First out of seven of their planned deliveries, AirBaltic welcomed its 26th airbus A220-300 jet, registered as YL-AAZ in Riga on 2 May – with an aim to acquire a total of 32 by the end of 2021.
This comes after they publicised their plan to expand their fleet. Since May last year, AB has operated all its flights with a single aircraft type, that is the A220-300, an air bus that is becoming AB’s unique selling proposition.
Founded 28 August 1995, AirBaltic (AB) has worked hard at finding a gap in the market for its airline. They not only work as a hybrid airline by combining practices from traditional network airlines and low-cost carriers, but also one that aims to become Europe’s most sustainable carrier. The Airbus A220-300 gives them that opportunity.
Saving whilst Sustaining
The A220-300 is the greenest commercial aircraft available. Its advanced aerodynamics combined with specially designed Pratt & Whitney PurePower PW15OOG geared turbofan engines contribute to an aircraft that delivers 25% lower fuel burn than previous generation aircraft – in turn helping reduce not only the Carbon Dioxide and Nitrogen Oxide emissions by 20% and 50% respectively, but also operational costs.
The previous generation model infers the A220-100 which burns 21,805 litres of fuel compared to the A220-300 which burns 300 litres less, that is 21,508 litres of fuel. The former also has a smaller capacity holding 135 passengers compared to the latter which holds 160.
AB’s fleet used to include Boeing 737-300 and 737-500 and Bombardier aircrafts DHQ400 and Dash 8 Q400 (now known as De Havilland Canada DHC-8-400) yet with a change to their business proposition, they started to phase each of them out, reporting that they began to reduce the number of Boeing 737s in 2019 to end in 2020, an aircraft that burns approximately 5,000 pounds of fuel per hour, compared to the A220 that averages 3,500 pounds per hour.
A single aircraft fleet not only makes Latvia’s flagship carrier unique, savvy and sustainable but it also plays into the growing concerns of key stakeholders and the public at large in relation to climate change.
Delta, another eco-friendly airline is also in pursuit of the A220 dream. Since the pandemic started, they have resorted to reducing the Boeing 717 models and have also placed an order for a batch of A220 models (45 A220-100s and 50 A220-300s) for 2021, suggesting that the A220 paves the way for fuel and cost efficiency.
Airbus has appointed a senior internal supply chain executive to run its Canadian operation, with responsibility for trimming losses on the A220 jetliner series, in the latest in a series of management changes at the European aerospace group.
Benoit Schultz, 48, will take over on Sept. 1 from Philippe Balducchi, a former finance executive who became the first head of the Canadian venture when Airbus bought the CSeries jet program from Bombardier in 2018 and renamed it A220.
Schultz, who was part of the team that ran a ruler over Bombardier’s supplier relationships when Airbus rescued it from cash shortages, is currently a senior vice president in the Airbus procurement office, which runs its global supply chain.
He steps up as Balducchi plans to “pursue opportunities” outside the group after integrating the former Bombardier plants into Airbus and opening a new U.S. assembly line, Airbus said.
The Canadian-designed A220, with 110-130 seats and a modern lightweight design, has seen a boost in sales under Airbus after its development took a heavy financial toll that triggered Bombardier’s near-total exit from the aerospace market.
It has notched up more net orders so far this year than any other Airbus model as airlines seek to reduce fuel costs and favour smaller aircraft in the wake of the coronavirus crisis.
But while sales have benefited from the stronger Airbus marketing machine, industry sources say the European group has yet to secure low enough prices for many of the plane’s components to push the A220 project convincingly into the black.
That creates a growing dilemma for Airbus as although new sales are good for the order book, producing those extra planes at costs that remain too high could simply deepen the losses.
Airbus Chief Executive Guillaume Faury has been seeking cuts of 20% in the cost of major components, industry sources say.
One source said Airbus had obtained solid cuts from dominant suppliers Raytheon Technologies – which makes engines and avionics – and wingmaker Spirit Aero Systems but was still struggling to make a significant dent in most other costs.
Airbus could further reduce costs by redesigning parts and overhauling the production system for the A220, which competes with Embraer regional jets and smaller Boeing 737s, but such spending is seen unlikely during the pandemic.
Airbus had no immediate comment on cost-cutting efforts.
Yesterday Airbus shared that the A220-300 has an increase in range from its current 3,350NM to 3,550NM. The former C Series continues to over-deliver just as Bombardier promised it would. This range bump is exclusive to the -300.
Looking at key operators of this aircraft, what could this range bump mean? A 200-mile range bump actually impacts far more than it first appears.
Air Canada, Delta, JetBlue – These airlines are likely to exploit the A223’s new capabilities by increasing the markets it can serve. All three airlines are using the A320 now and the A223 complements these operations. What might have been marginal routes are now feasible. The A320ceo and A320neo are at 3,300 NM, so the A223 now has longer legs. Air Canada has several markets that will exploit the A223’s capabilities – YHZ-LHR among them. Delta will also benefit from the A223’s extra range and capacity. The same applies to JetBlue which could open new markets, where the E-190 is too small and the A320 is too large. Moreover, JetBlue could operate in markets like BOS-DUB with the A223. JetBlue’s trans-Atlantic ambitions are well known.
