Leeham News and Analysis
There's more to real news than a news release.
Odds and Ends: GAO report on ‘Boeing’s bank;’ C919; Airbus widebody strategy
GAO report on ‘Boeing’s bank:’ The US Government Accounting Office, a non-partisan investigating agency, completed a study of the funding and guarantees provided by the US ExIm Bank, which is under criticism from Congressional Republicans, and concluded non-US airlines do benefit from what amounts to subsidies.
These put US competitors at a disadvantage, GAO concludes. The full 29 page PDF may be found here.
The study period covered the global financial crisis, during which a good deal of private capital funding dried up. Airbus and Boeing each relied more heavily on export credit agencies for customer financing–ExIm in Boeing’s case and collectively European Credit Agencies, or ECAs, for Airbus.
The GAO found that ExIm funded or guaranteed financing for 789 Boeing wide body aircraft while the ECAs supported 821 Airbus wide-bodies.
Parenthetically, this statistic alone should demonstrate to Congress the need for ExIm to continue to be available for Boeing airplanes.
Boeing sees 4% increase in aircraft demand in next 20 years
Boeing forecasts a demand for 36,770 new airplanes during the next 20 years, an increase of 4.2%, in its Current Market Outlook. The value of this demand, which covers the entire commercial aviation line from regional jets and up, is $5.2 trillion.
The company released its annual forecast today, for the period ending 2033.
As with previous forecasts, the single-aisle demand constitutes the vast majority, with a requirement for 25,680 airplanes to cover retirement and growth, the latter being driven by the proliferation of the low cost carriers worldwide. The “heart of the market” for the single aisles has moved up to 160 seats, says Randy Tinseth, VP Marketing. This is the 737-800/8 and A320ceo/neo-sized airplane. The Comac C919 and Irkut MC-21 will join this sector when they enter service later this decade.
Is the A330neo engine Rolls Royce’s first carbon fan model?
The Airbus A330neo program has come a long way since our 29th of December article “A330neo prospect gains traction.” With the Farnborough Air Show days away, we understand there are now Airbus internal job postings for engineers to join the program. The speculation then reduces to “when” the program will be announced, not “if.” Another would be what improvements are foreseen for the Boeing 787-derived engines that may power the neo.
Rolls Royce reportedly gains exclusivity
Reuters recently reported that Rolls Royce might get an exclusive engine deal for the A330neo. There are many reasons Airbus might give Rolls Royce or General Electric exclusivity on an engine for the A330neo, especially if Airbus sees the likely sales of the updated aircraft to stay below 500 units. The reasons can range from how much of the $2B estimated program cost the engine manufacturer would pay to what efficiency improvements they would undertake on top of what is already on the way for their 787 engines. There is every reason to believe the GEnx-1B can match the fuel consumption performance of a further developed Trent T1000-TEN. We understand Rolls Royce will leverage developments from the A350 TXWB engines but GE can just as easily leverage developments from the LEAP program.
The picture shows the Rolls Royce Trent 1000 carbon fibre fan demonstrator engine from the companies ALPS (Advanced Low Pressure System) program. Is this also the looks of the Rolls Royce A330neo engine?
Comparing the A330 and 777 Classic backlogs
Airbus has a major image problem with its A330 backlog: the aviation industry looks at the backlog and sees “two years worth of production,” assuming on its face that after 2016, there are no orders. Therefore the program is in dire straits.
It’s not that simple, as we’ve pointed out: firm orders extend to 2019, though heavily front-loaded to the near term–and certainly Airbus does have issues with the backlog.
The same industry looks at the Boeing 777 backlog, hears Boeing say it has three years worth of backlog and six years to fill a production gap to EIS of the 777X, blithely asserting there is no problem. This assumes 100% conversion of options, letters of intent and option LOIs.
We’ve previously plotted out the production gaps of both airplanes. Below we plot the orders, options, LOIs and option LOIs (Airbus does not list option LOIs) from the Ascend data base as of July 1. The plot lines are actually very similar near-term.
The struggling Boeing 747-8
News reports that Boeing is promoting the 747-8I to Emirates Airlines prompted some to leap to conclusions that the struggling program is about to get a sorely needed shot in the arm. We don’t think so.
For one thing, Emirates president Tim Clark immediately poured cold water on the idea. In the process, in the same report, he said the 747-8 can’t match the Airbus A380 economics.
For another thing, we believe Emirates is trending toward a two-aircraft type fleet for which there is no room for a third–whether it is the Airbus A350 or the 747-8I. It’s clear the Emirates business model is built around the A380 and the Boeing 777-300ER/777X.
New airplanes nearing fruition? A330neo, 757RS buzz increasing
Development of two airplanes–the Airbus A330neo and a replacement for the Boeing 757–may be pushing to the forefront, according to two news articles yesterday.
Reuters reports that a decision whether to proceed with the Airbus A330neo could come before the Farnborough Air Show, even if a formal launch isn’t announced at the international event next month.
Bloomberg reports that Boeing may be nearing the launch of a 757 replacement sooner than expected.
A330neo
We’ve written extensively about both prospective airplanes, with the A330neo concept one of many subjects from the Airbus Innovation Days. The Reuters article reports what we have been hearing for some time: the airplane could be announced at Farnborough–but it might not be, either. What is new is the increasing likelihood Rolls-Royce will become the sole-source supplier. Aviation Week originally reported this prospect.
Odds and Ends: MH370 Update: Australians think hypoxia most likely, others still point to pilot misdeeds; and more
MH370: Australian investigators, having reevaluated evidence of missing Malaysian Airlines MH370, conclude that crew hypoxia may be the most likely reason the flight disappeared. But even within the Australian government, this is not a unanimous conclusion, and it’s certainly not within the international community. The captain of the flight is the chief suspect, according to other reports.
Boeing cost cuts: Ray Conner, CEO of Boeing Commercial Aircraft, explained Boeing’s cost-cutting approach in Washington State and with suppliers and plead for understanding, reports the Seattle Times. Conner also termed the potential loss of ExIm Bank funding as a “huge blow,” should Republicans in Congress succeed in killing the program. Closing ExIm would give Airbus a major advantage, he said.
Airbus funding: Airbus and a company in the Middle East have created an Islamic funding structure to help finance Airbus aircraft in the region. With the Middle Eastern carriers becoming more and more important in global aviation, expanding this area as a funding source naturally follows. Islamic financing is not new, but it’s been a narrowly-based source of funding.
Challenge 777X tax breaks, “correct” US ExIm Bank Boeing funding, says Airbus CEO
Challenge Boeing 777X tax breaks and adjust the US ExIm Bank rules.
This is the view of Airbus CEO Fabrice Bregier.
We had the opportunity for what amounted to a one-on-one, on-the-record discussion with Bregier during the Airbus Innovation Days media briefings two weeks in Toulouse. We sat at Bregier’s dinner table, which although filled with media, was in a noisy setting, allowing us to have some elbow-to-elbow conversation on a variety of topics that couldn’t be heard in the din.