Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- The BWB has a long way to go before flying passengers, freight May 12, 2025
- 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
Mitigating risk, lessons learned as Boeing heads into MAX, 777X production
Aug. 12, 2015, © Leeham Co. Mitigating risk and taking lessons learned from across the entire 7-Series families are key to improving productivity, cutting costs and
Greg Smith, chief financial officer of The Boeing Co. Source: Boeing.
preparing for the transition from the 737NG to the MAX and from the 777 Classic to the 777X, the chief financial officer of The Boeing Co. said today at the Jefferies Global Industrials Conference.
Greg Smith told the conference, which was webcast, that putting all new airplane development under one department enables a common understanding of what’s going on across the product lines and therefore the new product lines benefit to reduce risk and create efficiencies.
The lessons learned from the 787 lines in Everett and Charleston “are very encouraging,” Smith said. “We are getting better learning from those efficiencies that transition to other parts of the business.”
Boeing is shutting the 787 surge line in Everett because production on the line is more inefficient than the main Everett and Charleston lines.
“The surge line has reached a point where it’s more inefficient than efficient,” Smith said. “We’ve reached a point of maturity in production where it’s clearly not needed. Getting the maturity of those two lines up gives you the confidence to shut down the surge line.”
B/E Aerospace sees “flat” widebody deliveries through 2016
Aug. 12, 2015, © Leeham Co.: Widebody deliveries are “flat as a pancake” and will remain so through 2016 before going up, driven by the Airbus A350, says a major 
supplier.
Officials of B/E Aerospace appeared yesterday at the Jefferies Co Global Industrials Conference, making the near-term forecast. B/E is best known as a seat supplier but also supplies galleys and lavatories.
With passenger load factors now routinely running around 85% and traffic growing, B/E’s backlog is greater than ever and the OEMs, pressured by airlines for on-time deliveries, likewise pressure suppliers. B/E competitor Zodiac had difficulties meeting demand late last year and early this year.
“You cannot image how much stress is created cannot deliver an airplane on time and the reason is a supplier,” a B/E official said. B/E has been able to keep up with demand.
C Series: challenges ahead
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Introduction
Bombardier CS300 (L) and CS100 (R). Click on image to enlarge. Photo via Google images.
Aug. 10, 2015, (c) Leeham Co. Bombardier came away from the Paris Air Show with positive reviews after finally displaying its new C Series. The CS100 was present in launch operator Swiss International colors and the spacious interior installed. The larger CS300, in house colors, was also on display and performed flying maneuvers, impressing the crowd with the quiet of the Pratt & Whitney P1000G Geared Turbo Fan engines, also a new product. Once airborne and circling around the runway, the engines could not be heard over the loud speakers of the show’s announcer.
BBD officials came away encouraged by response to the airplanes and they said potential customers were stopping by the chalet with new and renewed interest in the program.
But there remain formidable challenges ahead for the program. There were no sales announced at the Air Show, although BBD officials were clear in advance none was expected. None has been announced in the six weeks since the Air Show. Whether there will be any of substance by year end, and to whom, remains to be seen.
Focus is on execution: getting the aircraft certified by year end and preparing for delivery to Swiss in the first half of next year.
But the customer base remains of iffy quality and a number of the deliveries scheduled 2016-2018 fall into Leeham Co.’s Yellow and Risk Risk Assessment.
Summary
- Of nearly 200 deliveries scheduled 2106-1018, more than half fall within our Yellow-Red risk assessment.
- Country and region risk are concerns.
- A major customer has a changing business plan that puts deliveries into a Risk Assessment.
Bjorn’s Corner: Why is the real range of an airliner always shorter then what the OEM says?
By Bjorn Fehrm
07 August 2015, ©. Leeham Co: Now that we have explained the range consequences of weight and fuel limited airplane operations, we might as well explain the last important part of the range of an airliner: Why the practical range is always shorter than what the OEM says.
When an airliner OEM gives the design or brochure maximum range of an aircraft, they do that with an aircraft in a “show-room” configuration and which is loaded with a filled cabin only; no cargo is included in the calculation. Further, in the cargo area, there is only bulk-loaded passenger bags. Container loading of the bags would have cost tare weight for the containers used and weight is to be avoided when stipulating the maximum design range.
In practice, we would have to consider tare weight for bags containers and possible cargo when discussing what practical range an airline can plan for a certain aircraft model. But this is far from the whole story. Here is what has to be considered in addition.
Airbus fills in production gap for A330.
By Bjorn Fehrm
Introduction
Aug 3, 2015, © Leeham Co. Airbus successfully filled its production gap for the A330ceo for the transition to the A330neo, officials said Friday during the 1H2015 earnings call.
Production rate for the A330ceo can be maintained at the previously announced reduced rate of 6/mo, said CFO Harald Wilhelm.
