Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- RTX Q1 2025 Earnings: GTF Talk Takes A Back Seat To Tariffs April 22, 2025
- Tariffs Tumult Takes Over GE Aerospace Q1 2025 Earnings Call April 22, 2025
- Boeing reports mixed results of latest employee survey, but middle management and officers remain key obstacles April 22, 2025
- Hopes for 1Q financial progress turns into bumpy ride for Boeing April 21, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 18. April 18, 2025
Pontifications: Looking ahead to a major Defense procurement: Boeing vs Lockheed-Airbus
By Scott Hamilton
May 23, 2023, © Leeham News: Decisions by the US Air Force in Washington (DC) on whether to require competition for its next round of aerial refueling tanker aircraft are still months away.
But so far, the USAF technical group at the Wright-Patterson Air Force Base in Dayton (OH) is proceeding as if there will be a competitive battle. At stake is an order for more than 160 tankers.
Boeing thinks this will be a sole-source, follow-on order for its KC-46A, based on the commercial 767-200ER. Lockheed Martin Co (LMCO), partnering with Airbus, wants to see a version of the Multi Role Tanker Transport (MRTT), based on the commercial A330-200.
So far, the secretary of the Air Force publicly said he is leaning toward a sole-source follow-on order.
I visited LMCO last month to talk about the tanker competition. We also talked about the C-130J and its new commercial model, as well as other defense programs.
Making the case for competing the next USAF tanker procurement
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By Scott Hamilton
May 22, 2023, © Leeham News: The US Air Force is moving slowly toward another aerial refueling tanker procurement. With hundreds of ancient Boeing KC-135 tankers still to replace, the procurement will be a big one: more than 160 jets.
Concept of the Lockheed Martin LMXT aerial refueling tanker it wants to sell the US Air Force. This tanker is based on the Airbus A330 MRTT now in service. Credit: Lockheed Martin.
The big question that is as yet unresolved is whether the Air Force will place a follow-on, sole-source order with Boeing, or seek a competitive bake-off. If it’s the latter, a bid by Lockheed Martin Co. (LMCO) will be the competition. (Others may submit a bid, but the Boeing-Lockheed face-off will be the one to watch.)
LMCO partnered with Airbus to offer the A330 MRTT (Multi-Role Tanker Transport). This sets up a third Boeing-Airbus contest that could well be as bitter as the two previous ones. Make no mistake: although Lockheed will be the company submitting the bid, Airbus will become the target. It already has. Boeing surrogates lost no time in attacking Airbus after LMCO announced it will submit a bid, using the same old tired illegal subsidies claims and adding some new ones.
One surrogate questioned Airbus’ safety record. This was an astounding line of attack, considering the Boeing 737 MAX history and all the scandals that emerged in its development; and the 2013 grounding of the Boeing 787 for safety reasons. Airbus has never had a fleet type grounded by regulators for safety reasons traced to the design of the aircraft. (India’s regulator grounded A320neos equipped with Pratt & Whitney GTF engines due to issues related to the engine durability.)
More relevant is whether it makes economic and financial sense for the Air Force to have two primary tanker fleets: Boeing’s KC-46A and the A330 MRTT. LNA visited LMCO last month in Marietta (GA), the location of much of its defense business. It’s where the LMXT, as Lockheed calls its offering, will be militarized after production at Airbus’ Mobile (AL) aerospace complex should LMCO win the contract—if the procurement is competed.
LNA tomorrow will discuss some of the history of previous procurements.
Summary
- Commonality is Boeing’s argument. Derisking the fleet and greater capability is Lockheed’s argument.
GTF’s troubled history hurting future orders
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By Scott Hamilton and Bjorn Fehrm
May 8, 2023, © Leeham News: India’s GoFirst Airlines filed for bankruptcy last week. The carrier pointed to around 29 of its 50 Pratt & Whitney Geared TurboFan-powered Airbus A320neos being grounded as the reason.
