Leeham News and Analysis
There's more to real news than a news release.
Open Letter to Members of Congress on ExIm
To Members of the US Congress:
There will be a vote soon on whether to reauthorize the US ExIm Bank. You should do so.
Arguments by some that this is a form of corporate welfare are unfounded. Suggestions that ExIm Bank merely supports The Boeing Co. are misguided.
To be sure, Boeing airplanes received the majority of ExIm Bank commitments and guarantees. This is because Boeing makes the most expensive things ExIm supports. But plenty of small businesses benefit from ExIm as well.
Supporting ExIm for Boeing airplanes creates jobs in America. LionAir of Indonesia ordered hundreds of Boeing 737s. ExIm Bank support was pledged to support this order. LionAir also ordered hundred of Airbus A320s. If ExIm weren’t supporting the 737s, it’s a fair conclusion LionAir would have ordered more A320s instead of Boeing. Why? Airbus gets active support from the ExIm’s equivalent agencies in Europe.
LionAir is but one such example.
Boeing is one of the top exporters (if not the top) of US products. These exports help the US balance of trade.
If ExIm is not reauthorized, Airbus will have an international advantage over Boeing. My market intelligence tells me that Airbus has already used the ambiguity over ExIm’s reauthorization in sales campaigns against Boeing.
If there are specific problems with how ExIm is administered, fix them, but don’t kill the program that has been around–and successfully supporting American businesses–for decades.
ExIm returns a profit to the US Treasury with its fees and other charges supporting its work. How many government programs can say this?
Stop playing games with and holding hostage ExIm Bank. It’s time to grant long-term reauthorization.
Very truly yours,
Scott Hamilton
Editor
Leeham News and Comment
Pontifications: Boeing spin
By Scott Hamilton
May 18, 2015: Boeing has always been masterful with spinning its message, but the spin last week strains credibility with its explanation over how it will bridge the production gap for the 777 Classic into production of the 777X.
Leeham News last week examined Boeing’s detailed explanation, emerging from its May 12 investors day. Reports from aerospace analysts recounted Boeing’s assertion that when “feathering” in 777X production on the 777 Classic, because production of the X will be slow (normal for a new model and the ramp-up/learning curve), the X will be the equivalent of producing two or three Classics–and thus today’s production rate of 8.3/mo (100/yr) will be preserved, as claimed from the launch of the X program.
Poppycock. Read more
ISTAT Asia day two: home for the elderly
Introduction
May 12, 2015, c. Leeham Co: As you would have guessed we are talking Asian civil airliners, where planning in the region for the fast growing older generations is inadequate. This was the subject of several sessions during day two of the ISTAT Asia (International Society of Transport Aircraft Trading) conference in Singapore.
The problem is new, as up to now a newly established airline fleet in Asia has not had any numbers of older aircraft. But the expansion over the last 20 years is now producing the first transition waves of aircraft and the planning around the problems this generates is inadequate.
The result will be surprising write-downs of airline assets as aircraft being replaced cannot be transitioned out at booked residual values. The scale of the problem was highlighted by a survey of the 500 gathered ISTAT industry experts. The question posed to them was “There are 4700 aircraft coming up for replacement until 2033, has Asian airlines planned adequately for this?”:
- 49% of the delegates responded a few airlines have.
- 45% answered there are only some that do it.
- 5% of the delegates answered most airlines does it.
- 2% thought all Asian airlines have done it.
Paris Air Show: Boeing
Subscription required.
Second in a Series of Previews for the Paris Air Show.
Introduction
May 10, 2015, c. Leeham Co. Don’t expect Boeing to come away from the Paris Air Show next month with a ton of orders. It never does; this is Airbus’ home turf.
Although Boeing has said over and over and over again that it doesn’t hold back orders to announce at air shows, the fact is that it does, both for its own public 
relations value and at the behest of customers. Is this as aggressive as Airbus? No, but we know from talking with customers and with
Boeing’s own personnel that Boeing is just as aware of the air show PR value as is Airbus.
That being said, what can we expect from Boeing at the air show? A little bit here. A little bit there. But not a whole lot. The order cycle has flattened (though it’s certainly not collapsed) and the wide-body campaigns that are underway probably won’t be ready for Paris.
Summary
- Look for “Unidentifieds” to be revealed to bolster air show numbers, though this will be strictly a PR exercise;
- Watch the 737 MAX 200–so far only Ryanair has ordered this variant;
- Closely watch whether new orders for the 777 Classic are forthcoming; last week’s Swiss order, for three, were already accounted for in the Unidentifieds;
- 777 Classic production gap is much larger than generally recognized;
- Don’t expect much in the way of 777X orders; there are active campaigns but these probably won’t be ready by Paris;
- It’s doubtful if there will be many 787 orders; the backlog stream is just too far out to prompt airlines to commit right now; and
- Nothing on the Middle of the Market airplane or (probably) the 747-8I.
Airbus A350 start stretching its wings
By Bjorn Fehrm
Introduction
May 6, 2015, c. Leeham Co. Qatar Airways, as the first operator of the Airbus A350, now has four months of experience of the new twin aisle aircraft. As we have described in Bjorn’s Corner two weeks ago, the introduction has gone well, without major incidents.
