Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Boeing 3Q deliveries up despite strike October 8, 2024
- Strike slows Boeing’s march toward improving safety culture October 7, 2024
- Aerospace supply chain still ailing; Sustainable Aviation Fuel isn’t the answer to go green October 4, 2024
- Bjorn’s Corner: New engine development. Part 27. Long developments October 4, 2024
- Longshoreman strike adds to Airbus, Boeing woes October 1, 2024
Odds and Ends: ANA resumes 787 pilot training; Cash impact on 787; UAL, DAL miss profits; Mile High Club
ANA pilot training: ANA, the carrier with the largest fleet of Boeing 787s, has resumed pilot training for the aircraft, says Reuters. The article has a fair amount of detail about progress in the effort to return the 787 to service.
Cash impact of 787: UBS issued this note yesterday (April 1):
- See 787 as $6B cash drag in 2013: Even assuming battery issue is resolved and Boeing is able to hit its 787 delivery guidance at 60+, we still see 787 as a ~$6B cash drag in 2013 with ~$7B inventory build more than offsetting ~$1B advance draw. Our cash flow forecast assumes Boeing learns like it did on 777 and is worse than Boeing’s guidance for a similar 787 inventory build in 2013 as in 2012 ($5.7B).
- Cash drag could be much worse if battery issue lingers: As long as 787 remains grounded, Boeing is faced with the choice of either slowing production or building physical inventory. Every missed 787 deliveryrelative to Boeing’s >60 forecast adds $100-120M to our baseline forecast for a $6B 787 cash burn.
United, Delta miss profit forecasts: This isn’t good news: United Airlines and Delta Air Lines missed their first quarter profit targets on rising fuel costs. United’s profits have been hit-and-miss since the merger between legacy UAL and Continental Airlines. Delta has been more consistently profitable.
Next up, of course, is the union between American Airlines and US Airways. We’ll be going to the latter’s media day later this month, and obviously there will be much to talk about this year. CNBC has this profile on Doug Parker, the CEO of US Airways and the incoming CEO of the new American.
And finally: So much for the Mile High Club.
UBS: Even assuming battery issue is resolved and Boeing is able to hit its 787 delivery guidance at 60+, we still see 787 as a ~$6B cash drag in 2013 with ~$7B inventory build more than offsetting ~$1B advance draw.
I would like to see more than a “note” to explain the impact of the grounding on Boeing’s finances. If this thing drags on there could be severe repercussions not only for the Dreamliner, but it could also affect other programmes like the 777X.
UBS: Boeing is faced with the choice of either slowing production or building physical inventory.
Where is the turning point? If the grounding lingers, when will Boeing have to slow down or stop 787 production? There must be a point where building inventory doesn’t make sense anymore.
In regards to the Mile High Club, I don’t know what the regulations impose on the manufacturers and operators in terms of toilet dimensions for existing models. But I know that for new aircraft, like the CSeries for example, at least one toilet must be accessible in a wheel chair.
Nothing related to this post but a question: did you hear about British Airways going A350?
Announcement supposed to come this week.
In time for the A350 roll-out?
Not unexpected. If you google its clear BA looked at the A350 for years. Others that could decide soon to order/ convert to A350-1000 are SQ, UA and Qantas.
Pretty consistent over time ( from 2011):
http://www.flightglobal.com/news/articles/bas-777-300er-acquisition-does-not-rule-out-a350-walsh-320948/
The recent 777 sales rush could well be viewed as gapfiller purchases helped on by competitive pricing.
What adjustments do airlines today apply to EIS projections?
Re BA 350 order press leaks.
Despite the degree of effort that EADS has exerted in tempting BA away from Boeing heavy twins, for good reason BA are extremely cautious on ordering such a realively embryonic airframe. Particulary whilst the Lufthansa 7478i order is still ringing around the industry.
If true we’re convinced this A350 order is a canny decision by BA However Willy Walsh’s recent apparent enthusiasm for a yet to be designed & unknown 777X seems to fly in the face of this supposed leaked announcment, either a complete red herring from him or the A350 airframe offers all that it claims & more with the bonus of a reasonable time scale & of course the all important UK developed & sourced powerplants.
