Airbus buys into CSeries

[deicer]

http://www.avgeekery.com/heres-six-reasons-c-series-next-big-thing-commercial-aviation/

After getting off to a rocky start, Bombardier’s C-Series jets are uniquely positioned to become the next big thing in aviation. That is, if they do not incite an international trade war first.

Last spring, Boeing accused plane maker Bombardier of receiving financial backing from the government of Canada that helped it maintain the struggling C-Series program. Boeing filed suit against Bombardier, accusing them of then selling the aircraft to Delta Airlines for “absurdly low prices” which Boeing said unfairly penalized their own 737 program.

Bombardier, of course, denied those claims, stating that large discounts are extremely common in the aerospace industry. Canadian Prime Minister Justin Trudeau stated that he believed Boeing “is pursuing unfair and aggressive trade action against the Canadian aerospace sector.”

In defense, a spokesperson told CNNMoney, “”We like competition. It makes us better. And Bombardier can sell its aircraft anywhere in the world. But competition and sales must respect globally-accepted trade law.” Delta called the case “without merit.”

Bombardier BD-500-1A11 C-Series CS300 on finals after its first flight. Photo Gilbert Hechema http://www.airliners.net/photo/Bombardier/Bombardier-BD-500-1A11-CSeries/2599741/L/

Meantime, in September, the U.S. government backed Boeing in the lawsuit and recommended a huge tariff on each C-Series delivery into the country. After the tariffs were announced, in an unexpected move that resembles players in a chess game, Airbus swooped in and acquired a majority stake in the C-Series program, moving manufacturing to its plant in Alabama and moving the plane front and center in Boeing’s woes over worldwide aircraft sales.

The C-Series controversy is having a ripple effect. Canadian and U.K. leaders threatened to scrap a deal with the Royal Canadian Air Force for Boeing F/A-18 Super Hornet fighters worth $5.2 billion if the case wasn’t dropped. The issues also raised unemployment concerns in Ireland. The C-Series’ wings are manufactured at a plant in Belfast which employs over 1,000 people.

Even from the early days, the C-Series program was beset with problems. The first planes were supposed to be rolled out in 2013 but the complexity of the brand-new aircraft led to a three-year delay in its market introduction and sent the manufacturing program billions of dollars over budget.

Is the C-Series Worth All the Fuss?  Here’s 6 Reasons Why We Think So…

The cabin of the CS-100 is roomy.  It blurs the line between regional jet and airliner. Photo Kārlis Dambrāns from Latvia (Attribution 2.0, Wikipedia (CC BY 2.0))

The C-Series jets may be worth the fuss for passengers and operators for several reasons. The airplanes are roomy, quiet, fuel efficient, and technologically advanced. The benefits of flying the new C-Series include:

1. A roomy cabin

The jet’s cabin is roomy and comfortable. It has 110 seats, a wider aisle, large overhead bins, and bigger windows. Passengers can stretch out, enjoy the view, and there is still plenty of room for the beverage cart to pass by. There are about half the number of middle seats when compared to larger planes and those seats are wider by an inch.

2. Lightweight construction

Bombardier has introduced new technology, making the wing skins with a technique using liquid infusion inside an autoclave that creates panels that are lighter than metal. The fuselage is manufactured using lightweight aluminum-lithium alloy.

3. Geared turbofan engines offer next-gen performance

The C-series features Pratt & Whitney’s geared turbofan. It improves fuel efficiency by using the gear to disconnect the rotation speeds of the fan and low pressure turbine, widening the fan diameter and doubling the bypass ratio. This means that the C-Series has an engine with lower maintenance costs and better fuel efficiency.

4. Amazing efficiency from a sleek, modern design

The new airframe and state-of-the-art engine technology deliver a 20% fuel burn advantage over other aircraft in the same class. According to the Bombardier website, the C-Series burns only 2 liters of jet fuel per 100 kilometers per passenger. The savings rank high in importance to carriers, since fuel costs are their number one variable. While Airbus and Boeing have modernized jets, they both lack a clean sheet design that the C-Series offers.

5. Advantages of scale thanks to Airbus

With the existing partnership between the two, Bombardier has access to Airbus’ substantial product and sales support infrastructure. Bombardier also gains access to Airbus’ manufacturing base and substantial supply chain.

6. Long Legs To Connect New Markets

These new planes can make domestic tertiary markets viable, which is similar to what the 787 did for international markets. Longer range jets makes more connections feasible. These secondary routes would eliminate the number of connections for passengers and provide a direct route to their secondary market destinations.  The C-Series offers the ability to connect disparate small to medium size markets like never before.

Some historical parallels between the C-Series And The MD-80

This past year’s developments in the Bombardier program is similar the the MD-80’s challenges thirty years ago. Like the C-Series, the MD-80 program was teetering on the brink of disaster in 1982, when McDonnell Douglas made a deal to lease twenty MD-80s to American at a super-heavy discount. American then went on to commit to 67 orders and 100 options in 1984, and as of 2002, was flying more than 360 MD-80s.

American Airlines will retire its fleet of MD-80s by 2019. Photo: Piotrus, Own Work (wikimedia commons: Attribution 2.0 Generic (CC BY 2.0)

American Airlines’ success with the MD-80 brought attention to the struggling series. Other airlines started buying the planes once they knew that the MD-80 was selling. Alirlines like Alaska Airlines, Aeroméxico, China Eastern Airlines, China Northern Airlines, US Airways and Delta all ordered the MD-80. Many other airlines also purchased the stretched DC-9. American only recently announced that it will be retiring all its MD-80s by the year 2019. American will replace the ‘mad dogs’ with the 737-800 and -8 MAX.

Will Bombardier’s C-Series actually meet with the same success as the MD-80 or will international trade wars prevent it from reaching its potential? It has a fighting chance thanks to the boost provided by Airbus and Delta. With Boeing’s accusations hanging in the air, only time will tell.

 

 

 

 

[deicer]

Looks like Delta is coming up with a work around for the C-Series tariffs.  If they send the aircraft to Mexico, could they then transfer the frames to Delta as 'used aircraft' thereby avoiding the tariffs?

https://www.bnn.ca/aeromexico-eyes-delta-s-cseries-jet-order-amid-u-s-trade-spat-report-1.934444

[boestar]

I still don't understand why they don't convert the purchase to a lease from a foreign Lessor outside of the US.  The Tariffs would not apply then as the lessor would be the point of purchase.  The transaction would then be a lease deal. at some point to a buyback of the lease as a second hand aircraft and problem solved.

 

[J.O.]

5 hours ago, boestar said:

I still don't understand why they don't convert the purchase to a lease from a foreign Lessor outside of the US.  The Tariffs would not apply then as the lessor would be the point of purchase.  The transaction would then be a lease deal. at some point to a buyback of the lease as a second hand aircraft and problem solved.

 

I read elsewhere that the duty would apply in that case. Something about a change in the rules a few years ago to close that loophole.

[Maverick]

Opinion: Enough With The Hypocrisy, Boeing

 

Dec 8, 2017 Anthony L Velocci, Jr. | Aviation Week & Space Technology

 

International rebuke of Boeing’s recent petition seeking a tariff on Bombardier C Series aircraft sold in the U.S.—quickly followed by a proposed 300% duty to be imposed by the U.S. Commerce Department—has been both deafening and seemingly universal. We may never know for sure whether Boeing was emboldened by the protectionist agenda in Washington. Nevertheless, the Trump administration’s shadow looms over the company’s ill-conceived initiative, which is both breathtaking in its audacity and disingenuous in its arguments.

To briefly recap, Boeing claims Bombardier in 2016 was able to sell Delta Air Lines 75 of its new C Series passenger jets at a price below its cost of production as a result of unfair government assistance. Never mind that Boeing for decades has benefited from local, state and federal subsidies to advance its own competitive advantage. The legal process is continuing, with final rulings by the U.S. International Trade Commission (ITC) expected in early 2018. Meanwhile, Bombardier agreed in October to give Airbus majority control of the C Series program and to build the aircraft sold in the U.S. at an additional plant in Mobile, Alabama. 

