Leeham News and Analysis
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Customer Quality counts as much as orders, says Boeing
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Introduction
Jan. 14, 2015: Customer quality counts as much as the raw number of orders, a top Boeing official said yesterday during a bit of counter-programming on the day Airbus held its annual press conference recapping the previous year’s orders and deliveries.
In a tele-press conference, John Wojick, Boeing SVP of Global Sales & Marketing, said, “It’s not just orders, it’s also about the quality. We work very hard to do business that will actually get to deliveries. We have a much stronger history of orders-to-deliveries than our competitor.”
Summary
- Wojick has a point: Boeing’s customer quality orders historically have been better than Airbus; but
- This is changing. Our Storm Warning Flag assessment shows an improved Airbus customer quality base among the top orders.
- Both companies overbook in anticipation of cancellations and deferrals; Airbus is more aggressive in this practice.
- Airbus had three times the cancellations in 2014 as Boeing.
Odds and Ends: More from Airbus annual press conference; IAM focuses on wages
Jan. 13, 2015: More from Airbus: Airbus held its annual press conference today in Toulouse, reporting its full year 2014 orders and deliveries results. Our Bjorn Fehrm was there and filed a report from the event. He will have more this week. Here are some stories from other media.
Reuters: Airbus to juggle production, defense A380. Airbus says it will likely take A320 production about 50/mo. We reported months ago the supply chain has been notified to prepare for rate 54 in 2018. Airbus also said it will bring A330ceo production down after 2015. We predict 5-6. Decisions are to be made in the coming months.
Bloomberg: Airbus to add 20 passengers to A350-1000.
Aviation Week: Airbus formally launches the A321neoLR. You read this plan here first last October.
Seattle Times: Boeing is No. 1 by some metrics. Dominic Gates takes his usual thorough look at the bragging rights of Airbus and Boeing.
IAM on wages: Boeing’s touch-labor union, the IAM 751, says a Washington State study about aerospace jobs shows 58% of non-Boeing aerospace jobs in the state are paying less than $15 per hour.
Boeing sees little impact from fuel on orders
Jan. 13, 2015: Boeing sees little impact on orders from the falling fuel prices.
In a tele-press conference this morning, Randy Tinseth, vice president of marketing, said recent history shows that even as fuel prices went down, the backlog of orders went up.
Oil is currently hovering around $46/bbl. The last time it was this low was 2008, after the global financial collapse. It took 2 1/2 years for oil prices to recover to around $100/bbl.
Airbus reveals record orders at annual press conference
By Bjorn Fehrm
Toulouse 13 Jan 2015: Airbus today held their annual press conference where they among other things revealed their final numbers for orders and deliveries. The press conference was hosted by Airbus CEO Fabrice Bregier accompanied by COO Customers John Leahy, new COO Tom Williams and new Head of Programs Didier Evrard.
Airbus in 2014
Bregier started with pointing out that 2014 was a very eventful year for Airbus. Airbus did their customary end of year sprint and passed Boeing for net orders with 24 aircraft netting 1456 commands, Figure 1.
Figure 1. Airbus orders for 2014. Source: Airbus.
On the delivery side Boeing is ahead with 723 deliveries versus Airbus 629, Figure 2.
Figure 2. Airbus deliveries for 2014. Source: Airbus.
Further Airbus certified the A350 and delivered the first aircraft to its launch customer, Qatar Airways. It also launched the A330neo and got 120 orders during the year. Finally they flew the A320neo first prototype.
A380neo decision likely this year, triggering the next widebody engine project
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By Bjorn Fehrm
Introduction
Jan. 12, 2015: One of the subjects which is sure to come up on Airbus annual press conference on Tuesday the 13th in Toulouse will be when and how Airbus will re-engine the A380.
Airbus Commercial CEO Fabrice Bregier vowed during the Airbus Group Global Investors Day last month that an A380neo is coming.
There is much speculation around this subject as the business case of re-engineering an aircraft that is selling at such low numbers is difficult to get to close. The business case is difficult to make work for Airbus 
(such a project will cost in the order of $2 billion) but it will be equally hard for the engine manufacturers to offer engines that have enough efficiency gain to make the overall project feasible from an efficiency improvement perspective.
Summary
- A380 Classic equals Boeing 777-300ER seat fuel costs.
- Boeing 777-9 beats A380 on CASM, an A380neo regains the advantage.
- Engine makers face hard choices to retain dominance or to broaden market penetration.
AirAsia 8501: two weeks later, still looking for the voice recorder
Jan. 11, 2015: It’s now been two weeks and two days (local time) since AirAsia Flight 8501 crashed into the Java Sea. It took nearly two weeks just to locate the tail section of the airplane, which was raised. The flight data recorder was recovered Jan. 12 local time but the cockpit voice recorder is still missing.
Greg Feith, a former crash investigator for the US National Transportation Safety Board, wrote Sunday on his Facebook page, “ADS-B data was used to narrow the search area for the main wreckage. Info from both black boxes will finally provide a factual foundation that the airplane likely ended up in a high speed descent, probably a spiral descent, and impacted the water in an out-of-control situation and not an attempted emergency landing. With the main wreckage scattered, the airplane likely broke-up and skipped across the surface. We should know soon as the info is developed and provided by the NTSC.”
Aging Boeing 757 engines skew operating expenses
Jan. 8, 2015: Engines on the aging fleet of Boeing 757s are a key reason operating costs of this rather unique airplane are between 20% and 30% more than a Boeing 737-9 or an Airbus A321neo.
“The thing to worry about most for the 757 engines is the cost to overhaul,” says an industry official who trades in 757s. “The cost of producing life limited parts is crippling the marketplace.”
Total costs and the direct operating costs are being directly affect by the engine costs, the person says, who doesn’t want to be identified because of the sensitivity of the topic.
2015 a year of execution for Embraer commercial
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Introduction
Jan. 7, 2015: Embraer, the world’s #3 commercial airplane manufacturer, enters 2015 viewing this as a year of execution, says its chief commercial officer, John S. Slattery.
There are three pillars:
- Continuing to fill out the balance of the current generation orders and commitments in advance of the E-Jet E2 re-engined airplane scheduled for entry-into-service in 2018;
- Execution to continue to grow the commitments for the E2—there are already 590; and
- Execution for the next several years for the milestones of the E2 development.
Summary
- Customer base goal by the end of 2017;
- Customer support;
- Barriers to entry for competitors.
Odds and Ends: 737 MAX order breakdown; Airbus to top Boeing; Embraer to PNAA event
Click on image to enlarge into a crisp view. Source: Boeing.
Jan. 6, 2015: 737 MAX Orders: Boeing has broken down the 737 MAX orders for the entire program in response to our inquiry. The 737-8 has captured 87% of the program orders since launch in 2011. The MAX 8 includes the 100 MAX 200 orders for the high density version, placed by Ryanair last year. The MAX 9 has 11% and the MAX 7 just 2% (figures are rounded).
Airbus to top Boeing: It’s not really a surprise, because it seems to happen just about every year. Reuters is reporting that Airbus will top Boeing in gross and net orders when it reports its 2014 performance next week.
Embraer to PNAA: Embraer’s chief commercial officer, John Slattery, will speak at the Feb. 10-12 conference for the Pacific Northwest Aerospace Alliance. EMB has presented previously but this is the first time Slattery is joining the conference. Click on the banner ad above to go directly to the conference website.