Grounding takes toll on Boeing 737 MAX investment desires

By Scott Hamilton

March 2, 2020, © Leeham News, Austin (TX): A poll of people attending a major aerospace conference here today illustrates the hit Boeing took from the trouble with the 737 MAX.

The audience was asked to rate the Airbus A320neo against the 737-8 MAX for financier/lessor risk-reward investment.

The A320neo was rated favorably by 70% of the those voting. The MAX 8 was rated favorably by just 19%. The remainder rated the two planes equally.

In the era of the A320ceo and 737-800, the Boeing tended to have an edge by a few percentage points in this largely American audience. Audiences at similar European conference tended to tilt toward the A320ceo in past surveys.

In the same polling at this year’s conference 75% of those voting believe Airbus has the better narrow-body product line. Only 19% chose Boeing.

Changed circumstances

Circumstances are dramatically different than in the past, of course.

The MAX was grounded worldwide beginning March 10 last year. The US Federal Aviation Administration was the last regulator to ground the airplane, on March 13. Although Boeing hopes to have recertification mid-year, none of the regulators has issued a timeline to do so.

There are 385 MAXes that were in service when the groundings were ordered. Another 400+ were produced between March and mid-January when Boeing halted production. Boeing has not announced a date to resume production, suggesting only that it will occur about two months ahead of recertification.

Spirit AeroSystems announced it will resume production this month. It is widely assumed Boeing will restart the Renton (WA) final assembly lines in April.

Wide-body preference

Boeing was the clear winner in audience polling for wide-body investor and product line preference.

The 787-9 was the easy winner as the favored airplane for lessors and financier investment, capturing 57% of the vote. The A350-900 was the distant second at 18%. The 787-10, A350-1000 and 777-9 trailed.

Fifty-two percent of the voters rated Boeing for the best wide-body product line. Twenty-four percent chose Airbus, with the balance rating them equally.


25 Comments on “Grounding takes toll on Boeing 737 MAX investment desires

  1. @Scott, how do you think the on-going tarrif tit-for-tat with Europe is influencing the opinions of such conference attendees?

    As Leeham have pointed out a few times recently, there’s a drought of 787 orders these days. Either that 57% in favour of the 787 has already placed their orders, or they don’t all see a reason to put their money where their vote is…

    Doesn’t sound like anyone likes the 777X or A350-1000. Oops?

    The A320neo vs MAX vote, in a US audience, is really quite stark. I wonder if the vote reflects professional opinions, or does it reflect what the customers of lessors / financiers are saying? For that to be the received view even with trade tarrifs increasing the cost of the A320neo vs the MAX, is startling.

    It’s far from the ringing endorsement Boeing and its airline customers need if it’s to persuade paying passengers that all is well post RTS. Something along the lines of, if lessors / financiers aren’t prepared to buy it, why would a paying passenger want to fly on it?

      • No point interjecting facts into the discussion.

        This board is for Airbus Fan Boys only.

        • Sorry that we appear to squat on your home turf Fan Arena :-))))))))

    • You can wag the dog via voting such things.

      Looking back:
      IMU dissing the A350MkI and the A320NEO was mostly done by those invested in the encroached upon product ( Dreamliner resp. 737NG )
      Is the 787 the last Boeing product that sports a”well managed value assay” ? ( careful pimping of the value chain for boosting same, a technique Boeing seems to have excelled in versus Airbus.)

  2. Scott, should para 3 be “The A320neo was rated MOST favorably by 70% of the those voting. The MAX 8 was rated MOST favorably by just 19%. The remainder rated the two planes equally.”?

  3. Pretty much means nothing unless they are going to shift, and then you have the delay of building a fleet.

    And irony of C-19 and a grounded MAX.

  4. “The 787-9 was the easy winner as the favored airplane for lessors and financier investment, capturing 57% of the vote. The A350-900 was the distant second at 18%. The 787-10, A350-1000 and 777-9 trailed.”

    Someone forget the A330neo.

      • A330NEO: Air Asia that was in trouble already is now deferring (or working on it) 70 some orders

        The market is saturate and fragmented right now. 787 is doing the best in that market. ANA just ordered 15 more.

        So its a rate 8 order area now, not 14 that was way to high but cash greed drove it.

        A330NOE/A350 compete with each other so the orders are split and lower for each.

        If you operate A330, you want it to do the same as an A350 so they keep jacking it up.

        Long term its a rate 2 or 3 line like the 767 is now.

  5. If it is true that Airbus has has lost sales to Boeing based not on merit but availability then Coronavirus cancelations and be double bad news for Boeing. First Boeing will loose Max737 orders due to airlines canceling orders to reduce capacity or manage their finances. Airbus will also see that. But Airbus cancelations will open A32x slots which means Max737 customers who may have preferred the A32x but could not order one due to slot constraints will be able to switch. The net effect will be that Boing gets hit twice and the Airbus backlog is buffered by the switchers.

    Us outsiders will be able to see if the narrative that there are “reluctant” Max customers, Boing customers who would prefer to be Airbus customers holds up.

    Finally if the above is not bad enough, Max contracts probably have a “customer can cancel if the delivery delay exceeds x days” clause. With the grounding coming up on a year it must be getting close to that. For airlines who want to defer or cancel due to Coronavirus it may be easier for Boeing customers than Airbus customers. It will also let Boeing customer who want to switch do so without a penalty.

    In short bit of a perfect storm.

