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Paris Day Two: Air India finalizes earlier deals; Embraer, ATR … – Leeham News and Analysis

TuesdayPAS
By Bryan Corliss

June 20, 2023, © Leeham News – While Monday’s news from the Paris Air Show was dominated by the one big Airbus order from Indian carrier IndiGo, Tuesday saw a host of smaller deals announced by OEMs, airlines and leasing companies. 
IndiGo rival Air India also announced it had finalized its massive 470-jet order from February, which it had split between Boeing and Airbus. 
While there was a significant volume of deals announced Tuesday, in many cases, they were formal announcements of deals that OEMs already were carrying on their order books.

The day after rival IndiGo made its big splash, it was Air India’s day to shine under the gray Le Bourget skies, releasing statements that it had completed its previously announced deals with Boeing and Airbus.
Boeing image
For Boeing, that meant confirmation of the order for 190 737s, 20 787s and 10 777X jets. Air India also has options on 50 more 737s and 20 more 787s.

Airbus also confirmed its previously announced deal with Air India for 140 A320s and 70 A321s, along with 34 A350-1000s and six A350-900s.  
Air India also signed a letter of intent with Airbus for support services for the planes it had ordered.
As we noted yesterday, the IndiGo and Air India orders set the stage for significant growth and a major confrontation between the two carriers, plus a handful of smaller competitors, in a fight for market share in the world’s largest country.
Currently, there are about 700 aircraft in the combined fleets of all Indian airlines, which will need to increase infrastructure and hire flight crews and maintenance technicians to support all the new planes coming to them.
Taiwan’s state-owned carrier China Airlines placed an order for eight 787-9s on Tuesday. The deal already had been listed on Boeing’s books as an order to an unidentified customer.
China Airlines already had 16 787s on order from Boeing, from a deal announced last year. Part of this deal also involves converting six of those orders from 787-9s to 787-10s. 
Boeing image
Jet-leasing company Avolon said it had ordered 40 737-8 jets. 
“We are confident in the long-term demand from our customers for the 737 MAX, and this order extends our delivery pipeline out to 2030,” Avolon CEO Andy Cronin said. 
Airlines are looking for more fuel-efficient aircraft, Cronin said, calling it “a priority for our industry.” 
Avolon, Embraer and Toronto-based Porter Airlines announced a sale-and-leaseback agreement for 10 new Embraer E195-E2s. Porter, which serves routes in Canada, Chicago and the U.S. East Coast. As of March, it had 11 E195s in its fleet with another 39 on order.
Boeing image
Air Algerie confirmed it had ordered eight 737-9 passenger jets from Boeing, and announced a memorandum of understanding for two 737-800 Boeing-converted freighters. 
The order for the 737-9s had been on Boeing’s books as an order from an unidentified customer.
Philippine Airlines announced Tuesday it had finalized a deal for 10 A350-1000 ULR jets with Airbus. The airline had signed an MOU for the planes last month. 
The new planes will replace Boeing 777s the airline now operates, giving it an all-Airbus fleet.
The A350-1000 ULR is the ultra-long-range jet Qantas ordered for its Project Sunrise, and will give Philippine Airlines the ability to operate direct flights from Manilla to the U.S. East Coast.
Airbus image
Airbus announced Tuesday that Qantas Group had completed an incremental order for nine additional A220s, which it will use in its domestic route network. Qantas had ordered 20 of the single-aisle jets in 2022, and announced its intent to order more of them in February. 
Airbus said deliveries will start at the end of 2023.
Mexican ultra-low-cost airline Volaris was announced Tuesday as the buyer of 25 A321neos that were added to the Airbus order book in October 2022.

Volaris now has 143 A320neo family aircraft on order. The airline said it plans to expand its route network throughout Mexico and the United States.
Envoy photo
American Airlines announced a firm order with Embraer for seven new E175s. The aircraft will be operated by American’s regional subsidiary, Envoy Air, with deliveries to begin in this year’s fourth quarter.
Envoy is an all-Embraer carrier; this order will give it 141 E-Jets in its fleet by the end of next year.
