Leeham News and Analysis

Bombardier: Our turnaround plan is gaining traction

Alain Bellemare, CEO of Bombardier. CTV photo via Google images.

April 28, 2016: “Our turnaround plan is gaining traction,” said Alain Bellemare, BBD CEO, to lead off the first quarter earnings report for Bombardier.

“This is a big win for Bombardier,” he said. “This is a strong endorsement for the C Series.” He said BBD is finalizing the agreement with Air Canada for 45 firm orders and 30 options for the CS300. “We significantly improved the quality of the backlog list.

“Looking ahead, we are seeing increased customer interest in C Series,” Bellemare said.

The Air Canada, Air Baltic and Delta orders will result in a 2Q2016 charge of $500m, or nearly $4m per aircraft, BBD announced in its press release. This means the aircraft were sold at a loss, but the gain of these blue chip customers were needed. This is about the learning curve and unit accounting (see below).

Delta deliveries begin in 2018.

Belleman said the C Series will be the largest driver of future growth for BBD.

The CRJ and Q400 saw soft orders in the first quarter. Bellemare sees a stronger second quarter. He vowed increased attention by management this year.

40 Comments

Posted on April 28, 2016 by Scott Hamilton

Bombardier, CSeries, Delta Air Lines

Air Baltic, Air Canada, Alain Bellemare, Bombardier, C Series, Delta Air Lines, John Di Bert

Airbus Group 1Q 2016 results: Slow start to the year, guidance maintained.

By Bjorn Fehrm

28 April 2016, ©. Leeham Co: Airbus Group has had a slow start to 2016. Deliveries of A320neo, A350 and A400M are slowed by problems with engine and cabin suppliers. Only 127 aircraft were delivered out of a total guidance of 670 deliveries for 2016, a mere 18%. Group 1Q 2016 (1Q 2015) revenue were €12.2b (€12.1b) with EBIT of €501m (€651m), down 23% year on year.

The group expects to recover the shortfall in deliveries during the year and to reach guidance levels for revenue and EBIT, except for the troublesome A400M. This time it’s a engine gearbox item which is the culprit. Airbus CFO, Harald Wilhelm, gave a clear warning during the quarterly conference call: the A400M program “risks a significant charge” during the year.

The financial results for the divisions for the quarter were:

The commercial aircraft division delivered 125 (134) aircraft with revenues €8,668m (€8,565m) and EBIT €407m (€569m).
Airbus Helicopters delivered 56 (62) helicopters with revenues €1,158m (€1,285m) and EBIT €33m (€52m).
Airbus Defence and Space revenues were €2,534m (€2,603m) with EBIT €109m (€90m).

Details of the Airbus Group 1Q 2016 results are below.

7 Comments

Posted on April 28, 2016 by Bjorn Fehrm

Airbus, CFM, Pratt & Whitney

A320, A320NEO, A330, A330neo, A350, A350-1000, A350-900, A380, Airbus, CFM, Harald Wilhelm, Pratt & Whitney

Bombardier wins breakthrough C Series order, from Delta

April 28, 2016, (c) Leeham Co.: At long last, after years of disappointment for that big, breakthrough order, Bombardier finally got it: a huge deal from a blue chip

Delta Air Lines ordered 75 CS100s and optioned 50 more. This is the breakthrough order Bombardier has been waiting years to receive. Source: Delta Air Lines.

airline, and one from North America: a firm order for 75 C30S100s and options for 50 more from Delta Air Lines.

Delta has conversion rights to the CS300. Bombardier now has more than 300 firm orders, although many of these are iffy, and commitments for up to 500 more.

This is the order that observers, analysts and aviation geeks have been waiting for during much of the development and production of the C Series.

The announcement came concurrently with highlights of BBD’s first quarter results.

43 Comments

Posted on April 28, 2016 by Scott Hamilton

Boeing, Bombardier, CSeries, Delta Air Lines, Embraer, United Airlines

Bombardier, C Series, CS100, CS300, Delta Air Lines, E195 E2, Embraer

Boeing 1Q results reveal “underlying strength”

Dennis Muilenburg, CEO of The Boeing Co.

April 27, 2016: Boeing delivered better financial results in first quarter that reflect “underlying strength” in the company, said Dennis Muilenburg, CEO of The Boeing Co., on the first quarter earnings call.

Excluding charges of $243m pre-tax charges on the KC-46A tanker, earnings per share equaled last year. Charges related principally to engineering change to the completed tankers, required after flight testing began. Muilenburg said the program remains “on path” to meet the commitment to deliver 18 tankers by August 2017. With a potential program of 400 deliveries over the life of the program, Muilenburg said the program should be profitable.

