Odds and Ends: No Boeing response to A321neoLR; After DL loss, Boeing wins Kuwait; It’s ‘huge’

No response to A321neoLR: Reuters reports that Boeing isn’t going to respond to the Airbus A321neoLR, the airplane intended to be a bonafide replacement for the Boeing 757.

We are very happy with where the MAX 9 sits and feel the competition is simply doing things to catch up with it,” Randy Tinseth, vice president of marketing at Boeing Commercial Airplanes said, Reuters reports.

There’s really no other choice but to say Boeing is happy. As we demonstrated in our three-part 757 replacement series in October, the 737-9 can’t be made competitive with the A321neoLR. As Tinseth notes in the Reuters article, and which we covered in our three-part series, Boeing could put another fuel tank (as does Airbus in the A321neo) in the -9 to match the range. But what Tinseth did not note in Reuters (or at least it wasn’t reported if he did), and which we did write, the 737-9 comes up more than 15 passengers short of the A321neoLR and 20 passengers short of the 757–and it needs 12,000 ft of runway to take off with a full load.

Boeing can’t upgrade the 737-9 to a “MAX 10” without an Extreme Makeover: new wings, new engines, taller landing gear, fuselage strengthening–all adding up to about three quarters of a new airplane.

Tinseth’s message also doesn’t resonate for another set of reasons: the A321neo outsells the 737-9 by two or three to one, depending on how some 737 Series TBD are assumed to be allocated. The A321neo has 709 orders from 38 customers, according to a tally by PDXlight. The MAX 9 has 217 orders from 10 customers, 100 of which are from United Airlines, resulting in a major customer concentration, never a desirable situation and one which lessors don’t like when considering an airplane as a leasing asset.

Airbus has 183 orders, 26% of the total, for the A321neo from 10 lessors. Boeing has 10 orders for the MAX 9, or 6% of the total, from two lessors, according to PDXLight.

PDXLight at the moment allocates all of LionAir’s MAX orders to the -9 while we think the preponderance of these will be allocated to the -9. Still, Airbus has nearly four times the customers for the A321neo and this sub-type represents 22% of the neo orders, PDXLight calculates–vs 9% for the -9 of the MAX orders.

Tinseth always puts on a happy face but we’d certainly not be “very happy with where the MAX 9 sits.” Nor would we believe the A321neo is “catch[ing] up” to the MAX 9. The A321neo has outclassed the MAX 9, and the sales figures demonstrate this. Neither the airlines and certainly not the lessors are stampeding to buy the -9.

Aerospace analyst Ken Herbert, of Canaccord (who has a Buy on Boeing), issued a note Nov. 20 in which he commented:

We believe that Boeing is facing a growing concern with its relative lack of competitiveness in the 200-260 seat market. Boeing’s 737MAX-9 has had limited success and the company is doing all it can to transition customers up on the 787 from the -8 to the -9. The last 787-8 order was in October 2013. This is basically the 757 replacement market, which Boeing continues to insist can be met by the MAX-9, but this is not a viable long-term solution, in our view.

After Delta loss, Boeing wins: The day after Boeing lost a 50-airplane order for wide bodies from Delta Air Lines, Boeing won a commitments from Kuwait Airways for 10 777-300ERs, with deliveries from 2016.

While not as important as winning Delta would have been, this does help the 777 production gap–as early as the year after next. We’ve been told by customers that Boeing has (or, rather, had) 8-10 empty slots in the second half of 2016. The gap grows dramatically in 2017.

It’s ‘huge:” After we broke the news Wednesday, that Airbus won the Delta order, The Seattle Times interview us for color for its story. Unbeknownst to either of us at the time of the interview, the commentary was more colorful than intended. From The Times:

Conversely, snagging a major U.S. airline in a head-to-head competition between the 787 and its rival A350 is a boost for Airbus.

“It’s huge,” said Hamilton. “Airbus’ widebody penetration into the U.S. market is minuscule.”

On Thursday, Dominic Gates wrote to us:

“In the cold light of day, this quote sounds a lot more graphic than it did yesterday.”

 

82 Comments on “Odds and Ends: No Boeing response to A321neoLR; After DL loss, Boeing wins Kuwait; It’s ‘huge’

  1. Leahy and Tinseth are salesman!
    Having said that I have to conclude that the comments of Leahy tend to have a little more credibility than his Boeing counterpart.
    Tinseth’s reaction to the 321NEO LR would get a “Must try harder” on my school report.

  2. Not sure where Randy’s had his head recently, but a quick look at A321neo vs 737-9 sales tells you all you need to know about who needs to catch up with whom.

