Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: Air Transport’s route to 2050. Part 21. May 9, 2025
- Does an A220-500 need a new wing and engines? Part 2. May 8, 2025
- Embraer downplays tariff impact on 2025 results May 6, 2025
- JetZero readies effort for private equity fund raising May 5, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 20. May 2, 2025
Bjorn’s Corner: Exciting 2016
By Bjorn Fehrm
29 January 2016, ©. Leeham Co: In the corner of two weeks ago we did a retrospective of 2015. Time for looking ahead. The year of 2016 will be quite interesting. We had entry into service of the first re-engine single aisle aircraft this week, the Airbus A320neo, the same week as we expect first flight from its main competitor, Boeing’s 737 MAX 8. We will also see first flight of the Embraer E190E2 and A350-1000 before the year is over.
The Mitsubishi MRJ shall go test flying in earnest and Bombardier’s CSeries 100 and 300 shall enter service. On top of that, the COMAC 919 will probably start ground roll tests this year and we should see roll out of Irkut’s MC-21. I would say 2016 is a busy year for civil aviation.
In the 2015 corner we talked a lot about engine technology as a key driver to further efficiency of air transportation. Now will dissect the airframe technology that all these new projects will bring us. Read more
Worry over Boeing 737 production rate ramp up overblown
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Introduction
Jan. 27, 2016, © Leeham Co. As Airbus prepares to hike production rates of the A320 family to 60/mo by the end of the decade and Boeing mulls whether to boost 737 
rates above the announced 57/mo announced today, some question whether the companies should do so.
The questions become more frequent as falling fuel prices make the need for the fuel efficient A320neo and 737 MAX appear to be less compelling. The economic turmoil in China adds to uncertainties.
Today we take a look at the 737 order book, based on Dec. 31 data, and extrapolate this to announced and potential future production rate hikes, and draw conclusions whether the rates announced and those under study make sense.
We will look at the A320 backlog in a future post.
Summary
- Looking at firm orders only with actual delivery dates shows minor production gaps.
- Large MAX TBD, unidentified customers make drawing firm conclusions difficult.
- Options and LOIs from solid customers show some years oversold.
Boeing Outlook: 777 rate cut, 737 hike (Update 2)
- Due to technical problems with the webcast, Boeing ended the earnings call this morning before Q&A and rescheduled at 1pm EST.
- The original, short post is updated with the re-do of the earnings call.
- The PDF slide show is here.
- See Scott Hamilton’s column on Forbes.
Jan. 27, 2016: Boeing’s outlook for 2016 disappointed Wall Street for lower-than-expected revenue, earnings per share and delivery projections, spurring a sell-off in the stock by almost 10% in the first hour of trading before the earnings call.
Because of a late Tuesday night story in The Seattle Times that a production rate cut in the 777 Classic line was coming, analysts expected this news. Boeing made it official: the 777 rate to 7/mo in 2017, a figure that was telegraphed in pre-Paris Air Show briefings last year. Boeing says it is confident of maintaining this production rate until entry-into-service of the 777X in 2020.
The production of the 737 will increase to 57/mo in 2019, which was forecast by LNC last year.
Boeing earnings call: will Muilenburg be more forthcoming than McNerney?
- See Scott Hamilton’s new column with Forbes on-line, It’s time for hard questions for Boeing.
Jan. 26, 2016, © Leeham Co. Boeing’s earnings call tomorrow could have additional revelations about the 777 production rate and how its cash flow is being enhanced by continued maneuvering of advances and accelerated pre-delivery deposits (PDPs).
Whether it will or not remains to be seen. Under former CEO Jim McNerney, Boeing’s penchant for obfuscation was legendary among the aerospace analysts.
Dennis Muilenburg, who took the CEO title last summer in addition to his Chief Operating Officer position, has already shown he’s different than McNerney, evidenced by the surprise, early contract agreement with the engineers union, SPEEA.
Boeing last week announced a further rate cut, effective in September, for the ailing 747-8 program. Along with this came a pre-tax charge of nearly $900m.
Major questions to be answered revolve around the future production rate for the 777 and the cash flow.
Boeing 777 Classic production gap closing
- See Scott Hamilton’s new Forbes on-line column, It’s time for hard questions for Boeing.
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Introduction
Jan. 26, 2016, © Leeham Co. Boeing needs to sell more than 200 777 Classics, all with delivery dates through 2021, to bridge the gap to full production of the 777-8/9, according to an updated analysis by Leeham Co.
