Pontifications: Assessing the impact of COVID-19: today’s take

By Scott Hamilton

April 6, 2020, © Leeham News: It’s going to be quite a while before there is a clear understanding how coronavirus will change commercial aviation.

LNA already touched on impacts to Airbus, Boeing and Embraer. None of it is good. For Boeing, burdened with the additional stress of the 737 MAX, is in the worst position. Even when the MAX is recertified, there won’t be many—or any—customers in a position to take delivery of the airplane.

Bearing in mind that what’s true today will change in a day, or even an hour, let’s take a rundown of where things seem to stand now.

Airbus

What’s true in many respects is true for Boeing and Embraer.

Demand for the A-Series airplanes will tank across the board.

It’s unlikely airline service will recover until 2022 or 2023. Single-aisle service will recover more quickly than wide-body demand.

How quickly Airbus can bring down production rates to a supply-demand balance is a question. In ordinary times, rate breaks usually get 12 month notice for single-aisle airplanes and 18 months for twin-aisle.

Airbus suspended production in France and Spain for two weeks. (After restarting, the company again suspended production in Spain, which has a strict lockdown.) In announcing the suspension, CEO Guillaume Faury said it would be some time before the lines were operating “efficiently.” He did not provide a timeline not any production rate forecasts. These might come at the 1Q earnings call April 29 or the Annual General Meeting April 16.

Production rates across the board will have to come down. News reports suggest Airbus is prepared to cut rates by one half.

The biggest customer for the A330neo is Air Asia X. It can be argued this airline over-ordered well before the virus crisis hit. Airbus will be hard-pressed to retain production at 3.5/mo.

Airbus may well find itself producing airplanes that go straight into storage even at reduced rates.

Boeing

The overarching outlook for Airbus applies equally to Boeing.

737 MAX

However, Boeing’s MAX crisis exacerbates the situation. Boeing hoped to recertify the MAX in June or July. It hoped to restart production in May. But Boeing announced Sunday afternoon that production in Puget Sound is further suspended indefinitely, citing health safety for its employees. Friday, Gov. Jay Inslee extended the stay-at-home order to May 4. Recertification activity is now also suspended.

Contractually, airline or leasing customers that are tendered any airplane that isn’t subject to a 12-month delay cancellation clause are obligated to accept. Boeing desperately needs the cash flow and the airlines desperately need to retain their cash. They have virtually no revenue coming in. But with production suspended indefinitely, Boeing’s “excusable delay” clause in contracts may kick in.

There are two choices: the airlines and lessors, if they have financing, can accept delivery and store the airplanes. Or they can seek a deferral from Boeing, negotiating commercial terms.

Based on a previous LNA analysis, by the end of June, about 200 stored MAXes will have hit the 12-month threshold allowing for cancellations. This number increases with each passing month.

None of the new production airplanes on the restarted MAX assembly line will have the 12-month overhang.

Market sources indicate that the few airlines that reached a compensation agreement in 2019—Turkish, Southwest and American are among them—may include a clause reaffirming delivery acceptance of scheduled 2020 airplanes. Neither Boeing nor customers typically will affirm contract provisions. If true, and there is no reason to believe otherwise, the scenario outlined under “two choices” applies.

777X

The 777X program may be a casualty of the virus. There are only 285 orders by LNA’s count. (Boeing still lists 304, but this includes 25 for Etihad Airways, which publicly said it only will take six. It doesn’t even want these, following a fleet restructuring.)

Emirates Airline is the largest customer, for 115. President Tim Clark, who plans to retire in June, is understood to be sufficiently exasperated with delays that he may cancel at least some of the orders before he bows out.

Cathay Pacific Airways, squeezed by unrest in Hong Kong and now decimated by the virus, is said to have renewed leases for 12 777-300ERs for 10 years. The carrier has 21 Xs on order.

The Lufthansa Airlines CEO said the carrier will emerge from the virus much smaller. What this means for 20 X orders remains to be seen.

LNA was told before the virus reached a global disaster level that Boeing was already pondering dropping the 777 production rate from 5.5/mo to 3/mo. (The delivery rate is 3.5/mo.) This likely won’t be enough.

787

The aerospace analyst for Jefferies Co. last week issued a note in which Boeing is forecast to deliver an average of only four 787s a month this year. The production rate before the two-week virus-related suspension was 14/mo, going to 12/mo by year end and 10/mo next year.

Boeing hopes China will place an order for 787s and MAXes very soon.

Defense

Defense is outside the scope of LNA. However, the commercially-based KC-46A Pegasus tanker should have been named Albatross, for that’s what it is. (One could say the same thing about Airbus’ A400M Atlas.)

Years behind schedule and billions of dollars over budget, yet another problem was revealed last week: it leaks in the fueling system. This is another Category 1 (the highest level) of problems with the bird. It was also revealed last week that Boeing will have to foot the bill for a previous long-running Category 1 problem, the remote visual system used to mate the refueling boom with the trailing aircraft.

NBA: Next Boeing Airplane

The NMA is dead. Long live the NMA.

So declared the CEO of one of the world’s largest leasing companies.

What’s the next Boeing airplane going to look like? An “NMA Lite”? A new single-aisle?

The same lessor CEO and an officer of Pratt & Whitney told LNA it will be a single-aisle. Others suggest an NMA Lite. No matter. The virus totally upended all strategy.

Boeing CEO David Calhoun said last week in a letter to employees, “One thing is already clear: It will take time for the aerospace industry to recover from the crisis. When the world emerges from the pandemic, the size of the commercial market and the types of products and services our customers want and need will likely be different. We will need to balance the supply and demand accordingly as the industry goes through the recovery process for years to come.”

LNA doesn’t see any movement on the NBA until 2022 at the earliest.

Shoring up liquidity

Boeing has about $15bn in liquidity (compared with $30bn for Airbus). It’s unclear whether it will eventually take any federal money in the CARE bailout. The stimulus package provided $17bn for defense contractors. Although not specified in the legislation, this is believed to be for Boeing.

Yet, despite asking for $60bn for itself and the supply chain, Calhoun recently told CNBC Boeing didn’t need the money if strings were attached. Boeing had plenty of other options, he said.

Then, the obvious question arises: if Boeing has plenty of options, why ask for federal money for itself in the first place?

Embraer

Boeing and Embraer entered into an agreement to form a joint venture, Boeing Brasil-Commercial, for $4.5bn. Regulatory approval is stalled by the European Union. After several delays, a decision date of June 23 was announced. The virus may well set this back.

More to the point, all of Embraer now has a market value of around $1.5bn. How can Boeing justify to shareholders paying $4.5bn for only Embraer Commercial Aviation and a portion of its services unit? Given the mantra of “shareholder value,” this is a fair question.

Key officials at both companies say this is a long-term, strategic play that supports the negotiated purchase price despite the current depressed market value.

Nevertheless, Embraer Commercial, like Airbus and Boeing, faces disappearing demand. LNA is told EMB now expects to deliver less than a third of the E2s this year than planned. US carriers don’t want the E175-E1s that are in the delivery schedule this year, either.

COMAC and Irkut

The state-owned COMAC of China is so far behind schedule on the C919 that the virus probably will have little effect. Entry into service is currently planned for 2021, but 2022 was more likely before the virus. Regardless, when the C919 is ready for delivery, the government will force the airlines to accept it.

The same is true for Irkut and its MC-21. Also currently planned for a 2021 EIS, 2022 is more likely.

Mitsubishi

Mitsubishi Aircraft Corp (MITAC) isn’t supposed to deliver its first M90 SpaceJet to ANA and JAL until 2021 or 2022, so there’s time to see how the impact of the virus plays out. The M100 SpaceJet, designed for the US Scope Clause-restricted market, has a target of 2024 for EIS. One hopes that by then, the US carriers will be well on the way to recovery. But you never know.

The supply chain

The supply chain rises and falls on Airbus and Boeing. As they go, so goes everyone else.

74 Comments on “Pontifications: Assessing the impact of COVID-19: today’s take

  1. One big question going forward I think will be the role of air travel (indeed, all travel, land, sea and air) in spreading pathogens. The reason why the West has been “caught out” by COVID-19 is that previous examples (SARS, MERS), were successfully contained out in the Far East. But back then there was far less travel from that part of the world. COVID-19 spread out of the Far East pretty quickly, thanks in part to a large amount of discretionary air travel (e.g. to attend fashion shows in Italy).

    Everyone now knows that unless something changes, we’re always going to be one flight away from another pandemic next year, or the year after, and so on. I don’t think we’re going to want lockdowns to become a regular occurence in our lives…

    I don’t know what the changes need to be, and of course there’s way more to it than just changes to air travel (domestic healthcare policies, strategic reserves of supplies, hospital capacity policies will also play a part). Perhaps mandatory health screening? If you fly to Japan your temperature is taken on arrival (using thermal imaging video cameras). How about routine virus swabbing on arrival and mandatory tracking until your test results come back? Health checks as part of the boarding security process?

    It’ll all add expense to the business of flying, but that’d be nothing compared to the $/£/€trillions going down the plughole at the moment.

    • @matthew

      Instead of more surveillance & testing (at airports, entry&exit to office buildings factories malls, etc) health IDs (a constantly updating app, phone tracking) – this will merely lead to a general paranoia about health, other humans and contact (social distancing in airplanes? forbidden restaurants?)

      Why not a new regard for a less unhealthy lifestyle and health care, both currently afflicted by indulgent short termism

      Why not calm down several magnitudes – this bug is still unstudied enough not to allow definitive ‘scientific’ understanding, but seems, by design, to constantly mutate, so that each and every subsequent yearly biannual or monthly wave will involve everyone going once again through a version of the current lockdown panic

      Better to adapt

      (What happened to Rob? He would know what he thought)

      • The evidence so far is the mutations are quite slow and not to extent that require a yearly vaccine like flu.