All but lost in the clamor are the substantial benefits the U.S., the aviation community as a whole and travelers will derive from the Bombardier-Airbus partnership. For starters, the new C Series plant in Mobile will support American manufacturing through the creation of jobs and direct investment in the U.S. Construction of the C Series facility, which would be adjacent to the existing A320 plant, will cost an estimated $300 million. The deal could create about 2,000 permanent U.S. aerospace jobs and support thousands more as the new production facility is constructed. 

 

Credit: Bombardier

 

Another major beneficiary will be U.S. suppliers, who provide 52% of the content for the C Series and account for more than 22,500 existing jobs. More aerospace companies across the country will have the opportunity to work on the aircraft once production of C Series jets bound for U.S. airlines transitions to the Mobile assembly line, boosting U.S. content even higher and effectively making the C Series a bona fide American-made product.

Moreover, the whole lot of C Series work will be additive to the furious pace of commercial aircraft construction at Boeing, which is “oversold on its production line capacity,” Boeing Chairman and CEO Dennis Muilenburg recently told aerospace analysts. In other words, Bombardier’s and Airbus’ gain would involve no corresponding loss for Boeing, so disregard any bogus suggestion of a zero-sum game insofar as Boeing is concerned. Indeed, it is widely recognized in the aviation industry that the real competition for the C Series is the Embraer E2 series of regional jets.   

All of these benefits—particularly job creation and work volume—will expand as more of the aircraft are sold. The U.S. is the single largest airliner market, and with the C Series a part of Airbus’ global network, the stage is set for strong sales growth. Worldwide, the demand for aircraft in the C Series market segment is projected to be about 6,000 during the next 20 years, according to Airbus.

Let’s not forget pilots, travelers and airlines, who also will benefit. Although still in limited revenue service, Swiss International Air Lines and AirBaltic have logged enough flight hours for the lightweight-construction C Series to earn favorable reviews. The appeal: the airplane’s roomy cabin—aisles, windows and overhead bins are larger and seats are roomier than on other single-aisle passenger jets—and its state-of-the-art cockpit, reliability, lower emissions, fuel economy that meets or exceeds expectations and the fact that it is about 50% quieter than comparable aircraft.

The C Series also offers longer range. This is especially important, because a robust commercial air transportation system has an astounding multiplier effect. This new passenger aircraft, designed specifically for the 100-150-seat market, can make domestic tertiary markets viable, similar to what Boeing’s 787 did internationally. The C Series offers the ability to link disparate small-to-medium-size routes with nonstop flights while reducing the number of connections for weary passengers.

Sharply critical of Boeing and the Commerce Department has been the European Union, perhaps paving the way for action by the World Trade Organization. Even Delta, a Boeing customer, harshly disputed the complaint’s validity, accusing Boeing of “pure hypocrisy” and trying to “manipulate U.S. trade laws.” British Prime Minister Theresa May denounced Boeing’s actions, and Canada has canceled plans to buy new F/A-18E/F aircraft from Boeing and instead purchase F/A-18A/Bs from Australia.

Even aerospace industry insiders would be hard-pressed to recall a similar instance in which a company has risked alienating so many of its customers for so little perceived gain. Boeing’s bald mindset of entitlement also has not gone unnoticed both inside and outside the industry. The caustic opinions voiced by think tanks and news organizations around the country have been unsparing. 

“Boeing’s complaint . . . refuses to acknowledge the fact that Boeing does not compete with the same market segment that Bombardier is attempting to enter with the C Series” and “seeks to punish Bombardier for engaging in precisely the same pricing practices it uses itself,” declared The Washington Times. 

Curiously, some industry observers have compared Airbus’ decision to take control of the C Series program with the MD-95, which Boeing acquired and shut down following its merger with McDonnell Douglas in 1997. However, this is a case where history is unlikely to repeat itself. 