    • As I understand, the A321neo has better capabilities in terms of range, hot-and-high takeoff performance, and maximum seating capacity. But presumably there are many carriers with route networks for which those capabilities aren’t needed, and then Boeing can make an attractive offer for the 737-9 MAX in terms of availability and price. I think Tinseth does the right thing when he’s expressing optimism; he’s the leader of a large (‘huge’) organization, and if he’s not optimistic then how could other members of his team be? (rhetorical question)

      • Yes the MAX9 will fit some airlines, but it leaves no move up when the segment shifts to the higher seating requirements. Its a nice incremental step.

        Airbus can simply offer a slightly longer A320 if there is enough market there, Boeing cannot do anything in regards to matching the A321.

        Which position would you rather be in?

    • RT has to defend Boeing, its his job.

      His personal views are not part of that (if you don’t want to sell your soul don’t take the job)

      Ego, he is a mouth piece for Boeing and that’s all you can expect from him. He is not nearly as good as the previous Randy but its still the same job.

      Behind the scenes he is probably screaming bloody murder about the position the Chicago Mafia has put him in. We all know who wins that one.

      Ultimately the avalanche will sweep aside the nonsense and something will get done, how long and what that something is makes for great speculation (or Boeing will continue to be badly managed and sink, less likely but you can’t discount it entirely, thee is some phenomenal talent in Chicago thee days)

      • As Yogi Bera once said, this is “deja vu all over again”.

        Boeing puts it head in the sand and dithers and denies the commercial realities of the marketplace just like it did when the NEO launched before the MAX and Airbus ran away with the market.

        This will end in a similar way with a knee-jerk product reaction from Boeing Chicago when the A321LR is ordered in large numbers. Then Boeing Chicago will look for someone in Seattle to throw under the bus. All this is very predictable.

  3. Hello Scott

    Reading the Boeing statement on Kuwait airways :
    http://boeing.mediaroom.com/Boeing-Statement-on-Kuwait-Airways-Intent-to-Purchase-10-777-300ERs

    It is an intent to purchase. So no LOI, no MOU, no Firm Order.
    No word on Kuwait airways site.
    A bit of a fight betweem Kuwait airways and Kuwait state ?
    Can Boeing really freeze these slots
    10 777-300ER from 2016 and then 10 A350-900 from 2019

    Not related, but questionning :
    It seems that for “subscriber only” articles comments are also “subscriber only”. Is it normal ?

    Bonne journée

    • Helpful stuff:
      Why did the FAA take so long to come out with an essentially complimentary certification ( the reverse case was closely timed ) for the A350XWB.
      Why the lack of ETOPS classification yet but for giving Boeing a lift up for a potential sales chance ?

  4. I would assume that Boeing is simply lacking the money to fund another major program before B777 and B787 are out of the woods.

    • You think 😉
      A company that has posted profits all the while and thinks about share buy backs?

      • They report (book!)uge profits but they actually don’t make these (at least not in the stated numbers) at the moment. These profits may come one day when production costs for the 787 are significant lower than today but that doesen’t help them with their CASH NOW. So that’s the Problem.

        • Boeing generated almost $3B in free cash flow in the first six months of the fiscal year, so they certainly have the capability to invest in product development — if they so choose.

          There are a lot of not-yet-recognized losses in the 787 production. These will reduce future profits, but will not impact the cash flow as the money has already been spent.

          • It really isn’t a question of funds.

            My guess is that after the 787 Mcnerney is under no illusions about his ability to oversee the execution on a major project. His natural response is to just focus on easier thingslike derivatives and take his $20M+ annual paycheck. #No Moonshots

  5. Can they not convert the 737-8 into a range suitable 757 replacement? Not ideal, but at least they can probably cover the capacity req of about 80% of 757 operators with that. 738 LR 4 days a week 787 3 days a week…

  6. “We are very happy with where the MAX 9 sits and feel the competition is simply doing things to catch up with it,”

    Maybe Boeing should rely less on feelings.

    Joking aside, Randy’s comment sounds bit out of this world and I’m sure he wouldn’t say it again if he had a choice. Like nothing happened since 2010. http://www.boeingblogs.com/randy/archives/2010/08/sharks_and_jets.html

    Putting ourselves in the (John Lobb) shoes of Boeing executives, what would be the best strategy at this moment? Announcing a new Boeing NB would create a meltdown in NB orders & deliveries this decade. So looking brave while working out scenarios is probably what we see. I think the 2030 scenario is off the table.

    There could be a viable strategy IMO, but it’s radical. Close a JV with Bombardier, they’ve got a good platform but are too small to push through. Set up a second CSeries line to boost deliveries. Launch the CS500, get GE/RR in with a second engine, outmaneuvering Airbus in the strategic, huge, 130-180 seats up to 2000NM segment.