The aircraft have been grounded for months. Despite negotiations with PW and a favorable arbitration ruling, GoFirst says PW failed to provide replacement engines. As a result, GoFirst paid about $196m in lease rates for the grounded aircraft, without being able to fly them for revenue.
Lufthansa Group last week complained that a third of its Swiss Airbus A220 fleet, also powered by the GTF, are likewise grounded with technical issues. As LNA previously reported, Air Baltic, Egyptair and Air Senegal also have A220s grounded. Iraqi Airlines has some A220s that are grounded. And now there’s news that Embraer E195-E2s at KLM’s regional airline are also grounded due to GTF issues.
India’s Indigo Airlines also has a large number of A320neos grounded with GTF problems. About 11% of the nearly 3,000 A320neos in service are grounded or fly one a week, an Aviation Week analysis revealed.
PW’s reputation was already badly damaged before the GoFirst bankruptcy. However, an LNA analysis shows that forward orders for engines on the A320neo already were suffering.
Summary
- CFM’s LEAP has a consistently larger market share, boosted by exclusivity on Boeing 737 MAX.
- Initially PW won more orders for A321neo; CFM has overtaken in the order backlog.
- Including A220 (exclusive GTF power) and MAX, plus neo split, CFM’s in-service market share is 66% to 34%.
- But going forward, CFM has 60% of the backlog across all types to PW’s 19%–with 22% of the A320neo family orders undecided on engines.
Related Articles
Airbus 1Q2023 results: Supply chain problems persist
By Bjorn Fehrm
May 4, 2023, © Leeham News: Airbus has presented its results for the first quarter of 2023. The supply chain problems that lowered the 2022 production targets and that Airbus thought would subside in 2023 persist.
The company sticks to its 2023 guidance of delivering 720 commercial aircraft but now adds that the year will be more backloaded than thought. Guidance of EBIT adjusted of €6bn and Free cash flow of €3bn remains.
Airbus delivered 127 commercial aircraft in the quarter, compared with 140 last year. Net orders increased from 83 for 1Q2022 to 142 for the quarter.
Open Skies in Africa: a jump start to post-covid recovery?
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By Judson Rollins
May 1, 2023, © Leeham News: Could Africa’s first real “open skies” implementation boost its aviation recovery? So far, the continent’s rebound from covid has been anemic as food and energy crises, surging inflation, and debt tightening have battered consumers and producers alike.
Source: Wikipedia.
A December report from the International Air Transport Association (IATA) showed Africa’s post-covid traffic recovery on a trajectory like Europe or Latin America, with 2019 passenger volumes not expected to return until 2025. Industry economists believe the average African airline profit margin this year will be -1.7%. The US dollar’s continued strength hasn’t helped, given its impact on most non-labor airline costs, and looms as an even greater threat to profitability in coming years.
Summary
- African aircraft order books are relatively thin
- Flag carrier troubles, limited affordability continue to dampen growth
- Single African Air Transport Market: a new chapter?
Pontifications: A contrarian view of Stock Buybacks
By the Leeham News Team
April 25, 2023, © Leeham News: Airbus and Boeing last week held their annual shareholders’ meetings. Boeing continues to suspend dividends and stock buybacks as it struggles to recover from the grounding of the 737 MAX and delivery suspensions of the 767/KC-46A, 787, and 737 (again); and the years-delayed certification of the 777X. Losses and charges at its defense unit mount as well, hurting profits and cash flow.
Before the MAX grounding in March 2019, Boeing spent more than $60bn in stock buybacks since the 1997 merger with McDonnell Douglas. “Shareholder value” became a priority—and dirty words to those who long for the days of a Boeing based on engineering excellence vs focus on Wall Street and the stock price.
Airbus has taken over the lead in airplane engineering and innovation. Boeing in November deemphasized new product development and pointed to its guidance of $10bn in free cash flow by 2025. However, Airbus now puts shareholder value as an important business goal. At its annual meeting, Airbus continues its dividend and stock buyback programs. But Airbus buybacks and dividends are a fraction of what Boeing has spent and Airbus committed to a €10bn war chest for future contingencies.