Breeze – David Neeleman said he plans to use the A223 for Hawaii service – and this was before this range bump. Starting with the ex-AZUL E-190s, Breeze is likely to upset the US domestic market. Once its A223s come online, Breeze will be able to further disrupt the market. The combination of E-190s and A223s provides Breeze with the tools to cherry-pick city pairs and avoid hubs. This is likely to be very popular as travelers now have heightened health sensitivities.
Air France – Their A318 and A319 fleets will be replaced by 60 Airbus A223s starting this year. The selection of the A220 by Air France was important. As a Bombardier product, this was a far less likely outcome even with the promised economics. Another tidbit to consider at Air France actually starts with the 2010 conversations between Delta and Bombardier. Delta wanted the family to grow from just two models. Bombardier demurred and we see how that played out. Even so, a growth model is on the cards, the much-rumored A220-500. And it is Air France that is the likely launch customer.
If the -500 comes to pass we expect to see a lot of interest. With seating at about what the A320 and MAX handle, but with more modern technologies the -500 would be a compelling replacement. For Airbus, this would be an acceptable outcome because the A320 family is already moving upmarket to several versions of the A321. But for Boeing, not so much. An A220-500 could attack the MAX8 head-on and probably offer significantly better economics. Since the MAX8 is the crown jewel in the MAX range, that would be awkward for Boeing. That alone would be sufficient reason for Airbus to move forward with a -500. Its impact could be similar to what we have seen with the A321XLR.
The airlines named are bankable brands. (If not Breeze, then David Neeleman for sure) Fleet decisions made by influential brands are important because competitors pay close attention. A competitor doesn’t want to be caught with an economically uncompetitive fleet. Fleet decisions are something that one lives with for 15+ years.
For example, the current situation at Southwest. We understand that decision-makers are leaning towards the MAX7 – change doesn’t come easy and this is potentially a big change. There are still hurdles. An interesting aspect of the information reported is a possible Boeing order revolves around 300 aircraft (confirming The Air Current’s report) and this likely keeps the A220 in play as Southwest requires about 600 aircraft in the sub-150 seat segment.
Even mighty Southwest has to ponder what happens when Breeze starts its A223 enabled cherry-picking and when Delta is able to produce lower seat-mile costs and JetBlue deploys its A223s to effect. Fight one of them, no problem. But fight all three of them? It looks like whichever way Southwest turns it could be facing an A220. And that’s before other US competitors acquire A220s or E2s.
Airbus has the advantage of the A220 being a clean-sheet design that is proving to be an excellent tool. Even as Airbus finds ways to make this aircraft more capable, think about what happens when Pratt & Whitney offers a GTF PIP with improved gearing. The A220-300s growing popularity is understandable because it is at the start of its service life.
European manufacturer Airbus is currently placing a significant focus on its next-generation narrowbody airliners. It has found that the lower demand caused by the ongoing coronavirus pandemic has allowed the smaller A220 to emerge as an ideal aircraft for certain markets. Meanwhile, it is also developing a ‘neo’ (New Engine Option) variant of its short-fuselage A319.
It is possible to draw several similarities between these two small, efficient aircraft. But can one conclusively determine which is the better aircraft as a whole? Let’s take a look.
What is the Airbus A220?
The A220 actually began life as a Canadian-designed single-aisle jetliner known as the Bombardier CSeries. Bombardier developed and produced two variants of this next-generation narrowbody family, which it designated the CS100 and CS300. The first of these entered service with SWISS in July 2016, with airBaltic launching the larger CS300 in December of that year.
Airbus acquired a majority stake (50.01%) in the program in July 2018. This saw the CSeries family’s aircraft be rebranded as the A220-100 and -300 respectively. Having initially been constructed in Mirabel, Canada, Airbus opened a second A220 factory in Mobile, USA in 2019.
Then, in February 2020, it increased its share in the program to 75%. At this stage, Bombardier withdrew from the program, leaving the remaining 25% in the hands of the Quebec Government. The A220 features an unorthodox 2-3 seating configuration and competes with the likes of the Boeing 737 MAX 7 and Embraer E195-E2.
Introducing the A319neo
At around the same time as Bombardier was launching the CSeries, Airbus began the rollout of its A320neo family. These aircraft would be next-generation iterations of its popular A320ceo (Current Engine Option) series, which Air France launched in April 1988. Airbus designed neo versions of the A319, A320, and A321 models, but not the smaller A318 ‘Baby Bus.’
Eight years after the A320’s launch, Airbus also introduced the short-fuselage A319 with Swissair. Since then, nearly 1,500 A319s have been produced, including a handful of long-range A319LR models. The type’s next iteration will be the re-engined A319neo.
Benefits of the new technology
Besides benefitting from new engines that increase efficiency and reduce noise pollution, the A319neo will also boast other benefits over its ‘ceo’ predecessor. It will feature aerodynamic improvements, including ‘sharklet’ wingtips and an enhanced passenger cabin, including greater hand luggage storage facilities.
These factors, and others, will contribute to significant performance improvements over older models. They are predicted to reduce the aircraft’s operating costs by a factor of 8%, and its fuel consumption by as much as 15%.
Overall, this will lead to a 900 km (486 NM) increase in the aircraft’s range. However, while the A320neo and A321 neo have already entered active commercial service, this cannot yet be said for the smaller A319. That said, a handful are in service as corporate jets for companies such as Germany’s K5-Aviation and Hong Kong’s Shimao Group, according to Planespotters.net.
