Leeham News and Analysis
There's more to real news than a news release.
Bjorn’s Corner: Production costs.
By Bjorn Fehrm
11 September 2015, © Leeham Co: In connection with our articles, there a numerous reader discussions around the development and production costs of new aircraft families. It’s not easy to understand how these costs arise, how they are booked in the OEM’s accounting and how they can be compared. Time for a primer.
I will not duplicate a course in company accounting, but it can be worth the read to understand how costs are created, accounted for and what we as externals can observe via aircraft industry economic reports .
I will focus on Airbus and Boeing. These are good examples of the different ways of collecting and showing costs in the global aircraft industry.
Flying CS100 over a noise-sensitive airport
Bombardier’s CS100 made its first visit to Toronto today and in the process overflew the City’s Billy Bishop Airport, which is located just off downtown in a noise-sensitive area.
The Bombardier CS100 overflies Toronto Billy Bishop Airport during its first visit to the City.
Porter Airlines, which is based at Billy Bishop, has a large conditional order for the CS100. The plan requires extending the runway at both ends and gaining governmental approval to operate commercial jets there. Right now only turbo-props are allowed for airline operations.
There is substantial opposition from the plan, including from rival Air Canada. For the public, it’s mostly about noise. For Air Canada, it’s the competitive advantage Porter would have operating out of close-in Bishop while AC is at the more distant Pearson Airport.
CS100 noise tests indicate it is quieter than the Bombardier Q400 Porter flies from Bishop. The CS100 overflights are obviously a demonstration of the noise profile of CS100 operations at Bishop.
Embraer faces new challenge from MRJ90
Part 2
Paulo Cesar, president and CEO of Embraer’s commercial aviation unit. Photo via Google images.
Sept. 10, 2015, © Leeham Co. Embraer is the dominant producer of commercial aircraft in the 70-125 seat sector, having overtaken Bombardier in the last decade following the development and 2004 introduction of the E-Jet. Bombardier’s CRJ family struggles, hampered by a sales force that neglected it and the Q400 turbo-prop as attention focused on the new CSeries.
Embraer in recent years faced new competition. However, the early entries—AVIC’s ARJ21 and the Sukhoi Superjet SJ100, both in the 70-90 seat sector, proved little to worry about. The ARJ21, now eight years late, proved to be a technological and industrial dud, a project that was more about learning how to design and build an airplane than producing a commercially viable one.
The SSJ100, while winning favorable reviews, was and continues to be plagued by a poor production system and in recent years the political overhang of Russia’s annexation of Crimea and its war in Ukraine.
Shortly, though, the E-190 faces a new challenger: the Mitsubishi MRJ90. It’s two years late, now forecasting an entry-into-service of 2017—just one year ahead of the redesigned E-190, the E-190 E2. The MRJ90, a 90-seat clean-sheet design, is Japan’s first commercial airliner since the NAMC YS-11 turbo-prop of the 1960s. The MRJ90’s first flight is scheduled for the second half of next month. Full flight testing moves to Washington State in the first quarter next year.
Embraer CEO sees opportunity for 100-seaters in USA
Part 1
Sept. 9, 2015, © Leeham Co.: The chief executive officer of Embraer’s commercial aircraft unit believes a trend might be emerging for US major airlines to directly operate 100- and plus-100 seat aircraft (and below the 125-seat sector), opening new opportunities currently precluding the largest E-Jets, and by implication, competing jets.
Paulo Cesar, president and chief executive officer of Embraer’s commercial airplane unit. Photo via Google images.
US major airlines have generally migrated away from the 100-125 seat aircraft, up-gauging to the 150-162 seat Airbus A320s and Boeing 737-800s and their re-engined successor. The “baby” Airbus and Boeing aircraft, the A319ceo/neo and 737-700/7, haven’t sold well in recent years.
But the Embraer E-195 E2, at 122 seats in a comfortable single-class configuration and somewhat smaller in two class, hasn’t yet penetrated the US market. Neither has the Bombardier CS100, a 100-110 seat aircraft in two- or single-class configuration.
Delta Air Lines is bucking history with acquisition of 88 inexpensive Boeing 717s from the used airplane market. Southwest Airlines and United Airlines are acquiring used 737-700s and United agreed to lease in 25 used A319s.
Cheap fuel and cheap capital costs help these decisions. But Paulo Cesar, president and CEO of Embraer’s commercial unit, sees an opportunity for his airplane.
Boeing’s 767 revitalized as a MOM stop gap, Part 3
By Bjorn Fehrm
Subscription required.
Introduction
Aug. 31 2015, ©. Leeham Co: After examining the characteristics of the Boeing 767 to serve the market segment that Boeing is studying for its Middle of the Market (MOM) requirement, the 225 passenger/5000nm sector, we will now finish the series by looking at how the 767 can be made economically more competitive.
We will study the influence of improved aerodynamics like Aviation Partners Boeing’s Split Scimitar Winglet for the 767. We will also look at what engine PIPs can provide and also look at what a re-engine could bring.