When Boeing phased out production of the 106-to-129-seat aircraft in 2006, having provided little or no sales and marketing support, there were a paltry 155 on order, according to Teal Group, a Washington-based independent market intelligence, analysis and forecasting firm. In contrast, the C Series—which is listed as seating between 108 and 160 passengers in its two models—already has accumulated three times as many firm orders. Moreover, Airbus has made it very clear that it is fully behind the C Series and sees a strong market for a 100-seat aircraft. Supporting this view is the strong demand for used MD-95s (now called Boeing 717s) even today. This is because the 100-seat category is the ideal bridge between regional jets like CRJs and E2s and standard single-aisles like the Airbus A320 and Boeing 737. 

For reasons that do not add up, Boeing is seeking to prevent airlines and travelers from reaping the benefits that the C Series offers to an underserved segment of the industry. The only plausible explanation is that the aircraft is up against commercial aviation’s version of the bully-on-the-block, abetted by a Commerce Department that seems ready to rubber-stamp Boeing’s request that simply does not square with the facts surrounding its complaint.

Boeing is a great company and has been a leader in the aerospace industry for more than 100 years. Its legacy of disruptive innovation, connecting the world and contributing enormously to the U.S. economy is unsurpassed—implying a responsibility to uphold the highest standards of fairness and thoughtful moves, both tactical and strategic. It has been painful and disappointing to watch the company’s fair-trade complaint against Bombardier unfold over the past year. How it could possibly advance Boeing’s long-term game is unfathomable.

If Boeing prevails, it will not be just Bombardier that loses, but also the aviation community, passengers and the U.S. That is why it is imperative that the ITC in its final determination does what is fair and in the best interests for all stakeholders.

Anthony L. Velocci, Jr. was editor-in-chief of Aviation Week & Space Technology from 2003 to 2012. He consults for a number of leading aerospace companies, including Bombardier. The views expressed are not necessarily those of Aviation Week.

http://aviationweek.com/new-civil-aircraft/opinion-enough-hypocrisy-boeing?page=1

 

[dagger]

Keep on the lookout for new from the Delta board meeting this week. At stake is a decision to buy 100+100 737 MAX series vs A320 series Neos. A Max buy might be accompanied, now or soon, by a withdrawal of the trade case. A Neo buy will certainly keep the case going,  and show the depths of Delta's unhappiness with Boeing. Scott Hamilton of LeeHam says that apples to applies comparison of the economics of the two aircraft families are close enough to call it a wash on technical merit. He leans to a Boeing win. 

[J.O.]

So if Boeing drops its objection, does the whole tariff issue go away?

[Super 80]

I wouldn't rule out a CS500 launch order, Delta was negotiating for it before the Airbus transaction.

[dagger]

10 hours ago, J.O. said:

So if Boeing drops its objection, does the whole tariff issue go away?

Yes

[dagger]

10 hours ago, Super 80 said:

I wouldn't rule out a CS500 launch order, Delta was negotiating for it before the Airbus transaction.

I don't expect anything other than a MAX vs NEO decision this week, but I can't rule out a CS500 launch order at a future date. Of a NEO order were to end up at less than 100+100, that might indicate a willingness to leave some room for a CS500. 

[Maverick]

7 minutes ago, dagger said:

I don't expect anything other than a MAX vs NEO decision this week, but I can't rule out a CS500 launch order at a future date. Of a NEO order were to end up at less than 100+100, that might indicate a willingness to leave some room for a CS500. 

I've said it for a while but if they can get the CS500 to market it will kill the 737-7 and -8 along with A320 NEO.

I think Airbus would take that deal because without the smaller Boeing narrow bodies they effectively end the whole line.

[rudder]

Airbus will not do anything to jeopardize the future of the 320 platform. Airbus bought in to the CSeries in order to control it, not to save some CDN wonder plane.

