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SUMMARY: Paris Air Show 2015 is done, the winners were again the duopoly of Airbus and Boeing with 752 orders ($US 107.2 billion at “list price”) out of a total of 958 orders. The BIG loser was surely Bombardier which finally after 7 years from its launch, made its debut with both the CS100 and CS300 airliners, but left the show with 0 (zero) in new orders for their CSeries, Q400 and CRJ’s brands, which should be worrying, but after the show Bombardier said it was “absolutely satisfied”, with what ? The fact it had to choose the little known, barely profitable, Latvian government owned airBaltic as its launch customer for the CS300 (13 x CS300’s on order and 7 options) says novels about the poor quality of its order book. The airline’s order has a “list price” value of $US 1.44 billion, yet this airline has made a profit of only $US 11 million in the past 5 years on revenues of $US 688 million (1.6% net profit margin) ? unfortunately they have no “better” airline for such an important role. Meanwhile Bombardier now seriously talks of a stretched 160-180 seat CS500 to challenge Boeing and Airbus ? really ? it’s stock price keeps dropping, (TSE:BBD/B) is at $C 2.25 today down 45.8% YTD (year to date) and the corresponding drop in market capitalization to only $US 5.11 billion, investors are worried and Bombardier wants to spend more money on a CS500 to take on the big duopoly of Boeing and Airbus head on in the most lucrative market, the single-aisle/narrow-body segment ? Individual losers were the A380, A350-1000 and the MRJ, with no new orders, while little known Viking Air of Canada announces 50 “orders” from China for its pricey $US +7.5 million Series 400 Twin Otter even though the Chinese have a similar, good performing, FAA certified and cheaper Y-12E ? Embraer celebrated its 2 year anniversary at Paris of its E2 launch, booked 25 E2 orders at the show and now has 325 firm orders, while the CSeries is now 7 years past its launch (July 18, 2008) with only 243 firm orders, but realistically it is only 130 orders at best. ATR books 46 orders and 35 options at the show, as it solidifies its market dominance in the large turboprop market segment after 160 firm orders in 2014. Sukhoi’s SSJ-100/95 gets an order for 3 as shamefully up to 33 “white tails” (out of 85 delivered, or 39% of delivered aircraft) await customers even with price discounts of 56%, while the program struggles with production, sales, marketing, corporate governance and politics, as 51% partner Finmeccanica (Italy) is restructuring and understandably contemplating its exit from the Italian-Russian joint venture and surprisingly it also has doubts on its future with the very successful ATR program where its fully owned subsidiary Alenia-Aermacchi is a 50% partner with Airbus Group. Airbus and Boeing want to increase production of single aisle/narrow-body airliners (B737Max now has 2,773 orders and A320neo has 3,854 orders) to a possible 115 per month (Boeing to 52, Airbus to 63) by 2018 ! is that over optimism in this unprecedented period of growth ? can the already over extended supply chain even handle the extra work ? With an average monthly delivery of 112 aircraft in 2014 of all sized aircraft by both OEM’s (1,349 units), the latest Boeing 20 year forecast of 35,560 aircraft would translate to an average of 148 aircraft per month for all sized aircraft by both OEM’s, an increase of 32% on 2014 delivery numbers, with new orders in 1st half of 2015 already down on 2014 ? What role do speculative orders play in this order frenzy ? Deals at Paris are always quoted in List Prices but who is getting a good deal ? are you getting a good deal ? how do you know you got a good deal when almost everyone gets a discount, no one pays List Price and it is all so secretive, so how low can Boeing and Airbus go ? how about 64% off on big orders ? yup, enough to make sure that new competitors like the CS500, C919 and MC-21 do not win orders based on price. Lastly, Russia’s aggressive stand against NATO is seriously raising tensions in European countries on the Russian border, since 2008 Russia has annexed and integrated 4 Russian speaking enclaves/territories from 3 of its neighbors (Georgia, Moldova and Ukraine), now open conflict is a real possibility, and Russia’s military thinks a small tactical nuclear response today is possible without triggering a WW III ! in this political environment it is time for tough economic sanctions on Russia and especially its aerospace industry, the Sukhoi SSJ-100 is getting lots of financial support from President Putin, as it is the only Russian commercial aircraft ever built with any western appeal. It is time to stop buying Russian aircraft and stop ALL support for Russia’s aerospace industry, as any military conflict with Russia will make corporate profits absolutely irrelevant anyway !

