Embraer could feel the heat...

Last week's Farnborough Airshow yielded not many surprises - maybe the surprise was that mayn anticipated orders did not happen.

• Boeing does not have 1000 firm orders (or more) for the B737MAX (but Airbus did not either after the Paris Air Show last year.
• There was no VLA order from Turkish Airlines (nor from any other).
• There was no order for the A320neo or the B737MAX from Pegasus. Apparently Boeing trying all they can to keep Pegasus in the Boeing camp...
• There was also no order from Aeromexico - but all points to an order for Seattle/Chicago here...

But wait - there was one order that was remarkable and that could mark the beginning of a shift in the regional aircraft market. Although this order was not quite a real - firm - order. But the "agreement in principle" between Skywest and MITAC shows that the MRJ gains some confidence in the marketplace despite the recent announced delay in the development schedule and subsequently the EIS.

A few days before Embraer announced their statistics for the second quarter of 2012. backlog is now at a 6 year low for the EJet Family. It fell from 476 aircraft at the end of 2007 to 200 at the end of the second quarter. There are a lot of options, but if these ever get firmed up is not a safe bet.
Embraer shares took a hot following the release of the backlog and analysts called the airshow to be "dismal" for Embraer.
Well, that may be a little bit overstated, as Embraer got a lot of orders at the last airshows, including orders from ALC and GECAS that showed confidence in the EJet Family also from the leasing community.

But in fact Embraer could feel a little bit pressure now to react. The 50 seater replacement cycle in the U.S. regional market just has begun. The MRJ won two rounds, at Trans States and now at Skywest. The direct competitor to the MRJ90 is the E175, but according to todays planning the E190 would get the reengining first. On the other hand Embraer recently announced that there would be an "aerodynamic cleaning up" including new winglets in the works for all the EJet family members that results in a 5% lower fuel burn for the E170 and E175. This could give Embraer some breathing room, but I doubt that this is enough to cope with the brand new design (aircraft & engine) of the MRJ.
Embraer currently plans with an EIS of the E190G2 in 2018, probably meaning that the E175G2 could come in 2019. It remains to be seen if Embraer now speeds up their plans, despite saying that the Skywest order does not change their strategy.

Farnborough Airshow Orders

Here I will try to track all orders and commitments coming in at the Farnborough Airshow (main manufacturers only - sorry).


AIRCRAFT

Farnborough Preview

We are only days away from this years largest air show. There are quite a few previews out there, the most extensive I read comes from Scott Hamilton.
First at all - for me the SST mentioned in Scott's post is nothing more than a marketimg gag - at least for the flying public. The program could serve Boeing as a technology platform for military vehicles in the future, but I doubt that we will ever see a thing like that one shown in the post flying (in full scale at least).
But what about the rest?

CSeries in pricing pressure danger zone

In the last days there are again reports that Boeing and Airbus are accusing each other to start a price war in the narrowbody sector. Boeing argues (more or less between the lines) that Airbus started the row by selling the A320neo without a premium and by that gaining market share (at least in terms of sales) and that Boeing would not let Airbus gaining more than 50%, indirectly saying that they would fight back by cutting prices. Airbus argues that Boeing cuts their prices in campaigns where the B737NG stands (at least theoretically) against the A320neo (campaigns with deliveries between Q4 2015 and Q4 2017), as was the case in the Delta Airlines campaign last year.
In one of my last blog entries I wrote about the backlogs of the A320ceo and the B737NG and that Boeing needs to secure at least another 500 orders for the B737NG to bridge production between the -NG and the -MAX. In fact it is even more than 500 as there would be a gradual production ramp up of the -MAX and ramp down of the -NG. As these additional orders have to be won against the A320neo rather than the A320ceo (given that Airbus left some delivery slots open between EIS of the A320neo and EIS of the B737MAX, we have to expect a fierce pricing battle between Airbus and Boeing for orders with deliveries between these two dates. Boeing earlier said that the -NG would be produced for a long time together with the -MAX. This seems a little bit overoptimistic as of today.
Caught in the middle here is Bombardier with the CSeries. Production for 2013, 2014 and most of 2015 might be sold out, but what for the rest of 2015, 2016 and 2017. Bombardier can probably nothing better than taking part in that price war, hoping that delivery slots both at Airbus and Boeing are sold out until the end of 2017 as soon as possible. Bombardier in no way can win in that price war - they can only drive down margins for the big two where the campaigns are for the lower end of the narrowbody sector.

COC and DOC Part IV

Over at Leeham News where is a heated debate (once more) over if the A320(neo) or the B737(MAX) is the more efficient aircraft. As both aircraft were ordered and are flown in thousands both aircraft obviously cater their respective users - besides there are quite a few airlines operating both aircraft.
I tried to lay out how looking at DOC's or COC's or looking at costs per flight or per seat influences such a comparison in an earlier post.
Let's have another look at it. DOC or Direct Operating Costs are comprised of