    Meanwhile put serious resources on development of a higher capacity 170-240 platform able to carry containers, do quick turn arounds, accept future high BPR engines and able to do 4000NM in high MTOW versions.

    United will probably move to the A321 too, like AA, DL, Jetblue in the US. And the rest of the world. UA will probably be careful with their communication on their former owner. To not strenghten a growing perception of imbalance between the largest OEM’s.

  7. Since the Days of Mulalay and absorption of MD in the fold:Boeing heads are only interested the daily stock price(maybe the quarterly period and nothing more). With Airbus/EADS having the EU Commission/EU Tax Payers to pay for their endeavors……Boeing can’t compete and knows it. Boeing used to introduce a new-totally revamped project what every decade? But now it’s stuck in decadence, with all the 767/757 versions that will eventually need to be scrapped, who will the Carriers/Start-ups Turn to? Airbus………….Boeing thinks it can survive the future with less planes,it can’t. Embraer,Japanese,Russians, Chinese are all gearing-up to take some sizable market share in the single-isle market, Boeing will go down in 20-40 years time………a Dinosaur still peddling 737s,787s,777s that the World’s Carriers will no longer want. Even by then when it happens,a Government Bailout won’t save the Commercial Airline Division.

    New planes need to be developed to compete with the future onslaught of better/advanced planes from competitors. Consecutive “Moon Shots” need to occur, like a revamped 737 with a modular wing that can meet now-future specific carrier demands.The people that run Boeing now……..are poor in scope and vision…leading the company to its eventual doom.

    • “With Airbus/EADS having the EU Commission/EU Tax Payers to pay for their endeavors……Boeing can’t compete and knows it.”

      http://www.bizjournals.com/seattle/blog/2014/11/boeing-ceo-makes-more-than-his-company-pays-in.html

      Airbus, Boeing, Embraer, Bombardier, Irkit, Comac all receive substantial tax cuts, R&D support and political support in countries where that helps. Boeing has never been out of that playfield, contrary. On top of that it has/had a huge national defense business to milk. It was build on it.

      “Consecutive “Moon Shots” need to occur”
      Correct. And if there is a good business case the banks will lend the money. The technology to build something significantly better then the 737 seems there. A slightly larger, greener, better A320 like cross section seems low risk.

      • All the major manufacturers have substantial direct and indirect government support in the form of favorable government financial support, whether that be special tax provisions, infrastructure support, govt training programs, export financing assistance, military R&D that results in the tech IP being paid for by the people, but belonging to the company.

        the fundamental difference over the last 20 years is that since McD-D bought Boeing with Boeing’s money, the company has been run by people who care more about stock price than aircraft or the long term future of the company. American labor law encourages an adversarial relationship between companies and their employees. American finance law allows unlimited shenanigans.

        Airbus has been constrained by european labor and finance laws to play the longer game.

        I fully expect that over the next 20 years, McBoeing will:
        declare bankruptcy and be bailed out by the government (because nothing says free market capitalism more than the government bailing out capitalists after they have strip-mined the company’s balance sheet while sending workers to debtor’s prison)
        spin off commercial aircraft into a Cayman Islands subsidiary as a tax dodge
        systematically wind down all Seattle activities in favor of “business friendly” states in exchange for even more massive tax subsidies

      • 737 with a revamped modular wing (for different MTOW,Fuel Capacity,Passenger/baggage load, Range,runway length demands,etc.)would fill customers needs in the not too distant future. It would probably cost about 3 billion to do once the engineers and sneaky Boeing management teams deliberately take money out of the cookie jar (for other pet projects)…….which results in cost overruns.

        737 with a slightly bigger wing and lightweight is a must. with narrow-body aircraft already making the longer journeys and Legacy/Upstart Carriers being strapped for cash……you the airplane builder should build the plane many Legacy/Upstart carriers want; that is something affordable that won’t break the bank………sure as the revamped A319,320,321 line will fill that void and the new competitors coming on line in the very future will offer efficient long-range single-isle craft that can profitably carry 150-200 passengers around the clock 24/7. 757 program proves/proved you can cram a bunch a people in a tiny can for long distances and make money doing it.

        • 777X certification might be indicative.
          But a CFRP wing for the grand³fathered 737 would imho be more than one grandfathering level too far. But going by how far the FAA bent over for the 787 I wouldn’t think it is completely impossible.

          • Yeah, you have a good point. 737 with a modular composite wing, scaled down GEnx would be long term solution for all the Carriers wanting a single-isle with different capabilities.

            You should read Joe Sutter’s book on the 747,757/767 program. Then and now there is quite a bit of In-House Corporate Sabotage between all the Engineering and Management teams within Boeing. It’s amazing any planes get built.