Embraer announced a firm order for six E195-E2s from Binter, an airline based in the Canary Islands.

Binter was the first European airline to order the E195-E2 in 2019, ordering 16 of them, which are scheduled to be delivered by mid-2024. Deliveries on the new order will start after that.
Jet-leasing company Azzora was announced Tuesday as the buyer of 15 E195-E2 jets. The book has been on Embraer’s books since January. 
This is the fourth announced deal for Azzora involving Embraer jets this year.
ATR photo
Mandarin Airlines ordered six ATR72-600 turbo-props for its regional fleet. 
Mandarin is a subsidiary of China Airlines. It currently operates nine ATR72-600s, which it ordered in 2017. The airline said the new planes would allow it to add capacity on existing routes. 

Eviation, which flew its battery-powered nine-seat Alice for the first time last year, announced it had signed a letter of intent with Aerolease Aviation for up to 50 planes.
Aerolease is a jet-leasing firm that has specialized in financing passenger-to-freighter conversions.
In the four years since the last Paris Air Show, Eviation has signed agreements for potential sales of more than $4 billion worth of aircraft, CEO Gregory Davis said. The company has not provided specifics on firm orders versus LOIs or MOUs, something we’ve noted in the past.
Boom announced deals with three European companies that will supply key aerostructures for its in-development Overture supersonic jet, and said it had an agreement with its engine supplier to deliver the first 40 engines for the project.
The suppliers are: 
In addition, Boom said Florida Turbine Technologies would supply the first 40 engines for ground testing, flight testing and certification. That company previously had been identified as an partner developing engines for the project. 
 Category: ATR, Boeing 737 MAX, E-Jet, Embraer, Eviation, Paris Air Show, QANTAS
 Tags: A220, A321, A350, Air India
The Avolon MAX order was already booked by Boeing.
Nice few days for the A350.
10 from an undisclosed customer (before the show)
9 from PAL
10 from Biman Bangladesh
3 from Air Mauritius
40 from Air India
That’s 72 frames.
Indeed- good for Airbus. It’s interesting too to see Boom™ still in the news, here and there.
6 of the 40 are already existing frames from Aeroflot
Several of the MAXs initially promised to Air India are ex-China whitetails…
Yes, 40 of the 190
Who said they weren’t
Didn’t Scott say 140? 🤔
https://leehamnews.com/2023/06/20/boeing-ge-optimistic-for-return-to-normalcy-with-china/
Yes, but they were cancelled from the books by Airbus, so they are new orders that will be filled by frames that have already been built. They are new, net sales,
Yes, but they don’t actually expand the orderbook.
Yes they do. Airbus cancelled the Aeroflot order and reduced the A350 sales total by six.
Now those six get added back to the order book. Airbus will add 40 A350 to the order book for Air India.
34 A350-1000s seems very ambitious (plus 10 777X) as there maybe only Delhi and Mumbai that would support a few regular routes to major hubs, the other routes and indian cities have the 787 and -900 types.
I cant see the major european airlines plus the ME3 letting AI take their share of traffic to and from sub continent
British Airways for example has only 20 A350K in its long haul fleet
@ DoU
It’s called “growth”.
1.4 billion Indians are becoming more affluent, and want to travel more.
Hilarious! Poor duke. How many A380 BA has? How many 777 BA has?
What can the ME3 do?? How many airlines would act like U.S. legacy airlines to give up competing??
Duke – “British Airways for example has only 20 A350K in its long haul fleet”
They actually only have 14 with four on firm order, all due soon.
But BA made a balls up by retiring their 747s during Covid which has turned out to be too early now travel has rebounded. Some of them had recently been refitted, wi-fi enabled etc. and they basically gave them away.
Right now British Airways are short of long haul frames.
They have a few 787-10s and A350s trickling in and 777-9’s on order but they’re having to cancel routes daily and are currently leasing an A330 to help them through the summer. Some of their 777s are nearing 30 years of age and should have gone by now but delays in the 777X programme has meant they’re keeping them on.
IAG, as a group, have 36 A350 options and six 787-10 options. It can’t be long before they change some of those to firm orders.
