Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Updating Airbus and Boeing Orders At Risk November 23, 2020
- Pontifications: Why I’d fly the MAX; lessons learned and still to come November 23, 2020
- Bjorn’s Corner: 737 MAX ungrounding, the technical background November 20, 2020
- Enhancing the Dreamliner, Part 7: The optimum range for the 787-10 November 19, 2020
- Boeing responds to FAA recertification of the 737 MAX November 18, 2020
Updating Airbus and Boeing Orders At Risk
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By Vincent Valery
Introduction
Nov. 23, 2020, © Leeham News: It’s time to update the analysis on Airbus and Boeing orders at risk for delivery under the “weak customer” doctrine.
Under a US accounting rule known as ASC 606, Boeing must identify the number of orders that are unlikely to be delivered because the customer’s financial condition is weak. Airbus does not do this because there is no ASC 606 rule in Europe.
LNA wrote a few months ago an article that attempted to apply ASC 606 adjustments to Airbus’ order book.
Boeing publishes an estimation by the program of orders subjects to material cancellation risks, or ASC 606. The tally increased from 183 to 782 for the 737 between the end of 2019 and October 2020.
While Boeing has disclosed 1,020 net orders year-to-date canceled or subject to ASC 606 (393 canceled without accounting for ASC 606 adjustments), Airbus lists 308 net new orders. Airbus’ tally does not reflect a European equivalent to ASC 606 adjustments. The European OEM only publishes an overall outstanding value of its order book that accounts for customer risks in its annual report.
Despite last week’s news about progress on developing a COVID-19 vaccine, LNA’s Judson Rollins wrote that the timeline of a return to normalcy remains elusive. The lingering pandemic means that more airlines will run into financial difficulties, resulting in more orders that will be deemed risky.
LNA provides an updated tally of the orders at risk for both Airbus and Boeing, with minor changes to the methodology.
Summary
- Identifying customers at risk;
- Explaining differences with Boeing’s ASC 606;
- Applying adjustments to Airbus’ order book;
- Estimation of adjusted market shares;
- A digression to tariff exposures.
Pontifications: Why I’d fly the MAX; lessons learned and still to come
Nov. 23, 2020, © Leeham News: I’m okay with flying on board the Boeing 737 MAX.
Yes, it’s gone through the wringer in the 20 months since it was grounded.
Yes, Boeing and the US Federal Aviation Administration screwed up royally.
And yes, there’s solid reason to distrust the company and the agency, wondering if they got it right this time.
Which is why for me the tipping point is the involvement of Transport Canada and Europe’s EASA are the reasons to trust getting back on the MAX.
LNA addresses the safety in our new podcast feature, 10 Minutes About. The inaugural podcast, 10 Minutes About the Boeing 737 MAX recertification may be heard here.
Bjorn’s Corner: 737 MAX ungrounding, the technical background
By Bjorn Fehrm
November 20, 2020, ©. Leeham News: This week’s big news is the lifting of the grounding of Boeing’s 737 MAX.
I wrote about the changes made to the MAX Wednesday and why I believe it’s safe. Let’s use our Corner space to walk through what I wrote about, but with a more technical angle.
Figure 1. 737 MAX nacelles (right) compared with 737 NG nacelles (left). Source: Boeing and Leeham Co.
Enhancing the Dreamliner, Part 7: The optimum range for the 787-10
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By Bjorn Fehrm
Introduction
November 19, 2020, © Leeham News: Last week, we compared the economics of the 787-10 to the 787-9 on the San Francisco to Sydney route.
We could see this 6,500nm route does not suit the 787-10, even though it’s within the aircraft’s range capability. The 787-9 is the better alternative.
We now compare the aircraft on the 4,500nmm San Francisco to Tokyo route, a distance that should suit the 787-10 better.
Summary
- The 787-10 can fly routes of up to 6,500nm, but its payload capability gets compromised.
- You can fill the cabin to a reasonable load factor but must leave all cargo behind. In a high yield cargo market, this is not a profitable proposition.
- When the routes are below 5,000nm, the 787-10 works better. Now the large capacity can be utilized both for passengers and cargo. If it can be filled it’s now the lowest cost Dreamliner.
