Odds and Ends: AA, US and DOJ have mediator; new C919 order; A380 break even

Movement on AA-US merger: Terry Maxon of The Dallas Morning News reports that American Airlines, US Airways and the Department of Justice have picked a mediator to sort out the DOJ’s lawsuit to block the AA-US merger. See also this Maxon report.

Maxon has a long piece, asking several pontificators (including yours truly) what they think the outcome will be.

Bloomberg reports that American CEO Tom Horton “sees a way” to a settlement but did not elaborate.

C919 Pie ChartCOMAC orders: COMAC says it received 20 more orders for the C919, but it once again is from a Chinese lessor, not an airline. A majority of orders for the C919 are from Chinese lessors, in stark contrast to standard practice among established lessors that they want to see a solid base (or a likely solid base) for a new aircraft type from airlines before signing up.

Although COMAC says this latest order brings the total up to 400, a data base shows only 275 so far (meaning the other 125 haven’t been converted to firm orders yet).

A380 Break Even: Airbus CEO Fabrice Bregier says hitting break even on the A380 program in 2015, which is the current plan, will be difficult if deliveries fall below the target of 30 per year. Airbus should deliver 25 this year, he said.

737 MAX program update

Boeing today gave an update for the 737 MAX program. Keith Leverkuhn, VP of Program Manager, provided the briefing. Michael Teal, chief project engineer, was also on the call. The highlights, paraphrased:

KL:: We’ve had firm systems definition, firm design definition.

  • We now promise fuel improvement of 14% over today’s 737, vs 13% at the pre-Paris Air Show briefing. This is the integration of the engine performance, and the weight. This will widen gap between the MAX and the competitor.
  • CFM will begin assembly of the LEAP 1B in the next several weeks. Ground testing begins next year. Will get benefit of LEAP 1A testing [the one on the Airbus A320neo-Editor].

MT: We see airplane having an 8% operating cost per seat over competition.

  • The MAX will remain the lighter airplane vs A320neo.
  • The 737 historically had more reliability vs competitor’s.
  • Carefully offering new systems that will only give advantage without affecting reliability. Will add some of these first to the 737NG before the MAX.
  • Introducing on-board Digitable Flight Data system to NG to have paperless cockpit, on-board connectivity features to NG. MAX will build from these. MAX will be able to offer real-time data to prepare for maintenance actions. MAX will also have built-in maintenance test systems.
  • Leveraging from the lessons learned on recent development programs from 747-8 and 787. We implemented non-recurring development on these programs to predict future performance of design releases. These programs have been integrated on the MAX.

KL: With the recent audit numbers coming in and the 14% fuel efficiency, and continuing to make progress and pulling delivery date from 4Q to 3Q 2017, the MAX just keeps getting better.

Q&A

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Aerospace Supply Chain challenges for planned production rates

Airbus and Boeing have announced production rates for their single-aisle airplanes of 42/mo each and are thinking of going as high as 52/mo. Boeing last week announced a planned rate of 14/mo for the 787. Airbus has plans for 10/mo for the A350 XWB, and is considering a second final assembly line.

Bombardier, Embraer, COMAC, Irkut, and Mitsubishi each have new airplanes coming on line soon. There are more than 22 new and derivative airplanes planned to enter service between now and 2022.

How will the supply chain meet the demands of the OEMs?

It will be tough, says J. C. Hall, the chairman of the Pacific Northwest Aerospace Alliance, headquartered in the Seattle area. PNAA represents small-to-medium suppliers.

We sat down with Hall to get his take on the challenges ahead for the supply chain.

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777X FAL: 50/50 for Washington, decision boils down to tactical or strategic considerations, says trade group chair

The decision where to site the Boeing 777X Final Assembly Line–Everett (WA), where the current 777 is built, or Charleston (SC), where Boeing is rapidly acquiring land and shifting work from Washington–will boil down to tactical or strategic considerations, says the chairman of a suppliers trade group.

It’s 50/50 whether Washington will be selected, says J. C. Hall, chairman of the Pacific Northwest Aerospace Alliance. PNAA represents small- to medium suppliers in the Pacific Northwest, with concentration in Puget Sound around the Boeing plants in Everett and Renton.

We spoke with Hall today, with plans to post the interview tomorrow. But today The Wall Street Journal posted a story about this topic, so we’re advancing the posting. Jon Ostrower wrote:

Boeing is now evaluating using the South Carolina plant for both final assembly of the 777X and to build the jet’s new carbon-fiber composite wings, according to two industry officials briefed on Boeing’s development of the 777X. “South Carolina looks more and more promising.”

