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Deferrals grow as airlines fight to keep bottom line

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Introduction

Jan. 09, 2017, © Leeham Co.: Airlines have deferred or are thinking about deferring more than 400 airplanes in the near term, a review of decisions and deliberations that have been made during the last 12 months.

LNC tracked announcements last year of deferrals and statements by airlines that they are thinking about doing so.

We began identifying macro-level issues last week in our posts about emerging concerns for the 787 and LNC’s Outlook for 2017.

Reasons vary widely for the deferrals, these reports indicated. Low oil prices. Slowing economies. Declining financial results. Worries about two of the three top Middle Eastern carriers. A capital squeeze in China. Pressure on long-haul carriers from the emerging sector of low cost, long-haul airlines. Preserving capital expenditures to keep the bottom line in the black.

Today we detail the deferrals we tracked.

Summary

Deferrals of single aisle aircraft are less worrying than for wide-body aircraft
For wide-bodies, it depends on the program. For the Airbus A380, deferrals turns the program back into the red. For the A350, deferrals can help with delivery commitments.
For the Boeing 777, deferrals spells trouble, especially for the present generation.
The 787 is more resilient but the slow sales make the program sensitive longer term.

1 Comment

Posted on January 9, 2017 by Scott Hamilton

Airbus, Airlines, Boeing, Bombardier, Delta Air Lines, Leeham News and Comment, Pratt & Whitney, Premium, Qatar Airways, Rolls-Royce

777 Classic, 787, A380, Airbus, airlines, Boeing, Bombardier, Emirates Airlines, Goldman Sachs, Qatar Airways

Pontifications: Boeing’s book:bill shortfall draws market ho-hum

By Scott Hamilton

Jan. 9, 2017, © Leeham Co.: Boeing’s falling a little short of a 1:1 book:bill last year was expected and drew a ho-hum from the market.

The stock was up fractionally for the rest of the day after Boeing announced the year-end data at 11 am Eastern time, closing at $159.10.

Airbus announces its full year orders and deliveries Wednesday in a press conference (Boeing only issued a press release).

26 Comments

Posted on January 9, 2017 by Scott Hamilton

Airbus, Boeing, Pontifications

777, 787, Airbus, Boeing, Buckingham Research

Bjorn’s Corner: Turbofan developments in 2017

By Bjorn Fehrm

January 06, 2017, ©. Leeham Co: Before we finish of our series on airliner turbofan technology, let’s spend this Corner on what will happen on the airliner engine front during 2017.

While there is no totally new engine that comes into the market during 2017 there are a number of new variants of existing engine families that will be introduced.

Figure 1. GasTurb principal representation of a three shaft turbofan like our reference Rolls-Royce Trent XWB. Source: GasTurb.

If we start with the engines for regional/single aisle aircraft and then climb the thrust scale, we will cover the engines in climbing thrust class.

31 Comments

Posted on January 6, 2017 by Bjorn Fehrm

Airbus, Bjorn's Corner, Boeing, CFM, Comac, CSeries, E-Jet, GE Aviation, Irkut, Pratt & Whitney, Rolls-Royce, United Aircraft

737 MAX, A320NEO, A330neo, A350-1000, Airbus, Boeing, Bombardier, CFM, Comac, CSeries, Embraer, Pratt & Whitney, Rolls-Royce

Analyzing the Top Customers for Airbus and Boeing

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Introduction

Jan. 4, 2017, © Leeham Co.: The top 25 Airbus customers that are identified account for 63% for the current backlog, an analysis of the company’s order list shows.

For Boeing, its Top 25 customers account for 69% of its identified backlog.

Both companies have hundreds of Unidentified orders for which no customer is disclosed.

Summary

“China Inc.” is Boeing’s #1 identified customer and #3 for Airbus.
Two low cost carriers are the first and second top customer for Airbus.
Three low cost carriers follow “China Inc.” as Boeing’s Top Customers.
Boeing’s Top 3 wide-body customers are in the Middle East, where financial and traffic results are beginning to soften.
Three of Airbus’ Top 5 customers are also from the Middle East. The other two are from Asia.
Boeing has 54% of the market share among the Top wide-body customers. Airbus has a 54% market share in the narrow-body sector.

Market, other factors emerging, creating Boeing 787 concern

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Introduction

Jan. 4, 2017, © Leeham Co.: Despite a rosy picture painted by Boeing about the future of the 787 and the ability to recover more than $29bn in deferred production

Boeing photo.

and tooling costs, there are signs that cause concerns over the next 3-5 years.

Summary

Near-term production outlook solid, weakness begins in 2020, big gap in 2021.
Boeing doesn’t see wide-body sales recovery until next decade.
Company foregoes increasing 787 accounting block; sales won’t support it.
Market talks about deferring 787s.

2 Comments

Posted on January 4, 2017 by Scott Hamilton

Airbus, Airlines, Boeing, Etihad Airways, ExIm Bank, Leasing, Leeham News and Comment, Lessors, Premium

787, 787-10, 787-8, 787-9, A330ceo, A330neo, A350, Airbus, Boeing, China, Donald Trump, Etihad Airlines, ExIm Bank

Pontifications: Embraer, contrary to others, looks to momentum in 2017

By Scott Hamilton

Jan. 3, 2017, © Leeham Co.: Airbus, Boeing and Bombardier look toward 2017 as a bit of a punk year, as detailed in our Look Ahead for subscribers only. Not so by Embraer.

