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 20. May 2, 2025
- Supplier Howmet exceeds expectations despite tariffs May 1, 2025
- Airbus 1Q2025 results: So far, so good, but US tariffs make future results unpredictable May 1, 2025
- Does an Airbus A220-500 need a new wing and engines? May 1, 2025
- Teamsters, Boeing have a new contract April 29, 2025
Buckingham lowers Boeing to Underperform (sell), others increasingly bearish
Update: 24/7 Wall Street just published this gloomy outlook about Boeing.
Buckingham Research Group today lowered its call on The Boeing Co. from Neutral to Underperform, the equivalent of Hold to Sell. As far as we can tell, this is the first research analyst to put a sell on Boeing in recent years.
According to Thompson/First Call, 10 analysts rate Boeing as a Strong Buy, nine as a Buy and seven as a Hold. None rated Boeing as an Underperform or a Sell (Thompson separates the two ratings; Buckingham’s Underperform is a Sell). According to Thompson/First Call tallies on Yahoo Finance, there hasn’t been a downgrade to sell since 2008, when the 787 program problems were ramping up.
Buckingham has become increasingly pessimistic in recent months about Boeing, so the new rating isn’t necessarily a surprise, and Buckingham isn’t alone. Bank of America Merrill Lynch recently downgraded Boeing to Neutral and in June RBC Capital Markets downgraded Boeing to Sector Perform from Outperform. Wells Fargo and Credit Suisse analysts have been raising concerns in recent notes but haven’t downgraded Boeing, and UBS has been bearish for some time.
Buckingham cited anticipated worsening free cash flow as its principal reason for the downgrade, driven by BRG’s forecast of lower 777 production rates and higher than Boeing’s forecasted $25bn in deferred production costs for the 787. BRG also cited about 1,500 737s not yet added to the accounting block it believes have been sold at steeper discounts than historically.
Qantas defers 787s, Boeing gears up response to A330neo
Financially ailing Qantas Airways has deferred some of its order for Boeing 787s, a move that ordinarily would be seen as a negative to Boeing. But in this case, it comes at an opportune time that will actually help Boeing respond to the Airbus A330neo.
Qantas’ deferral is from 2016 to 2017 and only for a few airlines. But having posted a record loss and previously canceled and deferred aircraft, we wouldn’t be surprised if this happens again.
The A330neo is planned to enter service in 4Q2017. Airbus is counting on near-term availability to help sales.
Odds and Ends: Russian MC-21 subsidy; C919 assessment; ExIm countdown
Two news items popped up today on emerging aircraft.
MC-21 subsidy: Government subsidies for commercial aircraft development have been a sore point between the US and Europe (i.e., Boeing and Airbus) for decades. Although the US and Europe went through years of international disputes at the World Trade Organization on behalf of Boeing and Airbus, with adverse decisions now under appeal by both sides, and even though Canada and Brazil previously won cases over illegal subsidies to Embraer and Bombardier, nothing has come of the decisions–and nothing has been done about government subsidies by Japan and China to their aerospace industries. No complaints to the WTO have been filed against either country, which are members of the WTO.
This article updates some information about Russian aid to Irkut, which is developing a competitor to the Airbus A320 and Boeing 737 families. The MC-21 and China’s COMAC C919 are directly sized against the best-selling single-aisle airplanes. Russia is not a member of the WTO, so there is no legal basis (that we know of) to file a complaint.
Long-time readers know we disdain the entire WTO process anyway as more political than practical. The WTO has no enforcement powers and sanctions that might be authorized by the WTO against offenders don’t have to be implemented (as in the case of Canada and Brazil) or even applied against the offender’s products–another industry altogether may be sanctioned, a silly and unfair prospect.
C919 assessment: This article provides an assessment of the prospects for the COMAC C919. What’s especially interesting in this article is what we aviation geeks have known all along, and that is China uses Western technology to develop its airplanes (and trains, the article points out). Airbus and Boeing identify China as the next viable competitor in the airliner field, albeit perhaps a generation in the future. But the technology is coming from Airbus, Boeing, Embraer, Bombardier, the engine makers and the supply chain. They are creating their own future competitors.
While China’s industrial espionage contributes to its understanding and acquisition of Western technology, most of it comes from joint ventures between Chinese companies and the Western OEMs and suppliers.
ExIm countdown: The authorization for the US Export-Import Bank expires next month, and Boeing is pulling out all stops to get a recalcitrant Republican Party to agree to extend the life of the bank, reports The Hill, one of the specialty publications that covers the US Congress.
Killing ExIm will put Boeing at a disadvantage to Airbus, which uses and will continue to use European Credit Agencies (ECAs) to support sales of its aircraft. Boeing will have to fall back on its internal Boeing Capital Corp. or attempt to help customers find private financing if ExIm tanks.
Boeing on path to surpass Airbus in single-aisle production
Note: This has updated information from its distribution to our e-newsletter recipients a week ago.
Boeing is on a path to overtake Airbus in producing single-aisle aircraft by the end of this decade.
In the hotly contested single-aisle sector, which Airbus currently leads, both OEMs are essentially sold out through 2019. Few delivery slots can by found by either of the Big Two. Airbus already plans to boost production of the A320 family to 46/mo in 2016, when its new Mobile (AL) plant comes on line. It will initially produce 4/mo but has the capacity for 8/mo. It’s Tianjin, China, plant is producing at a rate of 4/mo and likewise has the capacity to go to 8/mo. The Toulouse and Hamburg plants are understood to be at capacity now, giving Airbus a total capacity of 59/mo: Hamburg can produce 25/mo and Toulouse 18/mo.
What order bubble?
Following the Farnborough Air Show last month, media and some aerospace analysts once again began asking the question: is the order bubble done?
We retort by saying, “What order bubble?”
We have been hearing since 2008 if the order bubble was about to burst. We’ve been asked this question many, many times. The trouble in answering this question is that nobody truly defines what they mean by “order bubble” when they ask if the bubble is about to burst.
Do people mean: