HOTR: Moving up the 777-8F?

 By the Leeham News Staff

June 4, 2020, © Leeham News: A lawsuit filed by cargo specialist Volga Dnepr against Boeing claims Boeing is running out the clock on the 747-8F.

The report by The Seattle Times makes for interesting reading. Key of HOTR is the reference that Boeing plans to end 747 production within three years. This is longer than LNA believes. Regardless, the three-year timeline fits with information LNA about the 777-8F.

LNA is told Boeing sales floated the possibility of launching the 777-8F around 2023-24. This would bring forward the launch by about two years from plans when the X program was launched in 2013.

Then, the entry into service for the 777-9 was targeted for 2019-2020. This was to be followed by the 777-8 passenger model in two years and then the 8F two years after that.

During the fallout of the MAX grounding, the 777-8 was deferred indefinitely. Now, with COVID upending demand, customers are deferring and talking about canceling 777X orders. Boeing is reducing 777 production from five to three per month. The 777-9 production will go to one per month.

The 777 Classic line is sustained by the 777-200LRF. The 777-8F concept is a couple of frames longer than the -8P but shorter than the 777-9.

Having spent more than $1bn for the advanced Composite Wing Center to build 777X wings and having produced about a dozen 777-9s so far, Boeing needs to boost the X sales prospects.

Bringing forward the -8F is the way to do so.

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How much of International passenger flights can be paid by belly cargo ?

By Bjorn Fehrm

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Introduction

June 4, 2020, © Leeham News: Air cargo prices are at an all-time high. The air cargo demand is down 28% compared with the same time last year, but the capacity has disappeared faster. Half of the world’s cargo was flying in the bellies of passenger aircraft, and as these were grounded, 50% of the world-wide cargo capacity went missing.

Airlines have taken the seats out of passenger jets and now fly them as belly freighters with light pandemic protective gear cargo in the cabins on special authorization from the authorities. This has alleviated the capacity crunch somewhat but demand and capacity still don’t match. As a result, cargo prices stay high.

As international passenger traffic slowly recovers, how much of the cost of flying passengers on the international routes can be paid by high priced freight in the bellies of the aircraft?

Summary:
  • While domestic passenger traffic shows the first signs of recovery, international traffic will take long to recover.
  • At the same time, cargo prices are two to three times higher than normal for international routes within Asia and between Asia and the US or Europe.
  • How much of the bills for flying international passenger traffic in the recovery period can be paid by cargo in the bellies of these jets?

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There could be a future for the A380—and it’s not what you think

By Scott Hamilton

June 3, 2020, © Leeham News: The conventional wisdom is there is no future for the Airbus A380 after front-line carriers remove the airplane from their fleets.

HiFly is operating its sole Airbus A380 with medical supplies flying on the main deck. Source: HiFly.

Singapore Airlines retired the first of five A380s a few years ago as 10-12 year leases expired. Only one found a new home, with ACMI operator HiFly. Others went to the scrap heap.

The virus crisis prompted several airlines to ground entire A380 fleets—perhaps permanently. Emirates Airline, with 115 in operation before COVID-19 essentially shut down world travel, said it would ground a big portion of its A380s. It took about a week before President Tim Clark said eventually these will return to service.

The A380 doesn’t make a good belly freighter airplane, like the Boeing 747. The lower cargo hold isn’t spacious. The elaborate landing gear takes space away from cargo. The upper deck is positioned a few inches too high to accommodate common containers. Loading cargo onto the upper deck is a logistical challenge.

Yet there is a P2F (passenger to freighter) option that is feasible and affordable. And it is being explored.

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An accelerating widebody fleet streamlining, Part 1

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By Vincent Valery

Introduction  

June 1, 2020, © Leeham News: As airlines slashed capacity in the aftermath of the COVID-19 outbreak, some took the opportunity to accelerate aircraft retirements.

Older generation twin-aisle aircraft, notably the Airbus A340, older A330s, Boeing 747 and 767, have exited numerous carrier’s fleet early. Several Airbus A380 operators put their Superjumbos in long-term storage, wondering whether these will ever fly in passenger service again.

Major crises tend to accelerate existing trends. The move away from large twin-aisle aircraft is a case in point. In the context of subdued demand for several years, airlines will be under pressure to reduce expenses. Streamlining fleets is an obvious target.

The Airbus A320 and Boeing 737 families dominated the single-aisle market for decades. The picture has historically been far more fragmented for twin-aisle aircraft. Airbus and Boeing still have three widebody aircraft families apiece with significant numbers of passenger aircraft in service.

LNA analyzes in two-part articles why the picture will likely change for the widebody market in the 2020s. In the first part, we will take a historical detour to analyze why twin-aisle fleets are still so fragmented nowadays.

Summary
  • Range going hand in hand with aircraft size;
  • Change in the 1990s;
  • Superjumbo gamble backfires;
  • Full widebody fleet streamlining becomes a reality.

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Pontifications: New GE Aviation CEO will face big challenges

By Scott Hamilton

June 1, 2020, © Leeham News: The new chief executive officer for GE Aviation (GEA) will face huge challenges when he or she succeeds David Joyce when he retires this year, say industry sources. Joyce was named CEO in 2008.

Like other sectors of commercial aviation, the COVID-19 crisis hit GEA hard.

Initially, the workforce was cut by 10% in March. This was deepened to 25% in May. Non-essential spending was cut. A hiring freeze was implemented and other cost-cutting measures were put in place.