Boeing firmed up an order for six 777 Classics early this month there are at least two campaigns in which Boeing hopes to land orders for around 20 777-300ERs.
But it’s the all-important delivery stream that isn’t announced with orders which raise the question of whether Boeing can bridge the gap.
The last 747-8 that is not a white tail is scheduled for delivery in May 2017—hardly enough to match the production rate in 2016 of one per month through August–or even the newly announced reduced rate of one-half per month from September.
Boeing booked a net of two 747-8F sales last year, but these were white tails sold to Boeing Capital Corp. for lease to Air Bridge Cargo.
The outlook for the 747-8 is very bleak. The outlook for the 777 Classic program remains challenging, to put it charitably.
Summary
- Annual update shows 777 production gap narrowing, but still remains.
- Aerospace analysts think 777 rate has to come down to six or lower.
- Pinning hopes on recovering air cargo market increasingly a reach.
Pontifications: Shifting focus to Embraer
By Scott Hamilton
Jan. 25, 2016, © Leeham Co. Embraer announced last week it had cut metal on its first E195 E2, more than a month before the roll-out of the first E190 E2, scheduled for Feb. 25, at is Sao Jose, Brazil, plant.
The aggressive manufacturer of small(er) passenger jets is moving forward full speed toward its next generation of aircraft even as Airbus, Mitsubishi, COMAC and Irkut encounter one delay after another.
Minuscule demand for Boeing 747-8F
- See Scott Hamilton’s new column for Forbes on-line, It’s time for hard questions for Boeing.
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Introduction
One of Boeing’s white tail 747-8Fs. This, and another that has been stored, was painted in the livery of the Seattle Seahawks. Boeing photo.
Jan. 25, 2016, © Leeham Co. Boeing’s decision to cut the production rate on the 747-8 is not a surprise. It’s only a surprise that it took officials so long to do so.
The company continues to cling to the hope of a recovery in the global air cargo market to sustain the program. This is unlikely, however.
The business case for the 747-8F is minuscule.
Summary
- The metrics of the global freight market have simply changed too much.
- Load factors for freight remain stuck below 45%.
- Yields continue to be low.
- Shifting trends from main deck freighters to using lower deck space on the big passenger airlines continues to grow.
- Low fuel prices, temporary though they may be, diminish the new for new 747-8Fs.
- Low capital cost 747-400 Passenger models stored in the desert or soon to be exiting the world’s fleet, along with stored 747-400Fs, provide ample opportunity for cheap freighters.
Bjorn’s Corner: The coin has two sides
By Bjorn Fehrm
22 January 2016, ©. Leeham Co: Today’s Corner should have been about something else. But we learned yesterday that yet another order did not go Bombardier’s way, the 125 seat aircraft order of 40 units for United Airlines.
Normally I don’t care about who gets a single aisle order; the players that are active are all producing very good products and which one that gets chosen in not a big deal.
Boeing took this business with its smallest 737NG member 737-700. The 737NG was scheduled to take on aircraft like the CSeries and the re-engined A320neo while Boeing perfected a clean sheet single aisle for the end of this decade.
This corner is about national characters and what happens when this character gets under pressure. It’s also about the fact that the coin has two sides.
The fuel effect; or old is beautiful
By Bjorn Fehrm
19 January 2016, ©. Leeham Co: When Willie Walsh, the CEO of IAG, said that the Airbus A340-600 “is a fantastic aircraft at fuel below $60 a barrel but perhaps not at $120,” he put operational words to something the Growth Frontiers 2016 conference in Dublin had been grappling with since it opened on Monday morning.
What is going to happen now? Crude is falling below $30 a barrel and Jet fuel is below $1 a gallon. This must have an effect on how people decide, whatever the lessors and aircraft OEMs say.
And it had to be a senior airline CEO that broke the mantra that everyone was repeating: “We don’t see fuel prices having any effect on fleet planning for airlines.”
IAG is looking at leasing used A380s
By Bjorn Fehrm
18 January 2016, ©. Leeham Co in Dublin: Willie Walsh, the CEO of IAG (which is the holding of Brittish Airways, IBERIA, Vueling and Air Lingus) spoke at the Growth Frontiers 2016 conference in Dublin about how the new IAG has become more agile in following market changes to opportunistically increase its operational efficiency.
Walsh gave the example of IAG’s aircraft fleets where he announced that it is looking to lease five to six used Airbus A380s in addition to the ones that British Airways (BA) already have on order. These could be aircraft for BA only use but also for a joint BA and IBERIA operation.