Comparing the specifications
A good way to compare and contrast two similar aircraft is to list their specifications side-by-side. For this analysis, we will compare the A319neo (listed first in each instance) with the larger A220-300 (listed second).
Length – 33.84 meters vs 38.70 meters.
Wingspan – 35.80 meters vs 35.10 meters.
Capacity – 140-160 passengers (six-abreast) vs 120-150 passengers (five abreast).
Height – 11.76 meters vs 11.50 meters.
Range – 6,950 km (3,750 NM) vs 6,204 km (3,350 NM).
Cruising speed – Both Mach 0.78 (833 km/h, 450 knots).
Cargo volume – 27 cubic meters vs 31.6 cubic meters.
Maximum takeoff weight (MTOW) – 75.5 tonnes vs 69.9 tonnes.
As we can see from their specifications, there is little to separate the two aircraft. While the A319neo has the edge in terms of capacity and range, the A220-300 offers operators more cargo space. This has become a particularly interesting design aspect over the last year. The increased importance of airfreight brought on by the pandemic has led to passenger-focused airlines increasingly delving into the cargo business. But how do they compare commercially?
Minimal commercial success for the A319neo
As Simple Flying explored last November, the A319neo has not been nearly as popular as its larger next-generation A320 and A321 counterparts. According to Airbus’s latest ‘Orders and Deliveries’ data, the European manufacturer has received just 78 requests for the aircraft. Of these, only three have been delivered, and all to corporate operators.
Among the few carriers to have placed orders for the A319neo are Spirit Airlines and China Southern. The list price of these aircraft comes in at $101.5 million, around 10% more than the A319ceo at $92.3 million. However, the A220-300 comes in lower than both of these, at $91.5 million. The smaller A220-100 costs even less, listed at just $81 million per aircraft!
The rise of the A220
This price difference quickly adds up when placing orders for large batches of aircraft. As such, this could go some way to explaining the A220’s popularity being far higher than that of the A319neo. While this aircraft’s orders are yet to crack three figures, the A220 family has far surpassed this milestone. The smaller -100 series is not too far ahead in terms of orders, registering just 90, but a much healthier 49 of these have been delivered.
However, the larger A220-300 has become a popular aircraft since its launch just over four years ago. As of February 28th, 2021, Airbus had received 539 orders for the type, of which it had delivered 99 examples. This success only seems set to continue, as it is ideally suited to the lighter loads seen on many routes at present due to the pandemic. Indeed, the A220 seems to have been one of a small number of winners in aviation over the last year.
On the whole, the A220 series seems to fairly conclusively be a more attractive prospect for airlines than the A319neo. As well as being cheaper and more popular (and thus a more established product), it is also better suited to today’s lower-capacity operations.
It also represents a product with excellent versatility. While we have compared it to a six-abreast Airbus product, it is also very competitive as a regional jet. Indeed, it serves smaller airports such as London City, which are out of bounds for the A319. Airbus seems determined to push on with its smallest neo aircraft, and it may well find that orders pick up. However, as our analysis has demonstrated, carriers may find it hard to resist the all-around versatility of the A220 series.
Air Canada has given outgoing CEO Calin Rovinescu one last shout-out. The airline has registered their first Airbus A220-300 after him. The sparkling new A220 has the registration C-GROV, the ROV tag referring to Rovinescu. In addition, the former CEO’s signature, name, and time served at the airline are distinctively displayed near the flight deck’s windows.
“Congratulations Calin Rovinescu on your well-earned retirement. Thank you for 12 years of leadership, vision and unwavering dedication to making Air Canada a global champion,” says Air Canada in social media feeds today while showing off pictures of the A220.
Calin Rovinescu leaves Air Canada after 30 years at the airline
Mr Rovinescu announced his retirement last October after heading the airline for 12 years and working there for over 30 years. Before assuming the top job in 2009, Calin Rovinescu had worked as Air Canada’s Executive Vice President and Chief Restructuring Officer.
While at Air Canada, Mr Rovinescu worked on the 1988-1989 privatization, the 1999 hostile takeover attempt defense, the 2000 Canadian Airlines merger, the aftermath of 9/11, the mid-noughties restructuring, the GFC fightback, and most recently, the 2020 travel downturn.
“I am especially proud of the company’s transformation over the last dozen years during which we built Air Canada into one of the world’s leading carriers and a global champion for Canada,” said Mr Rovinescu when announcing his retirement.
Congratulations Calin Rovinescu on your well-earned retirement. Thank you for 12 years of leadership, vision and unwavering dedication to making Air Canada a global champion. We are likewise excited to welcome Mike Rousseau as our new President and CEO! pic.twitter.com/99EyZR46cA
“Mr Rousseau played an instrumental role in Air Canada’s transformation,” said Air Canada at the time. The airline is now putting its gratitude on the public record. Every time passengers and crew board C-GROV, they’ll see the airline’s acknowledgment of Mr Rousseau’s service.Advertisement:
All of Air Canada’s Airbus A220s remain in service. Today, C-GROV operated a return service between Vancouver and Edmonton. On both Thursday and Friday, C-GROV will operate return services between Vancouver and Calgary.Advertisement:
The tribute a rare upbeat note from Air Canada
The tribute to Calin Rovinescu is a rare upbeat note from Air Canada. The airline recently reported a CA$3.8 billion loss following its “bleakest year.” A government bailout package for the wider Canadian airline industry is close to getting finalized. But that’s not a sure thing until the bailout money lands in Air Canada’s bank accounts. Meanwhile, Air Canada’s purchase of smaller rival, Transat, remains up in the air after an acquisition deadline passed just days ago. While neither airline has pulled the plug on the deal yet, either could. Air Canada says the deal remains in place unless and until either party terminates it. But Transat says there is no guarantee the deal, or a new deal, will hold up.