      • It’s not this bug we should be worried about. If ebola broke out of Africa in the way cvd19 has out of the Far East, we’d now be in truly deep trouble.

        We’ve created the means by which these things can traverse the world in less than a day, but we’ve not really done anything about dealing with that possibility when it becomes a reality.

        And I’m sure you’ve since noticed that I’d said that this wasn’t just a problem for the aviation industry solve.

        • @matthew

          But you are very worried about even this not so nasty bug, enough to what can only be described as panic and shut down very much of social and economic life

          There are bugs everywhere, indeed, some very much more fatal

          That is why, instead of wishing to be able to ‘vaccine’, or even test and track every one of them, other steps should be taken

          That is to say in stead of reacting on their appearance, when they spread, to every unknown, or more or less unknown, new bug now take general preventative steps to vastly improve health and robust immune systems in industrialised nations people’s health and immune systems

          Recent ex China bugs seem to be caused by the overhang of traditional meat eating which is possible in peasant conditions but not in semi industrial

          But H1N1 emerged out of the Mexican pork industry : it would seem advisable to consider the potential dangers of the industrial conditions of production of pig chicken beef, etc

          Ebola is recurrent in in the Congo, contained naturally by ‘traditional’ factors, as more foreigners and untraditional patters of living intrude this and perhaps other variants will spread (ditto Amazon basin, etc)

          The US reacted in recent years to the threat posed by a small number of terrorists with the construction of a gigantic surveillance machine and much warfighting at great expense and damage to the host population

          A reaction on these lines to the world’s bugs will prove fatal to the host

          Rob-please comment

          • Er, the last big outbreak of Ebola was in 3 separate metropolitan areas with good transport connections to the rest of the world. It is lunacy to suppose that “traditional factors” will guarantee that a carrier won’t one day get on an aircraft and fly to New York.

            That outbreak was frightening enough that countries like the USA, UK and France poured $billions into sending medical teams there and keeping outbreak from spreading out of those areas. It was contained, but even so it was brought back to the UK by a nurse who’d ignored the rules…

            Whether the US would choose to play a similar role under the current regime is now very much in doubt.

        • @matthew

          I guess you are referring to the 2014/2015 ebola spread to West Africa from Congo, as I remember three gold prospectors brought it back, when yes Europe and US was so terrified of the e- spreading to their homelands that they preferred to send medics to stamp out in situ

          You are Not referring I guess to the 2019/2020 Congo outbreak, 2,000 some dead, but in remote-ish Kivu

          But read what I wrote, I wrote that as the outer world intrudes on the Congo then traditional and natural containment will cease

          You’ll then have ebola in LA and why not Wuhan too

          Car factories in Wuhan are recent enough, they used, like in the Congo, to eat batmeat and pangolins and so on, still do

          So you’ve go ex Congo all sorts of corona possibilities as well as ebola, and probably lots more unknown thingeys from deep in the jungle

          You going quarantine all those outbreaks, mining for special metals and rare earths being lucrative nonetheless? Beating the Chinese to the punch may mean picking up some bugs while doing so…..

      • We need more “paranoia” about hygiene to the point it’s normalised. The pre baby boomers eliminated tuberculosis by X-ray testing and they would fine your ass of if you spat in public. It’s been coming back, in part due to PC culture and “tolerance” folks with traditions of spiting. Bacteriostatic coatings are needed on public touch screens along with a box of antiseptic wipes, someone needs to clean the door knobs and telephone 3 times every day, no communal eating with chopsticks from the same bowl. We’ve forgotten the lessons of TB, Polio, Cholera, yellow fever etc. 90% of these miseries were eliminated by hygiene before vaccines did the final 10%. There isn’t going to be a vaccine though we’re going to spend a lot of money on research. Comming to work with a cold or flu needs to end.

        • Very good points. Ultimately education, and a much less tolerant approach to hygiene that affects others is clearly needed.

          We also need better tests (quicker / instant), and a proper thought out plan for what to do with individuals who test positive for infection BEFORE they get on a flight, i.e. they are tested before leaving the country, and that country isolates the individual, and performs contact tracing.

          I wouldn’t rule out testing on entry to a country, I would say that would be sensible, but we need somewhere to start.

          The problem with education, and testing, is that everyone needs to obey the rules !

    • Health checks may need to become mandatory, but the effectiveness of the current thermal imaging cameras is pretty poor, we need something better.

      Mandatory use of masks on planes may become the new norm.

        • Interesting to see people knock a take and then have take that is equally not supported.

          1. Air Travel: For SARS and MERS it was already huge travel and a few years is not what caused things to go sideways. There are political aspects we can discuss, but call that the Most Probable Cause (no you could not stop it but you could slow it down, per Napoleon, Ask Me For Anything But Time (or the corollary If You Get Time Don’t Waste It)
          You can add in the experts said not to cut travel off, and now they are saying its a good move. Within that is that you can’t stop it, but what they ignored or missed was buying time. Call that a contributing cause.

          2. This bug was not designed. Human stupidity per SARS. Nothing knew in humanity not learning its lessons. So called Wet Markets are now hopefully gone.

          3. Masks: They are a miner help, they are not a high value solution.
          Where they work well is with a suite of PPE. Its a system.

          • Apparently the wet markets are back as normal. It’s been barely a week since China started relaxing the lockdown.

            South Korea learned the lesson of SARS, so did Hong Kong and Singapore. We here in the UK certainly didn’t, with Chief Medical Officers downplaying the value of testing up until very recently, despite the inescapable evidence that testing was a big part of South Korea’s success.

          • I would be interested in any links on the Wet Markets.

            I had read (no link) shutdown, then some back into ops and then shutdown.

          • TW, re links BBC had carried stories about the wet markets returning, but I’ve not seen anything about them being closed again (possibly because that’s not sufficiently dramatic!). You’ve likely got more up to date info than I.

        • Impossible in a lot of industrial jobs , In a lot of the jobs you need 2 or more people in close proximity to do the job no way around that. In the aircraft industries I don’t see for exemple how you are going to buck a rivet at 6 feet apart with one guy with a gun and the other with the bucking bar. It more like 12 to 24 inches apart. Also when you go into a cockpit or a fuselage you have at least 2 to 4 peoples working at the same time in close proximity. Unless you want to go down to a cadence of one A/C per week it not going to happen. I took A/C fabrication as an exemple but I would say at least 50% of all thing manufactured is in the same situation. Nobody will invest in robotisation right now, (no money) and more peoples will be loosing their job if that is the case ( unemployement will/would skyrocket)

  2. Re Boeing’s reason for seeking specifically a government bailout, could there be a legal aspect to this that would strengthen Boeing’s hand in forcing customers to take their orders?

    Re airlines and contract get outs, force majeure has been discussed.

    Re the lines with best survival prospects, two thoughts:
    1) If the lockdowns and economic shock cause a change in business practice, replacing some/a lot/most physical meetings with remote video meetings, so that high paying business class seats on any service and a high frequency of services on key routes are in significantly reduced demand, does this tip the economics toward fewer, larger aircraft?
    2) At the single aisle level, could this lead to a down gauging within lines over the next handful of years? So, some sectors that would take an A321 now can only support an A320. In consequence, does the MAX regain competitiveness?

    • Boeing playing the legal card? Definitely yes, but is it going to help if the airlines haven’t got any money.No one has dared to hazard a guess about the damage this could do to Boeing, my guess is that its devastating. DOD has released the cash it was holding back for KC 46 deficiencies to prop up Boeings cash flow. This will be the first of many interventions.
      The US and European governments should buy up airliner production, at least then they would be be getting something for their money as well as employees paying their taxes, etc. This should be done at cost price or below and there is even a possibility of making a profit on the deal instead of just paying unemployment benefit.
      Is there a case for some kind of scrapidge scheme like Singer used to do with sewing machines and was done to keep tax revenue flowing in the last crash?It seems fairly pointless to carry on fixing pickle forks now.

      • Pretty strange speculation that there is a legal card involved with Govt bailout as that is never been the case. A bit like saying the Earth is Flat and then arguing how close to the edge you are when in fact the Earth is not flat and there is no edge.

        On the other hand Pickle Forks are a legal obligation (unless Boeing goes Bankrupt and maybe the KC-46 will do it) with fuel prices low and staying there for 3-5 years, those are very viable aircraft.

        • I’m not speculating, I’m asking a question. Do you know the answer?

        • The earth is pretty flat in a spherical coordinate system… It depends on the coordinate system you live in. Still we normally see in a catheesian one and here the earth is round I agree…

      • A financial meltdown is different from war as all the hardware and systems are intact. Just that in a bancrupcy the shareholders, management and employes get swapped out for new ones eventually. Those with most cash and friendly banks can pick up the weak ones. To minimize harm the speed of processing the bankrupcy is essential.

  3. Force majeure provisions citing the COVID-19 pandemic will provide some protection against late deliveries though I imagine airlines are now interested in delaying rather than advancing. I suspect that mass production of testing kits for the COVID-19 virus and COVID-19 antigens will eventually get us to the point that every passenger can be tested prior to flight thus providing security for fellow passengers, airline staff and the destinations.

    • COVID-19 testing kits will help protect against COVID-19, but not COVID-20 or COVID-21, or …

      • If you are contending this is a designed virus I believe you are stepping over the edge of commentary let alone any basis of reason.

        • I think he was rather referring to the fact that viruses are mutating by its nature. That’s why every year we have different anti flu vaccine.

        • Suggestion going around that as Covid-19 is very contagious ‘normal’ level 2 measures might not be enough and that if China had identified it earlier it might then have ‘escaped’ from a research facility. No proof as far as I know, just China bashing.

        • @Transworld A new string of infuenza comes up every year nothing special of indusrtial about that.

          • The difference is in needing refrigeration trucks behind the hospitals to store the bodies.

            the trendy influenza virus of next year comes with just enough morphing to make last years vaccine less effective. But still it is not different enough to make a splash like this new Corona strain.