Interestingly, they let a load of options for the 787 lapse a couple of years ago so, as a group, they do appear to be looking more towards the A350 and 777-9 in the medium term on long haul.
Yes, true.
But what the A350 really needs is a big add-on order from SIA, Qatar, LH , Delta or Emirates.
Boeing just sold 100 + 100 B787 to United. They will likely cancel their A359 order (45 frames) .
They are also the favorite for the new Saudi airlines, another 50 B787.
I have the feeling that Airbus doesn`t get these big WB orders too much, and the B787 making a lot of them.
For example SIA, they upped their B779 order instead of ordering the A35k, which should have fit them perfectly.
@Sash
Relevant comment. Finally an analysis that makes you think 👍
While you’re doing something that “makes you think”, try to see if you can figure out what OEW is, and why it matters 😉
@ Sash
Big orders are nice — but smaller orders all add up.
In 2023 up to and including May, AB’s net firm order total was greater than that of BA:
Airbus: 178 orders and 34 cancellations, leaving a net of 144 orders.
Boeing: 223 gross orders and 96 cancellations, leaving a net of 127 orders.
Air India’s 40-unit order can hardly be considered small, can it? And the combined 72 A350 orders referenced above equate to one-and-a-half times the recent Riyadh order.
@Bryce
Big vs small orders
There are pros and cons to both, but a couple of salient points;
1) The margins for an OEM on a large order will be less, as airlines want a bigger discount for bulk buying.
2) Making 100 aircraft for one customer is easier (as long as that client isn’t a ball buster…cough cough AAB et al.) than say making 20 each for 5 different airlines
3) A bunch of eggs in one basket is another peril. Look at Jet Airways which had 250 Max’s on order. Look at what the Russia fiasco has cost ALC (and probably others). Look at what happens when China turns it’s back on an entire model and the mess it creates.
I guess the OEM’s know what they are doing and the proof will be in the pudding (financials)
Oh, the proof is already in the financials — every single quarter.
The Q2 financial results come out in just over 4 weeks. I wonder if we’ll see any new charges for the 787 program, in view of the latest screw-ups? Breakeven is currently at 1600 units…and that number is rising, as you know…
@Bryce
‘Breakeven is currently at 1600 units’
No. That is incorrect. It is more. Read the next paragraph (complete cut and paste) carefully.
https://s2.q4cdn.com/661678649/files/doc_financials/2023/q1/2379b8ef-05b4-49b2-88a5-851bd2cc46d7.pdf
pg 10
‘At March 31, 2023 and December 31, 2022, commercial aircraft programs inventory included the following amounts related to the 787 program: deferred production costs of $12,416 and $12,689, $1,821 and $1,831 of supplier advances, and $1,711 and $1,722 of unamortized tooling and other non-recurring costs. At March 31, 2023, $10,211 of 787 deferred production costs, unamortized tooling and other non-recurring costs are expected to be recovered from units included in the program accounting quantity that have firm orders and $3,916 is expected to be recovered from units included in the program accounting quantity that represent expected future orders. We are currently producing at abnormally low rates resulting in abnormal production costs that are being expensed as incurred. We expensed abnormal production costs of $379 and $312 during the three months ended March 31, 2023 and 2022.’
——————————————–
Highlight:
***At March 31, 2023, $10,211 of 787 deferred production costs, unamortized tooling and other non-recurring costs are expected to be recovered from units included in the program accounting quantity that have firm orders and $3,916 is expected to be recovered from units included in the program accounting quantity that represent expected future orders. ***
$10.211 billion is expected to be covered (read: expensed) by the current backlog.
$3.916 billion is expected to be covered by orders they have not received yet.
539 firm orders in the backlog.
https://www.boeing.com/commercial/#/orders-deliveries
They’ll need another ~250 to zero the production balance. If all goes well…
@ Frank
Thanks for the update!
Deterioration of 787 program finances is such a rapid, ongoing process that it’s sometimes hard to keep up…
In 4Q21, BA recorded a charge of $3.5 billion for the delay of 787 production and delivery; furthermore, it expected a further $2 billion “abnormal” production cost to incur. Total: $5.5 billion not included in BA’s 787 program cost.