With Air Canada busy juggling these issues this week, Mr Rovinescu might be glad he longer has to head into the office every morning. Calin Rovinescu’s successor is Mike Rousseau, another Air Canada veteran.
“He knows all of our strengths and opportunities and how we can lean into them,” said Mr Rovinescu. Mr Rousseau has a similar career trajectory as his former boss. Mike Rousseau had recently worked as Deputy Chief Executive Officer and Chief Financial Officer at Air Canada.
Meanwhile, the registration of the Airbus A220-300 to C-GROV is getting a positive reception on social media. Most people are praising the gesture and like the plane’s new look.
The A220 has proved popular with many airlines. As of September 2020, there have been 639 orders from at least 18 airlines. The largest order in Europe is from the Air France-KLM group, with Air France taking 60 A220-300 aircraft to replace its A318 and A319 aircraft.
Placing an order for 60 aircraft
The order was anticipated for some time and finally announced in July 2019 (with a memorandum of understanding signed at this time). It was formally confirmed in December 2019. The Air France-KLM group ordered 60 of the larger variant A220-300 aircraft, all destined for Air France. As part of the original memorandum of understanding, it also placed options for up to 60 more aircraft. This is believed to still be in place but not as yet taken up.
At the time of confirming the order, Group CEO, Benjamin Smith, said in a press release,
“We are very pleased to work with Airbus to add the A220-300 to our fleet, an aircraft that demonstrates optimum environmental, operational, and economic efficiency. The selection of the Airbus A220-300 supports our goal of a more sustainable operation, by significantly reducing CO2 and noise emissions. This is a very important next step in Air France’s transformation, and this evolution in Air France’s fleet underlines the Group’s determination to attain European airline leadership.”
Where will the A220s operate
The A220 makes a lot of sense for Air France. It already operates an all-Airbus narrowbody fleet, made up of the following (as of Ocotber 2020, according to Planespotters.net)
A318 – 18 aircraft
A319 – 33 aircraft
A320 – 44 aircraft
A321 – 20 aircraft
The A220 makes a good option for the replacement of the 51 A318 and A319 aircraft. The capacities are closely matched, with the A220 offering a bit of extra space (149 on the A220 compared to 131 and 143). The A318 and A319 are the oldest of the narrowbody fleet, with an average age of 15.5 years and 19.4 years. And of course, it will be some time before the whole fleet is replaced with new deliveries.Advertisement:about:blank
We will likely see it operating the same routes of short-haul European flights and domestic flights in France. In May 2019, however, Air France announced it would cut short-haul flights by around 15%, citing tough competition from low-cost airlines as well as high-speed rail options. With this in mind, it may operate more medium and even long-haul routes. And with a range of just over 6,200 kilometers, it is certainly capable.
What will the A220 be like
We will have to wait and see how the aircraft looks once it is equipped, but the A220 has received positive responses from passengers so far. It has been praised for its wider seats, large windows, and a quieter cabin. In particular, it offers a 2-3 cabin layout (and there is not enough space to increase this), a welcome change from the 3-3 standard. Air France has also stated that the aircraft will be equipped with WiFi.Advertisement:
Well in advance of its launch with Air France, the airline released the following video of how it will look:
Helping to cut emissions
A major motivation for the A220 is to cut emissions. Air France previously said that the aircraft will generate 20% less CO2 than others, allowing it to reduce cost per seat mile by more than 10%.
This became even more significant in 2020. As part of the conditions of government support offered to Air France, it must further cut its carbon emissions. According to Reuters, the airline will have to cut its emissions by per kilometer in half by 2030 (based on 2005 levels). And for domestic routes, this has to happen by 2024.Advertisement:
Taking delivery from Autumn 2021
The larger variant A220-300 aircraft entered service with airBaltic in December 2016. At this time, of course, it was still the Bombardier CSeries CS300. Airbus’s deal to acquire a majority stake (and rename the aircraft to the Airbus A220) did not conclude until July 2018.
Since then, 83 aircraft have been delivered. Air France-KLM will receive its first aircraft in Autumn 2021. As of April 2020, this remained on track, according to comments from the group CEO Benjamin Smith.
Air France would be interested in a larger A220
Air France has also indicated it would be interested in a larger A220 variant if it were developed. Notes about a potential A220-500 stretch appeared in an investor’s presentation in late 2019. And an airline representative confirmed the interest, telling Simple Flying:Advertisement:
“Airbus has the technical possibility, in the future, to stretch the A220-300 with a larger capacity aircraft. If this were the case, we would examine this option for the future development of the Medium-haul fleet (post-2025).”
There has been speculation about this further stretched variant (which would compete with the Boeing 737 and Airbus’ own A320), but nothing has yet been confirmed.