            Cousin used to work on the MD80, MD11, and C-17 Program and is now with the Wide-body group up in Washington……relations between labor and Management are not that great. Management/Engineering teams high in the Offices barks out orders down below;hostile bureaucratic Order within Boeing that is making the company extremely in-efficient to stay competitive for the long run.

            On a good note, Boeing did pay the full-tuition for my Cousin’s 2 Engineering Degrees. Only thing now is, Machinist,UAW, and other Trade Union workers make more money than him when overtime pay/extra benefits is put in the mix. Although my Cousin now has “guaranteed employment” until retirement age with the 2 Engineering Degrees as a Production Manager, he makes less money than many of the Senior Hourly paid labor that work double-shifts on a regular basis. LOL!

          • (creative?) internal sabotage.

            You have that in every big company. One reason the A380 problems lacked attention was management being busy with musical chairs at the time.
            IMU the A350 gestation must have been influenced by an internal faction fight at Airbus. outcome let the A330 chug on and target the 777 capabilities range with a new design that has A350 continuity by name only.
            With sufficient supervision internal competition can be a good thing.
            Without it will invariably turn into a kind of cancer killing the host entity.

  8. Airbus had nothing to complete with the 757.the world didn’t end,Airbus concentrated on other things and did fine.737-8 seems to be competitive and even 737-9 has sold 200.what would you have done differently,bearing in mind 737 ng sold like hot cakes and there was more profit in widebodies.i would argue 787 technology was pushed a bit too far.whilst Boeing were forced into an iteration they didn’t really want to do,they also avoided a technology jump too soon.

  9. At one time Boeing had a legitimate complaint, Airbus was started and continues to receive pan European subsidies as well as individual state subsidies. .

    Europe also elected not to defend itself (you can argue that all you want but they hid behind a US shield all those years of the cold war that extended well past the WWII economies being rebuilt). What they did was fragmented and grossly inefficient (three Main Battle Tanks to defend the same turf!). Currently 3 fighters in production run off low rate extremely costly assembly lines.

    That is why they had no defense industry the magnitude of Boeing, MD, Lockheed, Grumman etc. For anyone to complain Boeing had the advantage of that defense business is a real spin.

    I can argue that by defending Europe the US spend trillions to subsidize the European economies that should have gone into US development. To date Europe still has not been able to have any serious military campaign without US help (Libya and the Yugoslavian mess)

    Boeing has now joined Airbus in leveraging welfare. US style. they pay no taxes, they have manipulated the system into allowing that. They also now get massive state subsides. Classic welfare pig.

    Europe however has a more, its us in this together attitude. They are not compelled to destroy unions and dumb down the system. They have real obligation and expectation to return that investment. In the US there is none, the idea is to have the lowest level beggar in a shelter paid for by the taxpayers limping to work to fabricate the worlds most complex objects.

    Airbus currently is doing far better being competitive and doing what pure capitalism is supposed to do (but then pure capitalism is nothing more that a dictatorship run wild). There is a balance and Boeing is failing as the US system allows that (encourages it)

    • The US never defended Europe. They “defended” ( my foot ) themselves on Europes turf.
      Then, German Ostpolitik was a much cheaper way to come to grips with the SU _and_ have a future. ( Except for Reagan who nearly managed to blow the whole world to “Kindom Come” ).

    • The famous French and Spanish 11 month year should give you a clue about European unions and competitiveness.while it could be argued that Europe hasn’t done enough to defend itself,the bomber gap turned out to be the USA having far to many.all that profit and technology was very helpful to Boeing.the Chinese don’t seem too bothered about ROI,at least in the short term.the west had better get a strategy of steady and continual technical improvement sorted out,or the engineering talent will leak away.

  10. Airbus is closing the order gap for the A330 further.

    Airbus announces development of five A330-Belugas, first delivery 2019. This may effect availability of the A330 more than for five units, because the Beluga may need much more time on the line.
    Source (german): http://www.aero.de/news-20695/Neue-A330-Belugas-fuer-Airbus.html

    France orders 12 A330 MRTT for delivery in 2018-2019.
    Source (german):
    http://www.aero.de/news-20714/Paris-bestellt-bei-Airbus-zwoelf-Versorgungs–und-Transportflugzeuge.html

      • Going by what flightglobal reports the french MRTT will be NEO.
        “Once produced, the French aircraft will be the first to be produced in an improved next-generation standard, outlined by Airbus earlier this year.”

        Seen anything that says the Belugas will be NEO derived too?
        the aero changes would be beneficial but fuel shouldn’t be that much of
        a concern for these transport operations.

