Leeham News and Analysis
There's more to real news than a news release.
There's more to real news than a news release.
Leeham News and Analysis
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- Better transparency needed on Boeing’s 1Q earnings call April 22, 2024
- Bjorn’s Corner: New engine development. Part 4. Propulsive efficiency April 19, 2024
- Boeing unlikely to meet FAA’s 90-day deadline for new safety program April 18, 2024
Podcast: 10 Minutes About Boeing’s 2020 Financial Results
Jan. 28, 2021, © Leeham News: Boeing on Jan. 27 reported its 2020 financial results. They were ugly, to nobody’s surprise. Beset by the 737 MAX
grounding all year, delays in the 777X program, a suspension of deliveries from October of the 787, continued issues with the KC-46A tanker and problems with the space program, “ugly” financial results were expected.
LNA talks about the 777X, 737 MAX and 787 programs in today’s episode of 10 Minutes About.
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Very interesting to hear two experienced aviation experts calmly and methodically letting the air out of Boeing’s hype balloons 👍
I particularly liked the bit about RASM- CASM for the 777X.
Poor Boeing ☹
I disagree about the analysis about the 777X accounting block. Its not the full production expectation.. Just existing and foreseeable orders.
I showed with the 2002 annual financial statements which was the year the 777-300ER was rolled out, the accounting block for the whole 777 program was 600…deliveries around then were 420.
We now know at the end of 2020 the delivered 777 numbers were 2.75 that of the 2002 accounting block. Will the 777X get the same numbers of 777-300ER, probably not. But could it get to 2x 350, yes very likely.
It hasnt been announced yet the 777X accounting block number should come down, which would back up the large reach forward loss on this segment.
Let the nitpickers begin….
The world of aviation has changed since 2002.
A LOT!
It was to show the accounting block isnt the lifetime prediction of sales.
Remember the 777X is still a fuel efficient twin, just like the smaller fuel efficient twins.
Longer distance travel was growing along with the belly cargo market where the 777X passenger versions and a new cargo only version were still king.
Its a very expensive business to grow your traffic by opening new route with something like the 787 or A350, better returns form increasing capacity on your best routes
“Remember the 777X is still a fuel efficient twin”
The market thinks it’s an oversized, overweight, overpriced relic of tbe past.
It’s imp. to note that:
the 777 program was launched in Oct 1990
first flight June 1994
EIS June 1995
On February 29, 2000, Boeing launched its next-generation twinjet program which became the 777-300ER.
Orders rushed in only after that.
What we have now??
Uncertain EIS, low number of orders on hand and quite possibly dwindles further.
Can anyone sane here believes the current 777X resembles the 777 program back in 2002??
If they make a freighter, if the GE9x and aircraft perform well, if the 787 and A350 do not get a new engine for 15 years, then 700 seems reasonable. On the other hand, the 767-300F is in production from 1995 to 2025, 30 years. So maybe the 777F remains in production from 2009 until 2039, and the 777-8/F is shelved.
The 777-9 program has become under pressure because falling demand for very large aircraft and delays. Some carriers switched to to 787. 777-9 customers are:
– Lufthansa 20
– Etihad Airways 25
– Cathay Pacific 21
– Emirates 115
– Qatar Airways 60
– All Nippon Airways 20
– Unidentified customer(s) 10
– Singapore Airlines 20
– British Airways 18
What wasn’t mentioned in the podcast, those airlines have been ordering and taking large twins. Just not Boeings but A350-900s and -1000s. All of them, except LH, are 777-200/300 operators.
On the delays, it becomes clear what the most important hurdle is. The changed product rule & grandfathered 77W certification of the 777-9. Calhoun confirms it:
“We’re working closely with global regulators on all aspects of 777X development,” said Calhoun. “This involves listening to all their feedback and applying lessons learned from our experiences on the 737 Max program recertification and applying it to our 777 certification plans. It also involves making prudent design modifications as necessary to meet the various global regulators’ expectations.”
As part of its assessment, Boeing decided to make “certain modifications” to the aircraft design involving both software and hardware changes to the actuator control electronics, he explained, reflecting the company’s “current judgment of global regulators compliance expectations.”
https://www.ainonline.com/aviation-news/air-transport/2021-01-27/boeing-moves-777x-eis-target-late-2023
EASA is on after the MAX certification revelations. They are the authorities to approve introduction of the 777-9 with it’s launching customer: Lufthansa. And they aligning with Emirates authorities.
https://www.flightglobal.com/programmes/why-777x-certification-could-be-just-part-of-max-crisis-collateral-damage/139774.article
JAL odered A350 for both short and long haul, including Haneda and Fukuoka in domestic market.
CX probably regrets ordering the 777X.
UK bans UAE flights, closing world’s busiest route.
