Commercial Aviation Report Focus: Paris Air Show 2017

Commercial Aviation Report

A Leeham Co. LLC Publication

NO. 2 MAY 2017

Focus: Paris Air Show 2017

Disclosures and Disclaimers

This Focus Report is an “enterprise” work by Commercial Aviation Report and Leeham Co. LLC. No company mentioned in this Report, nor any company or person not mentioned in this Report, commissioned, sponsored, supported or provided any remuneration whatsoever for this Report. No company mentioned in this Report, nor any company or person not mentioned in this Report, participated or contributed in any way to the preparation of this Report.

The conclusions and work product contained herein are the sole work of Leeham Co. LLC and its affiliated companies. The conclusions and information contained herein are believed to be correct and valid as of the date of this Report. Facts and details unknown to Leeham Co. LLC at this time may, if known, cause different conclusions. Any party receiving or reading this Report assumes full risk of any decisions the party may reach as a result of this Report.

Dated:

TABLE OF CONTENTS

Introduction 4

What to Look for at the Paris Air Show 5

Airbus 6

Boeing 7

Bombardier 8

Embraer 9

COMAC 10

IRKUT 11

Mitsubishi 12

CFM 13

GE Aviation 14

Pratt & Whitney 15

Rolls-Royce 16

Introduction

The commercial aviation industry is in a trough that began at the end of 2015, hitting in earnest in 2016.

Orders for the Big Two airframe OEMs peaked in 2014 with nearly 3,300 gross sales.

Last year, Boeing fell slightly short of a 1:1 book:bill (668 orders to 748 deliveries), while Airbus did slightly better than 1:1 (731 net orders to 688 deliveries).

Going into the Paris Air Show, Boeing is running slightly behind a 1:1 book:bill, with a book:bill through April of 210 net orders to 221 deliveries.

Airbus, on the other hand, has a dismal first four months of 2017: just 23 net sales against 182 deliveries.

Boeing is guiding toward about a 1:1 book:bill this year, while Airbus sees less than this for 2017 and—notably—several years to come.

Embraer began the year saying it expected solid sales. Year-to-date, they are less than impressive: just 15 new orders and 18 deliveries.

And then there’s Bombardier, the perennial Rodney Dangerfield of commercial aviation. The late US comedian’s tag line was, “I get no respect.”

Air Shows have not been kind to Bombardier. Historically few orders have been announced at shows. Part of the reason is that under Canadian law, orders and commitments must be revealed within 24 hours of signing a deal.

More to the point, Bombardier simply hasn’t been able to sell much of its product, whether it’s the flagship CSeries or the aging CRJ and Q400s. What to look for at the Paris Air Show

What should observers look for at this year’s Paris Air Show?

Commercial orders are expected to be way down this year. With a dismal start to the year, eyes will be on Airbus to see if officials will announce a splurge of orders that will put it back in the running with Boeing for the year.

Since this is the Paris Air Show, one can expect Airbus will do what it can to have a good showing on its home turf.

Anticipation of Boeing launching the 737 MAX 10 is building.

COMAC completed the first flight May 5 of its C919 mainline jet, the challenger to the A320 and 737. But three weeks later, there doesn’t appear to have been a second flight. It’s unlikely the airplane will make an appearance at the Air Show.

The Irkut MC-21 undertook its first taxi tests in May, but at this writing, the first flight hasn’t been scheduled. The first flight should be completed by the Air Show, but an appearance is unlikely.

Otherwise, expect little coming out of the show in the way of commercial aviation news.

The following pages give a company-by-company rundown of what to look for at the Air Show.

Airbus

Many expect Airbus to announce a splurge of orders in order to have a good showing on its home turf in France. In fact, orders may be on the modest side.

There is no new product news to announce, unless Airbus were to take a pre- emptive strike with an “A322” against the still-in-concept Boeing “7M7” New Midrange Aircraft. This scenario is extremely unlikely, however. Airbus for now is content to wait for Boeing to make the first move in the Middle of the Market airplane sector. No such move is expected until next year.

Airbus’ biggest problem right now is its current line of aircraft.

The A320neo with Pratt & Whitney Geared Turbo Fan Engines remain a huge headache.

Teething problems with the GTF continue to dog Airbus and its customers.

PW promises all will be well by September, but this remains to be seen. (See the Pratt & Whitney section for more detail.) Deliveries are slow and customers are deferring GTF equipped A320neos, preferring instead to take A320ceos.

The A330neo program is half a year late. First flight is after the summer (vs spring) and delivery next spring instead of before Christmas.

