a trade lawyer.
- What’s the definition of a “partially assembled” aircraft?
- Appeals expected on ITC outcome.
- Bombardier’s “fatal error.”
History undermines Boeing claim of C Series impact: analysis
Analysis
Dec. 22, 2017, © Leeham Co.: Boeing blames a subsidized, price-dumped Bombardier C Series for the poor sales of the smallest member of the 737 family, the -700 and the 7 MAX, but history doesn’t support the claim.
The US Department of Commerce clearly ignored sales evidence that the 737-700 has been “done” for many years and the 737-7 MAX was an unattractive design
Boeing 737-7 MAX. Rendering via Google images.
that hasn’t been fixed with a redesign; airlines simply don’t want the airplane. Commerce levied tariffs amounting to 292% on C Series imported into the United States in the future.
The US International Trade Commission is currently awaiting post-hearing briefs from Dec. 18 testimony from Boeing, Bombardier, Delta Air Lines and other parties to determine whether Boeing suffered “harm” by the C Series deal with Delta and a near-miss with United Airlines.
If the ITC concludes Boeing suffered harm, the DOC tariffs stand. If not, the DOC action is moot. The loser at ITC is expected to appeal.
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Posted on December 22, 2017 by Scott Hamilton
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