10 Comments

Posted on April 27, 2016 by Scott Hamilton

air force tanker, Boeing

1Q2016 Boeing earnings call, 737 MAX, 737NG, 747-8, 777 Classic, 787, Boeing, Dennis Muilenberg, Greg Smith, KC-46A

Boeing takes new charges on tanker, 747-8

April 27, 2016: Boeing took new charges on the KC-46A tanker and 747-8 programs, but not on the 787, its first quarter financial results announced.

Boeing took a $162m pre-tax charge on the tanker at Boeing Commercial airplanes. A charge of $80m was taken on the Defense side of the business for the tanker. Another $70 pre-tax charge was taken on the 747-8 program.

Cash levels were lower than that at year end, due to the shareholder buyback, lower deliveries and the “timing” of cash flow, the company said. With marketable securities, Boeing ended the quarter with $8.4bn cash and equivalents vs $12.1bn at year end. Year-over-year, cash and securities were $8.4bn to $9.6bn.

Initial analyst reaction follows.

23 Comments

Posted on April 27, 2016 by Scott Hamilton

Boeing

1Q2016 Boeing earnings, Boeing

737-7X, 737-10 studies illustrate Boeing weakness in single-aisle market

~~Subscription Required~~

Introduction

April 27, 2016 © Leeham Co.: News that Boeing plans to develop a “737-7.5” MAX, following on the prospect of a “737-10” stretch of the 737-9 illustrates just how weak its single aisle product strategy has become.

The Wall Street Journal revealed last week that Boeing is planning the airplane, which is larger than the current 737-7 but smaller than the 737-8. Jon Ostrower, the reporter, dubbed the plane the 737-7.5. Internally, it’s called the 737-7X.

Summary

The 737-7 MAX has proved a sales dud. There are just 60 orders from two established airlines, Southwest and WestJet, and one start-up carrier that ordered just five.
Bombardier appears on the cusp of landing an order from Delta Air Lines for up to 125 CS300s, the direct competitor to the 7 MAX, but this is only one element in Boeing’s consideration to grow into the “7.5.”
Rather than being a growth of the 7 MAX, the 7.5 will be a shrink of the 737-8. This is a less costly and more efficient method for Boeing, but shrinks are never the best solution for the operator.
LNC reported in February that Boeing had decided to recommit to the 7 MAX after nearly losing an order to Bombardier for the C Series. Instead, UAL ordered the 737-700 at an unusually low price and other considerations. Ray Conner, CEO of Boeing Commercial Airplanes, called the deal a blocking move to BBD. The 7.5 appears to be the course Boeing has chosen.
Pursuit of a 737-10, a stretch of the 737-9 that may include a new wing, larger engines and other changes, is an acknowledgement the 737-9 is losing the battle for this size aircraft to the Airbus A321neo. But Boeing’s challenges to develop a 737-10 are vexing. More than a year ago, LNC outlined these.

Airbus deliveries first USA-made A321ceo, to JetBlue

The first Airbus A321ceo assembled at the Mobile (AL) plant was delivered today to jetBlue. Photo from Airways News via Twitter.

April 25, 2016: The first Airbus A320 family aircraft assembled at the Airbus Mobile (AL) plant was delivered today to jetBlue. The A321ceo, which the airline named BluesMobile, is the first of 10 A321s now in production at the plant. Eight more A321s will be delivered to American Airlines. Spirit Airlines gets the 10th.

45 Comments

Posted on April 25, 2016 by Scott Hamilton

Airbus, American Airlines, Boeing

A320, A321ceo, Airbus, American Airlines, Boeing, JetBlue, John Leahy, Spirit Air

Pontifications: Earnings week for Airbus, Boeing, Bombardier and Embraer

By Scott Hamilton

April 25, 2016, © Leeham Co.: Airbus, Boeing, Bombardier and Embraer having their first quarter earnings call this week. Bombardier also has its Annual General Meeting concurrent with its 1Q earnings on Friday.

The big anticipation will be with Bombardier.

Earlier this month, The Wall Street Journal reported Delta Air Lines was going to order 75+50 C Series from BBD. Delta, on its 1Q earnings call, said it had nothing to announce but would have more to say at its investors day. This is May 16.