      • The next time this happens procedures will be in place to rapidly produce and then implement testing as soon as the DNA sequences are determined, which is usually quite quick. Hygiene measures as well.

        In this case it’s absolutely clear that the Chinese Government covered up the outbreak for at least 2 weeks, probably much more. They arrested 8 field medical researcher and doctors for ‘spreading false rumours’, charged them and forced them to recant. (that’s on record and not conspiracy) and 2 weeks was lost in suppression and another two weeks in which the immense contagiousness of the disease was down played. The virus originates in bats, however it wasn’t spread by wet markets in Wuhan since no bats are sold there, “virus hunter” researchers themselves from two virology institutes were venturing deep into bat caves with inadequate protective gear (Tyvek suit, simple glasses) and coming out covered in bat dropping, urine etc and almost certainly infected the city themselves. The cluster of infections starts around the wet markets but the research institutes are about 100m away.

        The current director general of the WHO is “Dr”. Tedros Adhanom Ghebreyesus, who was appointed on 1 July 2017. He is the first non medically qualified director general in the WHO history. Essentially he is an Ethiopian Politician. The WHO director greatly exacerbated the COVID-19 by lobbying against travel restrictions on ideological grounds.

        SARS was dealt with somewhat clumsily but sincerely and properly. Ebola wasn’t covered up by a totalitarian one party government.

        • Yes, there was a combination of cover-up and incompetence in China until they realized how serious this was.

          Preparation and quick action is key for the future. Taiwan’s model is excellent, but needs to be supplemented with some stockpiles of protective equipment.

  4. For the 777X we would nearly forget the certification challenge. The aircraft has been certified using aggresive grandfathering rights, with a docile FAA allowing it. In the period Boeing felt invincible and was pushing around Congress & the FAA. EASA & EK drew conclusions and intervened. https://aviationnews.online/2019/11/29/bad-news-for-boeing-and-the-faa/ COVID-19 doesn’t make that go away for the people that decide.

    • Factually, the A330NEO is the decedent of the second most grandfathered hull of all time (first place going to the 737).

      The A320 takes third place (well maybe 4th by time but not number to the 747)

      Is there in fact an issue with a modern design and grandfathering vs an early age manual system (737) and we should not throw the babies out with the bath water?

      I see this as slinging mud based on the 737 (and arguably the 747 and 767 should fall in the old time manual certification category)

      Both the 747 and the 767 look to have dealt with those MAX issues, the bigger question then is why did not those same corrections get applied to the MAX (and even why the NG did not have manual trim addressed?)

      I see it as all AHJ were asleep at the wheel, while the FAA is at the pointy end for US that does not absolve others to do their due diligence all those silly agreements aside.

      Brazil at least addressed it, if I was EASA I would be (and should be) embarrassed for not having addressed the manual trim long ago.

      The FAA is not off the hook but its always been compromised and why people are surprised is a mystery as its happened over and over again.

      All other AHJ know its history and its structure (which is where the issue is) and should have acted accordingly as they answer to their regions not eh US

      • Devil in details – grandfathering wisely vs. shortcutting. Reputation and reputation of regulator is starting to play major role.

      • You can’t write a comment without giving false witness
        in some detail or other, can you?

  5. BOEING ‘s auditors will have a challenging job, regarding the 787 deferred costs…
    either they consider the declining production rate, and charge most of the remainder, with a $20bn hit on accounts which are probably already very ugly . Their Customer will not be happy…
    or they do nothing, and might face an uncomfortable (ENRON like) situation if (when?) things turn really nasty..
    We should know more at the end of this month when Q1 figures are released.

  6. The next 2 years will answer the question of how much of the market for the 737 MAX was due to lack of slots f0r the A320 neo. Even a recertified MAX may be seen by the airlines as a risk they don’t want to take until they know passengers accept it. For example, while SWA and Ryanair are likely to stay with the MAX, American could delay or cancel, especially if it feels the neos on order are likely to answer its needs.

    As for the hope that China will place an order soon, that is likely to be dangled until the trade war is over.

    • I don’t think so, if you have a 737 structure then shifting to A320 is a huge cost, when you don’t have any money anyway.

      Some that fly both types might shift.

      Be interesting to see what IAG does.

      • From the other hand if an arline choosed MAX because they were too late for a queue for NEO or believed in iPad training – now it’s a time for new possibilities and reconsiderations. Even switching from B737 to A320 should be cheaper and faster now.

        But I wouldn’t expect massive changes. Especially if an airline took already money for MAX delay.

        • It might be a window now for Boeing to design the “Not so small New Small Aircraft” while nobody has the money to buy new aircrafts.
          It does not need to be that much better than the A321XLR just cheaper and built mainly by robots. Super advanced RR or PWA very efficinet engines are maybe not worth the wait and the risk of delays and early problems, instead some “Nike Engineering” of “Just do it” with a carbon wing and Al-Li fuselage might save Boeings future. Lots of systems and software from the 787 can be carried over and also reduce the prices Boeing pays for them for the 787. Airbus might counter with a 35k A322neo but will have a cost of manufacture disadvantage until the sucessor is developed.