My bet is Boeing discounts the MAX and Delta does what every US airline does and buys American made product while keeping its toe in the water with Airbus (A321NEO). A condition for Delta with Boeing is the trade challenge is withdrawn.

Unless the CS300 starts selling in volumes of hundreds rather than dozens, there will be no serious talk of a larger CS platform.

[Super 80]

There are 3700 orders for the A320neo alone so there is no existential danger and if the A320 platform is going to be the basis of their competitive response to whatever the Boeing MoM becomes they're going to need a new heavier wing that is not optimized to the bottom half of the A320 mission.

[Super 80]

2 hours ago, dagger said:

I don't expect anything other than a MAX vs NEO decision this week, but I can't rule out a CS500 launch order at a future date. Of a NEO order were to end up at less than 100+100, that might indicate a willingness to leave some room for a CS500. 

I would expect any order will have a lot of options, Delta has a lot of decisions to make such as about how much of their engineering resources they're prepared to devote to the MD-90 fleet as MRO support dries up and where they want to draw the line on their oldest A320s.

[dagger]

Interestingly, one of Bombardier's CS300 demonstrators has landed in Atlanta to be on hand for the expected order decision. As a blogger noted, it could mean Boeing wins/complaint withdrawn, or Airbus wins/let's rub Boeing's face in it.

 

[Super 80]

I don't think Boeing withdrawing the complaint would end this fiasco, that is in the hands of Wilbur Ross now. That also sounds like an uncomfortably overt quid pro quo.

[dagger]

No quid pro quo: CNN says Airbus wins the deal, 100+100 A321Neos. Also going for the P&W GTF as well. So the trade complaint lives.

In a bit of good news for Canadian aerospace, PW Canada gets a major new exclusive mandate for its PW800. 

 

https://twitter.com/R_Wall/status/941014729346244608

 

[Super 80]

So the Airbus order is entirely A321neos and the CS300 demonstrator is sequestered in a hangar in Atlanta. Hmm...

[Guest]

Atlasglobal considers CSeries for fleet renewal

•  
•  
•  

• 13 DECEMBER, 2017
•  
• SOURCE: FLIGHT DASHBOARD
•  
• BY: TOLGA OZBEK
•  
• ISTANBUL

Turkish carrier Atlasglobal has raised the prospect of acquiring the Bombardier CSeries as part of a fleet-renewal programme.

The airline is seeking a replacement for older Airbus A320s.

Chairman Murat Ersoy says the carrier is aiming for younger aircraft and is considering different types.

 

"We are an Airbus operator but [we are] also looking to add [the] CSeries," he says, adding that it will reach a decision in the first quarter of 2018.

Ersoy says the airline will not expand aggressively in the run-up to 2020, preferring to concentrate on reducing the age of its fleet. The opportunities for rapid regional expansion are currently limited, he says.

Over the course of 2018 the carrier estimates maximum growth will be around 10%. Ersoy adds that Atlasglobal intends to reach revenues of $450 million this year.

[Maverick]

So much for Boeing dropping the lawsuit...

 

Delta Air Lines buys 100 Airbus planes, a loss for Boeing

• Delta Air Lines is buying 100 Airbus narrow-body jets.
• Agreement includes option for 100 additional A321neo airplanes.
• The buy comes amid an ongoing trade dispute in which Boeing alleges Bombardier sold planes to Delta below the cost of production.

Leslie Josephs | @lesliejosephs

Published 1 Hour Ago Updated 1 Hour Ago CNBC.com

 

Delta-Airbus order value exceeds $12.7 billion   15 Hours Ago | 02:35

Delta Air Lines on Thursday confirmed an order for 100 Airbus A321neo narrow-body jets, a major win for the European plane-maker as one of the largest airlines revitalizes its fleet.

The airline has options for up to 100 additional jets, Delta said, ahead of its investor day presentation.

The deal is a loss for rival airplane maker Boeing whose new 737 planes compete with the Airbus model.

 

It is also a win for United Technologies unit Pratt & Whitney as Delta had selected the engine maker to power its new planes.