The technical prowess the RR symbol still offers the UK flag carrier still holds significent influence within BA enginering……..
Yet the 777X concept in terms of risk is not so much different from the 747-8i – Re-use of the fuselage, center wing box and landing gear; new wings and engines; but it ended up 85% new. Like Boeing’s David Loffing says in one of the videos on their innovation webpage: “When you change the wing on an airplane, you effectively create an all-new airplane”
http://www.boeing.com/stories/videos/vid_04_747-8.html
I recall a BA executive complaining to replace their 747s they had to get planes that were bigger or smaller. The 777-9X would deal with that issue. The problem is timing. BA don’t seem to like to be first with a new model, which suggests shopping for the 777-9X after 2020. They need to get rid of their 747s before then. My guess is that they will replace their 747s with a mixture of A380s, 777-300ERs and A350s. They may subsequently replace some of their 777-300ERs and A350s with 777-9Xs and move the smaller planes to replace 777-200ERs starting at about the same time.
I detect that airlines are more willing to mix fleets than they used to, in order to get the most efficient planes for a particular mission and to get them as quickly as possible. The price of fuel must be driving this.
IAG going for A350-900/1000 doesn’t fly in the face of enthusiasm for 777-9X or a 7478i order.
There isn’t any reason to be enthusiastic about 777-8X unless you have simply ruled out operating A350.
Note: This VV is different from Vero Venia. Editor.
from
http://online.wsj.com/article/SB10001424127887324020504578396771770111436.html
“Even if IAG orders the A350 for British Airways, Boeing is “not out of the running” for a later order for the 777Xs, said one of the people familiar with the carrier’s plans.”
“But another person said that if IAG orders A350s, it wouldn’t receive preferential terms on Boeing orders.”
Note the second rumor. Interesting ( but dangerous ) sales tactic if true.
apropos: didn’t I also see two different “ikkeman”s at one time?
absolute not out of the loop:
http://www.reuters.com/article/2013/04/03/us-iag-boeing-idUSBRE9320YD20130403
IAG converts 18 options into 787-? orders.
( truth or a repeat of forbes blunder that Air Berlin orders fresh Dreamliners?)
The 407 seat 777-9i mini jumbo will do a great job closing the gab to the A380 and replacing the 747s.
The 777-300ER has a lenght of 73.9 m, the new 777-9i is advertised to have a lenght of 76.5m, so we are talking about a 2.6 meters stretch.
In my book 2.6 meters adds 2-3 row economy class, 15-30 seats depending on how you use the available space.
So if the 777-9i has 407 seats, from now on the 777-300ER has grown into a 385 seat aircraft, ok?
Mind the stabilizer stabilizer tip extension when playing around with overall length 😉
The B777 is attractive if the operator choses a 10-abreast economy. If the operator decides on retaining a 9-abreast economy (which most quality-oriented airlines probably do), the B777 cannot compete with the A350.
BA has a 9-abreast economy.
Air France has 10-abreast in its B777, so does Emirates.
That translates into a 17inch seat at a very small aisle. Even an “internal stretch” of 5 inch (much more appears dubious) would translate into .5 inch per seat, well below the generally accepted 18+inch seat width for a quality long range economy.
Re 787 cash burn, Boeing building 787s burning cash that later on will be returned when the airline takes the aircraft, is all smoke and mirrors to me. As is spreading out losses over 5 or 10 years, or 1400 aircraft.
Everyone can smell money burning because of the many modifications, cumulative delays now passing 4 yrs, all the compensations for 600-800 aircraft, the confimed launch pricing for the first few hundred 787 and 737 MAX. Add tHe troubles surrounding the 747-8.
Still we can be sure the next quaterly meeting will be upbeat and SeekingAlpha will tell us this is the right moment to buy.
I have given up trying to get a clear picture on how the company really does financially. You won Boeing.
