Pontifications: Looking to year-end

Nov. 30, 2015, © Leeham Co.: One month to go to the end of 2015. What’s left to come?

  1. The first Boeing 737 MAX is rolling out of the factory Dec. 8. For reasons that defy obvious explanation, Boeing is low-keying this event. Only a few members of the press will be there with the employees. This is a Big Deal, yet Boeing isn’t making it one. Strange.
  2. The final race is on to wrap up orders by the end of the year. Airbus salesmen are scurrying around. So are Boeing salesmen. So are Embraer’s. Bombardier’s sales force is taking a targeted approach to sell its CSeries, but it’s unclear if there will be any deals announced by the end of this year. United Airlines is a big target, but there are some interesting goings-ons there (see below).
  3. It’s pretty clear Airbus will win the order race. Boeing is trailing far behind. At the beginning of the year, Boeing predicted sales-to-deliveries (Book:Bill) of one. More recently the tone changed to saying it would be close to one.
  4. Embraer is having another good year with its E-Jet sales.

AerCap A319 Moves 92015

China Southern, Spirit Airlines A319s going to United Airlines. Note the part-out destination for the Boeing 777-200ERs. Source: AerCap.

United Airlines to take more used A319s

It made news in aviation circles when, early this year, mega-lessor AerCap said it will lease 25 A319s currently operated by China Southern Airlines to United Airlines in the coming years.

What was completely missed until last week was a reveal in September that 17 more A319s, these operated by Spirit Airlines are also on their way to UAL. As with the China Southern planes, these are also owned by AerCap.

Unknown to anyone but the principals, of course, is what the lease rates will be. In general–and not related specifically to the United deal–people remark that Bombardier’s biggest competition for the CS300 is “$100,000” (per month) A319s and Boeing 737-700s.

Indeed, AerCap is placing 27 737-700s with Southwest Airlines that have been operated by Aerolineas Argentinas, Transaero, China Eastern Airlines and China Southern. Southwest has a long history of opportunistically acquiring used -700s (and before this era airplane, 737-300s) at the right price, whether by purchase or lease. (I’m not suggesting BBD had any chance of selling the CS300 to Southwest, but rather to illustrate the point.

  • Delta Air Lines just announced it will refurbish and keep 14 Boeing 757s longer than expected. Failure to achieve a new pilot contract to support a new airplane order for Boeing 737-900ERs was given as the reason.

 

 

 

56 Comments on “Pontifications: Looking to year-end

  1. This is a Big Deal, yet Boeing isn’t making it one. Strange.

    It seems that after the big A380 reveal and subsequent issues, as well as after the 787 rollout on July 8th 2007 and subsequent issues, both Airbus and Boeing have somewhat lost their appetite for big celebrations around rollouts. There wasn’t a big fuss around the A350 rollout, nor around the A320NEO rollout. The A320NEO one looked even more low-key than the A350 one.

  2. “◾Delta Air Lines just announced it will refurbish and keep 14 Boeing 757s longer than expected. Failure to achieve a new pilot contract to support a new airplane order for Boeing 737-900ERs was given as the reason.”

    I think for some specific routes in the Delta network, these aircraft are irreplaceable for now, (too..).

    Keeping a bunch and effectively parting out others, go for surplus, have a dedicated crew going after the engines. Operating costs can be controlled, fuel is low. And as I said, they don’t have much choice either, the 763ER’s have significant higher unit costs.

    http://cdn-www.airliners.net/aviation-photos/photos/9/2/9/2302929.jpg

    • The main driver in fleet renewal are fuel prices. Presently they are quite low and expected to remain low for an extended period of time. If fuel was $150 a barrel, everything else being equal, I am not sure Delta would have elected to keep the 757 in its fleet much longer.

  3. Regarding 737 max: Airframe wise it’s no big deal. So if there is something that Boeing didn’t want to answer questions about, I would be thinking about the engines.

    • So by avoiding a big celebration at rollout no one will ask them questions about the engines? Right. Maybe they have just learned their lessons and are indeed under promising and over delivering from now on.

      • Yes.
        Boeing can trade access for favorable reporting. My bet is that only the the mot friendly, malleable media is getting the invite. And I wouldn’t be at all surprised if hardcore, technically savvy Aviation types get shut out.

        Boeing are the masters of PR. They have no peer in this area.

        • I’m sure you would have found some nefarious reason if they had made a big deal. Still nothing beats Evil Boeing conspiracy theories!

  4. 1500 A319s and 1200 737-700 ordered and most delivered.

    – Fully crew /MRO compatible with the larger types.
    – Mostly delivered in the 2000-2010 period, retire 2025-2035 time frame.
    – Mature, predictable, good MODS/STC’s/ upgrade options.
    https://www.modstore.aero/modifications/type(27)/Airbus_A319
    – Overbuild frames & de-rated engines, probably no hangar queens.
    – Most with large airlines, ok MRO history.

    A potent used fleet giving Bombardier, (less) Embraer, Comac headaches. Parting out a few hundred only makes things worse.

  5. “The first Boeing 737 MAX is rolling out of the factory Dec. 8. For reasons that defy obvious explanation, Boeing is low-keying this event.”

    The first 737 made its first flight in 1967. It cannot be compared to the 787 which was an extremely innovative aircraft. There are few good reasons for Boeing to trumpet the 737 at this stage. It may have an extraordinary backlog, but in the context of a shaky world economy, and at a production rate of more than 50 a month, this could shrink fast if the book to bill ratio drops below 1.

    Boeing has always been an innovative company and it was the main factor that kept it in the lead for so long. But today the future of Boeing rests for a good measure on an airplane that was designed more than 50 years ago, and which has increasing difficulties keeping up with the competition. The MAX will mark the end of the 737 for sure. I just hope it will not also mark the end for Boeing.

    • Nevertheless, the 737 could very well mark the end-of-the-road for Boeing because their other two programs – the 777 and the 787 – aren’t looking so hot. At this point, there is no reason to believe that the 787 will ever be a money machine, and the 777x seems to be only popular with the mideast airlines (like the A380). So that leaves the 737.

      Reports thus far indicate the 737 may not be the wonder-bird it was touted to be and may suffer some serious competitive headwinds vs the A320. And as far as the 737-9 ever competing against the A321: forget about it.

      So. given all this good news, where is Boeing’s next “Pot of Gold”? Where is their next “Money Maker” of an aeroplane?

      Indeed, for Boeing, that light at the end of the tunnel just may be the headlamp of a high-speed locomotive.

      • Jimmy, please do share these “reports” of the MAX headed for major headwinds wrt the A320″, and this being the “end of the line” for Boeing since the 7777 and 787 not doing so hot.

        Most curious

          • Lots of deferred costs on the 787, no question. But the cash has already been spent, so there is little risk to Boeing’s financial stability or cash position, only the quarterly financials will not look so pretty once they start realizing those deferred costs.

      • Jimmy the 787 is still handily outselling the A350 and as for the 777x I didn’t realize that Lufthansa, Air Nippon and Cathay Pacific were middle eastern!
        Really people need to dial back the silly vitriol towards Boeing, it clouds their judgement.

        • CX, LH and NH have indeed ordered the 777X. But as with the A380, the ME3 make up the bulk of the orders and the backlog — about 75% in case of the 777X. But the availability dates are pretty far out at the moment, fuel is cheaper than it has been for a long time, and used 772/773 are inexpensive, so there may not be so much urgency for other operators to order the 777X quite yet. Doesn’t mean it won’t be a success though.

          • What you say about the 777X applies equally to the 787, A350, C Series or any other new aircraft; and even older models like the 737 and A320. We may have already entered a slow growth period. The economic indicators are certainly pointing in that direction. So as the United States seemed to be on the verge of emerging from a long economic recession the whole planet appears to be heading in the opposite direction, and may very well take the US back into it in the process.

          • After a freak’ in long (6 yrs..) recession robbing many of their jobs and perspectives the Netherlands have been on the way up since last year. If we are, most countries around us are too usually..

      • Boeing has a 1100+ firm order backlog for the 787 as of today ~10 years of production. If Boeing can’t burn off their deferred costs in 1100 firm orders, they don’t deserve to be around. This is hardly a problem.

        As of today, the 777 is the most successful wide-body in history and they did it (shock!!) selling a ton to the ME3. If I follow your logic, the 777 is a mediocre airliner at best. Let’s keep going, except for the USAF, the KC-135 was a dismal failure!

