3/29/2020

How Corona could change the future of Aviation

How perfect aviation was just weeks before: the new corona virus (SARS COV-2) seemed to be contained to be local chinese problem only, global growth seemed to be unaffected. If the virus could have a negative impact, then it would be just a very temporary dip like we saw when SARS (SARS COV-1) appeared in 2003. Then, growth rates quickly came back to what they have been before.
For now, we should not count that to happen again after worldwide infections with the virus have dropped significantly. The timing of this, of course, is the first open question: some state leaders seem to think they can beat the virus by ignoring it and tell their people they should not be cutie-pies just because they do not get enough ventilators…
But let us think what will happen after the crisis – whenever that may be:
A lot of airlines will cease operations indefinitely – not just temporarily as just right now. Even if many governments will throw a lot of money onto their national airlines, I think it is fair to assume that many will not survive in the long term, just because they lost too much money meanwhile.
But what is more important is what CEO’s of large and strong airlines say these days. CEO’s of airlines which should survive the crisis. Let’s take a look at Lufthansa, Delta Air Lines and United.
Lufthansa’s Carsten Spohr said these days that after the crisis his airlines group will not see the scale as it had before. Spohr is sure that after the corona crisis the whole aviation industry will be a different one: “We have a smaller Lufthansa group ahead of us.”
As for Delta, CFO Paul Jacobson already said: “We’re going to be smaller coming out of this” and Henry Harteveldt, president and founder of Atmosphere Research said he would not be surprised if that will be also true for United and American. In fact, also United CEO Oscar Munoz and president Scott Kirby warned in a letter to employees, that “our airline and our workforce will have to be smaller than it is today.”
If this will be true, and not just for these particular carriers but for the whole industry around the globe: what does it mean?
First: less airplanes in the sky. The question is then, relative to today, where airlines parked up to 95% of their fleet, which airplanes they will fly then. Will they put their older aircraft out of storage again or will they grow only modestly, getting only the younger aircraft out of storage and then grow slowly with deliveries of new aircraft? That depends on if they can pay for new aircraft and if the aircraft they own today are owned by themselves.
Airlines with better financials may take new aircraft and benefit from lower operating and maintenance costs. On the other hand, if they own their aircraft without any debt on them and oil prices are staying low, it could be more economical for some time to put at least some of the MD80, B757 and B767 out of storage again.
Why is that an important question?
First, it is important for the fight against global warming – at least politically. As most sectors were able to cut their CO2 output in the last years, aviation was not. In fact, the goal of climate neutral growth from this year on was always questionable at best. Now, with the corona crisis, CO2 output this year will fall compared to last year for sure. It will probably take some years to reach the level of 2019 again. And it will take longer, the more of the older jets now in storage will be replaced with A350, B787, B777-9, A320neo, B737MAX, A220 and the likes.
But the question is also important for the ones like Airbus and Boeing of course. If airlines let their old aircraft in the desert, aircraft production will soar again as new aircraft are needed for the growth after the crisis. But if older aircraft be flown again, we probably will never see the rates of 60 aircraft a month for the A320neo or B737MAX.
For the engine industry, it would be more of a financial problem when all the old(er) aircraft will be scrapped. Too many engines would then be available for part-out, flooding the aftermarket with used parts and destroying the then anyway smaller, but today very profitable business with spare parts.
Sales of the engine industry would then be heavily torted to the new engine business, which is not profitable at best, not to say loss-making.
So the profitability of the engine industry would be hurt badly -  or the industry would have to change their business model by shifting profits from the aftermarket business to the new engine sales. Of course that could only happen if all engine makers would agree to that and if airlines up to a certain point as well.
In case the profitability of the engine makers is hurt too much, they would not be able for adequate research for the next generation of engines that would be needed for an A320neo or B737MAX successor. The corona crisis could have shifted the arrival of these new aircraft the right for a few years now anyway as also Airbus and Boeing will probably have to scale back their R&D costs in the next few years.
So a good thing - a more modern and CO2 efficient fleet in the short and mid term - could lead to a bad thing in the more distant future: later introduction of breakthrough technologies.

12/23/2019

A small review of 2019 - and outlook for 2020

Looking back at what happened at Civil Aviation in 2019 first of all there are two things belonging to Boeing: most important of course the grounding of the B737MAX. A lot was written about it, so I won't do... at least it was good for every lessor who had a B737NG or an A320 coming off-lease, making a good lease rate for the next lease. But bad for all the airlines which now has to pay the higher lease rates...
Boeing now stops B737MAX production for some weeks or months, also the suppliers will at least slow their output. That could give some of them breathing room -  at least all the casting houses for turbine blades were running over capacity...
The second "important thing" from Boeing did not happen - at least so far: the NMA. Who knows if Boeing would have launched it if the B737MAX did not happen?
Airbus meanwhile launched the A321XLR and now has a few hundred orders for it, some of them maybe only because NMA was not launched. A320neo family production is still a problem, this time not because of missing engines, but because of missing cabins. Airbus maybe should have launched a new-build freighter version earlier...😂
Production of the A220 though went better than predicted by Airbus. According to the Airbus Family Flight Page 44 aircraft were delivered so far and 48 had a first flight. I guess the four remaining aircraft will be delivered until the end of the year.That would be three more deliveries than anticipated and about 45% more than in 2018 (33 deliveries). A welcome break from Bombardiers policy to forecast more deliveries than actually were delivered.
But with the recent announcement from Airbus that building the so-called "pre FAL" I doubt that out of Mirabel there will be a big jump in delivery numbers out of Mirabel in 2020. Airbus made some progress in completing the aircraft, building more capacity in the "back part" of the assembly process. But as long as there is no capacity increase by building the "pre FAL", the input of new aircraft at the "front part" cannot be increased very much.
Another six aircraft for Delta and one for Jetblue should be delivered from Mobile. I wait to see the combined delivery goal from Airbus...
A little bit of a disappointment is the Embraer E2 Family: deliveries for the E190E2 and the E195E2 are still below 20! I doubt that Azul will get six E195E2 until the end of the year, so far they got four. Also Helvetic only got two of their anticipated four E190E2, with the second aircraft (HB-AZB) reaching Zurich only yesterday.
At least Embraer managed to get the E175E2 in the air before the end of the year. But without a customer and with no changes in the US Scope Clauses in sight, where is the program heading to?
Talking about orders, at the beginning of the year, John Slattery promised that 2019 would be the year of the big orders for the E2. Sure the order from KLM is good for the program but not  really a new order as they take the aircraft from existing lessor orders.
Slattery also promised large orders for 2018. Maybe we have to wait until the merger with Boeing is finalized, but there are two questions to this theory:
1. When will the merger be finalized: the EU is holding up the process and that might be e political response to the U.S. tariffs against Airbus.
2. Will Boeing have any priorities to sell the E175E2. They have to rebuild trust in their own bread-and-butter product, bring the 777-9 into the air and through flight testing, maybe launch, market and sell NMA...