And:

The South Carolina plant has had some hitches. Boeing initially planned to be building three 787s a month by the end of this year, but the new site wasn’t prepared to make that jump and the company now expects to build two to three 787s a month there by year-end. The Everett plant will build eight 787 a month by year’s end, relying further on its twin assembly lines. Boeing announced Wednesday it would accelerate total 787 production to 12 a month in 2016 and 14 a month before the end of the decade.

We’ve previously written that our market intelligence tells us Boeing Commercial Airplanes wants to build the 777X in Everett but that Boeing Chicago (i.e, headquarters) seems to favor Charleston.

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How the Scimitar has an advantage over winglets

Alaska Airlines is the latest carrier to order the Aviation Partners Boeing Scimitar split winglets. Here is the press release. United Airlines was the launch customer for the Scimitar.

Alaska Airlines image.

The Scimitar provides additional fuel burn savings over the blended winglet, also created by APB. The blended winglet has been retrofitted to most Boeing 737NGs, some Classics and some Boeing 757s and 767-300ERs.

Boeing has adopted a split winglet for the 737 MAX, but of its own design, which is similar in look to the APB Scimitar. APB’s cost for the Scimitar is a list price of $545,000 for the 737-800-3, a designation for the Scimitary-equipped 737-800.

Range increase in nominal over the blended winglet, according to APB.

Here are APB’s charts showing the advantage of the Scimitar over the blended winglets:

737-800-3

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737-900ER

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Odds and Ends: MC-21 to be renamed; Boeing buys land; seat wars ahead?

MC-21 to be renamed: After creating a brand for the Russian Irkut MC-21, authorities have decided to rename the airplane the Yak 242, according to this article in Flight International.

The article is too brief to explain the reasons behind this, other than to indicate the MC-21 evolved out of a design that was designated Yak-242. The MC-21 is somewhat larger than the 242 and it is a direct challenger to Airbus and Boeing in the 150-210 seat sector.

Among our activities, we engage in branding. We don’t think this is a particularly smart move on Russia’s part. Returning to the Yak name is a throwback to the old Soviet Union and the history of Soviet airliners that left a lot to be desired. The “Irkut MC-21” name creates some distance to this history in the effort to sell the airplane outside the old Soviet political sphere.

The Sukhoi Superjet SSJ100, which has had some success selling beyond the sphere, nonetheless reinforces the history of troubled Soviet airliners. Production has been painfully slow and in-service reliability difficult.

We think the Irkut name should be retained, a move toward the future, not one toward the past.

Boeing buys more Charleston land: The US government shutdown delayed the land purchased by Boeing of federally property around the Charleston (SC) airport. Now that the government is open again, the purchase has moved forward, according to the Charleston Post and Courier. According to reports, Boeing now owns or has under contract slightly more land at Charleston than it owns at Everett.

Boeing has been shifting work from Washington to Charleston, and the trend toward purchasing land means this will continue. We continue to believe that when clean-sheet airplanes come out of the Boeing shop to replace the 737 and 777, production of these will be at Charleston. Hopefully the demand for the 737 replacement will be high enough that production will be split between Washington and Charleston. We can foresee a scenario where Boeing has a more equal split between the two locations, such as Airbus has with Hamburg and Toulouse.

But the immediate question is whether the 777X derivative will be built in Washington or Charleston. We’ve heard both scenarios but don’t have enough information to know which is correct.

Seats Wars pending? Airbus has called for an industry standard for 18-inch wide seats in coach. Plane Talking has an analysis of this. We’ll point out that Embraer already has 18-inch seats as standard in its E-Jets and Bombardier has 18-inch window-and-aisle seats plus a 19-inch middle seat for its CSeries. This makes the E-Jet and the CSeries the most comfortable domestic airplanes available, with the middle-seat bonus for the CSeries.

We haven’t flown coach internationally for years, but we do so domestically and have been crabbing about the 17 inch seat on the Boeing 737 for a long time. With the Airbus A330 and Boeing 777 nine-abreast essentially the same width, we believe airlines and their drive toward cramming as many seats in as possible to the total disregard of passenger comfort certainly merits international standards at 18 inches.

But we’re not deceived that this proposal is altruistic on the part of Airbus. Boeing’s ability to accommodate one more row of seats with a slightly wider standard than Airbus, reducing CASM in the process, is clearly the motive. When Boeing compares today’s 777 against the A350 in sales campaigns, it uses 10 abreast in coach vs nine abreast for the A350 and argues superior CASM costs. Customers tell us this indeed reduces the CASM advantage the A350 has at an apples-to-apples 9 v 9 (the A350 continues to maintain a trip cost advantage).