Airbus also has problems with its interior supplier, Zodiac, for the A350XWB. Delays in providing toilets and other interior components slow deliveries.

As it did last year, Airbus will have to scramble in the second half of this year to deliver enough A320s and A350s to meet targets and guidance.

Then there are the A380 and A400M programs. Sales are non-existent for the A380 and production is being slowed next year to 1/mo. The A400M continues to be a technical and financial drag.

Boeing

Boeing officials hope to launch the 737-10 MAX at the Paris Air Show and Marketing is expending a lot of energy to get there.

Lessors are cool to the MAX 10, which is nothing more than a 737-9 with two fuselage plugs, one fore and one aft of the wing.

Boeing trades range for payload, with the MAX 10 having 10%-15% less range than the MAX 9.

Although as of May a formal Authority to Offer (ATO) still had not been issued by Boeing’s Board of Directors, an informal green light was given and salesmen are actively showing the airplane to potential customers.

In the USA, United Airlines is alternatively said to be interested or not. A deal in combination with 777-300ERs is rumored. American Airlines is a large Airbus A321ceo/neo customer. Delta Air Lines is a key target, but it’s not planning to start its competition until well after the Air Show. The plane is probably too big for Southwest Airlines and Alaska Airlines won’t make its fleet decision until August.

Air Canada, Spice Jet and Copa are MAX 10 targets. Whether these are ready in time for the Air Show remains to be seen.

There will be no launch of the “7M7” middle of the market airplane. It’s not ready.

Boeing will likely reveal several “Undisclosed” customers for the current line up. It may also firm up the Iran Air order. But don’t look for big numbers of new deals from Boeing. A major, new order might be forthcoming from China, however, that could include the MAX 10.

Bombardier

As noted in the Introduction, Air Shows are not kind to Bombardier. Don’t expect anything of consequence at this one.

The CS300 may make its first air show appearance. The CS100 may make a return

engagement. Aerial displays may be repeated, after a debut at the Farnborough Air Show last year. Bombardier justly wants to show off the quiet nature of the airplane, powered by the Pratt & Whitney GTF engine (a different version than on the A320neo, not giving the CSeries any trouble to date).

The Q400 and CRJ will likely be on static display.

With new orders down last year and this for the entire industry, suppressed in part by continued low fuel prices, there is little need for airlines to place orders now. April’s complaint by Boeing to the US government and International Trade Commission over alleged price dumping by BBD by its order with Delta Air Lines may cast a cloud over some potential deals.

Bombardier hopes for a significant order this year from a major European carrier. Whether this is ready for the Paris Air Show remains to be seen.

Embraer

Like the Big Two, Embraer has had little to crow about year-to-date in the way of orders.

Despite an optimistic outlook for 2017, outlined in an interview with Leeham News and Comment in January, in which Commercial President John Slattery predicted wrapping up pending deals and obtaining new ones, there have been few orders so far this year—just one, for 15 E2s.

Embraer can be expected to announce orders at the Paris Air Show—it typically does. The EJet E2 will be on display and the company said it will bring the KC-390 to Paris this year.

The KC-390 is the largest airplane Embraer has developed. It’s the size of the Boeing 737 with a fuselage width of the 767.

The airplane was designed to service Brazil’s vast expanses. Development stalled under the government’s budget problems, but is back on track. Embraer is pursuing sales outside Brazil.

Engines are the V2500s from International Aero Engines.

COMAC

For COMAC, 2017 is a significant year. Its main project, the C919, had its first flight early May. The aircraft is a conventional single aisle construction, similar to the A320 but a little larger. It allows one seat row more in its cabin.

COMAC C919. Photo Flightradar via Google images.

The C919 uses the LEAP-1C engine, the same base engine as for the A320 but mounted at the fore and aft cases instead of the A320 core mount.

The first flight of the C919 was an achievement after many delays. Certification will take its time, if the work with COMAC’s previous aircraft, the regional ARJ21, is anything to go by. Entry into service is foreseen for 2020.

The c919 market will be predominately China, with 560 aircraft ordered, optioned and under LOIs and MOUs to date by Chinese airlines and lessors.

IRKUT

The IRKUT MC-21 is Russia’s second project to get it back into the world market for civil airliners, after the regional SSJ100. The MC-21 is an advanced design with Carbon Fiber Reinforced Polymer (CFRP) wing and empennage.

The wings production technique is the first implementation of Out of Autoclave curing of a resin infused Carbon fiber airliner wing.

Irkut MC-21. YouTube image via Google.

The cabin has a center aisle which is broader than normal, enabling a passenger to pass a flight attendant with a serving trolley.

Capacity for the first variant, the MC-21-300, is three seat rows larger than the A320.

