Oct. 26, 2020, © Leeham News: It’s earnings call week for Boeing and Airbus.
And Mitsubishi Heavy Industries is said to plan an announcement “freezing” development of the SpaceJet.
Let’s preview these events.
Boeing’s earnings call Wednesday at 10:30 am Eastern time will be the most watched of the day, if not the week.
With recertification of the 737 MAX appearing on track for next month, an update on the program and delivery schedule certainly will be watched for.
Boeing’s cash burn, exacerbated by COVID, is another.
Boeing may get a question about potential development of a new airplane.
The Wall Street Journal reported last week in an “exclusive” that Boeing is talking to the market about a new, single-aisle airplane in the 200-250 seat sector.
Well, it really was not so exclusive.
Aviation Week reported in February from the Singapore Air Show that Boeing refocused on the A321XLR.
LNA reported April 2 that Pratt & Whitney and Avolon, a lessor, that they saw Boeing’s NBA as a single-aisle airplane.
And last year after the MAX grounding, LNA heard from the leasing and airline communities that Boeing was talking about such an airplane.
The long and the short of it is, Boeing talks to everybody about every possibility. Including, for a long, long time, a new, single-aisle airplane.
But that doesn’t mean Boeing is ready to jump off the multi-billion-dollar cliff and launch an airplane program any time soon.
Bernstein Research, responding to the WSJ article, called the idea “absurd.”
“We doubt Boeing would launch such an airplane.” Bernstein wrote, in bold face. “This looks absurd, although Boeing is always discussing concepts like this with different constituencies.
“Why is this absurd? First, Boeing is in the process of bringing the 737MAX back. A 200-seat airplane would cannibalize the MAX-10 and kill residual values for customers on the MAX. Second, it would lack commonality with the 737, which would be a barrier for 737 operators. Third, there is no technology jump to act as a catalyst. At this size airplane, composites would give limited weight savings and likely be more expensive to manufacture. There is not a next generation engine on the horizon and engine OEMs are so cash-constrained that they would hardly prioritize developing one. Any aerodynamic improvements are likely to be minimal.”
Seaport Global sees “things…moving in the right direction. MAX is on track for
re-certification close to year-end, some signs of improving air travel, and we think its
likely that the worst of the COVID-19 financial impact may be behind Boeing.”
MAX deliveries should start in 1Q2021, Seaport believes.
Airbus’ earnings call is 08:15 Wednesday morning Paris time.
Reports emerged last week that Airbus already is talking with its supply chain about increasing the A320 production from 40/mo to 47/mo, in the second half of next year.
This seems ambitious. As the London firm MainFirst dryly writes, this will be a “key topic of interest” on the earnings call, “given recent media reports of more deferral requests.” Current production rates are 40/mo for the A320, 2/mo for the A330 and 5/mo for the A350.
MainFirst also says cash flow, “and in particular, the extent to which customers are making Pre-Delivery Payments on schedule and any comments on the pace of clearing the inventory build of completed but undelivered aircraft (144 as of Oct. 1, according to FlightGlobal)” will be another key topic of interest.
“The appetite of the financing market to support new aircraft deliveries, particularly activity in the Export Credit Agency guarantee and sale-and-leaseback markets,” will also be a point of discussion, MainFirst believes.
Following the eruption of the global coronavirus pandemic, MHI “suspended” development of the SpaceJet. Now, according to Japanese media picked up by Western wire services, including Reuters, MHI will announce as early as Friday it is freezing the program. MHI hedged on the word “freeze.”
Reuters wrote, “Mitsubishi Heavy said in a statement it was considering various options for the SpaceJet but that it had not decided to freeze development. It will announce plans for the SpaceJet along with its group business plan on Oct. 30, the company said.”
Those steeped in the Japanese culture say MHI is taking steps that will ultimately lead to canceling the SpaceJet, to avoid deciding outright.
However, LNA spoke with a customer who participated in recent communication with MHI. Certification of the M90 SpaceJet (formerly the MRJ90, which the customer ordered) will continued. Once certification is obtained, then MHI will decide what to do about the M100 SpaceJet, the customer said.
This fits with one internal debate that happened at MHI: whether to sequentially do the M90 and M100, which was preferred by one faction, or to do the programs in parallel. Sequential appears to have won out, at least on paper. (The betting is MHI will ultimately kill the M100.)