      • I don’t see IAG taking any MAX orders. Just look at what IAG airlines fly.
        Aer Lingus: All Airbus except for 2 x Avro RJ85
        Aer Lingus Regional: ATR 42, and ATR72
        British Airways: Mix of Airbus, and Boeing twin aisle aircraft, Airbus single aisle aircraft.
        BA CityFlyer: Embaer E170, and E190
        Comair: Boeing 737 various with 7 MAX on order (Total aircraft including orders 27)
        Sun-Air: Dornier 328JET
        Iberia: All Airbus
        Air Nostrum: ATR72, and Bombardier CRJ
        Iberia Express: All Airbus
        Level: All Airbus
        Air Europa: Airbus, and Boeing twin aisle, 20 737-800, and 22 737 MAX 8 on order
        OpenSkies: All Airbus
        Vueling: All Airbus
        Level Europe: All Airbus

        As you say “if you have a 737 structure then shifting to A320 is a huge cost” the reverse is also true.

        So Willie Walsh “orders” 200 MAX, which IAG airline is going to use them ? Or was that a blatant attempt to get Airbus to give him a better price ? He was to have stepped down in March 2020 but is staying on during the COVID-19 crisis.

        I was eagerly awaiting the response from Airbus pre COVID-19, now I just can’t see IAG even ordering more Airbus aircraft, so unless Boeing is going to dump MAX aircraft at way below cost, I just don’t see any way that IAG is going to start moving over to MAX fleets.

        • IAG was not moving to MAX fleets, it was opening a second source for availability as well as competitive reasons.

          IAG has proven it can run very mixed airlines ops, they are more than big enough to fit two different single aisles into specific owned airlines.

          Airbus may have both availability and better pricing as this evolves and it may result in no IAG MAX orders.

          It was never intended as a wholesale move and it can and does work.

          Delta runs a mix of NG and A320 various, Alaska (was) dong the same with the A320 and took the A321NEO order.

          No one smaller than a IAG, Delta, United etc is going to have money to mess around with a change unless forced to.

          • This was a year ago, only was ‘Intent to buy’ not an order at that stage. Notice too they thought Max would be back in service ‘soon’
            https://boeing.mediaroom.com/2019-06-18-International-Airlines-Group-Announces-Intent-to-Buy-200-Boeing-737-MAX-Airplanes
            “In selecting the 737 MAX, IAG says it will fly a combination of the 737 MAX 8, which seats up to 178 passengers in a two-class configuration, and the larger 737 MAX 10 jet, which can accommodate as many as 230 passengers. The airline did not disclose a specific split between the two MAX models, though it anticipates deploying the aircraft at a number of the group’s airlines including Vueling and LEVEL.
            When a final agreement is reached, it will be posted to Boeing’s Orders & Deliveries website.”
            IAG will have enough problems delaying its Airbus firm orders and playing games last year with Airbus means they made themselves a ‘hostile’ buyer
            Easyjet is another player who the founder and part owner wants to be another hostile buyer but management arent so sure

  7. Another factor that must be considered is the price of fuel!

    Whereas the current low price mitigates some of the effect of lower demand, this situation illustrates just how unpredictable cost and revenue forecasts can be.

    More importantly however, unless fuel prices recover quickly to at least previous levels the case for utilization of new, highly fuel efficient but expensive models like the MAX or NEO instead of older models will more and more favour airplanes on hand over new deliveries.

    Makes one wonder if Airbus will have an advantage long term given the flexibility of NEOs like XLR to supplant wide bodies where demand wanes since increased fuel efficiency also results in longer range.

    • Given it has the range, always bet on the smaller more flexible aircraft.

  8. With most of the western world doing home office quite successfully, the need for business travel will be reduced significantly in the future. Corporations will see the cost effectiveness of virtual meetings and will be more strict in their travel approvals. Eventhough it looks very important to travel far for a meeting, it is in effect a very unproductive way to do business. Business travel will be limited to customer meetings, contract signings and of course trouble shooting and product support. But not available any more for the common employee to have a day out of the office. The need for future fleet expansions will be less. And while Corona will be out in the world for quite some time, leisure travel will not getting back to the level from before for quite a long time.

  9. Suspect what air travel needs most is a Covid-19 vaccine, just add another line below yellow fever on current vaccination certs. We’re still looking at two years developing/inoculating until until things get back to near normal.

    Can’t help thinking that governments will be looking at passenger space on aircraft in the near future. Touching the passenger beside you for 12 hours isn’t smart. 787s and 777s have 18.5 inch seat options, anything under that might be more difficult for Airbus.

    The free market, capitalist, price if oil has to be less rhan $30. Saudi production is $3? a barril, Kuwait is similar. Fall in prices makes a lot of currencies cheaper, ie Roubles, which pushes the rest of the World’s costs down as well. You could say that fracking is a result of govt. incentives, Saudi govt! What happens next is anybody’s guess but have read that Saudi govt can run on $35. If they up production $30 could become the new norm. Unless you have very old airframes and maint. costs are out of hand, any airline is going to want to wait and see before taking new metal. Expect operators to cancel anything they can.