Other large A220 orders
Air France is not alone in making a significant commitment to the A220. As of late 2020, Delta Air Lines is the largest operator of the A220, and it looks set to stay that way. It has taken delivery of 31 aircraft and has a total of 95 ordered. It is the only one of the big three US airlines to order the A220. JetBlue has also ordered 70 (with delivery expected from December 2020) to replace its Embraer 190 aircraft.
Air Canada has also made a large commitment, ordering 45 A220-300 aircraft to replace its Embraer 190s and older A320s.
In Europe, airBaltic has ordered 50 A220-300 aircraft and will be the only all-Airbus A220 operator. These were due to be fully delivered by 2023, but this has been delayed to 2024. Lufthansa has also ordered nine smaller A220-100 (now all delivered) and 21 larger A220-300 aircraft.
Do you think the A220 will be a success for Air France? And would you like to see a larger variant developed?Adve
There are winners and losers of every crisis in the aviation industry. The coronavirus pandemic has already forced some airlines, like Virgin Australia, into restructuring. It’s also grounded many large aircraft like the Airbus A380, but an emerging winner may be a Canadian jet that recently got a new lease on life and is now proving its worth.
That jet is the Airbus A220, formerly the Bombardier CSeries. The plane benefits from its small size and low operating costs coupled with operating capabilities that rival larger planes like the Airbus A320 and Boeing 737. These are proving assets to airlines looking to slash expenses while maintaining a minimal flight schedule through the COVID-19 crisis.
“When we come out of the other side of this we continue to be excited about the A220s and the benefit that can bring to JetBlue”, JetBlue chief financial officer Steve Priest told analysts and investors on 7 May. “The economics of this aircraft are spectacular”.
The coronavirus crisis has prompted something of a reckoning at airlines. For years fleet planners pushed for larger and more efficient narrow-body models that could fly, for example, transcontinental routes in the U.S. with a full load of passengers. Airbus and Boeing delivered hundreds of their largest narrow-body models, the Airbus A321 and 737-900ER respectively, to airlines across the world.
Then the spread of COVID-19 and fear of the virus halted most air travel in just a few months. Globally, the number of flights was down 81% year-over-year on 5 May, according to flight-data firm Cirium. In a slight positive note, the number of flights was up 19% compared to the week before.
More than half of the global A220 fleet was tracked flying during the week ending 4 May, the data shows. This is a higher percentage than for either the A320 family, 737 family or Embraer E-Jet family.
“Airlines want jets that offer equivalent range and equal or better economics than bigger models, but fewer seats”, Teal Group analyst Richard Aboulafia told TPG. “The A220 is one of the very few products that bring this to the table”.
The A220-300 can fly as far as the A320, about 3,855 miles, but more efficiently and with fewer passengers. The A220 is lighter than the legacy Airbus narrow-body and benefits from the latest generation of engines.
Those advantages play out in the decisions airlines are making during the pandemic.
For example, Delta Air Lines is parking all 62 of its A320s but still flying its 31 A220-100s. The Atlanta-based carrier fits 109 seats on the latter jets compared to 157 seats on the former. In addition, the smallest A220s can fly nearly 100 miles further than the A320s.
More A220s may also be good for passengers. The aircraft are quieter than most larger jets and, in many cases, offer a better onboard experience than comparably sized planes. In the U.S., Delta has even installed seat-back inflight entertainment where most other carriers — excluding JetBlue — have removed systems from their planes.
Even in Europe, where first class often means a blocked adjacent seat, the A220 is a comfortable option for travellers.
“The 2-3 configuration, large and modern bathrooms, big windows and modern touches combine to make for a pleasant flying experience”, wrote TPG’s Zach Griff after two A220 flights on Swiss last summer.
Zurich-based Swiss operates 29 A220-100s and -300s. Many of the planes remain in the air, with the A220 operating 83% of the airline’s flights in May, according to Cirium schedules.
Demand for new A220s continues apace. Air Canada maintains plans to take its full allotment of the jet this year, with 14 A220-300 deliveries still pending. The move comes as the Montreal-based carrier retires its 14 E190s and 65 more Airbus A319 and Boeing 767 jets due to the crisis.
In the U.S., New York-based JetBlue plans to take its first of 70 A220-300s by year-end, Priest said this week. The airline has accelerated A220 deliveries even as it postponed the arrival of 22 new A321neos to beyond 2022 amid broad efforts to cut expenses. The airline will configure its A220s with between 130 and 140 seats compared to 200 seats on its A321neos.
And in Europe, Latvia-based Air Baltic plans to emerge from the crisis as an all-A220 operator after retiring its last 737-300s and ATR turboprops. The airline operated 22 A220-300s and had orders for 28 more at the end of April, according to Airbus orders and deliveries data.
The jury remains out on whether the coronavirus will prove a pivotal moment for the A220. Airbus had just 529 outstanding firm orders for the aircraft — compared to 6,156 for its A320neo family — at the end of April. And the planemaker has not received any new A220 commitments since the crisis began.
Airbus continues to produce four A220s a month even as it has slowed rates for other passenger jets. However, plans to increase production are indefinitely postponed.
“As preferred as it may be to acquire aircraft to match the need of the network, with coronavirus, the airlines are no longer afforded this luxury”, wrote The Air Current managing director of analysis Courtney Miller in a piece on 7 May. Existing commitments for the A220, as well as the E-Jet-E2, are likely to be delivered and utilized. But new orders from cash-starved airlines are unlikely, he said.