Summary
  • Demand for new airplanes tanked. The Boeing 737 MAX, powered by CFM LEAP engines, has been grounded since March 2019. No return to service is in sight. (GE is a 50% partner in CFM International, which makes the LEAP.)
  • LEAP engines on the 737 and the competing Airbus A320neo family fall way short of on-wing targets. Shop visits, under warranty, add to GE’s cost basis.
  • The Boeing 777-9, powered by the GE9X, is already a year late. A redesign of some critical parts of the engine was required.
  • COVID also decimates the engine aftermarket business, which is core to the OEM business model.

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What’s the gain of flying a smaller single-aisle during COVID-19 recovery?

By Bjorn Fehrm

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Introduction

May 28, 2020, © Leeham News: As flying recommences after country lockdowns, the fill factors for the flights will be low for an extended period.

Airlines and the OEMs are anticipating the low load factors. For instance, Delta has not deferred any Airbus A220 deliveries but is postponing deliveries of larger aircraft. How much of an advantage is a smaller aircraft when opening up the traffic again?

We compare the operational costs of the Airbus alternatives. The cost of flying the A220-300 is compared with the A320neo.

Summary:

  • The A220-300 is about 25 seats smaller than the A320neo. It’s smaller airframe makes for lower fuel costs and airway/landing fees.
  • There are savings on the crew side as well, as both flight and cabin crew costs less.
  • Finally, modern systems, a composite wing, and a fuselage made of advanced materials promise lower maintenance costs than the A320neo.

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Pontifications: Aircraft values, lease rates plummet

By Scott Hamilton

May 25, 2020, © Leeham News: Aircraft lease rates continue to plummet as the virus crisis infects the airline industry.

In an update of its periodic look at rates, the UK advisory firm ISHKA last week looked at 5-year old aircraft. Monthly Rates plunged as much at 26%. Aircraft values dropped as much as 15% (22% for an ATR-72).

Since Jan. 1, the Boeing 777-200F lost only 2% of its value but lease rates dropped 11%, despite high demand for cargo airplanes now. The Airbus A350-900 lost 5% of its value but lease rates were off 17%.

A five year old Boeing 787-8, on which pricing was under pressure before COVID decimated the airline industry beginning in March, now can be leased for $575,000/mo, ISHKA says.

The Airbus A320/321ceo and Boeing 737-800 also show sharp value and lease rate declines.

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Lessor exposure to Airbus, Boeing wide-bodies

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By Scott Hamilton

May 18, 2020, © Leeham News: As airlines park or retire thousands of aircraft, lessors with wide-body airplanes are most at risk.

Single-aisle airplanes are easier to re-lease and more in demand when traffic recovers. Reconfiguration and maintenance costs, if required, are reasonable by aviation standards. Cabin reconfiguration may run up to $1m. Airframe and engine MRO costs for Airbus A320s and Boeing 737s typically are in the low millions, depending on condition.

MRO and reconfigurations costs for wide-body airplanes, on the other hand, can cost more than a new A320 or 737. GE Aviation GE90s on Boeing 777-200LRs, -300s and -300ERs are notoriously expensive. MRO for Rolls-Royce wide-body engines is costly under RR’s contract packages.

Reconfiguration costs for A330s, 777s and A380s can run up to $30m, depending on the initial operator and who the second (or third) one will be. Therefore, HiFly did not reconfigure the ex-Singapore Airlines Airbus A380 it acquired after SQ retired the airplane.

LNA analyzed the number of wide-bodies owned by lessors. There are more than 670 Airbuses and more than 600 Boeings.

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Pontifications: There is no good news

May 18, 2020, © Leeham News: There simply is no good news in commercial aviation right now.

By Scott Hamilton

Yes, airport traffic is upticking in the USA (and elsewhere) slightly. But in the USA, it’s still less than 10% of last year’s totals.

There remains a tremendous amount of uncertainty.

  • Airbus plans to lay off some 10,000 employees, according to press reports. Another production rate cut seems inevitable.
  • Boeing’s CEO revised the forecast for air traffic recovery from 2-3 years to 3-5 years. Production recovery will take another 2-3 years after that, he said.
  • Embraer’s biggest customer for the E195-E2, Azul Airlines, deferred deliveries from 2020-2023 to 2024. There haven’t been announcements about deferrals by US carriers for E175-E1s, but there is no reason to believe these won’t be deferred.
  • Delta Air Lines says 7,000 of its 14,000 pilots will be surplus to its needs this fall.
  • Spirit Aerosystems laid off about 1,700 employees due to Boeing’s production planning.
  • Qatar Airways will retire 50 airplanes, defer new orders from Airbus and Boeing and cut the workforce by 20%.

The list goes on and on and on.

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Analysis: Mitsubishi suspends development of M100, continues M90 due to COVID

By Scott Hamilton

Analysis

May 12, 2020, © Leeham News: Mitsubishi Heavy Industries (MHI) yesterday said it cut development money for the M100 SpaceJet. M100 R&D is suspended indefinitely while it continues for the M90 on half rations.

MHI will continue certification of the M90.

MHI also said it will reevaluate demand for the M100 because of COVID-19 impacts.

This immediately raised questions whether MHI may kill the M100 program.

To do so will squander MHI’s once-in-a-lifetime chance to become a real global power in commercial aviation. If this happens, “Japan Inc.” also loses a chance to be part of this.

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