    • @jbeeko
      I totally agree with your assumption. I’d just add that it could well be a catch 22 situation for both Airlines and Boeing. If an airline delays delivery, they lose the right to cancel. On the other hand, Boeing restarts production hoping to avoid cancellations only to find Airlines will delay deliveries. This really is a perfect storm.

    • The logic issue here is that anyone who wants to order is also subject to the same C-19 issue and won’t be able to afford it, slots or not.

      Some may if the cash balance is good, many not and you still have the conversion factor.

      And you are coming up on the sweet spot of delay that you can cancel your order and negotiate new terms with Boeing. Take it or leave it (one year delay is the trigger area)

      Boeing does not have to ramp down, Airbus will have to and there go your slots.

      Its not an easy slam dunk one auto win and the other auto loose.

  6. In a few years we will realize Boeing has a gap in its WB portfolio. Where the 777-200ER & 777-300ER used to dominate.

    The 787-10 & 777-8 are compromised by design 300-350 seats 8000nm. Boeing will deny until they have a solution, probably a beefed up 787-10.

    • “… probably a beefed up 787-10.”

      More like a major revamp?
      I find it amusing that 789 and the decidely bigger A359 are more or less matched on fuel for similar payloads and distance.

    • The RR Ultrafan should do wonders for the 787-10 if it fits beneath its wing,
      similar for the A350-1000 that in its ULR Ultrafan version will cause some troubles for the ME3 as a stopover will no longer be required. Still the ME3’s might develop its fleets cabins quicker than LH,BA, AF/KLM and thus be the preferred choice.

      • So, RR comes out with its THIRD engien for the 787?

        I don’t think we have seen that since WWII.

        Of course it can fit, you may have to compromise on the optimal, fan diameter but as we saw on the 737, there are tricks to play.

        But who is going for it after the Trent disasters?

        Fleets are moving to the Gen-X. Which can be pipped again. They sure are not going to want to do a new engine (let someone else prove it works)

        How many new engines can RR do before they go belly up? You have to get some kind of return. They are saying no profits on the A350-1000 variant. And they are going to offer a new one to loose more money on?

        This on top of the issue with the Trent 900 Emirate won’t talk about but are there.

        • @Transworld

          Rolls Royce has a long history of producing excellent aero engines and
          your comment “I don’t think we have seen that since WWII” is particularly unwarranted.

          In 1946 Phil Taylor the ex Chief Engineer of Curtiss-Wright visited Rolls Royce and acquired a licence for the RR Nene. The Nene was tested by the US Navy and passed it 150 hour American Type Test with flying colours. At the time no American jet had succeeded in passing the test without the replacement major part replacement. The GE I-40 (J33) engine which as large and as heavy as the Nene was only rated at 4000 lb thrust compared with the Nene’s 5000 lb.

          The outcome of test test was that the US Navy then insisted that Pratt & Whitney (the US navy’s main engine contractor) inspect the engines which led to P & W taking out a licence for the RR Nene. The P & W produced Nenes was called the J42 but was also given given the name the Needle Engine because of its effect on the US engine firms.
          For more details concerning the licenced production by the US of British jets is given in Sir Stanley Hooker’s autobiography ‘Not much of an Engineer’.

          The Nene at the time was about 20% better that comparable US jet engines. The new RR Advance is aiming to be beat current engines by about the same margin.

          If Rolls Royce produce a reliable versions of the Advance that fufil their performance targets then Airbus could create an A350 NEO with a fuel burn airlines would find hard to resist.

        • Large turbofan engines have always come in families and had major changes over the years.
          The TF39 (43k lbs thrust) became the CF6 and the early variants bear no comparison to the last of the line (70k lbs)

          Same went for the RB211 line and even for the smaller end with the CFM56 line.
          Even before the turbofans , types such as the JT3 first came in jet then turbo fan versions ( to compete with RR turbofan only Conway) and then further developed as the JT8 series.

          Welcome to the world of ‘big power’

          • BernieNZ:

            Boeing has been justifiably smacked for the MAX disaster.

            So you contend RR gets credit for past engine success but does not OWN the current mess?

            My view is RR deserves full smack for the Trent 1000/Ten/7000 mess as well as the talked about 900 issues (we can guess its failed to beat the GP7000 fuel economy it was going to exceed by 5% as well as blade issues of some kind)

            WWII was a rapid introduction of engines, then superseded engines, some due to performance and some due to problems.
            Wild times and I think the reference is spot on.

            RR has been skirting on the edge of two 787 engines shutting down at the same time for a long time and in denial just have each projection prove to be wrong.

            They are equal with Boeing in trying to get away with things (succeeded so far) – how many miracles n the Hudson do we want to go to the well on?

            Two Blue Chip airlines have switched the engine choice after complete fleet investment in RR. That speaks volumes.

            now if you have anything to contraction the Trent 1000/Ten/7000 debacle I am happy to hear it and view any reference.

  7. This is either going to make you want to beat your head bloody or fall to the floor laughing.

    1. I see current administration political language leaking into the verbiage (can I say that?)

    2. He was on the board, he is supposed to over see the CEO.

    3. He was on the board that put or kept (?) Mulgenburg as the Chairman of the Board (which is totally against the checks and balances of a Corporate Structure – but we have seen a lot of that as well in the political arena)

    4. Considering how Corporate Boeing treats the FAA can you wonder that people make fun of them? Just following the obvious.

  8. As I said before, if Boeing doesn’t get the MAX back in service, they will be in for a financial hiding.

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