@Bryce
My pleasure.
A little more analysis;
So program accounting allows you to estimate things over the life of the project. You estimate revenues, expenses and profits. Instead of taking profit on what you get on a per unit sale, it allows you to estimate what you will make. Hence the figures:
https://www.boeing.com/investors/accounting-considerations.page#
Commercial Airplanes Segment Information – Earnings from Operations
Program Accounting (615)
Unit-Cost Accounting * (1,871)
Which is kicked into the future
——————————————————-
Some profits were pulled from the program. We don’t know how much was and when (if) it was stopped. I’m pretty sure that when it hit some $28 billion then probably stopped pulling profits and used the margin to cover the DPB.
Per The Air Current:
https://theaircurrent.com/aircraft-production/boeings-787-profitability-program-accounting/
‘The Dreamliner has been a phenomenally expensive airplane to build. In its decade of deliveries, Boeing has earned back about half of the more than $28 billion in 787 production costs it has consistently reassured Wall Street it will recover”
————————————————-
Here’s the point to ponder:
From the financials BA says they will cover $10.211 billion with the 539 firm orders on it’s book. That’s a touch under $19 million per unit.
Is that their estimated margin (all production kinks worked out and all things being equal) for the jet?
—————————————————
In the first quarter of 2023, they delivered 11 Dreamliners. They also had this to say:
‘We expensed abnormal production costs of $379 and $312 during the three months ended March 31, 2023 and 2022.’
So they lost $34.5 million per aircraft with those ‘abnormal production costs’, but they did also manage to knock off $273 million from the DPB during the same period (At March 31, 2023 and December 31, 2022, commercial aircraft programs inventory included the following amounts related to the 787 program: deferred production costs of $12,416 and $12,689. )
So it looks like a $106 million ($379-$273) loss on the program, for those 11 airframes (assuming they didn’t add in other rework costs from other airframes) during the quarter, or about $10 million a plane, which makes reasonable sense, given the delays.
(If you’re wondering how that $106 figure comes about, imagine they didn’t have a DPB – it was zeroed. So they wouldn’t have to reduce it and that $273 million could go to margin, which would lessen the $379 million hit by that amount.)
@ Frank
Thanks, again!
BA could *theoretically* make $19M EBIT per 787 — but only if they had production costs strictly optimized, and only if they stayed below 58.5% on their discounts*. However, not very unlikely that either of those conditions will be satisfied any time soon.
However, that’s just EBIT — it still leaves loan interest to be paid. Sobering fact: that (optimistic) $19M margin per 787 would mean that the yearly interest repayments of $2.5B would devour the EBIT of 132 787s per year! In reality, the number is even higher!
* Taking a 787-9, with a list price of $292.5M, we get 19/292.5 = 6.49%. Taking nominal unit production costs of 35% of list price, we get:
Discount (%) = 100 –35–6.5 = 58.5%.
@Bryce
You know what – I’m going to look at it from a different perspective.
The DPB ballooned to over $28 billion. We’ll call it that. It’s now down at $12.5 billion, which is down some $15.5 billion.
Now we add back the write off of $3.5 billion which they took in a one time charge, which takes us to $16 billion, or $12 billion worked off during production.
They’ve delivered 1062 aircraft to get that $12 billion worked off, or an average of around $11 million an airframe (plus whatever profit they pulled off while they were sticking with their estimates).
Now they are estimating that they are going to work off $19 million an aircraft, for the firm orders they have.
I guess we’ll see
@Bryce:
The B787 is harmed by all the issue, but it`s on track to 1650 orders, and it will sell more.
Boeing increases the block, and most ppl think they are over the hill.
Surprisingly, though all the issues and financial troubles, it seems like the B787 will make money for Boeing.
It was already cash flow positive (development cost is written off already) and with the increased block they will also be able to remake the deferred cost.
The way it looks like, the options that are out there, Boeing will sell 2000 B787.
And print money with aftersales.
It sounds like Airbus sold a lot A350s, but if you substract the 45 for United, and them going all B787, it doesn`t look that great.