Talking of Seeking Alpha, I came across an interesting opinion piece:
http://seekingalpha.com/article/1313601-boeing-dreamliner-vs-buyback-a-jam-or-a-spam
Partly explains why the share price rocketed up in 2 months, following the grounding…
Any connection that those “floaters” regularly precede bad news? ( forbes air berling news ( or some invisble rumor that was based on ) seems to have give a significant boost that wasn’t lost over the following fr/weekend that saw the ntsb interim report.)
Re: the Reuters article on the ANA pilot retraining:
“After the FAA’s certification, Japan’s Civil Aviation Bureau is likely to certify the fix around the same time.”
Is this speculation on the reporter’s part or do have they been in communication with those responsible at the JCAB?
“The NTSB is likely to make non-binding recommendations to the FAA at the end of an investigation. The two agencies work closely together.”
An interesting point of view. I get the impression the NTSB makes reccomendations which the FAA decide not to employ in any widespread manner. Throughout this whole process, except for the first week or so after the FAA was forced to save what little face it had and ground the 787 since the Japanese had already done so, it seems like the FAA and the NTSB have been treating the process, and Boeing in totally opposite manners.
Finally, does this not seem to indicate that none of the airlines invloved expect to fly before June, and that at the very earliest? Would this indicate they know something that Boeing either doesn’t know or is unwilling to admit, at least publicly?
Seeking Alpha:
I respect the fact that Boeing is operating in a highly capital intensive industry. The lower dividend yield compared to its peers might be acceptable while considering that fact. But the dividend increase and share buyback are contradicting ideas and raise questions for company’s sustainable dividend and the intended message to the investing communities about its future prospects and growth. The point to ponder is if the intent of this news was to bring a hurdle to the falling stock price after the news of Dreamliner being a total flop or the company wants to take the shares away from investors’ hands as they expect gold from their future.
http://seekingalpha.com/article/1313601-boeing-dreamliner-vs-buyback-a-jam-or-a-spam
Thanks to UKair for bringing this interesting article to our attention.
I think the public perception at this moment is Boeing stock makes you money and EADS stock doesn’t because its irrelevant. Check the news reports. If the BA stock goes up its news, if it aint there no news. Nobody checks anyway. http://uk.finance.yahoo.com/echarts?s=EAD.PA#symbol=ead.pa;range=5y;compare=ba;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;
Aviation Week:
Air Berlin is changing its Boeing 787 order to the -9 variant favored by its largest shareholder, Etihad Airways, says the Abu Dhabi-based carrier’s chairman and CEO, James Hogan.
This change in Air Berlin’s firm order is unsurprising, and Huettmeyer in March indicated that the airline was interested in the larger 787 variant as a replacement for the airline’s fleet of Airbus A330s. Etihad, meanwhile, has championed the combination of the two orders as a way to share infrastructure, pool maintenance and streamline purchases for engines, rotables, avionics and inflight entertainment systems.
http://www.aviationweek.com/Article.aspx?id=/article-xml/avd_04_03_2013_p01-01-565021.xml
Many airlines have switched to the -9. It probably will be a more matured aircraft.
http://www.pdxlight.com/787_01.jpg
http://www.pdxlight.com/787.htm
British Airways just exercised their options for 18 more 787’s. I could not find info on whether they were -8’s or -9’s. Iberia has also secured future delivery slots.
Total tally is now 908, 2 shy of the 2008 high water mark.
No, BA *will* exercise their options, there are no details yet, that’s why you cannot find the -8/-9 split.
““We are delighted that our valued customer IAG plans to increase the number of 787s in the British Airways fleet, which is testament to the 787s unrivaled fuel efficiency and passenger comfort,” Boeing said in an emailed statement, *adding the deal still needs to be finalized*.”
http://www.bloomberg.com/news/2013-04-03/british-airways-boosts-boeing-787-order-with-iberia-set-for-more.html
I would not be surprised if the A350/B787 announcements come at the same time…
Reuters:
Airbus said it had increased A330 production to 10 a month from 9.5 a month as of the beginning of April.
http://www.reuters.com/article/2013/04/04/us-airbus-order-idUSBRE9330F320130404