    • the MRTTs are regular line items going to conversion as flyable aircraft.
      I’d expect similar for the future Beluga frames.
      You can’t mesh time intensive specials with serial production.

  11. How difficult would it be to downgrade the 787-8 to be a short(er) range aircraft and make it also turnaround faster?

    In terms of efficiency it should be state of the art, though it might be a bit on the high end with seats.

    But having smaller tanks, adapted landing gear, etc. to match a lower MTOW shouldn’t be too difficult to come up with, no? Add some Marketing to have bigger seats and sell at a low price to keep the market share. With enough numbers sold, the ROI on the 787 will be taking advantage.

    Question is just, would the 787-8 Regional be efficient enough?

  12. All of A321 NEO or A321 VLCC @ 240 pax or A321LR and similar Airbus product incursions into 757 territory (whereof down the street we may soon see A322, why not ?) are deliberate carefully timed Airbus provocations intended to spurring Boeing into committing to their 757+737 MAX combined family replacement (emphasizing the urgency) … but Randy knows very well that such a decision would be a shot in the leg of the MAX, making this project vulnerable (on top of being born “obsolete in the egg” for the lack of CLS) …

    Randy is singing “We’re fine – we’re fine !” … Randy’s swan song ?

  13. I’ve read your comments on aerospace commercial market for some time:
    However, since I entered the subscription zone, I feel I’ve been transported to an Airbus cheering section.
    Have you relocated to France?
    Or, is it the news cycle?
    You seem to have gone from objective consultant to cheerleader for Airbus.
    Will keep reading. Did Boeing step in your toes?
    Brent

    • It’s the news cycle. Early this year Airbus was the target on A380 and A330, grossly upsetting Toulouse. Now, you have McNerney saying no more moonshots and no 737 replacement for 15 years. You have Tinseth expressing satisfaction with a model (737-9) that is selling poorly in the market and is inferior to the A321neo as sales numbers attest, with Airbus marketing the A321neoLR to further marginalize the 9 MAX. The production gap of the 777 is a major concern. On Monday, we will focus once again on the A330 production gap. It goes back and forth. Boeing’s been press shy since the Al Jazeera thing.

    • Brent, Leeham takes aim at Airbus if he thinks they do or say dumb things. Also if Boeing does or says dumb things. Do you want people that name a cat a cat to shut up/ go away, if it’s about Boeing? Put pressure on him to change his tone? I support free speech.

        • You see factual errors ?

          Objective reporting is not cheerleading in my book.
          ( though looking at main stream media that most certainly
          is not every ones position. for political topics I see
          the complete opposite. )

        • Brent I think you are confusing opinions with observations.

          Airbus having the upper hand on narrow body is an observation widely shared.
          https://pbs.twimg.com/media/ByM0Ib3IcAAO_uQ.jpg

          WB A350 vs 787/777. Apart from Delta, United and AA also ordered A350s. Just like Singapore Airlines, JAL, BA, Lufthansa, Cathay and many other Boeing operators. It recently got ETOPS 330 out of the blocks.

          The 777X being heavy and available earliest 2020, the 787-10 being payload restricted and the 747-8 being the 747-8 are also not opinions but observations.

          Whether you like them or not is a different story. I would prefer a more balanced playing field.

          I think the upbeat, positive analyses on Boeing during the last decade supported by not addressing deferred costs but cheering quarterly results allowed Boeing to arrive where it is now. IMO you should pull those reporters/analysts into the spotlights.

    • Brent, if you haven’t already done so could you perhaps read some of the comments in this piece by Dominic Gates: Boeing loses $6B Delta order; gives a big boost to Airbus

      http://discussions.seattletimes.com/comments/2025059475

      Since the Second World War European airlines have bought a huge number of Boeing/MacDac airplanes. Yet, very few (if any) Europeans have ever made much of a fuss when their flag carriers — or any other European airline for that matter — have ordered aircraft that were manufactured in the US. In fact, the Boeing brand is generally well regarded in Europe.

      Now, when you read the comments in the link above, there are quite a few people who seem to be regarding the latest Delta order from Airbus as outright treason. It would be interesting to hear your views on why the Boeing cheering section in the blogosphere typically get so worked up whenever a major American Airline orders aircraft from Airbus.

      • “Yet, very few (if any) Europeans have ever made much of a fuss when their flag carriers — or any other European airline for that matter —”
        They did, just that there was no internet back then. Check out an organization called Airbus.