Spacejet... I don't know. FTV10 is still not in the air and this is the aircraft which MITAC needs for certification flights. The main problem will be to build trust they can manage to build the M100, on paper a very good aircraft...

So far, so good! I know, this review and outlook is incomplete, but these were the topics that came through my head this morning...

I wish everyone (who wants one) a Happy Christmas!
And really everyone a peaceful 2020 - the world needs it!


11/01/2018

A220 Deliveries in 2018

How many A220 will be delivered this year? Well, if you read the Airbus Q3 Press Release, it will be 31. The press release said it will be 18 deliveries, counted from July 1st, when Airbus took over the program. There were 13 deliveries between January and June 30th, so in total that would be 31.
But I would say this is the upper limit. It could also be "just" 30.
Looking at specific customers it is unlikely they will get another four aircraft this year besides the first one delivered. Why: let's count:
The first aircraft for Delta, MSN 50020, was the 23rd aircraft for this year. Next in line to be handed over is 55044, a A220-300 (CS300) for Swiss. This could happen as early as tomorrow.
Then 55042 for Air Baltic should be the next one, having it's first flight on October 30th. Expect delivery in 2-3 weeks. Also 55045, again for Swiss, is waiting for the first flight - that should be every day now, as it is already a week late. We should expect a handover in late November.
The second Delta aircraft, 50021, is just before the pre-delivery stage. If it moves to the flightline quickly and gets through the test and customer acceptance flights as smooth as the first one, it could be handed over to Delta in late November as well.
That would be 27 until the end of November then. Then there is also 55037 for Korean Airlines and 55046, another one for Swiss. An the third one for Delta, 50022, could m ake it to the customer this year as well. These would be 30 then. I don't think that we will see 50018, on of the two remaining CS100 (A220-100) for Swiss getting ready this year. So Tanzania could be the customer of the 31st and final aircraft this year.
Remember that Bombardier said that they would ship 40 aircraft this year... 

7/11/2018

First A220 order

It was just hours after Airbus officially renamed the CS300 to A220-300 when the first order under Airbus control came in yesterday. Jetblue ordered 60 A220-300 and took options for another 60 (per a MoU).
Also, Jetblue converted their order for A320neo to the larger A321neo, now having 85 A321neo on order but no A320neo anymore.
The 60 firm A220-300 will be delivered by H1 2025, the options would be delivered from 2025 onwards.
by that time the oldest A320ceo in Jetblue's fleet are 25 years old - time to say goodbye maybe? But then what? Jetblue could have ordered A320neo again, of course. But what if there would be a A220--500 (formerly known as CS500) by then? Maybe we have already seen a (tentative) launch order for the A220-500...

10/21/2017

The Bombardier-Airbus CSeries deal

I think it is not overstated when I say the last week changed the landscape of civil aircraft manufactures for years and probably decades to come.
The deal between Bombardier and Airbus that most likely from 2019 onwards lets the CSeries to be a majority owned Airbus product has the potential to influence how the product landscape will look like in 2030. And that includes the products that will be there and also that will NOT be there.
Let's image two things:
  1. Airbus and Bombardier decide to do the "simple stretch" CS500, meaning no changes to the wing, the engines, the landing gear and the Max Takeoff Weight. That would be a roughly 2400nm aircraft with about the capacity of the A320(neo), but with significantly lower empty weight and thus lower trip costs for the typical ranges of up to 800nm. The (official) launch could come by early 2019, after the expected closing of the deal. EIS could then be in 2022 or 2023.
  2. Airbus will adopt much of the cockpit and avionic technologies from the CSeries described here by Björn Fehrm for the A320neo (+, ++ or whatever it is called then) and also scale the wing for an A322. Development of the wing could also start in 2019 with an EIS maybe 2024, leapfrogging the potential Boeing NMA.
That would leave Boeing with a big problem: they are in the middle of defining their NMA, or "Middle of the Market" aircraft. But with these potential developments from Airbus&Bombardier Boeing's B737MAX product line just would not be competitive enough. Boeing would have to react to that and instead of launching the NMA with an earliest possible EIS of 2025 they would have to focus on a B737 replacement first
Although a A322 would not be the perfect "Middle of the Market" aircraft it could take away to many sales from the Boeing NMA to let the business case look unattractive. And the shrinking market share in the mich larger traditional narrowbody segment would drain on the cash flow.
So this past week has the chance of really becoming a defining moment...