    • I think that the vaccine will be here in about 8 months. First responders and the older population would get it first.

      2 years is based on the old paradigm of trials, slow regulatory movement.

      There was a major amount of COVD (SARS/MERS) prep work that was not finalized that is moving fast.

      They have run human trials already (possibly more than one).

      They are leveraging AIDS and EBOLA work as well. And in this case its not a drug company investment pay off, its all fully funded with at least 6 very advanced groups going at it.

      The biggest drawback is the industrialization of the process but that too is in place, we can forgo a flu shot and shift to COVD-19.

      I know this sounds optimistic, but I think they are being deliberately conservative (right thing) but I think it will move fast.

      While new, the approaches are not brand new and have been trialed and tested on the basis of the tech and that has presented no issues.

      • Sorry TW, COVID-19 vaccine is at least 12 months away.

        I agree there are usually all sorts of regulations that usually get in the way, and I am sure that will be cut to the minimum, BUT the biggest issue is in determining if a vaccine is safe, is that human trials last 12 months, I don’t think they are going to shorten that. They have to be sure that they know the potential side effects.

        Human trials have started, but that still puts us at 12 months from now.

        The other thing is that even in developed countries flu vaccine take-up is often below 70% of the population, it can be below 70% in the vulnerable groups, and surprisingly even amongst medical professionals.

        And then we have the anti-vax movement, and the idiots that believe that 5G cell phone towers trigger COVID-19 in humans. I saw a few good quotes recently “You can’t argue with stupidity, you can’t quarantine it either.”, and Mark Twain “Never argue with stupid people, they will drag you down to their level, and then beat you with experience.”

        What will likely happen is a slow development of herd immunity, along with an eventual vaccine (or two, or three), better testing (anti-body, antigen), with a potential certificate to prove that the holder has been verified as having had COVID-19 (Germany, and the UK are considering this).

        In the short term (for the next 12 months or so), at least in the UK, I can see lockdown being eased periodically, and then tightened up, eased again possibly 5 or 6 times between now, and March next year.

        A few informed sources to follow on Twitter:
        https://twitter.com/AdamJKucharski
        https://twitter.com/neil_ferguson

        • While overall I agree, the one operation feels it will have a million doses available this fall.

          Will try to review the past work and if they went to human trials. The technique has been proven, a variation of that should be safe.

          I would be willing to be a guinea pig and they have had no issues with volunteers.

          Washington State has 47 people in human trials and the other one has 40.

          I think they will be able to make an informed decision by fall and then see how fast they can crank it out.

          There is a balance of impact of some adverse reactions to something like 25% of the economy shut down.

          • A million doses! Assuming that it actually works, and that it’s approved, a million doses should be enough to cover, uhhh, about 0.1% of the OECD countries’ population.

            And, yes, there will be other manufacturers. But the point is that the numbers are BIG, for the manufacturing first, and then for actually getting the people vaccinated.

      • No, the old paradigm of vaccine development would be 4-10 years. In 8 months we may have something, but still not be sure it won’t adversely affect a percentage number of people.

        For most people Covid-19 is a none event. So if you are going to inject 100% of the population to protect the 15% who have severe symptoms you better be pretty sure you are not sickening the other 85%.

        • I’d add two caveats to that.

          First, there isn’t actually any guarantee that I’m aware of that any vaccine will emerge at any time. Witness HIV. Only that the best estimate widely discussed is 12-18 months from start.

          Second, a vaccine would not need to be given to 100% of the population initially. The most at risk are the most at need. So if phase II trials are sufficiently encouraging, in these extraordinary times maybe phase III would be modified to be offered to a much larger cohort specifically inclusive of the most at risk. They would be told the elevated risk of being in a trial but if the balance is sufficiently strongly in favour of taking the vaccine it could be a worthwhile choice. Of course, extreme transparency of information would be required.

          I remain of the view that the first key event is roll out of a treatment that significantly reduces mortality rate so the disease becomes a manageable one for a sufficiently large population % that economies can be restarted. Be it any of the current repurposing trial meds or any new med (eg https://globalbiodefense.com/2020/04/02/tests-in-engineered-human-tissues-shows-hrsace2-drug-blocked-early-stages-of-sars-cov-2-infection/, which in lab reduces viral load by orders of magnitude).

      • COVID 19 is a corona virus distinct from influenza viri. It is related to the common cold more than influenza. I’m highly sceptical about a vaccine.

        • A good point. If we are lucky, with the amount of time, and money being spent on a COVID-19 vaccine, and some new thinking, we my end up with an approach that addresses all corona viruses, including the common cold.

      • @ Transworkd that a good leap of faith you have . It might not be here before 5 years or more . Ebola for exemple they started working on a vacine in 2003 and they didn’t really have anything untill 2018. And it been appouved by the USA in december 2019. That the reality of vaccines some comes fast while others take a lot longer to be discovered. Even more to be available to everybody.