The base engine is the Pratt & Whitney GTF with a Russian Aviavidgatel PD-14 as option. The engine is mounted at the fan and turbine cases, creating fewer problems with rotor bow than the core mounted GTF on the A320.

The MC-21 is expected to fly before the Paris Air Show. Entry into service is foreseen for 2020. The aircraft has 175 orders from Russian airlines and lessors.

MITSUBISHI

Mitsubishi is struggling with its MRJ program.

Running more than six years late, entry-into-service is now projected to be in mid- 2020.

The company’s first effort at a commercial airliner is a far greater challenge than being an industrial partner on the Boeing 777 and 787. Integrating all the systems and meeting complex international regulations proved to be more challenging than thought.

Mitsubishi has resorted to hiring a plethora of engineers who once worked for Boeing and Bombardier to help with these vexing issues.

The delays, while a major blow, nevertheless have some silver linings.

The MRJ was designed in the last decade. Advances in interiors left the original design outdated. This can be brought up to the latest technology. More advanced systems (ones that don’t require major redesigns) can be adopted.

Most importantly, delays give time for US labor contract Scope Clauses to be amended to permit regional airlines to operate the heavy MRJ90 on behalf of the major carriers. The MRJ90 exceeds the weight limits in the Scope Clauses (as does the Embraer E175-E2).

If the Scope Clauses aren’t amended, the smaller MRJ70 might be substituted by the USA’s Trans States Airlines and SkyWest Airlines, which account for about two-thirds of the MRJ90 order book. The delays give Mitsubishi time to produce and test the MRJ70 and have it ready by 2020 (though the timeline calls for the MRJ70 to follow the MRJ90 by about a year).

Mitsubishi expects to have the MRJ90 debut at the Paris Air Show this year.

CFM

CFM will showcase the LEAP engines, powering three new single aisle aircraft. The LEAP-1A powers the Airbus A320 series and the -1C the COMAC C919. It’s the same engine, mounted to the aircraft in different ways (core versus fan/turbine case mount).

The CFM LEAP 1B entered service in May on the Boeing 737-8 MAX. Photo via Google images.

The LEAP-1B is slightly smaller engine for the 737 MAX. It entered into service with Indigo’s Malindo Air mid-May.

The challenge for CFM is the fast ramp of production engines for the A320neo and 737 MAX production lines. For 2017, 450-500 engines will be produced, ramping to 1,100 engines for 2018.

Service introduction on the LEAP engines on the A320 has gone well so far.

GE Aviation

GE Aviation is busy developing the GE9X engine for Boeing’s 777X. The 105klbf turbofan has the largest fan of any aircraft engine at 134 inches.

GE Aviation is developing the GE9X for the Boeing 777-8/9 family. Photo via Google images.

The first test engine built to final specifications started test in April. Flight test engines will be delivered to Boeing later in 2017. Certification is foreseen for 2018 with entry into service on the 777-9 late 2019.

Pratt & Whitney

The Pratt & Whitney Geared Turbo Fan (GTF) has many design wins. The first was for the Mitsubishi MRJ, followed by Bombardier’s CSeries and Airbus’ A320. The Embraer E2 version of the E-Jet and the IRKUT MC-21 subsequently were added.

The Pratt & Whitney Geared Turbo Fan engine on PW’s Boeing 747 test airplane. PW photo.

The many projects have proven tough for Pratt & Whitney, which struggled with production issues and initial problems for the A320 series engines. The core mount of the engine created problems with rotor bow, which necessitated cooling scavenging of the engines before start.

There have been additional teething problems on the A320, which has caused a tense situation with customers and Airbus.

The engine’s service introduction on the Bombardier CSeries has been smooth on the other hand. The prolonged certification period for the aircraft, gave the time for Pratt & Whitney and Bombardier to find problems and correct them.

Rolls-Royce

Rolls-Royce has a busy 2017 with start of testing of the Trent 1000-TEN on the Boeing 787-10 and the Trent 7000 on the Airbus A330neo. It’s the same engine but with different auxiliary gearboxes and an aircraft bleed off-take for the Trent 7000.

The Rolls-Royce Trent 7000 is being developed for the Airbus A330neo. Airbus rendering.

The Trent-100-TEN was delayed when the variant had to revert to the original design of a compressor seal. This delayed the Trent 7000 project as well. A gearbox issue delayed the Trent 7000 further. First test flight in an A330neo is now scheduled for August 2017.The flight tests of the 97klbf Trent XWB for the Airbus A350-1000 is going well. First delivery to Qatar Airways is scheduled for October this year.

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