Embraer bridging between E1 and E2

Much hype there was during and after the Paris Air Show last year, when Embraer launched their EJet E2 family. 365 orders, MoU and LoI from Skywest, ILFC and five unannounced customers sounded like a good start and some media was quick to compare it to the current backlog of the CSeries, which had a similar amount of orders at this time – but 5 years the “launch” LoI from Lufthansa/Swiss.
Now, a few months later, there are “just” two the two orders that were announced at PAS13: 100 aircraft for Skywest (E175E2) with 100 further options and both 25 E190E2 and E195E2 for ILFC also with an equal number of options. None of the five unannounced customers came forward since June 2013 and no other customer was added.
Last week Embraer announced their numbers for orders and deliveries in 2013. Deliveries for the EJets were exactly at plan with 88 for the year. Orders looked great with American, United, Skywest ordering large numbers of E175 and taking even more options.
But let’s have a deeper look in the orderbook: Open Orders at the beginning of the year was at 279:
    1 E170
188 E175
  73 E190
  17 E195
The E170 is obviously one delivery away from dead. It is too small for the North American regional market, where the new sweet spot if 76 seats in two classes and this is where the E175 fits in ideally. The backlog of 73 for the E190 does not look too bad at first glance, but in fact you have to subtract the 24 E190 for Jetblue as they are deferred until after 2020, when the E2 version of the E190 is available and Jetblue made it already clear that they are aiming for a switch to the E2. It could also be that they will abandon the 100 seater altogether by that time and finally cancel the order.
The 7 E190 in the orderbook from flynas (or Nasair) are also questionable, as the airlines is phasing out their EJets they already have. Another shaky part of the order book are the 24 open orders for E175 from flybe. The carrier is deep in a restructuring phase and has to become profitable soon. But let’s keep them in for that following exercise:
Without the 24 E190 for Jetblue the backlog at Jan. 1st, 2014 was 255 aircraft. With a constant delivery rate of 88 aircraft per year the backlog will be at zero in Q4 2017 2016. But the EIS for the E190E2 is slated for the middle of 2018, the E195E2 should come in 2019 and the E175E2 finally in 2020. So Embraer has
-          to find more customers for the current EJets
-          to speed up the development of the E2 family

Well, in essence, they have to do both, I would say!

Embraer first announced the EJet E2 with in January 2013 when they said that they will be powered by PW1700G and PW1900G engines by P&W. These engines are essentially the engines for the Mitsubishi MRJ (PW1200G) and the Bombardier CSeries (PW1500G). These engines are already existing, tested and, in the case of the PW15000G, certificated. This is the big difference between the EJet E2 reengine program and the A320neo and B737MAX program, where the engines are the pacing item.
The EJet E2 aircraft are getting new wings, new undercarriages, a new flight deck and a full fly-by-wire system: sure, these things take their time, but Embraer took a lot of time already to decide how to react to the MRJ, CSeries and the A320neo/B737MAX. So there should have been more than just a concept at the beginning of last year and Embraer is currently testing a full fly-by-wire system with their Legacy 500 Business Jet. In fact, they “learned” so much that they switched to Moog as a supplier for the FBW system for the E2 Jets, as the Parker system contributed a lot to the delay of the Legacy 500/450 program (there could also be another reason behind that switch, as Parker is part of the “GE World” and GE lost the engine contract…).
In short, I think Embraer has to bring forward the E2 program as much as they can – otherwise they would face a production hole – but wait: there is hope: if the Mitsubishi MRJ would be delayed even further, the two big customers (Trans States and Skywest) for the MRJ would be forced to look at alternatives. The only logical aircraft that could replace the MRJ90 deliveries in the 2016/2017 time frame with the same cabin comfort would be the E175E1. This might be the reason why Skywest took options for 100 E175E1 last year when placing the order for 40 E175E1. Also United, American Airlines and Republic took further options for the E175E1. It looks like there is a considerable “hedging” against a further MRJ delay and this might help Embraer to bridge to gap between the current E1 and the forthcoming E2.


Airbus Order and Deliveries 2013

The final numbers for orders and deliveries from Airbus came out yesterday. There were no big surprises - just a few things to clarify...
The "mystery buyer" of 100 A320 appears to be Air China and Shenzen. Compare the numbers that Airbus reports to the numbers when the upcoming order was announced back in May.
I have no clue however who is the unidentified customer for the 20 A320neo. Loong was reported to have ordered 20 A320 at the end of December, but this should be a mix of 11 A320ceo and 9 A320neo and this order is missing in the 2013 table.
There are quite a few A320ceo&neo orders to be firmed up in 2014:
  • VietJet for 20 ceo and 42 neo
  • Qingdao for 5 ceo and 18 neo
  • Spring for 30 ceo
  • Lybian Wings for 4 neo
  • Hong Kong Aviation for 60 neo
  • CASC for 42 ceo (but that could disappear now that individual chinese airlines place orders themselves)
as well as
  • Doric for 20 A380
  • Chinese airlines for some more A330
So the offical goal of  book-to-bill just simply greater than 1 does not seem overambitious. Chinese airlines are still behind in the race for reengined narrowbodies, despite the 100 A320 order and probably some of the unidentified orders for the B737MAX coming from China. So I guess we will see some more A320neo and B737MAX (maybe also CSeries) orders from China this year.
An announcement to increase production for the A320ceo before production ends and for the A320neo to a range of about 50 per month seems to be inevitable and we should expect it soon.

The possibility of a A330neo was downplayed by Airbus officials yesterday. It would be just one option and not the main one...of course they have to downplay the possibility as long as possible as they have to protect sales of the existing model. But I would not be surprised if we would see a move in the first half of the year.


Strong 5th season at Boeing

As expected not only Airbus had a "fifth season" in 2013 but also Boeing.

And these are the final numbers:

1208 B737 (699 -MAX, 509 -NG)
    17 B747-8
      2 B767
   121 B777
   183 B787

1046 B737 (699 -MAX,  347 -NG)
    12 B747-8
      2 B767
  113 B777
  182 B787

Especially the B737NG and the B737MAX had very strong order intakes in December 2013.
All in all 124 B737MAX and 143 B737NG orders were recorded. All but the order for 75 B737MAX and 11 B737-800 were from unidentified customers. Chinese airlines and jet Airways (for 50 B737MAX) are hot suspects for these.
The situation for the B737NG as I described here is a little better now but still Boeing has to sell about 690 B737NG's to fill all productio slots until the B737MAX takes over full B737 production.

One thing that is clear even before the Airbus numbers will be published next Monday is that despite the large December order intakes Airbus outsold Boeing with the A320neo against the B737MAX as Airbus sold 759 A320neo until the end of November. But the recent win at Air Canada (which is not reflected in the 2013 numbers) and flydubai could hint that that could change in 2014 as with the recent announcement of production increases to 47/month for the B737 line Boeing can offer fresh delivery slots. We will see how soon Airbus will hit back...