The rebirth of the storied brand last year was celebrated across the commercial aviation world. De Havilland Canada (DHC) is a brand associated with classic aircraft like the Beaver and Twin Otter. It is quintessentially Canadian. Coming after the shrinking of Bombardier and its departure from the commercial aerospace business, commercial aviation celebrated the De Havilland Canada rebirth.
At the last Dubai show, DHC made a splash and was the most active OEM – an unexpected situation for sure. But since that show, the company has been quiet. But for the recent talk about the bigger bins that will be used on lessor NAC’s aircraft, there has been little or no market news. The lack of news, combined with undelivered aircraft on the ground in Downsview has led to industry rumors that appear to be inaccurate.
We had a chance to discuss the company’s current outlook with senior leadership. It turns out that De Havilland has been quiet because the company has a small team that is currently stretched, and because it is now a privately owned company that has fewer reporting requirements, and hence lower visibility.
Some of the items we reviewed with management follow, and quash some of the rumors that have been floating about recently:
- DHC faces a China supply-chain crisis:
The only product DHC produces is the Dash8-400, previously known as the Q400. This aircraft gets its fuselage from Shenyang in China. This is a primary part and in the wake of the coronavirus, a supply chain dependent on China is a concern.
The Chinese factory did close because of the virus but reopened two weeks ago, once the 10-day extension to the New Year’s holiday ended. Shenyang and DHC have come to an agreement to catch up. Current Dash8 production is two aircraft per month and there are presently five fuselages in inventory. This means the delayed supply is not critical nor threatens future work as the FAL has 10 weeks of production in hand. DHC expects to continue to receive new deliveries as they are needed to maintain planned production levels.
- DHC has a growing undelivered aircraft fleet
There are six completed Dash8s in Toronto, that would appear to an observer as stored and undelivered. Of the six aircraft, one belongs to DHC and is their test aircraft which recently came back to Toronto from its former home in Wichita. That will now remain in Toronto.
Three aircraft are completed in SpiceJet colors. SpiceJet is a big customer and delivery of these three aircraft has been deferred. They will be delivered when the customer is ready and has arranged the financing. DHC would not comment on their customer’s plans, but it is worth noting that SpiceJet is a MAX customer and has a consequent significant financial hurdle to overcome. Moreover, with the collapse of Jet, Spicejet acquired several of its aircraft, crews, and slots. The Dash8s have just not been as important as the one-in-a-lifetime opportunity of Jet’s collapse occurred. DHC did advise that they have taken the remaining 17 Spicejet aircraft on order out of their skyline until the customer is ready to accept deliveries again. The orders have not been removed from the order book, but production slots have been deferred.
There are two Jambojet aircraft stored. One has been delivered to AVMAX, who is dealing with the airline and arranging delivery. The second remains in production and is nearing final flight test. Once it receives a CofA, it will be delivered to AVMAX to then deliver to the customer. It is worth pointing out that Jambojet is a subsidiary of Kenya Airways, which recently secured a loan for the Kenyan government. AVMAX is temporarily storing them in Downsview pending finalizing customer arrangements.
- DHC is rapidly working through the Bombardier backlog, and needs to add new customers quickly
The current skyline is set through November 2020 and filling that skyline with new orders is the company’s primary area of focus.
At the last Dubai show, De Havilland made more news than any other OEM. Yet since then, no order news or conversion of LOIs to firm orders have been announced.
The 37 deals announced at the show are all currently in process and moving forward. But a combination of factors is slowing things down. First is Covid-19 that has plugged up every airline and OEM. Second, several of the deals depend on state approvals, including Ghana and Russia. Boeing also announced a deal with Ghana in Dubai. Watch this 90-second response from Ghana’s Minister of Transport to our questions for context.
Other deals with lessors are awaiting securing operator agreements for the aircraft, with current market conditions making this quite challenging.
- The Dash-8-400 needs a product refresh
Looking forward, we asked management about what is being done with the Dash8. There is an interest in a large cargo door freighter and a package freighter as well as the combi version. The challenge operators face is finding the right combination of freight and passenger traffic mix. To date, the only combi customer is in Japan. The African market has proven to be receptive to Dash8 passenger orders, but operators need to develop a favorable cargo/passenger mix before they can order the combi.
Even so, other operators have approached DHC to discuss a new-build freighter. Also, DHC is looking at freighter conversions of older passenger models, much like Boeing and Airbus have done. Conversion offers the lower capital costs that will enable Dash8 freighters to operate with more attractive economics for what are typically low-frequency freight operations.
The Bottom Line
In summary, De Havilland is quietly working very hard behind the scenes.. They are crisscrossing the globe to introduce their new company to former Bombardier customers while at the same time delivering on the backlog they inherited, and focusing on obtaining new orders to increase the backlog and fill the skyline. They have focused on converting the 37 LOIs announced in Dubai, and have several other potential deals in discussions.
Unfortunately juggling those challenges has not been made easier by Covid-19 and the associated meltdown in airline traffic and business. But the rumors that are circulating about DHC don’t appear to accurately represent the current situation. Rumors of an impending demise appear to be premature.