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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Delta CEO is right about 777-200ER values, says market

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Introduction

Richard Anderson, CEO, Delta Air Lines. Photo via Google images.

Delta Air Lines CEO Richard Anderson is right.

Actual market values for 10-year old Boeing 777-200ERs are around $10m, not the $50m-ish suggested by Boeing and professional appraisal firms.

This is the conclusion of our Market Intelligence of real-world demand for these airplanes, not some theoretical book appraisal.

Furthermore, used 777-300ERs are in little demand.

The costs involved in reconfiguration and maintenance, repair and overhaul (MRO) simply upend traditional expectations.

Summary

  • Used 777-200ERs can’t be “given away,” reducing values to scrap regardless of book values carried by owners or appraisers.
  • Rolls-Royce-powered -200ERs, caught up in RR maintenance programs, make traditional engine valuations irrelevant.
  • A sudden glut of late-model 77-300ERs upend these values.
  • Ten year old -300ER lease renewal rates demanded by airlines drop to $325,000 in negotiations.

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Pontifications: Boeing to focus on “long-term liabilities” in 2016’s SPEEA contract negotiations

Hamilton KING5_2

By Scott Hamilton

Nov. 16, 2015, © Leeham Co. Boeing will target “long term liabilities” in its contract negotiations with SPEEA, the engineers union, its president quoted CEO Dennis Muilenburg as telling him in September.

Ryan Rule, president of the local SPEEA union, met for an hour with Muilenburg when he was here for a visit by China’s president Xi Jinping. Rule termed the meeting cordial. He told Leeham News last week that Muilenburg wasn’t specific about the “asks” Boeing will seek in contract negotiations next year, citing only “long term liabilities,” which Rule took to mean health care and pension benefits.

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Bjorn’s Corner: MRJ90 first flight

By Bjorn Fehrm

By Bjorn Fehrm

13 November 2015, ©. Leeham Co: Mitsubishi flew their MRJ for the first time this week. I could have added “finally” because it is two years late compared to the original time plan. But who cares when the aircraft is finally ready to fly and everything goes well? (Well, the customers do, actually.)

It was a big moment for Japan, a nation with a sizable aeronautical industry. Japan has been a major partner to Boeing in their larger airplane programs over the 757/767 to the 777 and 787. For the Dreamliner, they even designed and made the hottest item, the high-tech Carbon Fibre Reinforced Plastic (CFRP) wing.

Despite having such a capable aeronautical industry, Japan has not built an own civil aircraft since it closed the production line for the YS-11 twin engined turboprop in 1973. Since then it has acted as sub-supplier and has worked on certain military programs like the Mitsubishi F-2 fighter, based on the Lockheed Martin F16.MRJ first flightThe Mitsubishi corporation flew the MRJ90 for the first time Wednesday from the Nagoya Airport in Japan (screenshot from video from Mitsubishi). Most of the flight testing will be done in Moses Lake (WA), USA, where four test airplanes will be based.

Moses Lake is blessed with open skies, little air traffic, a long runway and good weather. It has a long history of flight testing, serving as a test-base for Japan Air Lines 747 pilot training for decades. Boeing also uses Moses Lake for flight testing.

We analyzed the MRJ90 and its main competitor the Embraer E175 in a subscriber article the 25th of January. We will revisit the main characteristics and then comment on what could be seen from the first flight. Read more

Boeing unions gird for new jobs-for-tax breaks push

Nov. 11, 2015, © Leeham Co. Boeing’s two leading unions, the IAM District 751 and SPEEA, are girding for a second try in the Washington State Legislature to retroactivity tie job retention to $8.7bn in tax breaks given by the state in 2013 in exchange for the 777X final assembly line and the airplane’s wing production factory being located in Everett (WA).

IAM 751 is Boeing’s “touch labor” union that assembles all the 7 Series airplanes in Washington State. The District also represents some Boeing employees outside Washington. SPEEA is the engineers union that represents all in-state engineers and technicians under contract to Boeing.

The 787 assembly site in Charleston (SC) is not represented at this time by any union.

Leaders of 751 and SPEEA Monday said they will renew their efforts to tie jobs-for-tax breaks when the next session of the state Legislature convenes in January. Efforts in last January’s session came up short, largely overshadowed by the bi-annual budget session that required special sessions extending into the summer recess because no agreements could be reached.