Cathay is probably heading in the same direction as HNA: bankruptcy, followed by a state intervention. If that happens, it will be another 21 777X orders lost for Boeing.
Scott, do you have any data on the typical/average load factor achieved worldwide in recent years on 777-300ERs — preferably with the ME3 separated out?
Background:
– A 777-300ER with a 75% load factor can easily be replaced by a 787, A350 or A330 neo with a higher load factor. Range is no longer a deciding factor.
– A 777-300ER with a 100% load factor can be replaced by 2 787-8s on two different daily flights, giving customers more choice and flexibility.
– Slot restriction is being alleviated by use of “secondary” airports. For example, nowadays there are longhaul flights to two airports in London (not just LHR), three in/near NYC (not just JFK), and two in the Bay Area (not just SFO).
NY only has 2 long haul airports, not 3 as La guardia isnt even allowed US transcontinental flights.
But yes secondary airports at Paris and Tokyo and Beijing are recent additions for long haul, but are there any others?
Slots at desirable times are still very very limited, even at Dubai the peak times had heavy delays and Chinese airspace and airports are still congested leading to long delays.
LGA has a flight to PHX with a flight time of 5h 48m.
Nominally, Dubai would have been on its way to having 2 airports by now. Abu Dhabi is effectively a third, since it’s only a 1h20m drive from Dubai.
Istanbul and Berlin now have 2 each. Amsterdam is moving LCCs to a nearby airport to free up longhaul slots.
Where there’s a will, there’s a way.
Berlin has closed Tempelhof about 10 years ago and Tegel definitely at the end of 2020. So, there is just BER left.
The idea to move LCCs from AMS to Lelystad might have pleased legacy carriers but LCCs are not so successful because they are stupid. They will stay if there is a market and actually LCC presence at big hubs in Europe is growing. Ryan and Wizz now increasingly serve AMS, BRU, VIE or FRA and all big Italian airports.
Hey Bryce, I’ll chime in here as this is my area of expertise. Airlines don’t disclose airplane-specific load factor, even in the few jurisdictions where route-level disclosure is required. Most LF data from paid providers is no better than educated guessing. Consultants and airplane salesmen use it because “data beats no data,” but it’s well understood that such estimates are unreliable.
Besides, LF isn’t as relevant as you think. Outside a pandemic, I can get any airplane to 100% load factor if I give away the seats for free or cheap. But I’d still lose a ton of money. This is why unit revenue / RASM matters: it’s LF times yield (average fare per mile).
You’re right about smaller airplanes. I’d add that a smaller airplane has the benefit of higher yield because you don’t have to sell as many cheap seats to fill it. This results in higher RASM and isn’t subject to seasonal or market demand risk. In other words, it’s a lot easier to fill a 787 or A350 to a breakeven revenue level on off-peak days, low seasons, etc.
Thank you, Judson.
That’s a great point (also from the podcast) about erosion of RASM by having to offer bargains in order to fill up residual empty seats.
I have only very rarely been on a chock-full large widebody; on most of my flights, a smaller widebody would easily have sufficed.
Before Covid, airlines which had a 777-300ER in their fleet needed to use it. They didn’t have spare planes they could use and especially not more fuel efficient 787, A350 or A330neo.
They might lose more money if a 777-300ER is parked than if they use it. Maintenance checks depend on time too, not only flight hours or cycles.
If you replace a 100% load factor 777-300ER with two 787-8 you would lose money because the 777-300ER cabin is only 55% bigger.
I think you get the point: you could also replace 2x 777s by 3x 787s.
One way or another, using smaller widebodies at higher frequencies offers more flexibility and less headache in terms of load factor.
It is fascinating how Boeing is being “out Boeing” by Airbus. Airbus just had to build that A380. Boeing countered with the B787. Then, Boeing had to make the Biggest Twin the World might ever see. Airbus goes with the A350, a reasonable Twin, and beefs up its single aisle offerings with the A321LRs and the A220s (which BA could have had for a song.) A major squeeze is taking place. Boeing needs to seriously get going on the 757 and the 767 replacements. They must have taken the Critical Thinking classes out of the cririculum at the MBA schools.
@ Sam
The skippers at Boeing only need to keep the ship floating long enough to be able to accumulate nice levels of remuneration/benefits. The fact that the ship is battered, beaten, adrift and nowhere near a port is of little interest to them — they’ll just jump ship (with a fat bag of dollars) when the going gets rough.
Let me point out another fact. Boeing does not need to roll out a new 757/767 replacement. It has to offer it with a competitive price. There have been talks over the years that te market prices such an aircraft at 70m. That’s roughly around the price of the A321neo. So how will go against an A321XLR or an A322 with a new aircraft with R&D of 10bn+? It just doesn’t make sense yet.