Take American Airlines, for example. The messaging of its plans to retire or park five aircraft types from its mainline fleet — including its smallest, the 99-seat E190 — focuses on simplifying its fleet, not adding new optimally-sized models like the A220. In fact, the carrier is even spending money to reduce fleet complexity, moving forward with work adding seats to some A321s and 737-800s. The effort, part of American’s “Project Oasis” updates, comes with the expectation of operational savings after the coronavirus subsides.
But fleet simplification, as American and others are undertaking in a big way, does not necessarily mean orders for new types will dry up completely. Boeing CEO David Calhoun made just such a point during the planemaker’s first quarter earnings call on 29 April.
“This is that moment where rationalization efforts get big”, he said. “And believe it or not, in some cases, it even requires that maybe new aeroplanes [be] ordered”.
MONTREAL — Nearly 700 workers are to be laid off in Quebec by two of the province’s main aerospace companies, Airbus Canada Limited Partnership and Pratt & Whitney Canada.
Half of the employees will be laid off Monday for an undetermined period of time in Mirabel, where the A220, the former Bombardier C Series, commercial aircraft is assembled.
Airbus Canada spokeswoman Marcella Cortellazi says the layoffs will last until it has “a clearer visibility” of its activities.
Engine manufacturer Pratt says it will cut more than 343 jobs on May 22 when its order book is reduced due to the airline industry being hit hard by the COVID-19 pandemic.
The Quebec government is allowing manufacturing companies to restart their operations on May 11, but restrictions on the number of employees that can work won’t be lifted until May 25.
Concerned about not being eligible for the federal emergency wage subsidy, Airbus says it will nevertheless pay $847, less applicable deductions, to more than 470 of its workers next week while awaiting their return on May 11.
This report by The Canadian Press was first published May 1, 2020.
Exit of commercial aerospace completed with sale of remaining interest in A220 partnership for ~$600M cash proceeds and the elimination of future investments of ~ $700M(1)
Pro Forma(1)cash on-hand of more than $4B, including all previously announced transactions, enhancing financial position
Company continuing to actively pursue strategic options to accelerate deleveraging
Fourth quarter, and full-year results in line with preliminary results previously announced
2020 consolidated outlook: double-digit organic revenue growth(3) to more than $15B(1)
2020 consolidated adjusted EBITDA margin(2) expected at ~ 7.0%, adjusted EBIT margin(2) expected at ~3.5%(1)
2020 consolidated free cash flow(2) expected to be positive, excluding Residual Value Guarantee (RVG) payments(1)
MONTRÉAL, Feb. 13, 2020 (GLOBE NEWSWIRE) — Bombardier (TSX: BBD.B) today reported its fourth quarter and full year 2019 results, in line with previously announced preliminary results. The company also confirmed it is still actively pursuing options to accelerate deleveraging, strengthen its balance sheet and enhance shareholder value.
Sale of A220 Partnership Interest
Bombardier has entered into an agreement with Airbus SE and the Government of Quebec, under which Bombardier transferred its shares in the Airbus Canada Limited Partnership (ACLP) to Airbus and the Government of Quebec, improving Bombardier’s cash position. This includes cash proceeds of ~$600 million from Airbus, of which $531 million was paid upon closing with the balance to be paid over 2020-21, and the elimination of all future capital requirements for the A220 program, estimated at ~ $700 million.(1)
Bombardier will also transfer aerostructures activities and employees supporting the A220 and A330 in St-Laurent, Québec to Airbus subsidiary Stelia Aerospace. Finally, the agreement provides for the cancelation of 100,000,000 Bombardier warrants owned by Airbus.
Bombardier’s decision to sell its stake in the A220 partnership completes its exit from commercial aerospace, a significant undertaking. In 2016, Bombardier’s commercial aerospace business lost approximately $400 million and was consuming approximately $1 billion in cash. Addressing this challenging portfolio was a fundamental step in the Company’s turnaround plan.
“We are incredibly proud of the many achievements and tremendous impact Bombardier had on the commercial aviation industry,” said Alain Bellemare, President and Chief Executive Officer, Bombardier Inc. “We are equally proud of the responsible way in which we have exited commercial aerospace, preserving jobs and reinforcing the aerospace cluster in Québec and Canada. And, we are confident that the A220 program will enjoy a long and successful run under Airbus’ and Québec’s stewardship.”
Acceleration of Deleveraging Phase of Turnaround
The sale of our interest in the ACLP, combined with the previously announced aerospace divestitures, will generate more than $1.6 billion in cash proceeds and eliminate close to $2 billion in liabilities and future commitments. Liquidity remains strong, with Pro Forma cash-on-hand of more than $4 billion and $5.5 billion in liquidity, providing the necessary flexibility to complete the turnaround. Both the CRJ program sale to Mitsubishi Heavy Industries, Inc. and sale of the aerostructures business to Spirit AeroSystems, Holding Inc. are expected to close in the first half of 2020.(1)
As previously announced, the Company is actively pursuing options that would allow it to accelerate deleveraging, paydown debt and position the business for long-term success with greater operating and financial flexibility. This process remains ongoing, however the company does not intent to provide any further updates at this time.