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Emirates’ 615 seat A380, is it more economical?

By Bjorn Fehrm

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Introduction

Nov. 11, 2015, ©. Leeham Co: Emirates Airline showed off its newly delivered two class A380 at this week’s Dubai Air Show. With a record 615 seats, this is the densest A380 that has been delivered by Airbus.

EK 615 seat A380Emirates have reached this record seat number by replacing the first class cabin (and showers) with economy seats. Part of the business area has gone as well. What remains on the Premium side are 58 of the well known lie-flat seats and the ubiquitous Emirates bar.

The aircraft is aimed at high density destinations which are reached within a 12 hours limit, therefore the aircraft has no crew rest facilities.

The question is, what improvements in seat-mile costs does this configuration bring and how does it stack up against a similarly configured Boeing 777-300ER or 777-9?

Will there be a change in the economical pecking order compared to the more classical long range configurations that we looked at December last year?

We used our proprietary performance model to find out.

Summary:

  • To be fair to all aircraft, we equipped them with similar high density two class cabins.
  • We also kept the ratio of business-to-economy seats the same for all cabins.
  • The result is high capacity workhorses that are used for flying passengers and cargo at sector lengths of up to 12 hours. Consequently, none of the aircraft have crew rest facilities.
  • We then looked at fuel efficiency, Cash Operating Costs and Direct Operating Costs for these long-haulers now given a mostly mid-haul work scope.

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Emirates’ mid-range choice

By Bjorn Fehrm

Nov. 10 2015, ©. Leeham Co: The Dubai Air Show is on its second day and there are no mega orders. The one that should have been, the mid-range requirement for Emirates Airline, has been postponed, not only to “next year” but for “another year.”

What is the reason? Are we seeing a widebody oversupply fueled by used Boeing 777s/Airbus A330s being available in the market “for very low prices,” as suggested by Delta Air Lines CEO Richard Anderson? Are these the first signs of a damping of an order bonanza which has been going on for five years? Will things be more quiet (or should we say normal) going forward?

We don’t think so. Emirates just want to make the right choice and the equation has got more complicated as it has been working the problem. And it is in no hurry.

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Embraer’s fundamental advantages

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 Introduction

With the first Embraer E-Jet E2 under assembly, we take a look at the E1 and E2 programs in the run-up to roll-out of the E-190 E2 next year and projected Entry Into Service (EIS) in 2018.

Summary

  • Broad customer base gives Embraer a major advantage against new competitors.
  • More than 2,300 ERJs, E-Jets in service.
  • More than 1,100 E-Jets in service.
  • Broad product support a key advantage.

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Pontifications: A380neo? Try A380TXWB. Dubai Air Show and other Odds and Ends

A380 Trent XWB

Click on image to enlarge. Airbus photo.

Nov. 9, 2015, (c) Leeham Co. Airbus last week launched its A380 flying test bed with the A350-1000’s Rolls-Royce Trent XWB 97,000 lb engine placed in the number two position.

The first thing that came to mind when I saw the photo was that if Airbus put three more engines on it, you’d have the A380neo. Or maybe call it the A380TXWB. Done and dusted, as they say in England.

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Bjorn’s Corner: Aircraft systems, the real nuts to crack

By Bjorn Fehrm

By Bjorn Fehrm

06 November 2015, ©. Leeham Co: COMAC’s C919 was rolled out in the week. We got to see a new shiny aircraft which looked ready to fly. The nicely curved fuselage and wings were immaculate, the paint was shiny and the CFM LEAP-1C engines were ready to go.

Yet many ask, when will it fly for the first time? It used to be that when the airframe was finished and the engines ran reliably it was time to fly. No longer! Today the most challenging part of an aircraft program is the integration of all the complex systems which hide under the skin. This is what kept the Bombardier CSeries on ground longer than it should and the Boeing 787 and Airbus A380 had the same flu (the latter also had to short wires).

It is the part of the aircraft which takes longest to get to work reliably. The A380 is known for its long period of nuisance warnings from the complex avionics system after entry into service and the reliability work for the 787 has to a large extent been one of software tuning of its system side.

As the system function of modern aircraft has grown more complex the whole architecture of how it was built had to be changed. Here’s how.

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