With the 2015 Paris Air Show now behind us, it is worth to look at the final results of the big aerospace event and analyze the winners and the losers as it gives a pulse on which OEM’s are on top of their game and those that are not. —————————————————————————————————————————————————————————————– The battle in the narrowbody … Continue reading

SUMMARY: The good airline news out of Europe is that TAP Portugal is finally 61% privatized and in good hands for the future while the Irish Government gives the go ahead for IAG’s buyout of Aer Lingus. The bad news is that Lithuania’s small national airline, Air Lituanica becomes the 5th European airline this year to shutdown (27 in 2014), while Croatian Airlines and Adria Airways nervously wait for their privatization as it is “swim or sink” time for them and others like LOT, TAROM, Estonian Air, Czech Airlines, AirBaltic, etc. as they have all taken or will take their last “one time” EU allowed state aid packages, and from now on for most, if they run out of money, they have NO choice but to file for bankruptcy. The low cost carriers (LCC) in Europe continue to grow at a fast pace and challenge the existence of national carriers as incumbents cannot muster any significant competitive response against the LCC onslaught in Europe. Meanwhile, fully government owned AirBaltic of Latvia becomes the launch customer for Bombardier’s CS300 (20 on order, 13 + 7 options), the $US 1.44 billion aircraft cost and launch customer designation is not realistic from an airline based in Latvia that lost $US 220 million since 2010, bailed out by the Government in 2011 and has made only $US 11 million in net profit in the past 2 years on revenues of $US 688 million (a slim 1.6% net profit margin), it is a barely a financially viable carrier without the new and expensive CS300’s. The airline has 24 aircraft today (B737-300/500, Q400’s) making it the 36th largest airline in Europe (following ‘big’ names like Onur Air and Norwind Airlines ?) is this a joke ? Bombardier has NO “better” customer for the launch of the CS300 ? the quality of its current customer order book is sad indeed after Lufthansa and Korean. It reminds me of the Sukhoi SSJ-100 tragic launch customer Armavia (of Armenia), which was an absolute PR and marketing disaster, as it accepted the 1st aircraft, could not finance the 2nd aircraft, and then went bust. Anyway, the plight of the small/medium government owned and private airlines in Europe continues, what is their future ? or is there one ? Air Serbia pulls off an incredible corporate turnaround in 1 year under its “white knight” equity partnership with Etihad Airways, but other airlines may not be so lucky, time to look at new business models for survival before the wave of European bankruptcies begins as surely 50 European countries cannot all have a national airline !

The European airline industry is tough, unstable and very dynamic, the latest casualty is little known Air Lituanica of Lithuania, which is the 5th European airline victim in 2015 (not counting Russia), following Cyprus Airways, EuroLot (Poland), Tend Air (Romania) and Wizz Air Ukraine into the history books. The European airline industry is in trouble … Continue reading

SUMMARY: It is rare for any Eastern European or Russian aircraft manufacturer to come out with anything that the market needs and that is competitive with what is out in the market already. The Czech Republic’s Evektor has an opportunity with its EV-55 Outback, a 10-14 seat twin PT6 powered STOL utility aircraft that was forecast to sell 800+ units over 20 years, as it was designed to replace the large number of out of production cabin class piston twins still in commercial service today, as well as offering a twin engine alternative to the very successful Cessna Caravan, but with two engines instead of one, better airfield performance, more speed, more payload and volume at a very competitive price. The EV-55 program was stalled for several years due to a lack of funding to finish certification and last year they found their “white knight” in Malaysia and it looked like the EV-55 was finally on its way to a bright future with a promised EIS (entry into service) in 2017. Unfortunately, as you will read in this business case article, the situation is not as rosy as we are lead to believe, and it is a good lesson and warning to those small aerospace companies that seek “white knights” to help them achieve their goals. The Czech Government accepted my 2004 initial marketing and conceptual design study, and eventually over several years the Czech Government poured in CZK 1.0 billion ($US 40+/- million) in funding to bring the EV-55 to the certification stage, along with CZK 600 million ($US 24+/- million) from 17 other Czech aerospace firms who had a stake in the project. In fact EASA certification just started in March, 2015 with the first official meeting, but don’t hold your breath for this program to materialize any time soon or at all, the process is very long and requires many qualified people to lead it. With 7 brand new Part 25 and Part 23 aircraft projects launched in the Czech Republic in the past 26 years (est. investment of $US 400+ million), NOT one aircraft has gone into production and only one received certification. In fact all aircraft made it to flight testing but all failed to cross the finish line, to be certified, produced and commercialized which is the ultimate aim of any aircraft OEM, (e.g. LET-610G a 40 passenger regional airliner, IBIS 270 single engine turboprop funded by Taiwan-FAR type certified and cancelled, Ayres LM-200 Loadmaster twin engine single prop cargo plane launched by FedEx order for 50, Wolfsberg 257 a 10 seat rear loading cargo door piston twin, VUT-100 Super Cobra a 5 seat high performance metal piston single and the Z-400 Rhino based on Russia’s Technoavia SM-92 Finist a 6 seat STOL aircraft powered by one Orenda V-8 engine) and now the EV-55 may become aircraft #8 for the “Czech Museum of Aircraft that could have been”.

This article is written by my colleague and friend Peter V. Hartmann, and is based on his research and knowledge of Evektor s.r.o., and my 12+ years of working with the Evektor s.r.o. as its part-time Marketing and Business Development Director and Adviser. I have written the SUMMARY to lay out the challenges the Czech … Continue reading