        • Boeing has a 1100+ firm order backlog for the 787 as of today ~10 years of production.

          At the moment they appear to have 784 frames in the backlog.
          6.5 years at 10/month resp 120/year.
          4.5 years of they went to 14/month now.
          http://www.pdxlight.com/787a.png

        • Garret: Sort of depends on how you look at it.

          A330 may well surpass the 777 and if you add in its a derivative from the A300 probably does. (A340 as well).

          As I recall the A330 is well over 1000.

          We can also start new and it still stands up but then you can’t add in the 777X orders as its a derivative as well.

  6. The PDX Light site gives 268 Max orders until Nov 13.

    Then there are always NG-MAX conversions, cancellations and a few new NG orders. In my opinion they successfully pumped up 2013 en 2014 sales with “undisclosed” orders and lessor commitments for 400-500 frames.

    So if they have ~300 nett NB orders this year, we have a book to bill rate of .6-.7 And a drop of 600 compared the last year.

    Not everyone has woken up (or was willing to smell the coffee) & it is not something the board wants to discuss in detail with analysts around year end. Because it isn’t an industry wide trend either..

    • keesje:
      “In my opinion they successfully pumped up 2013 en 2014 sales with “undisclosed” orders and lessor commitments for 400-500 frames.
      If that was to be the case, why put just 400-500 undisclosed orders, why not 1000-2000? It will surely make the order-book sexier for sure.
      Out of the undisclosed customers, weren’t Easyjet one of them with 75? I’m sure there must be close to 150 if not 200 for Chinese airlines in there as well, so what is fake about that 400 undisclosed that you want it so bad to be true.
      Not defending any company here but that is just plain silly.

      • Oscar: Are you suggesting 75 737Max for Easyjet? Since when has Easyjet shown any interest in the 737Max?

        • Roger,
          My bad,
          I got that Jet thing completely wrong. I meant to say Jet Airway (India), not EasyJet (an all Airbus customer).
          But the rest of the comment stands.

          • Not at all. If you ad up all undisclosed (incl. jet airways) and undefined (unclear end users, soft bail out conditions) lessor commitments, you end up way over 400-500 aircraft.

            Nowhere I state they are fake, just pulled forward to mistify the NEO dominance since launch and protect perception driven stock value. McNerney is gone now, here comes reality.

      • “why not 1000 – 2000?”

        because that would make even the most supportive observers suspicious. You have to do it smartly.

          • Well…with your type, Pickles, Boeing doesn’t need so much genius – you seem willing to uncritically accept about anything they say.

          • Sorry Jimmy when Bjorn or Scott, serious analysts, start lending credence to whacked out conspiracy theories that are floated by people who have obviously lost balance when it comes to views of Boeing then I will listen seriously.
            On another note you seem to accept any kind of positive news without grasping at some negative. In these comment sections you have plenty of company but don’t let an echo chamber be your guide to a more truthful view of things.

          • Pickles,

            are you able to consider the possibility that Boeing actually did pull forward orders for obvious reasons?

            They did so with profits, pushing out costs. Pulling forward orders to back it up is in line.

            It took a docile part of the community some time to see what they managed to ignore before, blinded by “cashflow”, “customer commitments” and notoriously incomplete comparison slides by the Randy’s.

            https://leehamnews.com/2014/10/22/boeing-earnings-margins-up-cash-deferred-costs-disappoint-some/

        • Smart ??? why use this nice wording when McNerney is around ??
          He got the monies but left the company in quite a poor state …

          If Airbus do not have competition (after the end of 737) it will follow the same route down hill as Boeing … a chance for Bombardier finally ??

    • “Undisclosed” orders for 737 reached an unbelivable high figure end of last year .. Scott says those were real orders
      Now back to about 100 units I suppose that most of the 2015 sales were already included in 2014 sales

      • The current total, according to Wikipedia (which relies on Boeing’s own published order data), is 659 orders for undisclosed customers. Not much higher than this time last year, but on the other hand not many have been disclosed, either.

          • Running the Boeing’s own “Report by unfilled orders” and choosing “Orders by customer” shows a total of 972 unfilled 737 orders to unidentified customers. (This year’s number is much smaller, but the number of undisclosed orders in the backlog is still very high.)

