Boeing’s big opportunity

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By Scott Hamilton

Analysis

Introduction

Aug. 3, 2020, © Leeham News: Boeing has one of the biggest opportunities in decades.

This is counter-intuitive, given the disaster it faces with the COVID-19 crisis.

But in chaos, there are opportunities.

There are some key assumptions that must be made. But these are not outlandish.

Summary

Assume:

  • Boeing survives the virus crisis.
  • Boeing consolidates 787 in Charleston.
  • 787 demand doesn’t return, reactivating Everett line.
  • Sharp gains in production efficiency.
  • These lead to the Big Opportunity.

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Bjorn’s Corner: The challenges of Hydrogen. Part 2. Ecosystem.

By Bjorn Fehrm

July 31, 2020, ©. Leeham News: In our series on Hydrogen as an energy store for airliner use we begin by looking at the needed ecosystem that can produce and distribute Hydrogen.

When I was skeptical about hydrogen as a means to propel our airliners three years ago, the main problem was the lack of this ecosystem. That year, in 2017, 13 transport and energy companies formed the Hydrogen Council, to create this ecosystem. Today the council has 81 members, with 22 joining in the last year, Figure 1. The list reads as Who’s Who in the transport and energy sector.

Figure 1. Members of the Hydrogen Council. Source: Hydrogen Council.

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COVID production rates “firm” up

By Scott Hamilton

July 30, 2020 © Leeham News: Airbus and Boeing refined their COVID production schedules this week slightly downward in some cases.

Airbus largely held to its previously announced production schedule. It dropped the A350 rate by one, to 5/mo from six. The A320 rate remained at 40/mo, as did the A330 rate at 2/mo. The A220 rate is returning to 4/mo in Montreal and 1-2/mo in Mobile.

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Airbus 1H2020; “We have reached the right production level for the pandemic”

By Bjorn Fehrm

July 30, 2020, © Leeham News: Airbus presented its results for the first half of 2020 today. Airbus CEO, Guillaume Faury said on the analyst call “We made a large adjustment to lower production rates end April. We are there now and it seems the right level. Except for a small adjustment for A350, from six to five per month, we are happy, we have found the right level for the crisis”.

The group revenue settled at €18.9bn for the first half of 2020 compared with €30.9 a year ago, with deliveries at 196 commercial aircraft (389 1H2019). EBIT adjusted for the first half is €-0.9bn, the size of the COVID-19 extra costs charge.

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Airbus says A350 loans now WTO compliant

By Bjorn Fehrm

July 30, 2020, ©. Leeham News: Airbus CEO Guillaume Faury announced Friday that it had made the A350 Repayable Launch Investment (RLI) loans fully WTO compliant, to break the deadlock in the 16-year-old fight with Boeing over state subsidies to their airliner industries. The claim was reiterated today during the Airbus second-quarter earnings call.

“We have fully complied with all the WTO requirements. These additional amendments to the A350 RLIs demonstrate that Airbus has left no stone unturned to find a way towards a solution,” said Faury. “This is a clear signal of support to those who are suffering from the severe impact of the tariffs imposed by the USTR, especially at a time when industries are hard hit by the consequences of the COVID-19 crisis.”

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Applying ASC 606 to the Airbus Order Book

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By Vincent Valery

Introduction  

July 27, 2020, © Leeham News: Since the first quarter of 2018, Boeing applies a new revenue recognition accounting standard, ASC 606, to its aircraft order book.

As a result, the OEM needs to remove orders from the backlog when a customer deviates materially from its contractual obligations.

ASC 606 adjustments affect all Boeing commercial aircraft programs apart from the 767. Orders removed from the 737 backlogs increased from 183 to 622 between the end of 2019 and June 2020. The figure should rise further as more airlines have strained finances due to the COVID-19 outbreak.

Other aircraft OEMs, notably Airbus, do not apply such standard. As a result, the firm backlogs of Airbus and Boeing aren’t apples-to-apples comparisons.

With Airbus reporting earnings Thursday, LNA adjusts the OEM’s order book for orders at material risk of cancellation. The goal is to obtain a more representative market share picture.

Summary
  • ASC 606 Course 101;
  • Identifying Boeing ASC 606 customers;
  • Applying adjustments to Airbus’ order book;
  • Estimation of adjusted market shares.

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Restoring capacity with the A330ceo or A330neo, Part 6, Wrapup.

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By Bjorn Fehrm

Introduction  

July 23, 2020, © Leeham News: Over the last four weeks, we analyzed the venerable Airbus A330, to see if the present low fuel and lease prices make the recent A330neo version less attractive than an older ceo version.

As airlines are cash injection driven in the present COVID-19 crisis, taking delivery of a new aircraft and then do a sell, lease back deal injects fresh cash to the airline. The order deposit and the Pre-Delivery-Payments, PDPs, then flows back to the airline. This is why we see airlines take new aircraft despite not really needing them right now.

The A330 has seen phenomenal growth in capability as the Gross Weight has gone from 212t to 251t over the years. We now wrap the series by looking if there is potential for another stretch in the A330? Could it grow to a true Pacific-Ocean crosser, and if so, what changes should be made?

Summary
  • The A330neo now has a 251t Maximum TakeOff Weight (MTOW). Is this enough or could the aircraft gain from another MTOW hike?
  • We go through the gains and the areas that need changing should the business case be there to stretch the payload-range curve further for the A330neo.

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HOTR: Norwegian claims $1bn+ in damages from Boeing

HOTR072120

By the Leeham News staff

July 21, 2020, © Leeham News: Norwegian Air Shuttle said June 30 it canceled orders for 92 Boeing 737 MAXes and five 787s.

The orders still appear on Boeing’s Unfilled Orders website, which is updated monthly.

In a lawsuit filed June 20 in Cook County Circuit Court (Chicago), NAS claimed breach of contract for failure to deliver the MAXes due to grounding. It claims breach of contract for failure to delivery 787s due to the long-running issues with the Rolls-Royce engines.

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As federal aid comes to end, small suppliers see “blood bath”

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By Scott Hamilton

Introduction

July 20, 2020, © Leeham News: As the Payroll Protection Plan of the US government nears expiration, a blood bath among small suppliers is all but certain unless an extension is approved by Congress.

This is the dire forecast by William Alderman of Alderman & Co. Alderman specializes in representing small suppliers and aftermarket companies wanting to exit the business. Small, in this case, is defined as revenues up to $100m.

Alderman told LNA that some of his clients don’t see business recovery for 10 years. This is a different metric than the one most often cited: air traffic returning to pre-COVID levels in 2023-24, by most accounts.

Summary

  • Small companies need PPP extension.
  • Small companies need working capital, fast.
  • If neither is forthcoming, exiting the business in the other alternative.

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Restoring capacity with the A330ceo or A330neo, Part 5

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By Vincent Valery

Introduction  

June 18, 2020, © Leeham News: In the previous articles, we outlined Economic factors that determine whether the older A330ceo or newer A330neo is a better choice for airlines. We summarize those findings and broaden the discussion.

Summary
  • Economic summary;
  • The case for keeping older aircraft;
  • And purchasing newer ones;
  • A further factor in favor of more modern airplanes;
  • Potential A330neo enhancements.

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