        • I don’t think you got the point of OV999: I think Airbus has any right to make fuss when someone doesn’t buy their aircrafts, as well as Boeing has. Competition. Completely different point. But I never ever heard of someone who said “You don’t purchased Airbus? Won’t fly with you”. When Lufthansa decided to by 777X, there was no “cry foul” as far as i remember. The normal passenger is just totally desinterested what aircraft he is flying. Why should they: The passenger is interested in price and comfort. The airline is interested in earning money with the prices paid by their customers. Neither normal passengers nor airlines have sentimental connection to an aircraft, just their interest. I tend to think that perhaps just former or current employees of one of the OEM come done to such conclusions like treason or never fly delta again … doesn’t sound that unprobable for a comment section of a newspaper in Seattle. Perhaps wouldn’t be different for Toulouse or Hamburg, however so far i didn’t observed it.

          • Not Exactly, Airbus/EADS is petitioning the EU Commission in Belgium to Manipulate/Force EU State Owned/Supported carriers and Abroad-Affiliates to buy a percentage of all types of Airbus/Subsidiary-Aircraft or face harsh tax penalties if they don’t…..this after Lufthansa agreed on the purchase of the 777xs with the further possibility of options on 747-8s beyond the 18 they have already agreed to purchase……..to replace the A340s currently in the fleet. 747-8s and 777Xs will be used on the most profitable routes, A350,remaining A330s and A380s relagated to least profitable routes.Ever Wonder why Hawaiian Airlines is going all Airbus? It’s parent company sounds all American “Ranch Capital”, but the real currency,players/investors comes from the EU/EADS close ties…so it’s only natural it go all Airbus. same with over-leveraged Jetblue……….EU investors.

          • I’d really like to read about this Airbus petitioning of the EU. Do you have a link? Thanks.

          • Yes, we’d like that link or a PDF of documents as well.

            Leeham

        • “They did, just that there was no internet back then.”

          What, there was no Internet when BA and AF bought 787s or LH bought 747-8s or 777Xs? Damn, I didn’t know that! Please show us all the complaints about those orders.

        • I’m sorry, but I just can’t see the relevance of the comparison of birth of Airbus to the typical knee-jerk reactions from the Boeing cheering section — and others — when US airlines are ordering Airbus aircraft. There’s nothing remotely equivalent to this “phenomenon” when major European airlines are ordering Boeing aircraft. Perhaps you can explain why?

          Today Airbus is thriving, but success was never a certainty. In 1974, Boeing vice president Jim Austin described the first Airbus product as “a typical government airplane. They’ll build a dozen or so and then go out of business.” Austin spoke from experience, and he was almost right.

          Europe had invented the jet engine, built the first jet and turboprop airliners, and was building Concorde. But Boeing and Douglas were doing to the Europeans what de Montfort had done to the Cathar heretics. The 116 options to buy Concorde had melted away. Dassault had produced the Mercure, a Boeing 737 lookalike, but was never going to sell more than the 10 copies it had foisted on France-owned Air Inter. West Germany’s first and only commercial jet, the VFW-Fokker 614, was a dog. Britain was delivering a few last BAC One-Eleven twinjets and Hawker Siddeley Tridents—like smallish 727s—to Romania and China. Thanks to some crafty, almost underhanded maneuvering led by a French engineer named Roger Beteille, Toulouse had one rock left: the Airbus A300B.

          Beteille was surprised when, in 1967, he was asked by his bosses at Sud-Aviation to form a team to design a jetliner. For 10 years he had headed a team in Cannes developing France’s nuclear missiles and its first satellites. Before that, he had been in charge of flight-testing the Caravelle, a rear-engine twinjet that had sold well in the late 1950s. United Airlines bought Caravelles, and the French almost had a deal with Douglas to build them, but the French balked at the upfront cost, and Douglas went on to build DC-9s.

          Europe’s mistakes taught Beteille some key lessons. “You cannot compete with somebody by doing what he’s doing—you have to do something better, or at least different,” he says. In the mid-1960s, with Boeing already building the four-engine 747 and McDonnell Douglas and Lockheed discussing three-engine wide-bodies with U.S. airlines, the field was open for Europe to build a big twinjet.

          Europe’s national aircraft industries were starting to work together, but jealousies prevailed. The Germans had money, but the British and French treated them as metal benders, not partners. The French government, embroiled in the summer street riots of 1968, had a record of seeking leadership in projects, then threatening to go it alone if their demands were not met. In Britain, many politicians and civil servants thought engines were a better business than aircraft. Working alone, none of them had competed successfully with the Americans, so Beteille’s mission to assemble a multi-nation team made sense. But it would be immensely complicated.

          http://www.airspacemag.com/flight-today/the-contender-3630193/?no-ist

      • The funny thing about all this guys at Seattletimes is that they forget the realities of a global market: Do they really believe their Seattle-build aircraft is really a seattle-build aircraft, instead of an aircraft with parts sourced from the cheapest vendor worldwide and that the aircraft build in Europe is really an european-build aircraft … with so many parts coming from the US or sold by companies of the US. What ever brand you prefer in aircrafts, all aircrafts are products of a globalised economy and globalized manufacturing chains.