We agree with Airbus on the principal. But far chance it will happen.

Odds and Ends: Boeing’s MAX to China; Airbus sees no order bubble; Boeing’s wide-body dominance; BBD’s risk

Boeing’s MAX to China: The absence has been conspicuous, but no more: China will take 200 737 MAXes, according to Reuters. It will be interesting to see what delivery slots becoe available. Boeing always holds open some slots for key customers, but the real opportunity is boosting production, as Boeing CEO Jim McNerney alluded to on this week’s earnings call and which we reported back in June. We’re looking for 737 rates to hit 47/mo by the time the MAX enters service in 2017 and 52/mo two years later. This will open slots for China and other customers that otherwise aren’t available until 2020.

Airbus sees growth: Fabrice Bregier sees no order bubble because the company expects annual passenger growth of 5%, reports USA Today. The comments come on top of Airbus’ USA suppliers conference.

Boeing’s wide-body dominance: Boeing has for decades dominated the wide-body market in its rivalry with Airbus, but this has narrowed to parity this year. Aspire Aviation has a long analysis (best printed out) concluding that Boeing’s dominance depends on the success of the 777X.

Bombardier’s risk: CEO Pierre Beaudoin gives his thoughts about the risk BBD is taking with the CSeries, in this interview in Maclean’s.

Future for the 777, A330 as 777X nears launch, A350 nears EIS

With the launch of the Boeing 777X expected to be approved this month by the Boeing Board of Directors, followed by the public launch at the Dubai Air Show next month, the future sales of the in-production 777 will be closely watched by the industry as well as by Boeing itself.

It is conventional wisdom that sales will fall off as entry-into-service nears for the 777-9X, said to be “late this decade” by Boeing but more likely 2020 or even 2021, according to customers.

 

Sales of the Airbus A320ceo and Boeing 737NG families have, so far, held up surprisingly well despite the launch in 2010 of the A320neo and in 2011 of the 737 MAX families. Most of the neo and MAX orders have been combined with the current generation aircraft. This has been viewed as a way to keep the production lines full in advance of the EIS of the new airplanes.

 

Further, Airbus and Boeing plan an overlap of production of the two generations of about two years. This contrasts with Boeing’s decision to cease production of the 737-300/400/500 concurrent with the launch of production of the 737NG, a move Boeing today says was an arbitrary choice.

 

Boeing plans to begin building the MAX on a third line in its primary Renton (WA) factory before phasing out the NG. Airbus hasn’t specified how it plans to integrate the production of the ceo and neo.

 

What will happen for the current Airbus A330 and Boeing 777 lines as the A350 and 777X come on line?

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Lion Air’s massive orders continue to raise doubts

The news that Asia’s Lion Air might be planning an order for the Bombardier CS300 energized the media and those that follow the OEM. If Lion Air follows through, this would be a major defection from Airbus and Boeing, which have large backlogs with this Low Cost Carrier.

It would be a major breakthrough for Bombardier.  But there are key questions about the prospective order.

  1. How big will it be? Lion Air’s president was quoted as saying up to 100, but this leaves a huge spread of 10 to 100, presumably in a combination of orders and options. Ten wouldn’t mean much in the all-important momentum/image battle. Fifty would. One hundred would be great. But…
  2. How can Lion Air, a carrier that has spotty financial results and a safety record that earned it banishment from flying to Europe and a raft of accidents within Asia, afford, support and staff another order?
  3. How can Lion Air, with 550 Airbus and Boeing A320 and 737 family jets on order, absorb yet another fleet type?

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Odds and Ends: Airbus to rethink A380 strategy, says Reuters; Boeing B-29

A380 Strategy: Airbus may rethink the near-term strategy of the A380, with an eye toward reducing production rates, reports Reuters. Earlier this week, Boeing announced a rate reduction for the 747-8. Very Large Aircraft (VLA) continue to be a tough sell. YTD, Airbus has net orders of minus three for its VLA, although a Memorandum of Understanding for 20 was signed at the Paris Air Show and is expected to be firmed up by year end and possibly at the Dubai Air Show next month.

Still, the VLA market is very tough. Boeing sold five 747-8s this year and had cancellations of five. Airbus hasn’t met its annual sales target for the A380 for a couple of years.

787-9 Video: In a change of pace, enjoy this video that is nothing but a relaxing visual.

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Boeing B-29: Here’s a sight not seen much anymore: take off and landing of a B-29. As interesting as this is, the weather and the photography is pretty cool, too.

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