Overview Financial Performance
Bombardier’s consolidated revenues for the year were $15.8 billion, highlighted by an 8.5% growth in business aircraft activities. The growth in Aviation revenues were offset by the lower contribution from commercial aircraft businesses following their divestitures. Revenues at Transportation also decreased, mainly due to contract estimate revisions.
Consolidated adjusted EBITDA and adjusted EBIT for the year were $896 million and $470 million, respectively, reflecting (i) improvements at Aviation as it exits underperforming commercial programs and ramps-up production on the Global 7500 aircraft; and (ii) additional charges and investments at Transportation to complete challenging projects. Reported EBIT loss for the year of $498 million includes a $1.6B impairment charge related to the ACLP investment.
Fourth quarter cash generation reached $1.0 billion, reducing free cash flow usage to $1.2 billion for the year. Higher than anticipated cash usage was driven by additional investments made to address challenging rail projects, as well as, the deferral of deliveries, mainly at Transportation. Cash usage from operating activities amounted to $680 million for the full year.
Revenues from our sustaining business aircraft and Transportation activities in 2020 are expected to grow organically by double-digit percentage over the $13.7 billion revenues recorded from these businesses in 2019(1). This strong growth is driven mainly from the acceleration of Global 7500 deliveries contributing to a total of 160 aircraft or more for the year at Aviation. The consolidated revenue growth is also supported by the ongoing production ramp-up of Transportation, driven by the solid orders from the past few years.
Adjusted EBITDA and adjusted EBIT are expected to increase to approximately 7.0% and 3.5% respectively, mainly from the acceleration of Global 7500 deliveries at Aviation and gradual margin normalization at Transportation. The adjusted EBIT margin expansion includes a higher amortization expense as Global 7500 deliveries increase. The full year outlook for earnings reflects the partial year contribution from ongoing divestitures of the CRJ program and Aerostructures businesses.(1)
Free cash flow is expected to be positive in 2020, excluding Credit and RVG payments. These residual liabilities related to the exit of commercial aircraft are estimated to be approximately $200 million for the year and are expected to be paid from the CRJ transaction proceeds.(1)
Stronger Financial Performance as Aviation Reshapes its Portfolio
Revenues for Aviation totalled $7.5 billion for 2019. This reflects an 8.5% revenue growth from business aircraft activities and continued double-digit organic growth from aftermarket.
The segment achieved 175 aircraft deliveries during the year, comprised of 54 Global, 76 Challenger, 12 Learjet, as well as 33 commercial aircraft. ° The fourth quarter’s activity level was high, with deliveries reaching 52 business aircraft as Global 7500 deliveries accelerated.
Adjusted EBITDA margin was 10.8% for the year, up 200 bps driven by the exit of the Q400 and C Series programs. This profitability was nonetheless diluted in 2019 by CRJ activities, accounting for $1.2 billion in revenues for the year.
The adjusted EBIT margin of 7.1% is up 70 bps year-over-year, reflecting the early production ramp up and higher amortization associated with Global 7500 deliveries, as well as the dilution from commercial aircraft activities.
Business aircraft backlog increased slightly for the second consecutive year, reaching $14.4 billion at year end, while the CRJ backlog declined as production winds down.
Concentrating on Business Aircraft while Addressing Underperforming Programs
In February 2019, the Corporation acquired the Global 7500 aircraft wing program operations and assets from Triumph Group Inc. This transaction enabled the company to leverage its extensive technical expertise to support the ramp-up of the Global 7500 aircraft and secure its long-term success.
In March 2019, we concluded the sale of Business Aircraft’s flight and technical training activities to CAE Inc. for net proceeds of $532 million.
In May 2019, we completed the previously announced sale of the Q Series program assets, including aftermarket operations and assets, to De Havilland Aircraft of Canada for net proceeds of $285 million.
In June 2019, the Corporation entered into a definitive agreement with Mitsubishi Heavy Industries, Ltd (MHI) for the sale of its regional jet program for a cash consideration of $550 million payable upon closing, and the assumption by MHI of approximately $200 million of liabilities related to credit and residual value guarantees and lease subsidies. The transaction is currently expected to close by mid-year 2020 and remains subject to regulatory approvals and customary closing conditions.
In October 2019, the Corporation and Spirit AeroSystems Holding, Inc. (Spirit) announced that they have entered into a definitive agreement, whereby Spirit will acquire Bombardier’s aerostructures activities and aftermarket services operations in Belfast, U.K. and Casablanca, Morocco, and its aerostructures maintenance, repair and overhaul facility in Dallas, U.S. for a cash consideration of $500 million and the assumption of approximately $700 million of liabilities, including government refundable advances and pension obligations. The transaction is expected to close by mid-year 2020 and remains subject to regulatory approvals and customary closing conditions.
Positioned for Growth through certification and ramp up of New Programs and Service Network Expansion
Reaching full-scale production of the class-defining Global 7500 aircraft. With increased deliveries, the Global 7500 aircraft is expected to contribute significantly to revenues growth in 2020. As the aircraft progresses on the learning curve, it will also contribute to margin expansion.
Certified the new Global 5500 and Global 6500 aircraft, followed by the entry into service of the Global 6500 aircraft in 2019, offering customers the perfect combination of range, speed, field performance and smooth ride.
Continued and consistent growth of the aftermarket business, with further expansion of the service network in Singapore planned for 2020.