      • Well, comparing article body with the comment section doesn’t really lead anywhere. The basic article from Dominic Gates is ( as ever ) well written and factual.
        What I noticed is that there is a trend to reporting actual sales volume ( both for the Delta deal and also the potential 777 sale announced shortly after )
        instead of $lumped_sales_and_options times $listprice equals $humungous_summ ;-).

        • No intention on my part to compare the article body with the comment section as the link is directly to the latter. I agree, though, that I should have written “some of the comments in the comment section” instead of just “comments” in order to make it unambiguously clear that this had nothing to do with the basic article written by Dominic Gates.

          • Long time ago when I looked for more in depth information on the A380 I found significantly more information on english language sites. Thank you.
            What I also found was a religious fervor in “rightsizing” and “homesteading” of foreign achievements by US posters.
            I’d never encountered anything of that magnitude of navel centric righteousness presented in a no holds barred way. Not in personal contact nor in perusing the nooks and crannies of the internet ( which from the beginning tended have a more “intense” discussion style ).
            I felt like I had to burn all my Apollo memorabilia to effect some balance 😉

    • Hi,

      The big change is that due the addition of “Leeham EU” there is MORE content about Airbus, but I don’t think that the objectivity has changed a bit

      Cheers

  14. Boeing built the 737-700ER and there was the A319LR. Trade passengers for gas and range. A 97 ton A320LR for transAtlantic or a 100 seat 737 Max 9 for transcons? Probably a market for a dozen here and there.

    Boeing has to wait a few years and see how the geared turbofan performs before they launch their next product anyway.

  15. at 97t MTOW a simple stretch of a321neo of about 4 meters is possible with around 3000 nm range…but is there a business case for it?

    • I believe there would be a significant market for a 8-10 frame stretch of the A321. It would have the same MTOW as that of the A321neoLR, thus it would have true US transcontinental range capability. In terms of capacity, it would have about the same number of seats as that of the 767-200 in a like-for-like, apple-to-apple comparison (i.e. when you subtract the floor area equivalent to that of the second aisle of the 762, the effective floor areas of the A321 and the 762 are about the same).

      • Correction:

        In the last sentence above; that should be A321 stretch instead of just A321.

  16. u r rigth they did explore a stretch of a321 in ’90s but found the range to be deficent…but now thats not the case plus they hv the top end of single aisle market to themselves for next 15 years!!
    a330neo style wing extentions should help take off performance

  17. Dear Scott, as a reader contribution, I’ve produced the following analysis which you may or may not find sensible. The conclusion is that at a production rate of 14 frames per month, the 787 program is projected to become cash flow positive.

    During the year 2013, at an average production rate of 6 frames per month, the 787 program added $5.7 bn to its deferred production costs, according to Boeing’s SEC filings. Boeing also billed 64 frames, yielding revenue of $6.4 bn under the assumption of an average price of $100 million for those early year 2007 orders. The assumption of a relatively low price will produce a more favorable conclusion, as will be seen shortly. Thus, the costs of the 787 program amounted to $12.1 bn in the year 2013.

    During the year 2014, at a production rate of 10 frames per month, the 787 program is on glide slope to add $4.6 bn to its deferred production costs, and bill 107 frames. Under the assumption of an average price of $100 million per frame, the costs of the 787 program will come in at $15.3 bn for the year 2014. Consequently, the marginal cost of increasing the production rate by four frames monthly is $3.2 billion.

    At a production rate of 14 frames per month, promised to be implemented in the year 2016, the annual costs of the 787 program will then amount to $18.5 bn. This number could perhaps be lowered by a few percent or so, through, e.g., the partnership for success program, but the average price assumption used is relatively favorable already towards the positive cash flow prospects. If Boeing then bills 154 frames annually at $120 million on average, the program will become cash flow positive.

    At this point in 2016, the deferred production costs will likely top out at above $30 bn, and considering the difficulties of reaching a positive cash flow, it is not easy to see how Boeing could begin to amortize this balance sheet debt appreciably. As a result, another conclusion of the present analysis is that Boeing in a few years will begin writing this debt down, at perhaps the rate of $1 bn per year.

    • I deeply hope Boeing will turn the 787 program into a revenue generator within say 5 years, but 2013 and 2014 adding 10 billion to the deferred program costs (weren’t they 25 billion already in 2013?) makes you scared. Debts of this size can start living a live of their own..

    • From January to October 2014 Boeing delivered 90 787. So 30 aircraft within 2 months to reach 10 aircraft per month for 2014.