Stock buybacks remain a target of criticism. While our view of over-emphasis on shareholder value is well known—we favor a balance on free cash flow expenditures between shareholder value and new product development—there is another side to stock buybacks that haven’t been discussed.
Leeham News is going to take a step back and dig into the details of the buybacks, analyzing the numbers behind the repurchase program, its results, and possibilities for the future.
Boeing offers bonuses up to $10,000 as it searches for scarce talent
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By Bryan Corliss
April 17, 2023, © Leeham News: The Boeing Co., which has talked of making significant production rate increases “very soon,” is offering bonuses of up to $10,000 as it recruits workers in touch-labor positions in both South Carolina and Puget Sound.
In Charleston, Boeing is offering $5,000 signing bonuses specifically for experienced painters and interiors installers as it tries to first stabilize, then increase, production of 787s. Boeing wants to reach a rate of 5/mo by the end of this year and 10/mo by 2025/26.
In Puget Sound, the company isn’t offering signing bonuses, but it is offering hefty payouts of up to $10,000 to current employees who refer experienced aerospace workers to openings in a number of job categories, including structures mechanics and general machinists.
The moves come as analysts continue to sound alarms about workforce shortages across the industry.
“We continue to remain cautious on the supply chain’s ability to support the planned production rate increases in 2H23 and into 2024,” wrote Ken Herbert, with RBC Capital Markets, in a report earlier this week. “We continue to see labor availability and training as the largest headwind facing the sector.”
- Boeing hiring as it prepares to ramp up
- Boeing offers hiring incentives
- Northwest aerospace labor market is tight
- S. Carolina: Lockheed-Martin offers $10K
Pontifications: Airbus grows in China while Boeing remains on the sidelines
By Scott Hamilton
April 11, 2023, © Leeham News: Airbus last week firmed up an order for 150 A320neos and 10 A350-900s with China. The deal was announced last year.
Additionally, Airbus and the Chinese government agreed to add to the A320 family assembly site in Tianjin, increasing the capacity of the plant. This will be another step in Airbus’ goal to achieve a production rate of 75 per month by 2026 for the A320 family.
And that’s not all. Airbus and the China National Aviation Fuel Group (CNAF) signed a Memorandum of Understanding to increase the development of Sustainable Aviation Fuel.
Meanwhile, Boeing remains essentially frozen out of China. Deliveries of the 737 MAX remain stalled. Although China Southern Airlines outlined expected deliveries this year and through the next few years, we’ve seen this sort of thing before. Until an official announcement comes from Beijing authorizing deliveries, or some of the stored airplanes are delivered, words are just words.
That said, there are some solid indications we’re seeing that Boeing deliveries to China may well resume in the not-too-distant future, but on a glacial pace. The financial viability of some airlines within China, while opaque to outsiders, is monitored by the CAAC, China’s regulator. Some airlines are deemed too financially risky now to accept delivery of any new aircraft, whether the OEM is Boeing or Airbus.
While Boeing’s 140 MAXes originally ordered by China remained in a Twilight Zone of sorts, delivery of some Airbus A320neos also has been blocked. Generally, though, Airbus continues to tender airplanes and win orders while Boeing sits on the sidelines.
Bjorn’s Corner: New aircraft technologies. Part 7. Propulsion
By Bjorn Fehrm
April 7, 2023, ©. Leeham News: This is a summary of the article New aircraft technologies. Part 7P. Propulsion. The article discusses how developments in the next-generation airliner propulsion system will be the second most important area for improved efficiency and lower emissions after we have decided on the fuselage type.
Figure 1. The CFM LEAP engine gained 15% efficiency compared to the engine it replaced, the CFM56. Source: CFM.
Bjorn’s Corner: New aircraft technologies. Part 7P. Propulsion
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By Bjorn Fehrm
April 7, 2023, ©. Leeham News: This is a complementary article to Part 7. Propulsion. It discusses in detail the next-generation propulsion systems and what to expect from their possible increase in performance and efficiency.