          • Thysi … You are right !!! sorry for my comment which refer to 93 undisclosed orders ADDED this year and not the total

          • Correct, only 93 orders by unidentified customers this year. But the current total of 972 is almost one third of the total number of 737MAX orders. I am baffled why such a large proportion of customers cannot be disclosed.

  7. I can’t see why Boeing should have a big Christmas party for all the analysts,but I think you are right to be suspicious. They had quite a bit more to do than Airbus with the Neo. Are you getting any hints of things not going well? Were you invited? Bitter perhaps?
    With the A319 a quick bit of maths seems to indicate that that they are either much cheaper than I thought or someone is swallowing a huge loss. How old are they? Are these Chinese built? (Not that it should make any difference) lt was implied that these were only for the home market.
    It always seems crazy to me that airframe manufacturers chase end of year totals like a car dealer looking for a bonus. Is it a good time to buy?

  8. If used aircraft prices are low, that will temper the demand for production. 600/yr is reasonable in 2020. How many this year? Let’s see if either can actually produce a benchmark of 550 in 2017. 700 or 750 per year would be a spike in demand if it materialized before 2025.

    • What is or replacement and what is for growth?

      Cheap used frames could dampen replacement but they will not have much impact on demand for growth.
      ( “real” growth not zero sum growth of a select market participant.)

  9. The newsworthy event re the max is when it’s successor will be ready and what it will be ready.

    PS Boeing’s sales force may be all male but they are now called salespeople not salesmen.

  10. “Failure to achieve a new pilot contract to support a new airplane order for Boeing 737-900ERs was given as the reason” strikes me as some classic management-union sparring by Delta. One suspects it has much more to do with low fuel prices making refurbishment a better mid-term value play (particularly given Delta’s TechOps and comfort with older airframes), but it’s handy to blame the pilots in public pronouncements.

  11. Here we go again. The last person in Seattle please turn off the lights cause those stupid folks at Boeing are failing the aerospace industry again. Man I wish Boeing would read the posts on here so they could stay in business just a little bit longer.

    Scott, were you not included on the invite list to the 8th roll out? I hope so, you need to be there because maybe you can share pics of those horrible engines hanging off that tired dated MAX. No way it will every meet the A320NEO.

    Randy – if you’re reading this tripe please make sure to get Scott an invite so he can tell the restless natives things are really as bad as they seem posted here.

    • Nope, not invited. Not on Boeing’s “select” list of journalists.

    • I hope being / remaining on the select list doesn’t require leaving stuff out, avoid asking questions nobody wants to hear.
      Just the 2015 deliveries, no orderscomparisons, no deferred stuff, no 747, no Delta, no 321, just qoutes, no double checking, questions in writing 2 hours before the conference. The buffet is open.

  12. I think every one must watch their tone, not refer to unconfirmed rumors and demonstrate a positive, constructive attitude. We need that ” can do” mentality and if you can’t follow go out of the way! No room for negativity, know your place. Exceptionalism in operation showing the rest how it should be done, like in the early Dreamliner days.

  13. So Boeing and the 787 are dead. Let’s look at the facts. The 787 currently has 1,124 orders for all three models. Since June 28, 2013 Boeing has delivered 340 frames. Compare that to Airbus great program the A330. The A330 has 1,584 orders over it’s entire life. 1,206 are flying but 1,230 have been delivered. That leaves the program with 354 orders remaining to be delivered, which includes the A330-800 and 900s. Now if you take out the 135 A330-900 and 10 A330-800 orders, the A330 CEO program has 209 orders left. There will need to be more low ball sales to get to keep the market dominance that so many on here say is happening. They’re coming cause China has a completion center and something needs to be completed in it. Now let’s look at the A350 program. To date the program has 787 orders (I wonder how that happened?), and in 2015 it has collected 14 orders. We won’t talk about the net for the year. The A330 program has collected 119 orders, but the A350 program has won 14. The 787 program has collected 97. Keeping with the theme of not discussing net we’ll leave it at that number. The A330-900 has gotten 25 and the A330-300 has gotten 76. Again, the A350 program, the newest program in the Airbus widebody fleet has collected the smallest number of orders in the Airbus stable of widebodies. this year. Not only is it losing to the 787 but it can’t even beat the dated stuff being sold inhouse? Rolls is going broke trying to keep up with all the XWB demand in addtion to the Trent 7000 development!!! And, the A350 has delivered 10 frames to date. I guess a 1:1 ratio of orders to deliveries is going well for that program? As I’ve often said the A330 program is not going to kill the 787 because sales continue to happen despite the exstence of the A330-800/900 and its holding its own. What is not holding its own is the A350 program. The one big bright spot will be the rewinning of the EK A350 order and maybe that will help the 1000 get to over 200 units? I think there are some other potential wins for the program if those customers don’t opt for the low ball deal of a A330NEO? There is much said on here about the 777X but compared to the A350-1000 is has moved the needle faster. Wherever the customers come from, they seem to head to Seattle faster than they are to Europe.