Boeing responds to FAA recertification of the 737 MAX
- Coverage of recertification of the Boeing 737 MAX continues with the next post.
Nov. 18, 2020: Boeing issued the following statements in response to the US Federal Aviation Administration recertifying the 737 MAX.
Breaking News: FAA recertifies 737 MAX–continuing coverage
- Coverage continues in the next post.
Nov. 18, 2020, (c) Leeham News: The US Federal Aviation Administration today recertified the Boeing 737 MAX, ending a 20-month grounding.
Underlying photo: Source, Boeing.
Recertification of the airplane will follow by Transport Canada and Europe’s EASA, probably this month.
FAA recertifies Boeing 737 MAX
- Continuing coverage in next post
By Bjorn Fehrm
November 18, 2020, ©. Leeham News: The FAA has declared the Boeing 737 MAX 8 and 9 safe to fly after a 20 months grounding. On March 10, 2019, the Ethiopian Air ET302 crashed after Boeing’s pitch augmentation software MCAS triggered erroneously and caused the aircraft to crash. This accident followed a similar accident of Lion Air JT610 on October 29, 2018.
Ethiopia grounded the MAX on the day, China the day after, and the FAA on March 13. The 737 MAX has been grounded worldwide since the FAA grounding.
It has been a gruesome 20 months for Boeing, where it’s gone from denial of guilt to a full acceptance of responsibility and a complete change of attitude. With changes to the MAX verified by FAA, EASA, Transport Canada, and Brazil’s ANAC, it’s now ready to fly again.
We will cover the return to flight of the 737 MAX in several articles, the first dealing with the question: Is the 737 MAX safe to fly?
Below we go through what went wrong and why this chain of events will not happen again on an updated 737 MAX.
Podcast: 10 Minutes About the 737 MAX Return to Service
Nov. 18, 2020, © Leeham News: LNA today launches a new feature, a periodic podcast about key issues of the moment.
Called “10 Minutes About,” the podcast is—as the title says—10 minutes about the issue selected. This time frame is short, to the point and doesn’t take too much time from the listener.
Today’s launch podcast is 10 Minutes About the 737 MAX Return to Service. The US Federal Aviation Administration today recertified the MAX.
Boeing, unions need reset: analysis
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By the Leeham News Team
Analysis
Introduction
Nov. 16, 2020, © Leeham News: Boeing is at a defining moment, says John Holden, the president of IAM 751. This is the labor union that assembles Boeing’s airplanes in Washington State.
The Seattle Times wrote that “Boeing must realign for better days“.
Neither said anything that hasn’t been said before, some of them repeatedly.
There is a new twist to it this time. Boeing is seriously bleeding money. It is making changes for survival and paying a horrible price as it loses talent that takes years to develop. There are many losers here: Boeing, Washington State, Snohomish, King and Pierce counties, Everett, Renton and all the communities in the Washington Aerospace heartland. There are no winners.
But for all the points identified, few offer solutions. What should a realignment include? What could it look like?
Over a series of articles, LNA will examine some possible solutions.
The first is Labor, starting with the IAM 751.
Summary
- Long, tortured relationship.
- Strong union state.
- “Expensive labor.”
- Is there a “value” premium?
Pontifications: EU tariffs on Boeing airplanes in effect; ~60 at risk
Nov. 16, 2020, © Leeham News: The European Union implemented tariffs Nov. 9 on Boeing and other US products in retaliation for the Trump Administration tariffs on Airbus and EU products.
By Scott Hamilton
This is the latest in the 16-year trade battle between the US and Europe over subsidies and tax breaks found to be illegal under World Trade Organization rules.
The US was authorized last year to impose tariffs on Airbus and other EU products. The Trump Administration initially imposed a 10% tariff on imported Airbus aircraft. A320/321s assembled at Airbus’ Mobile (AL) plant were exempt, even though major components were imported.
Trump increased the tariffs to 15% in March, just as the COVID-19 pandemic erupted worldwide. As a result, few Airbus airplanes were delivered into the US since then.