Qatar Airways’ A350 stretching its wings. Source: Airbus.
The first destination was Doha-Frankfurt, to be followed by Doha-Singapore on June 1. Both destinations are mid-range, with flying times of six to eight hours. These can be seen as introductory rotations, close to Qatar’s base should replacement aircraft or maintenance actions be needed.
With the first period in the bag, Qatar now feels confident enough to announce how they will take the A350 to its true job types. Here the relevant parts of what Qatar Airways announced Tuesday this week:
“Increasing passenger demand to America’s largest city and financial centre, New York, has prompted Qatar Airways to add a second daily service to the city from 1st March 2016. Qatar Airways has served the city daily since the initial route launch in 2007. The second daily service to New York’s JFK will be operated by the Airbus A350 XWB aircraft providing passengers an opportunity to experience both the Boeing B777 and the A350 aircraft types on the route.
“ From 16th March, 2016, the airline will launch daily flights to Boston, the capital and largest city of Massachusetts, and will operate its latest flagship A350 XWB in a two-class configuration with 36 Business Class seats in a 1-2-1 configuration, featuring an 80” fully flat bed and 17” HD in-flight entertainment screen.”
This is more challenging work for an A350 and we will therefore take a first look into what Qatar can expect in terms of overall aircraft performance on such destinations come spring next year. Read more
The higher level game
By Bjorn Fehrm
Introduction
May 4, 2015, c. Leeham Co. The other day one of our readers asked something along the lines, “now that Airbus has the A320neo 20% more efficient than today’s A320, how shall Boeing’s 737 MAX fair in the market? It is only 15% more effective and there are question marks around the LEAP-1B?”
This made me realize that marketing works. I decided to write about the phenomenon that the OEMs seem to find further improvements all the time and how these continually higher improvements seem to work beyond the physical laws as we know them.
The answer boils down to the fact that there is more than meets the eye around how much fuel an aircraft uses to transport people from A to B. In fact, the OEMs’ marketing departments excel within the complexity of the task and can always find a way to say “my mousetrap has now improved another x% and is therefore Y% better than yours”.
To cut through these marketing moves one need a bit of background and first grade math. Let’s see how they do it. Read more
Pontifications: the A380, Airbus and Boeing
By Scott Hamilton
May 4, 2015, c. Leeham Co. Of all the things we write about, nothing stirs responses and readership than news–of any kind–about the Airbus A380.
Last week I wrote about Malaysia Airlines putting a large number of its Airbus and Boeing wide-bodies for sale or lease. MASCargo’s entire fleet of Boeing 747-400s and Airbus A330Fs is on the chopping block. Some Boeing 777-200ERs are, too. The six A380s (all of those in the MAS fleet) are also being offered for sale or lease.
Holy crap. This news headlined not only international press but sent the social media into a frenzy. Within 12 hours it had become our second most read story of 2015. In less than 36 hours, it became our top story of the year so far.
I also wrote last week about the 10 year anniversary of the A380. It was a mixed review: the plane is a technological success, if by now a bit dated, but sales continue to be poor. I talked about the prospect of an A380neo and how Boeing is rooting for Airbus to proceed, sucking up money and resources in the process. I wrote about the urban legend that Boeing tricked Airbus into launching the A380 program as a way to divert money and resources.
And then I suggested that Boeing’s own failed strategy, ineptitude and arrogance prevented the company from taking advantage of Airbus’ focus on the A380.
CNN.com had this on its home page Saturday. Even though there are more than 250 Boeing 787s in service, the strategic industrial and early design blunders continue to dog the airplane.
You’d have thunk I dropped a skunk at a lawn party.
One reader suggested I was part of the Airbus PR department or Airbus’ John Leahy ghosted the article. Never mind that the day before I wrote a strong defense of the Boeing 787 and suggestions that “everyone” was deferring the 787; and gave an equally strong defense of the 787 in TheStreet.com. Perhaps Boeing’s Randy Tinseth ghosted my article and impersonated me to The Street.
I didn’t go into detail in my article about Boeing’s “failed strategy, ineptitude and arrogance” because I thought after all these years, these were pretty obvious. Apparently not. So I’ll hit some highlights. Read more
Bjorn’s Corner: China’s civil aviation, from nothing to world’s largest in 2030
Introduction
By Bjorn Fehrm
14 May 2015, C. Leeham Co: In my ISTAT Asia reports, I wrote about how China will overtake USA as largest civil aviation market in 2030. Airbus China Group chairman, Laurence Barron, and I had a chat after his ISTAT presentation where he described China’s evolution as a civil aviation market and how Airbus gradually worked itself from a late and hesitant start to today’s split of the market with Boeing.
Barron provided his slides, some of which we will use to review how China grew from virtually no civil aviation after the Chinese revolution in 1949 to the world’s largest market by 2030. We will also look at what aircraft have made up this growth and finally describe how Airbus progressed from a latecomer in 1985 to sharing the market with Boeing today.
Read more
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Posted on May 14, 2015 by Bjorn Fehrm
Airbus, Airlines, Bjorn's Corner, Boeing, China, Douglas Aircraft Co, Leeham News and Comment, McDonnell Douglas
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