  10. Boeing may try to use their “Excusable Clause”, but the fact remains that the primary cause of Boeing’s contract violations with the Airlines, who have made their B737 MAX orders in “Good Faith”, can and will imply the “Cancelation Clause” with no penalty, due to the delays arising out of Gross- & Malicious/Criminal Negligence on the part of Boeing. The Senate made public very clear accusations to both Boeing and FAA a few days ago and supports future claimant and cancelations. Boeing now is trying to blame their Chaos on the COVID-19 which is a totally different event to their “B737 MAX FLOP”

  11. This story flew under the radar

    https://www.flightglobal.com/safety/easa-advises-carriers-to-switch-off-recirculation-fans/137727.article

    As a first step the whole “will you get sick from recirculated air in an aircraft” question needs to be studied rigorously and based on the outcomes the FAA and EASA should mandate the maximum recirculation rate.

    As a follow on there should be studies on airflow paths and how to minimize transmission. Best practices should get put into certification requirements. There is more to keeping people safe than not-crashing.

  12. After hurricane Covid-19 and considering longlasting 777x delays I will be surprised if Boeing will stay with 200 real orders in 2021.

    Smaller, more versatile, already proven and certified A350-1000 (possible strech to 2000) will be a very good alternative, if an airline will be looking for one. Mostly 777x orders will be cut for cutting not for an alternative.

    Hard time for Boeing 757NSA is a must.

    • Airbus has Boeing snookered there as well. P&W is talking new engine for the A320XLR. Airbus can do that with a new wing and get most of the improvement a single aisle NBA would show. Plus a faster production ramp I would guess.

    • After Covid the A359 will be the ‘big’ twin for the next few years.

  13. Sort of close to topic- Monday april 27 9:00 AM CT is the published schedule for the Annual Meeting in the Field Museum in Chicago. No word yet as to how that will now happen- Usually a 100 or more attend- and of course a rep for shareholder proposals – 6 of them. While video conference may work- seems to me it will be on the company to arrange somehow for the necessary non commercial joe lunchpail types to ‘ work from home ‘ if they have a proposal.

    And for participants to ask questions, etc.

    Just my guess – there will be plethora of negative votes for most Bored of Directionless types.

    Especially Calhoun

  14. I guess Corona isn’t that bad for the Max at all.
    It takes out any urgency in recertification, takes the topic Max out of the headlines, and Airlines don’t worry at all to get their planes as quickly as they can.
    It’s almost a perfect setting for Boeing.
    They can work on recertification, wait out the lock down, did take China 6 weeks, so I guess the USA will be done early May, while Europe will be restarting Mid/End April.
    While everyone restarts its’ ops, Boeing can slowly ramp up production.

    I guess for the Max it’s a perfect setting.

    Not so for B777x and A330neo.
    The A330neo is hit worse, Air Asia X holds 1/3 of the backlog, and Avalon is in trouble. Will ACL take all their orders?
    For the B777x, it could be a disaster too. Many airlines will shrink their fleets in numbers and size, guess what planes are going out? B744, A380, A340.
    Take for example LH: They fly A380, B744, B748, A346 and A343.
    A380 is grounded just flying evacuation flights.
    B744 is out to be replaced by B777x.
    What if LH decides to make a final cut on its fleet, pushing away all A380, B744, A346? And move to a fleet of A330, B789, A350 and B748?
    What if they approach Boeing to convert their B777x order in let’s say 25 more B789? There are rumors Lufthansa already has cut it’s firm commitment to the B777x down to only 6, but it’s unsure as the order statet once 34 and was cut by 14.

    Ethiads order is gone already, they will not take 25, and 6 don’t make any sense at all, they will wiggle out somehow.
    Cathay Pacific has a horrible year, there’s a chance the company fills for bankruptcy and the order for the B777x is void. Especially with the A35k already in fleet, this order isn’t fix at all.

    Hard to say if Emirates and Qatar will take all of theirs, with their economic situation. I guess they will stretch delivery and may ask to convert into B787.

    Both of them have huge issues with their re-engined WB families, I guess cost wise it’s even worse for Boeing, as the B777x redesign was way more expensive than the Neos, which was basically done already with the first try of the A350.

    Might be a major struck to Boeing, if the B777x is dead on arrival, with the Max in the crisis.

    • @Sash
      It takes out any urgency in recertification of MAX? Not so quite, airlines anyway do need a new fuel efficient aircrafts. But it will suit to slow ramp up of production.

      The A330neo is hit worse? In Aibus family, probably right, but A330neo has its purpose and place in the market. I wouldn’t be surprised if downsized A330-800 will gain more orders.

      B777x is dead on arrival? Not really possible, I think it will survive, however maybe will be manufactured at loss for a long time.

      Golden times for smaller / downsized versatile aircrafts, and Airbus stands well in it, you can have A320, 321, LR, XLR & A220s which you can have for yesterday.

  15. Just explain then who should by A330 neo and B777x in case Air Asia and Emirates / Qatar don’t or can’t anymore.

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