Leeham News and Analysis
There's more to real news than a news release.
Muilenburg’s challenges as Boeing CEO
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Introduction
Jan. 27, 2015: Dennis Muilenburg has been the No. 2 at The Boeing Co. for a little more than a year. He was named vice chairman, president and COO in December 2013.
Jim McNerney
His boss, Chairman and CEO Jim McNerney, turned 65 last August. Sixty-five is the mandatory retirement age, but this has been waived before and McNerney is widely understood to want to stick around through Boeing’s 100th Anniversary in 2016.
The industry is buzzing with reports that McNerney might move up soon to
Dennis Muilenburg
non-executive chairman, with Muilenburg assuming the CEO title.
If and when Muilenburg becomes CEO, he faces a laundry list of challenges.
Summary
- Strong competition from Airbus that is getting stronger;
- Continued cost cutting;
- Learning the Commercial Airplanes business;
- Declining defense business and revenues, putting pressure on profits and cash flow;
- Flight testing and development of the KC-46A;
- Development of the 737 MAX and 777X and proving that delivering new airplane programs on time and on budget can be achieved again;
- Selling enough 777 Classics to maintain production rates to the 2020 EIS of the 777X;
- Dealing with labor unrest with its Seattle area unions and a new attempt to organize the Charleston 787 plant; and
- Deciding whether to take that “moonshot” and launch new airplanes earlier than the 2030 EIS McNerney set as policy.
Rolls-Royce and the leasing market
By Bjorn Fehrm
22 Jan. 2015: When talking to leasing companies at the annual Growth Frontiers 2015 conference in Dublin, Rolls-Royce is the engine manufacturer that is perceived as the least desirable on their airplanes.
This has no reliability or performance background, Rolls-Royce has a good reputation for producing solid and reliable engines which serves their operators well. It is rather the success of Rolls-Royce’s after market program, TotalCare, which is the at the root of the Leasing companies problems with Rolls-Royce.
Odds and Ends: AirAsia; Philippine Air, Russia defers
AirAsia: Group CEO Tony Fernandes made appearances on international news programs, providing his first interviews away from the direct events surrounding Flight 8501’s crash. Here is a transcript of his interview on Bloomberg News.
The interviews come as the first read-outs of the cockpit voice recorder and flight data recorder have been undertaken. Indonesian officials are quoted as saying the alarms overheard on the CVR were “screaming,” a description which has been criticized by some, who point out correctly that alarms don’t “scream.” This is certainly true, but we take a more charitable view about the term. This could be a reflection of English being a second language to the government officials and merely a translation issue.
Regardless, the data seems to confirm early reports that the flight was caught in massive up- and downdrafts that threw the airplane into a stall and out of control. Former NTSB crash investigator told us he believes the airplane went into a tight descending spiral and broke apart when it hit the water.
Philippine Air, Russia deferrals: PAL deferred 38 Airbus narrow- and widebody aircraft, according to this news report. Boeing is in talks to defer deliveries to Russian airlines, according to Bloomberg.
Growth Frontiers 2015 conference: Fuel prices and the order bubble
By Bjorn Fehrm
18 Jan 2015: The subject of the first day at the Growth Frontiers 2015 in Dublin has been very much “what will happen with lower fuel prices”. The conference is the yearly gathering of the aircraft financing community with investors, banks and lessors gathering to learn how key factors in the market affect their industry. With the first day behind us, it is clear the top subject is the low fuel prices and how these will affect aircraft orders and prices going forward.
Interview with Airbus CEO Fabrice Brégier: Airbus and innovation
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By Bjorn Fehrm
Introduction
18 Jan 2015: When visiting Toulouse last week we got the opportunity to talk to Airbus CEO, Fabrice Bregiér, on one of his pet subjects: the need for Airbus to be more innovative.
Background to the discussion was that we had observed that Airbus, after decades of a high innovation level, higher than its main competitor Boeing, had slipped behind in the last decade. We wanted to discuss this with Brégier, who has during his tenure, elevated the innovation theme to one of his top priorities. We wanted to see if we had consensus on the past and understood Airbus way forward.
Summary
- A380 problems undercut subsequent innovation; but
- Airbus still maintains innovative lead, Bregier says;
- A350, A320neo, A330neo examples of innovation; and
- Don’t need to overreach when benefits aren’t there.
A321neo configurations and A320 production
By Bjorn Fehrm
18 Jan 2015: As part of the preparations for the Airbus A321LR article 15 Jan. we saw a need to clarify with Airbus the production configurations for A321neo. There had been several iterations of what will be produced come mid-2018 when the A321neo variant is scheduled to roll off the FALs at Airbus in an enhanced Airbus Cabin-Flex (ACF) variant.
This variant features a three-door pairs layout that allows a raised max passenger limit by virtue of displaced door three and an addition of a second overwing exit. Recent media articles have suggested that both the initial four-door variant as well as the three-door variant would be available.
Airbus formally launches A321LR; we look behind the “LR” to see what’s there
15 Jan 2015: Airbus officially launched what to date has been called A321neoLR as the A321LR at their annual press conference Tuesday. The former A321neoLR name was formed by Leeham News on 21 Ocober 2014 when we could reveal the existence of a A321neo variant which Airbus had started to present to airlines at the time. The final name kept the LR attribute used in the article to distinguish the longer range variant from the standard A321neo.
The A319 has used the LR designation but its use has been limited. The suffix is more commonly identified with Boeing, used as it is with the 777-200LR. Boeing has also commonly used the ER for extended range like 777-200ER, 737-900ER and 777-300ER.
Interview with John Leahy: A380 sales strategy going forward
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Now open to all readers (Fe. 15, 2015)
By Bjorn Fehrm
Introduction
Jan 14 2015: In our deep analysis of the Airbus A380, we concluded that there is nothing wrong with the basic economics of the giant airplane. In fact, with today’s fuel prices, the aircraft’s Direct Operating Costs (DOC) are 20% below its alternatives in the market. Yet the aircraft is experiencing its worst sales drought since its launch, despite adding a leasing alternative during 2014 and efforts by Airbus.
To understand why and what Airbus plans to do about it we arranged for an exclusive interview with Airbus Chief Operating Officer-Customers, John Leahy, at the sidelines of Airbus annual press conference.
Summary
- Our assessment of A380’s cost of operation
- Operating airlines experience with the A380
- Airbus sales strategy to date and changes going forward
Market potential for A321LR
Here’s how Airbus sees the market potential for the A321LR, going well beyond the 50-60 Boeing 757s flying the Atlantic and some limited operations on other routes.
Airbus believes the A321LR will expand the market considerably over the Boeing 757 long-range routes today. Source: Airbus.