    The 787 might be a dog, but it is dog that continues to hunt and bring back 97 wins this year. At this rate, it will make money well before the A350 program reaches 100 deliveries. Given the current output I expect that to be more than 5 years from now.

    I know all the fans will say, the slow pace is driven by ensuring the frames meet performance expectations, versus the 787. And, the customer feedback has been nothing but expectional on all of the 7 daily flights flown with the current huge fleet of 5 revenue flying frames. I wonder, how do paying customers even fly on those flights when most of the seats are filled with the service personnel needed to ensure each flight leaves on time without incident? When are the training wheels going to come off the program folks? Will it be when the revenue flight reach 10 flights per day, or will it be in year 2 of service? Given the current rate of widebody success at Airbus, as they are right now, the A330-900 will continue to capture more sales than the A350-900. Again, to date it’s up 9 – 25 to 14.

    I just wish people would stop this kind of stuff and show respect for the industry because we need both OEMs to continue to grow the technology. When the fan gets too caught up and fails to understand that both companies need each other to survive, we end up with warmed over programs. Please respect the industry enough to stop the mess that’s been shared on this site. We need new single-aisle frames badly, and we need to push to kill dated programs, so we move the needle of development in ways that grow and develop talent. Stop the, “my company is better than yours”, crap. Spend your time pushing the industry to produce solutions that move technology forward. Yes there will be misses, but we should not spend our time attacking those willing to try. NEOs and MAXs may be safe for the financial markets, but they’re worthless to to the industry. When you take less risk the industry is weakend and its development capabilities are weakend also. Boeing is not displaying the MAX because MAX is not worth the fanfare. Both the NEO and the MAX were terrible for an industry ready to go to the next stage of product development. So, please think before you type and work to be a part of the voices asking for the next stages of product development.

    I pray every day that the A330NEO is failure so Airbus will actually commit to being a new generation company. Kill all NEOs and let’s get to working on a new single/double aisle solution. Force Delta to understand that playing old might mean creating an offer customers might appreciate.

    • About half (36) of the 787 orders for 2015 are “undiscloseds”.
      Is that correct?

    • L7:

      So we are undermining the industry by being negative? Wow, I did not know we had that much HP. Surely if we did Scott would have been invited to the 737 MAX rollout!

      I for one am not negative about the 787, I am negative about the manage screw ups of biblical proportion that lead to its problems.

      I am fine with derivatives. There is not enough improvement in the area to justify all new. 787 proves that for all its advances (structure and the more electric architecture) its not a quantu7m leap forward. 20% at best and a NEO A330 in its route structure achieves that.

      In the 787 case Boeing needs a successful program to start recovering form the 787 debacle quicker. I don’t think the 737MAX should have been launched but it is and it will be reasonably successful.

      777X the same. If you can’t make a 40% improvement why spend 10s of billions getting a tad more than a 777X derivative? My only quibble is it needs to be the BEST derivative possible not a minimal one.

      ITs also clear this is the end of the 737 line though not the A320 (they can still put an all new wing on it and get another 5-10% improvement ).

      As noted, if you want the industry to stay alive it needs profits that allow it to make those kind of screw up they do (A380 and 787 management)

      Sad story when the B767 could have had new engines and winglets and come close to the 787 in efficiency.

      I do suspect Boeing will pull the trigger on the MOM soon and then we get to see where that goes.

  14. Apropos:
    Do the recent NG to MAX upgrades sit well with the requirements for transitional production bridging?

Leave a Reply

Your email address will not be published.