But at the same time, BBD postponed its AGM and 1Q call from the 28^th to the 29^th. Delta’s board of directors meets on the 28^th. Previously, BBD postponed by one day its year-end earnings call to coincide with Air Canada, which announced an order for 45 C Series, plus options.

Is Bombardier’s rescheduling another harbinger of the Delta order, or will Delta hold off any announcement until that May 16 investors day?

Or could Delta announce the Bombardier order Friday and the widely reported, expected order for 30-37 Airbus A321ceos?

The world aviation geeks wonder.

90 Comments

Posted on April 25, 2016 by Scott Hamilton

Airbus, Boeing, Bombardier, CSeries, Delta Air Lines, Embraer, Pontifications, Pratt & Whitney

737-7, 737-7.5, A320NEO, A321ceo, A350, Airbus, Bank of America Merrill Lynch, Boeing, Bombardier, C Series, Credit Suisse, Embraer, GTF, Pratt & Whitney, Ron Epstein, Ron Spingarn

Can Bombardier extend CS300 to a CS500? Part 3.

By Bjorn Fehrm

Subscription required

Introduction

April 25, 2016, ©. Leeham Co: We will now finish our series where we look into how big an undertaking a CS300 stretch to a 150 seater would be for Bombardier.

The C Series existing models, the CS100 and CS300, were designed with the CS300 as the main family member. That makes a stretch to a CS500 a pretty straight-forward job from a wing perspective, only minor adjustments are needed.

The problem area for the stretch is the fuselage. The C Series is a five abreast aircraft and at 150 seats the aircraft will have more than 30 seat rows. The resulting long fuselage limits the available rotation angle at takeoff.

Having discussed the different actions that can be taken to handle this problem in Part 2, we will now check the implications for the takeoff field length with our performance model. The model will also show if the engine takeoff thrust needs to be increased.

Finally, we will use the model to estimate the fuel consumption and the range of a CS500 derivative.

Summary

A CS500 derivative made from the CS300 is a pretty straight-forward stretch project.
Special care has to be taken with the risk for tails strikes from a longer fuselage.
With the discussed actions in place, the field performance of a CS500 is still very good, even though it can’t compete with a CS300.
The range would be less than a CS300 but the aircraft would still be capable of five hour missions.
Fuel consumption would be higher per trip but lower per seat than a CS300. It would give existing 150 seaters strong competition on efficiency.

1 Comment

Posted on April 25, 2016 by Bjorn Fehrm

Airbus, Boeing, Bombardier, CSeries, Pratt & Whitney, Premium

737-7, A319neo, Airbus, Boeing, Bombardier, CS300, CS500, CSeries, Pratt & Whitney

Bjorn’s Corner: We fly to Nice

By Bjorn Fehrm

22 April 2016, ©. Leeham Co: Last week we described the function of the aircraft’s Flight Management System, FMS. Now we will use the FMS to program a flight between Innsbruck in Austria and my hometown Nice on the French Riviera.

To make it practical and easy to follow, we will focus on how the Flightplan that we have programmed into the FMS will be processed. To follow that, we look at the display of the FMS navigation on the aircraft’s navigation display. There, one can follow how the FMS and Autopilot work through all the information that a flight-planned mission contains.

The cockpit we see in the picture is the aircraft we will use, an A319 that we have borrowed for the day from Lufthansa, just to help us understand how navigation with a FMS works. It is of course not a real aircraft, but it’s not far from it.

Figure 1. Our flight for the day, Aerosoft’s A319. Source: Aerosoft’s A319 flight simulator

The best flight simulators that are available for your PC today are extremely well done and realistic; this is one of them. It’s an A319 simulator from the German company Aerosoft. I flew the mission for us yesterday.

Let’s see how it works.

15 Comments

Posted on April 22, 2016 by Bjorn Fehrm

Airbus, Bjorn's Corner

A319, Aerosoft, Luftansa Airlines

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Leeham News and Analysis

There's more to real news than a news release.

Leeham News and Analysis

Bombardier: Our turnaround plan is gaining traction

Airbus Group 1Q 2016 results: Slow start to the year, guidance maintained.

Bombardier wins breakthrough C Series order, from Delta

Boeing 1Q results reveal “underlying strength”

Boeing takes new charges on tanker, 747-8

737-7X, 737-10 studies illustrate Boeing weakness in single-aisle market

Airbus deliveries first USA-made A321ceo, to JetBlue

Pontifications: Earnings week for Airbus, Boeing, Bombardier and Embraer

Can Bombardier extend CS300 to a CS500? Part 3.

Bjorn’s Corner: We fly to Nice

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