Airbus Group reported solid progress in all areas where we previously described it had outstanding challenges. Cleaned from one time effects (among them a Dassualt share sale income of € 748m), sales and profit where 6% higher than 1H2014 at € 28.9bn and € 1.88bn respectively. Free Cash flow consumption was now € 1bn instead of € 2.3bn last year. Airbus expects to be Cash Flow neutral on a full year basis.
Rather than going through all figures of the results, we will now go through each major program in Airbus Group and try to understand whether it is a contributor to profits or a consumer of company cash.
Rolls-Royce and Safran, major European engine OEMs with different fortunes.
By Bjorn Fehrm
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July 30, 2015 © Leeham Co. Rolls-Royce and Safran, the parent company of CFM partner Snecma, released their Q2 and first half 2015 earnings today. It is interesting to compare these companies as they are in different strategic situations in their dominant business segments, civil turbofan engines.
Civil turbofans constitute 52% of Rolls-Royce total business whereas it makes 54% of Safran’s turn over. Rolls-Royce’s focus has been widebody engines to the point where it exited its part of International Aero Engines, which makes the single aisle V2500 engine, three years ago. Safran on the other hand is heavily invested in the single aisle market through its 50% part in CFM through its Snecma subsidiary.
The present situation and the future outlook for these two companies are intimately aligned with this strategic difference. We look at why and how this will affect their immediate future.
Summary:
- Rolls-Royce is experiencing migration problems in its widebody turbofan business. Its bread and butter Trent 700 engine is on its way out and it takes until 2018 for the replacement, Trent 7000, to kick in.
- Other programs are only growing slowly: the Trent 1000 for Boeing’s 787 or Trent XWB for the Airbus A350.
- Safran civil turbofan business Snecma is enjoying record sales and deliveries through its CFM joint venture with GE.
- Despite sharing its revenue 50:50 with GE, the business turnover is the size of Rolls-Royce turbofan business today and larger tomorrow. Profit margins are three times higher.
Fancher takes on KC-46A; FAA investigating Allegiant Air
July 30, 2015: Scott Fancher, regarded as the person to come in and take over troubled programs at Boeing, has been named to take over the KC-46A program.
Scott Fancher. Source: Boeing.
Fancher originally came to Boeing Commercial Airplanes from the Boeing defense unit to take over the 787 program at a time when development and design issues were rampant and the plane had yet to be delivered to a single customer.
After that was straightened out, Fancher took over new airplane programs and then moved to oversee development of the 777X, which is Boeing’s response to the Airbus A350 XWB. Although the 777X is a derivative, Boeing’s 747-8 derivative was two years late (in no small part due to the knock-on effects of the 787 program problems). Fancher’s charge with 777X was to be sure it comes in on time and on budget.
Spirit Aerosystems: Higher profits on lower revenue
July 29, 2015: Spirit Aerosystems, whose principal business is a major OEM supplier to Boeing but which also makes fuselage panels for the Airbus A350, reported 
lower revenues but higher profits for the FY2Q2015.
The press release is here.
Revenues were down because the company sold its Gulfstream wing sector and lower revenues were recognized from the Boeing 787 program.
“Preparing for aircraft rate increases is a key focus for us this year. Near term, we are capitalizing to increase the production rate of the 787 to 12 shipsets per month and the 737 to 47 shipsets per month, as well as the higher production rates on the A320 and A350 programs,” said Larry Lawson, CEO.
Wells Fargo has this initial reaction:
Triumph Group disappoints, cites decreased aircraft production
July 29, 2015: Triumph Group reported lower FY1Q2016 earnings below analyst expectations, citing in part decreased production of the commercial Airbus A330
program as well as lower production of the Gulfstream G450/550 and Boeing C-17 and 747-8 airplanes. It’s previously taken large write-offs of the Boeing 747-8 program on its poor sales.
Triumph said in its press release:
The Aerostructures segment reported net sales of $611.8 million in the first quarter of fiscal year 2016 compared to $612.2 million in the prior fiscal year period. Organic sales for the quarter declined fourteen percent primarily due to decreased production on the C-17, 747-8, A330 and G450/G550 programs. Operating income for the first quarter of fiscal year 2016 was $66.0 million, compared to operating income of $68.8 million for the prior year period and included $1.9 million of pre-tax costs related to initial facility consolidation actions. The segment’s operating results for the quarter included a net favorable cumulative catch-up adjustment on long-term contracts of $1.3 million. The segment’s operating margin for the quarter was eleven percent. Excluding the 747-8 program, the segment’s operating margin for the quarter was thirteen percent.
Triumph’s Top 10 programs are mostly Airbus and Boeing commercial airplanes. Boeing makes up more than 10% of Triumph’s 1Q revenue. The earnings call presentation is here. Slide 15 outlines the Top 10 programs.