Leeham News and Analysis
There's more to real news than a news release.
VLA sector dead, Boeing claims, but Large Wide Body also struggles
Subscription Required
Introduction
Sept. 26, 2017, © Leeham Co.: Boeing declared the Very Large Aircraft sector dead in its most recent Current Market Outlook, removing the category entirely when the 2017 CMO was revealed at the Paris Air Show.
Airbus A350-1000. Sales are slow–is the 350-450 seat sector the next VLA? Airbus photo.
But the Large Wide Body (LWB) category appears to be on life support.
The LWB is 350-seats and above. This includes the Boeing 777-300ER, which is already on its way out, the 777-8, the 777-9 and the Airbus A350-1000.
The Medium Wide Body (MWB) category centers around 300 seats. This includes the A330-900, A350-900, 777-200LR and 787-10.
The Small Wide Body (SWB) includes the 787-8, 787-9, A330-200 and A330-800 in the 220-275 seat sector, twin-aisle aircraft. This does not include the 220-240 seat high density Airbus A321neo and Boeing 737-10 single-aisle aircraft.
Boeing’s CMO defines the twin-aisle markets differently: Small wide-body: <300 seats, Large wide-body: >300 seats.
Summary
- Airlines prefer smaller wide bodies.
- Downsizing trend begun with 787 continues.
- Smaller outsells larger in seven of last 10 years.
- Two of the three years involved extraordinary events.
Boeing’s bold ambition
Subscription Required
Introduction
Sept. 25, 2017, © Leeham Co.: The ambitious plan of Boeing CEO Dennis Muilenburg to grow after-market services from today’s $14bn in revenues to $50bn in 5-10
Stan Deal, CEO of Boeing Global Services.
years was announced nearly a year ago—Nov. 21.
Boeing Global Services, or BGS, combines separate operations in Boeing Commercial Airplanes and Boeing Defense, Space and Security (BCA and BDS respectively).
The growth depends on a combination of improving its current operations, growing organically and through mergers and acquisitions.
Wall Street aerospace analysts generally regard the timeline as ambitious.
In an interview with LNC, the CEO of BGS, Stan Deal, agreed.
Summary
- Muilenburg’s bold ambition.
- The next 100 years.
- Creating a value proposition.
Pontifications: Revisionist history
By Scott Hamilton
Sept. 25, 2017, © Leeham Co.: The US Department of Commerce today is scheduled to release its decision on whether to impose tariffs on each Bombardier CS100 delivered to Delta Air Lines, starting this year. (The public announcement is tomorrow.)
The tariffs will be in two forms: one for dumping the aircraft at prices below that sold in the home market (Canada) and one for “injury” to Boeing.
LNC understands the total could be in the range of $32m per plane. We don’t know if this a correct figure.
Boeing told its investors conference last week it’s pursuing this complaint about Bombardier subsidies to avoid another Airbus emerging and destroying Boeing and the US aerospace industry—an idea included in Boeing’s filings with the US government.
In those filings, Boeing claimed Airbus led to the demise of Lockheed’s commercial aviation business and of McDonnell Douglas.
I think this is a bit of revisionist history.
Assessing the 25 YOA aircraft factor
Subscription Required
Introduction
Click on image to enlarge.
Sept. 21, 2017 © Leeham Co.: Airbus and Boeing look ahead to 2021 and the next several years when wide-body aircraft begin turning 25 years old to spur orders for this sector.
Boeing specifically points to this period as one reason for the announcement last week that it will boost production of the 787 to 14/mo beginning in 2019.
Summary
- There already are 1.4 times more wide-body airplanes scheduled for delivery in 2021-2025 than there are aircraft turning 25 years old.
- The next surge in aging aircraft comes ~2030.
- Middle of the Market aircraft isn’t factored in.
CSeries economy up to 3% better than advertised
Sept. 19, 2017, © Leeham Co., Montreal: The Bombardier CSeries has proved to be 1% to 3% more fuel efficient in service than advertised, the company revealed last week at its Media Day.
The improvements depend on the mission: 1% on shorter routes and 3% on the longer ones.
Better-than-advertised performance had been rumored, and reported, for months but this is the first time Bombardier confirmed the reports.
It also depends on the model. The CS100, a shrink design, is slightly better than advertised; the CS300—the optimized design—is the better performer.
Assessing the 787 production rate increase
Subscription Required
Introduction
Sept. 18, 2017, © Leeham Co.: Boeing last week announced it will take the production rate of the 787 from 12/mo to 14/mo in 2019.
Boeing 787-9. Source: Boeing.
The decision to do so was couched in a strong backlog and strong forthcoming demand by CEO Dennis Muilenburg at a Morgan Stanley conference.
But analysts think the move is more about boosting free cash flow and hitting margins than it is about demand.
Summary
- Boeing sees demand surging from 2019 for widebodies generally and the 787 specifically.
- Muilenburg says Boeing is working “skyline” positions in 2019 and 2020 (LNC saw these years as already filled).
- Widebody jets hitting 25 years old early next decade.
- Airbus concurs.
Assessing the United A350-900 order
Subscription Required
Introduction
United Airlines last week returned to the Airbus A350-900 it originally ordered. It will replace Boeing 777-200ERs beginning in 2022. Image via Google.
Sept. 11, 2017, © Leeham Co.: The deal last week between United Airlines and Airbus was a winner for the carrier and a mixed win for the OEM.
Boeing was also a mixed winner.
Summary
- United was in the best position to come out ahead, and it did.
- Airbus kept a high-profile US customer, but the A350-1000 program took a hit.
- Boeing’s strategy of putting 777-300ERs into United hurt the A350-1000, but UAL remained an A350 customer.
Pontifications: Boeing’s sense of invincibility
By Scott Hamilton
Sept. 11, 2017, © Leeham Co.: I can’t help but get the feeling that Boeing feels it’s invincible these days.
And why not?
Boeing racked up some impressive victories and took some hardline positions in recent months that move it forward for its corporate goals.
Costs for IAG’s low-cost airlines
By Bjorn Fehrm
Subscription required
Introduction
September 07, 2016, ©. Leeham Co: Yesterday we described International Airlines Group’s (IAG) Vueling and LEVEL LCCs. Now we look at their cost and compare these to the direct competition; Ryanair, easyJet, Norwegian and Eurowings.
For Vueling and its competition, we have cost data from 2016 and 1H2017. For LEVEL, it’s too early. It started operations in June 2017. Here we compare the seat-mile costs of the chosen Airbus A330-200 to Norwegian Air Shuttle’s (Norwegian) Boeing 787-8.
Summary:
- Vueling has higher operating costs than its direct competition, mainly caused by lower load factors and lower fleet utilization.
- At present fuel prices, the A330-200 used by LEVEL does not have a Direct Operating Cost (DOC) disadvantage compared with Norwegian’s 787-8.
IAG’s low-cost airlines.
By Bjorn Fehrm
September 06, 2016, ©. Leeham Co: We continue our series about the European legacy carriers’ LCC arms. Now we cover International Airlines Group or IAG.
The LCC approach of IAG has a more local focus than for Lufthansa Group. Europe’s leading LCCs are based in UK/Ireland. Yet IAG, with its main brands, British Airways and IBERIA, only has a Spain-centric LCC, Vueling, and since June a Spain-centric long-haul LCC brand, LEVEL.