In an exclusive interview, John Slattery, the president of Embraer Commercial, said EMB will gain “momentum” this year. This is at a time where sales at the other three of the Big Four OEMs are expected to slow off an already slow 2016.

30 Comments

Posted on January 3, 2017 by Scott Hamilton

Airbus, Boeing, E-Jet, Embraer, Emirates Airlines, Pontifications, Rolls-Royce, Sukhoi

737-900ER, 777, 787-10, 787-8, A330-900, A350-900, A380, Airbus, Boeing, Delta Air Lines, EJet, EJet E2, Ejet-E1, Embraer, John Slattery, Northwest Airlines, Rolls-Royce, Scope clause, SSJ100, Sukhoi

2017: the year ahead

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Introduction

Jan. 3, 2017, © Leeham Co.: The New Year is here and it doesn’t look like a good one for commercial aerospace, if measured against previous outstanding years.

There are some troubling signs ahead, piling on to a slowdown in orders from last year that didn’t even reach a 1:1 book:bill.

This year looks to be worse than last. Airbus and Boeing will give their 2017 guidance on the earnings calls this month and next. Bombardier and Embraer earnings calls are a ways off, when each will provide its guidance.

But LNC believes the Big Two in particular will be hard pressed to hit a 1:1 book:bill this year and may even struggle to match 2016 sales.

Boeing’s year-end order tally comes Thursday. Airbus’ comes on Jan. 11.

Summary

Wide-body sales remain weak.
Narrow-body backlogs and low oil prices continue to inhibit sales.
China, Middle East concerns emerging.
United Aircraft MC-21 and COMAC C919 begin flight testing.
Airbus A330neo, Boeing 787-10, Embraer E195-E2 and Mitsubishi Aircraft MRJ-70 roll-out and begin flight testing.
Airbus A321neo and Boeing 737 MAX 8 EIS.

1 Comment

Posted on January 3, 2017 by Scott Hamilton

Airbus, ATR, Boeing, Bombardier, CFM, Comac, CSeries, E-Jet, Embraer, Etihad Airways, Farnborough Air Show, GE Aviation, Irkut, Leeham News and Comment, Middle of the Market, Mitsubishi, Pratt & Whitney, Premium, Rolls-Royce, Sukhoi

Airbus, Boeing, Bombardier, CFM, Comac, Embraer, GE Aviation, Irkut, Mitsubishi, Pratt & Whitney, Rolls-Royce, Sukhoi

Airbus, Boeing Top Customers mix of stable, risk and reward

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Introduction

Dec. 22, 2016, © Leeham Co.: When it comes to comparing backlogs of Airbus and Boeing, the latter likes to point to what it calls a better quality of customers.

The fact is, both companies have large orders with airlines that may be characterized as less than top quality, or which appear to have over-ordered.

Summary

Airbus is more risk-reward oriented than Boeing.
Airbus appears more aggressive in emerging markets.
Airbus and Boeing share risky and quality customers.
Many of the shared top customers are roughly balanced between Airbus and Boeing.

1 Comment

Posted on December 22, 2016 by Scott Hamilton

Airbus, Airlines, Boeing, Premium

Airbus, airlines, Boeing, Lessors

Boeing announces 2017 job cuts

Dec. 20, 2016: Boeing yesterday announced a new round of job cuts, hoping that these will come from retirements voluntary buyouts–but it did not rule out involuntary layoffs.

No number was given by Boeing for the workforce reduction.

Just a week ago, LNC predicted more job cuts would be coming at Boeing–and at Airbus.

Boeing’s message to employees is below.

50 Comments

Posted on December 20, 2016 by Scott Hamilton

Airbus, Boeing

Airbus, Boeing, Kevin McAllister, Ray Conner

Pontifications: Leeham News’ approach to the news

Leeham News and Comment will be on holiday Dec. 24, 2016, through Jan. 2, 2017, barring major breaking news. Merry Christmas and Happy New Year.

By Scott Hamilton

We approach our job with a little different perspective than the daily newspapers and aviation trades. They have greater resources than we do and have a greater ability to report the news. So LNC tries to bring news with perspective that those outlets don’t.

Analysis, economics, forecasts

We provide analysis of events and of aircraft economics and performance. Not even the trades do the latter. We also make our own forecasts of trends and production rates. Sometimes it takes a few years to be proved right or wrong. So far, we have a good track record of being right.

We’re also not afraid to take on controversy—and be controversial. And we don’t hesitate to call bullshit when we see it.

This gets often us into hot water with the subjects of the controversy.

This is what sets LNC apart.

28 Comments

Posted on December 19, 2016 by Scott Hamilton

Airbus, Boeing, Pontifications

737 MAX 200, 777 Classic, 777X, 787, A321LR, A321NEO, A330, A350, A380, Airbus, Boeing

Leeham News and Analysis

There's more to real news than a news release.

Leeham News and Analysis

Deferrals grow as airlines fight to keep bottom line

Introduction

Summary

Pontifications: Boeing’s book:bill shortfall draws market ho-hum

Bjorn’s Corner: Turbofan developments in 2017

Analyzing the Top Customers for Airbus and Boeing

Introduction

Summary

Market, other factors emerging, creating Boeing 787 concern

Introduction

Summary

Pontifications: Embraer, contrary to others, looks to momentum in 2017

2017: the year ahead

Introduction

Summary

Airbus, Boeing Top Customers mix of stable, risk and reward

Boeing announces 2017 job cuts

Pontifications: Leeham News’ approach to the news

Analysis, economics, forecasts

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