Bombardier transfers its remaining interest in Airbus Canada Limited Partnership (Airbus Canada) to Airbus SE and the Government of Québec
Airbus now holds 75 percent of Airbus Canada with the Government of Québec increasing its holding to 25 percent for no cash consideration
Bombardier work packages for the A220 and A330 will be transferred to Airbus, through its subsidiary Stelia Aerospace, securing 360 jobs in Québec
Bombardier will receive US$591M, net of adjustments, of which US$531M was received at closing, and is released of its future funding capital requirement to Airbus Canada
Over 3,300 Airbus jobs secured in Québec
AMSTERDAM, Netherlands and MONTREAL, Feb. 13, 2020 (GLOBE NEWSWIRE) — Airbus SE (EPA: AIR), the Government of Québec and Bombardier Inc. (TSX: BBD.B) have agreed upon a new ownership structure for the A220 programme, whereby Bombardier transferred its remaining shares in Airbus Canada Limited Partnership (Airbus Canada) to Airbus and the Government of Québec. The transaction is effective immediately.
This agreement brings the shareholdings in Airbus Canada, responsible for the A220, to 75 percent for Airbus and 25 percent for the Government of Québec respectively. The Government’s stake is redeemable by Airbus in 2026 – three years later than before. As part of this transaction, Airbus, via its wholly owned subsidiary Stelia Aerospace, has also acquired the A220 and A330 work package production capabilities from Bombardier in Saint-Laurent, Québec.
This new agreement underlines the commitment of Airbus and the Government of Québec to the A220 programme during this phase of continuous ramp-up and increasing customer demand. Since Airbus took majority ownership of the A220 programme on July 1, 2018, total cumulative net orders for the aircraft have increased by 64 percent to 658 units at the end of January 2020.
“This agreement with Bombardier and the Government of Québec demonstrates our support and commitment to the A220 and Airbus in Canada. Furthermore it extends our trustful partnership with the Government of Québec. This is good news for our customers and employees as well as for the Québec and Canadian aerospace industry,” said Airbus Chief Executive Officer Guillaume Faury. “I would like to sincerely thank Bombardier for the strong collaboration during our partnership. We are committed to this fantastic aircraft programme and we are aligned with the Government of Québec in our ambition to bring long-term visibility to the Québec and Canadian aerospace industry.”
“I am proud that our government was able to reach this agreement. We have succeeded in protecting paying jobs and the exceptional expertise developed in Québec, despite the major challenges we faced in this regard when we took office. We have consolidated the government’s position in the partnership, while respecting our commitment not to reinvest in the program. By opting to strengthen its presence here, Airbus has chosen to focus on our talents and our creativity. The decision of an industrial giant like Airbus to invest more in Québec will help attract other world-class prime contractors,” the Premier of Québec, François Legault, stated.
“This agreement is excellent news for Québec and its aerospace industry. The A220 partnership is now well established and will continue to grow in Québec. The agreement will allow Bombardier to improve its financial situation and Airbus to increase its presence and footprint in Québec. It’s a win–win situation for both the private partners and the industry,” pointed out Pierre Fitzgibbon, Minister of the Economy and Innovation.
With this transaction, Bombardier will receive a consideration of $591M from Airbus, net of adjustments, of which $531M was received at closing and $60M to be paid over the 2020-21 period. The agreement also provides for the cancellation of Bombardier warrants owned by Airbus, as well as releasing Bombardier of its future funding capital requirement to Airbus Canada.
“This transaction supports our efforts to address our capital structure and completes our strategic exit from commercial aerospace,” said Alain Bellemare, President and CEO Bombardier, Inc. “We are incredibly proud of the many achievements and tremendous impact Bombardier had on the commercial aviation industry. We are equally proud of the responsible way in which we have exited commercial aerospace, preserving jobs and reinforcing the aerospace cluster in Québec and Canada. We are confident that the A220 program will enjoy a long and successful run under Airbus’ and the Government of Québec’s stewardship.”
The single aisle market is a key growth driver, representing 70 percent of the expected global future demand for aircraft. Ranging from 100 to 150 seats, the A220 is highly complementary to Airbus’ existing single aisle aircraft portfolio, which focuses on the higher end of the single-aisle business (150-240 seats).
As part of the agreement, Airbus has acquired the Airbus A220 and A330 work package production capability from Bombardier in Saint-Laurent, Québec. These production activities will be operated in the Saint Laurent site by Stelia Aéronautique Saint Laurent Inc., a newly created subsidiary of Stelia Aerospace, which is a 100 percent Airbus subsidiary.
Stelia Aéronautique Saint-Laurent will continue the production of the A220 cockpit and aft fuselage production, as well as A330 workpackages, for a transition period of approximately three years at the Saint-Laurent facility. A220 workpackages will then be transferred to the Stelia Aerospace site in Mirabel to optimize the logistical flow to the A220 Final Assembly Line also located in Mirabel. Airbus plans to offer all current Bombardier employees working on the A220 and A330 work packages at Saint-Laurent opportunities around the A220 programme’s ramp-up, ensuring know-how retention as well as business continuity and growth in Québec.
At the end of January 2020, 107 A220 aircraft were flying with seven customers on four continents. In 2019 alone, Airbus delivered 48 A220s, with the further ramp-up to be continued.