Finally we examine at what happens when we add crew costs, underway/landing fees and maintenance costs to form Cash Operating Costs (COC) followed by capital costs to form Direct Operating Costs (DOC).
Summary:
- Boeing’s 767 has the right cross section for passenger transportation in the 225 passenger/5000nm segment.
- Its wings and empennage are too large, however. We make them work harder by transporting the 767-300ER fuselage and passengers.
- We also introduce aerodynamic and engine improvements. Still, the fuel consumption per seat mile is considerably higher than modern alternatives.
- At a Cash Operating Cost and Direct Operating Cost level, the higher fuel consumption has less influence in today’s fuel prices. The result is that the 767-300ER becomes an interesting alternative as long as the fuel price stays low.
Bombardier snares Lufthansa’s Nico Buchholz
Bombardier scored a major executive coup with the appointment of Nico Buchholz as Chief of Procurement for the entire company.
Nico Buchholz, the new Head of Procurement for Bombardier. Photo via Google images.
Buchholz was Executive VP Group Fleet Management for Lufthansa Airlines and Group, with various fleet management titles, since 2001. He previously was an executive at Airbus.
Buchholz was the launch customer for the CSeries, placing an order in 2009 for 30+30 CS100s and CS300s. Lufthansa Group’s Swiss International Airlines subsidiary will become the first operator when the deliveries begin next year. While the Middle Eastern airlines get the headlines for being launch customers for the Boeing 777X, in fact it was Buchholz who bought the airplane for Lufthansa, which is the first 777-9 customer.
Buchholz is a major “get” for Bombardier.
A320 oversold in bridge from ceo to neo
Subscription Required
Introduction
Airbus A320neo. Source: Airbus
Sept. 7, 2015, © Leeham Co. Airbus is oversold in its A320 family positions as it transitions from the ceo to the neo, an analysis shows.
The first delivery of the A320neo is scheduled for December. Airbus plans to phase out the A320ceo family over two years (as does Boeing with the 737NG in favor of the 737MAX).
We analyzed the 737NG bridge to the 737MAX last week and concluded Boeing faces a production gap of between 100-200 aircraft, depending on how delivery dates of 737MAXes for Unidentified customers are scheduled. We indirectly received push back from Boeing on this, which we also address in today’s report.
Summary
- Airbus is oversold in 2016 and 2017.
- A gap appears in 2018, but this depends in part how “TBA” delivery dates are allocated for Unidentified customers.
- Boeing says Options and Overbooked orders fill its apparent 737 gap.
- We update our 737 production gap analysis to include Options and find a gap still exists.
- Boeing wants to accelerate MAX deliveries from 2018 into 2017.
Pontifications: Airbus flies past Boeing in order race
By Scott Hamilton
Sept. 7, 2015, © Leeham Co.: Airbus flew past Boeing in the annual orders race when the August numbers were reported last week by both companies.
With the order for 250 A320s finally firmed up by India’s Indigo Airlines (it was announced last year), and an order for 45 A330ceos announced by China, the outcome was clear.
Through August, Airbus now has a 66% market share of single-aisle orders. Boeing has a 60% share of wide-body orders, thanks to a boost from FedEx for 50 767-300ERFs. (Boeing reported 48 767 orders net of cancellations.)
But if you remove the FedEx orders and just look at passenger airplanes, Airbus edges out Boeing in the year-to-date wide-body market share.
Bjorn’s Corner: The seating dilemma
By Bjorn Fehrm
By Bjorn Fehrm
04 September 2015, © Leeham Co: One of the hottest areas of modern airline aviation is the passenger experience and especially the seating. There are people who are specialists on the subject like Runway Girl Network; I will not try to duplicate their work here on my Corner. But I follow the subject in detail as it touches on our work of creating apples-to-apples airline comparison conditions, our Normalized cabins or LOPAs as its also called (Layout Of Passenger Amenities).
As I observe the debate on more and more cramped economy seating, I can’t but feel the whole debate is revolving around the wrong dimensions. The debate is focusing on seat width but it is a seat width which is not the primary one that affects a passenger’s comfort. Before being accused of trying to confuse with facts, let me explain.
Air show coming to Paine Field
Sept. 3, 2015: An air show this weekend at which about 60 aircraft will be on display, many taking part in flying, will begin Friday at Paine Field, Everett (WA), the home to Boeing’s wide-body production plants.
The Historic Flight Foundation (HFF) sponsors the event, which kicks off Friday evening with a dinner and dancing from the Big Band era of World War II.
https://youtu.be/ESrmKMmsYx8
Aircraft pre-dating the War will be flown at 10am Saturday. WW II era trainers fly at 11am. War Birds fly at 1pm and a Douglas DC-3 in Pan American World Airways colors flies at 5pm. Rides may be purchased on many of the airplanes on Saturday and Sunday.
WW II veteran fliers will be present to answer questions and talk about the vintage warbirds that will be on display. The DC-3 flew with the China National Aviation Corp. over the Hump, supplying troops in China from bases in India.
One of the veterans who will be present is Johnny Oberto, 93, who was a test pilot for the Navy throughout the war.