Nor when you think about the rate that is planed to go up to 10.
You need to sell 120 a year to keep the backlog stable, that`s a lot of WBs.
Airbus needs to step up, they are wining the SA game, but with WBs Boeing seems to be ahead.
@Sash
‘It was already cash flow positive’
Really? Lol. Do you know how much abnormal production cost BA incurred last quarter on the 787 program?? Sigh.
@ Sash
Sorry to stick a pin in your balloon, but the 787 program is nowhere near breakeven.
You should carefully read what @Frank and I posted above…though, if you do, you won’t be pleased by the message…
@Bryce,
Lol! I bet they’ll be the only ones for the year
The A350 sales too slowly
Based on your comments, one can only conclude your parents don’t know you’re using their computer.
Go back to VV, it’s more your intellectual level.
It will be an exciting, Wait & See for the shower of additional orders, for what remains of the Le Bourget Airshow 2023.
“In addition, Boom said Florida Turbine Technologies would supply the first 40 engines…”
Florida Turbine is part of Kratos Defence and Security , its KTT division is a provider of small jet ( 200lb class) for cruise missiles etc
‘responsible for the development of affordable and highly-efficient, turbojet and turbofan engines, demonstrator engines, liquid rocket engine turbopumps, and MRO services.’
https://www.kratosdefense.com/about/divisions/turbine-technologies
Seems a big leap to supersonic class turbofan , as described by Boom:
Engine design features to include:
• Architecture: twin-spool, medium-bypass turbofan engine, no afterburner
• Thrust: 35,000lbs at takeoff
• Fuel: optimized for 100% Sustainable Aviation Fuel
• Single-stage fan designed for quiet operation
• Passively cooled high-pressure turbine
• Additive manufacturing for low weight, low part count, and reduced assembly costs
• Certification: compliant with FAA and EASA Part 33 requirements
How long it’ll take to certify an all-new engine for a “game-changer” civilian supersonic aircraft? How much it would cost? Who pays??
https://twitter.com/WandrMe/status/1671105767745675267
No wonder Tony Douglas (Riyadh) is worried about 787 deliveries: we’re two thirds of the way through June and there have been zero 787s delivered from the line this month, and just one from inventory (a 2.8-year-old frame that went to Qantas).
The recently-discovered horizontal stabilizer issue appears to be taking its toll…
https://airlive.net/news/2023/06/07/following-horizontal-stabilizer-issue-boeing-will-slow-787-dreamliners-deliveries/
Another sizable AB widebody order (MoU) at the PAS:
“Lessor Avolon Books In For 20 A330neos From Airbus At Paris Air Show”
https://simpleflying.com/lessor-avolon-airbus-a330neo-paris-air-show/
That’s now 92 AB widebody orders in a week.
For the A330neo: the order book now swells to 309…for development costs of just $2B.
It seems that they are also upgauging their A320Neo order of 50 aircraft to the A321Neo.
https://markets.financialcontent.com/stocks/article/bizwire-2023-6-21-avolon-agrees-memorandum-of-understanding-to-order-20-airbus-a330neo-aircraft
‘This agreement will also see 50 A320neo aircraft Avolon has on order with Airbus converted to the larger A321neo model.’
Always nice when extra revenue just presents itself on a plate…
The decks are starting to clear, as well, on the A320Neo backlog. More A321Neo orders, more up-gauging, more A320’s going out the door first.
A320neo 3,987 1,732 2,255
A321neo 4,675 1,046 3,629
From 46% of the entire order book, to 38% of the remaining backlog.
Delivery of the Avolon A330 neo order will be in 2026-2028:
https://www.proactiveinvestors.co.uk/companies/news/1018502/rolls-royce-to-power-new-avolon-aircraft-1018502.html
Interesting:
“Airbus achieves full power with fuel cell during ground testing”
“Airbus has successfully tested a hydrogen fuel cell at 1.2MW, the level of power its engineers believe is needed for a fuel cell-based commercial passenger aircraft to fly.”