      “Under the assumption […]”
      To much assumptions for me.
      I don’t know for what price Boeing sold these 787 and I also don’t know the costs at which Boeing is building the 787 today. I also don’t know how much Boeing has to pay for delays.

      • Because some data are confidential, some assumptions must be used. The number $116 million per 787-8 has been reported by a number of news media outlets, including LNC. Using the number $100 million produces a more favorable conclusion than $116 million, as mentioned. Some delay penalties may be included in deferred production costs, but it is likely a relatively small part of the total production costs during the year 2014. The well-informed blog nyc787.blogspot.com has followed the 787 program since the year 2008, and they estimate that Boeing will deliver 8 frames this month; however the number delivered does not appreciably affect the analysis above. Achieving a positive cash flow in the year 2016 is hardly an extreme conclusion; it’s rather consensus opinion.

    • Boeing continues to say it will reach positive cash flow in 2015 (whether this means January, June or December, we don’t know). Rate 14 is not scheduled until 2018. Rate 12 is, I think, scheduled for 2016. Boeing said on its most recent earnings call that it does not see a “path” to deferred costs reaching $27bn but immediately added a “but,” depending on some pull-forward of inventory on 787-9 and 787-10–but did not explain what this means, precisely.

      Hamilton

      • Dear Scott, Thanks for the input. I was wrong about the time of the 14 per month ramp up; I misread Boeing’s press release from January 24.

        If the 787 program can eliminate traveled and out-of-sequence work, they could let go of a number of contract workers. However, under any set of assumptions it is difficult to see how contract workers could possibly represent $4.6 bn, or 30% of annual 787 program costs. With a more favorable mix of 787-8 and 787-9 variants, Boeing can increase the average price per frame delivered between 2014 and 2015, but a 10% increase would only represent about $1.1 bn to $1.3 bn. All in all, reaching a positive cash flow in the year 2015 seems like a very remote possibility, but this is probably what most analysts have concluded already. Adding $2.5 bn to $3.5 bn to deferred production costs during the year 2015 seems to me like a fair estimate.

      • What is the Boeing definition of “positive cash flow”?

        The 787 is sold for more money than it costs to produce one aircraft or the price even covers all interest related to the project?

    • “At this point in 2016, the deferred production costs will likely top out at above $30 bn, and considering the difficulties of reaching a positive cash flow, it is not easy to see how Boeing could begin to amortize this balance sheet debt appreciably. As a result, another conclusion of the present analysis is that Boeing in a few years will begin writing this debt down, at perhaps the rate of $1 bn per year.”

      Keep in mind that this is not DEBT, it is simply money that BA has already used, and which simply has not been recognized as a cost on the financial statements. It’s not a really a balance sheet problem, it’s an income statement problem: BA could decide to take a hit and recognize all the outstanding deferred costs in one year, and suffer the stock price consequences for it (and I think they should do this) — but whether they do or not, does not affect their cash flow at all.

      • Isn’t that more like the maxed out credit card conundrum?

        I fail to see how creative bookkeeping makes a real world difference for the overall outcome.
        Note that imho the values reported as inventory are mostly unrecoverable.
        ( traditionally inventory stuff is “frozen” capital. You have spent money on it but it also presents a balancing value. Not in this case here. )

  18. According to the A330CEO order gap

    There might be a production gap but has Airbus the manpower to fill this gap? The all time high of A330 production was in 2013 with 108 aircraft per year. This year maybe around 100 aircraft deliveries or even less together with A350.

    The A350 production is now at 3 aircraft per month or 33 aircraft per year. With the expected ramp up of 1 aircraft for each of the two following years Airbus needs more workers on the A350 FAL.

    Hire and fire is not so a French or European business therefore the skilled workforce will grow rather slow. Airbus needs more workers to build the A350 and A330 at combined production rate of more than 10 aircraft per month.

    Is it really an order gap or does Airbus hesitate to offer these slots? A Chinese A330 FAL could be a solution.

    • The order gab on the A330 will be there, but more moderate as suggested elsewhere.

      Assuming:
      – A330CEO production ending in 2018.
      – probably some green A330 CEO airframes will be produced for ’18-’20 commitments.
      – A330 NEO deliveries starting 2017

      I sketched this overview a while ago:
      http://i191.photobucket.com/albums/z160/keesje_pics/A330B777gap_zpsc7e0ba66.jpg

      This excludes the new DL order for 25 A330 NEO’s delivered from 2017. I assume the MRTT’s for the french AF will be NEO’s, deliveries 2019-2024.

      I seems Airbus is able to keep A330 deliveries above 80/yr for the 2015-2019 period, without any additional sales.

      If the Chinese A330R order comes through, likely the majority will be NEO’s.

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