"This is the right transaction at the right time for our customers, our employees and our shareholders," said Delta CEO Ed Bastian.

Delta will start taking deliveries of the plane in 2020, the airline said.

The decision, which was reported Wednesday, comes as Delta is in the middle of a snowballing trade dispute between Boeing and Canadian plane maker Bombardier, which Boeing alleges sold planes to Delta below the cost of production.

 

https://www.cnbc.com/2017/12/14/delta-air-lines-buys-100-airbus-jets-upping-the-ante-against-boeing.html

[J.O.]

I'd love to be a fly on the wall in a certain boardroom in Chicago today.

[Guest]

I imagine the Delta decision to poke Boeing in the Eye was influenced by Boeing going after the Delta purchase of the Bombardier aircraft.  What goes around, comes around. 

[rudder]

This is not political. There is no comparison between a 737 and the 321NEO. I am certain that Boeing was even willing to hack the price to seal the deal (ironic). But that does not change the fact that the 737MAX is not in the same league as the 321NEO.

Delta seems to be blazing its own path and not wrapping itself in the US flag. Good for them.

[boestar]

the new in "new 737" should be in Quotes.  NEW 737 is just makeup on an old pig.

 

[Guest]

Bombardier upholds five-year plan amid cash flow uncertainty

• 14 December, 2017
• SOURCE: Flight Dashboard
• BY: Jon Hemmerdinger
• Boston

Bombardier continues to insist its five-year turnaround plan remains on track, though the company says free cash flow could still be negative in 2018.

The Montreal-manufacturer has long upheld that its free cash flow would breakeven next year.

The company still says it will achieve that goal, but Bombardier now defines "breakeven" as within a wide positive-negative range.

"Bombardier is targeting to achieve free cash flow breakeven in 2018, plus or minus $150 million," it says.

The company clarifies that its 2018 projections do not take into account a planned acquisition by Airbus of 50.01% of the CSeries programme. That deal could close in the second half of 2018, Airbus and Bombardier have said.

Bombardier provides no additional details, but executives will likely further discuss the company's projections during a meeting with investment analysts scheduled for later on 14 December.

Bombardier expects to end 2017 with about $1 billion in negative free cash flow.

“As we approach the half-way point of our five-year turnaround plan, we continue to meet our commitments and build a strong foundation for generating sustainable profit growth,” Bombardier chief executive Alain Bellemare says in the release. “We remain very much on track to achieve our 2017 guidance, our 2018 free cash flow goal, and see a clear path to deliver on our 2020 objectives.”

Bombardier projects it will generate $17 billion to $17.5 billion in revenue in 2018, up about $1 billion from 2017, with the commercial aircraft division generating a projected $2.7 billion in 2018 revenue.

"This growth is expected to be driven by the ramp-up of key projects at Bombardier Transportation and higher CSeries aircraft deliveries," the company says.

If the Airbus deal closes, Bombardier projects earning annual revenue of $20 million by 2020 and free cash flow between $750 million and $1 billion.

In its 2016 financial report, the company had targeted 2020 revenue of more than $25 billion.

Bombardier projects revenue from the commercial aircraft division in 2020 will be $1.5 billion if the Airbus deal closes, or $5 billion if it does not.

Analysts have questioned Bombardier's ability to reach free cash flow neutrality in 2018, citing uncertainty about its Global 7000 business jet programme and its ability to deliver CSeries to US customer Delta Air Lines.

"With the uncertainty about the timing, and how the company will sell the CSeries into the US, Bombardier could continue to generate negative free cash flow in 2018, dependent on a final US duty ruling," Moody's Investors Service said in a November report.

Bombardier's ability to sell CSeries in the USA has been uncertain since Boeing filed a trade dispute against Bombardier in April.

The US government is expected to decide in February 2018 whether to slap CSeries with import duties that could be up to 299% of Delta's reported purchase price.

Story Link: https://www.flightglobal.com/news/articles/bombardier-upholds-five-year-plan-amid-cash-flow-unc-444194/