“First revealed in December 2020, one of the ZeroE concepts is a 100 seat, 1,150 mile (1,850km) range aircraft that uses six hydrogen fuel cell powered engines.
“According to Airbus, each of these fuel cell engines would need to output up to 1.2MW of electricity to make the concept viable, and this level of power was achieved during bench testing at its Ottobrunn facility near Munich in Germany earlier this year.”
“Speaking at the Paris Air Show this week, Sabine Klauke, chief technical officer of Airbus said, “This is the most powerful fuel cell test ever achieved in aviation, anywhere in the world and it will be a great platform for us to learn from.””
https://www.aerospacetestinginternational.com/news/electric-hybrid/airbus-achieves-full-power-with-fuel-cell-during-ground-testing.html
Another A220 operator
https://airwaysmag.com/cyprus-airways-to-lease-a220s/
Cyprus to lease 2 A220’s from ALC
Very nice.
There are plenty of thinner routes on which European LCCs could successfully use A220s, if they were willing to take on an extra type.
At the moment, those routes are served at low weekly frequencies using mid-sized/large narrowbodies; with the A220, a higher-frequency service could be offered.
Things are not looking great at Fedex
https://www.msn.com/en-ca/money/topstories/fedex-paring-costs-grounding-more-planes-as-margin-pressure-persists/ar-AA1cPS8O?ocid=msedgntp&cvid=3b758ccad376447d87f17d97dc27ad33&ei=62
‘FedEx, which is slashing costs to protect profits as demand wanes, said on Tuesday that ongoing “demand challenges” prompted its plans to ground 29 more aircraft in the fiscal year that started on June 1.
Last fiscal year, FedEx slashed 29,000 jobs, retired 18 planes, shuttered offices and pared back profit-sapping Sunday deliveries in a bid to cut $4 billion in permanent costs by the end of its 2025 financial year.
Shares in the company fell 2.7% in extended trading on Tuesday after FedEx posted adjusted profit of $4.94 per share for the fourth quarter ended May 31, compared with $6.87 per share a year earlier.’
BUT…
It’s not all doom and gloom, because even though they laid off 29k, retired 18 aircraft, are parking 29 planes, there is:
‘The company said it would buy back $2 billion of its common stock in the new fiscal year.’
What a bunch of pr!cks.
(excuse my french)
Well, hopefully those 29k employees will go away and find better jobs elsewhere, and never come back to FedEx.
I suppose management is still awarding itself luxurious salaries and benefits…?
On the subject of India, there’s still a bit of life left in GoFirst (PW GTF victim):
“The cash-strapped airline Go First on Wednesday announced that its scheduled flight operations will remain suspended till June 25 due to operational reasons.
“The crisis hit airlines had earlier announced that its operations would remain cancelled till June 22.
“”We regret to inform you that due to operational reasons, Go First flights scheduled till June 25, 2023 have been cancelled. We apologise for the inconvenience caused by the flight cancellations,” the airline said in a tweet.
“The airline said it expects immediate resolution and revival of operations. The company said in the tweet that it hopes to resume bookings shortly.”
“Delays in the delivery of Pratt and Whitney’s (P&W) engines also led to the grounding of a portion of its fleet and the suspension of flights. However, Pratt has argued Go First failed because of “its own poor management and events like Covid”. The two sides are fighting legal battles in India, Singapore, and Delaware. ”
https://www.business-standard.com/companies/news/flights-to-remain-suspended-till-june-25-says-cash-strapped-go-first-123062100462_1.html
https://twitter.com/theaircurrent/status/1671272450414223362
I wonder how much Airbus business is hampered by engines.
A350 and A330neo – RR only. And airlines might be wary tying themselves to RR considering its troubles
A220 – PW GTF only. Which happens to have severe reliability problems
Only A320 is not impacted since it can use GE LEAP
There have been no major issues with the RR engines on the A350 and A330 neo.
The PW GTF fiasco is quite another matter! And it also affects Embraer.
It doesn’t seem to be having much of an impact.
United just selected PW for their A321XLR order.
Yes, well, it looks as if US carriers may be getting preferential treatment from PW as regards parts supply…
Thanks.
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