Leeham News and Analysis
There's more to real news than a news release.
Odds and Ends: KC-46A update; A440M in the US; A320neo first flight; Southwest no longer an LCC
KC-46A update: Aviation Week has an update on the status of the Boeing KC-46A tanker. Among other things, first fight has now been moved from June to November at the earliest.
A400M in the US: Airbus thinks it’s possible to sell hundreds of its A400M to the US Armed Forces to replace the Lockheed Martin C-130 and Boeing C-17, according to this article by Reuters.
A320neo first flight: Is the Airbus A320neo first flight going to run behind schedule? Airbus won’t say but Reuters suggests that it might. So does Aviation Week, like Reuters, pointing to an issue with the engine.
Southwest no longer an LCC: Bloomberg writes that Southwest Airlines is no longer a low cost carrier, with Cost per Available Seat Mile now approaching the legacy carriers. Years ago we characterized Southwest as the first legacy LCC, as costs increased, low fares began to disappear (it’s often easier to find a low fare on a competitor today) and routes took it into big city airports previously eschewed.
Odds and Ends: Safran benefits from engine after-market; ExIm could back Airbus; Paine Field future
Engine After-market: Safran, which owns 50% of CFM International with GE Aviation owning the other half, is positioned in the “sweet spot” of the engine after-market, according to a recent report by Bernstein Research.
The report further supports our own analysis posted August 25 and the growing importance of MRO support in winning engine orders.
According to Bernstein, Safran “has the best positioning in the aircraft engine after-market” in the investment bank’s coverage. This position is “driven by two engine families with strong growth ahead and low exposure to older engines that are at risk of early retirement.”
Bernstein notes that more than 95% of Safran’s after-market sales are derived from the CFM56, which powers 75% of the narrow-bodied aircraft, and the GE90, which powers the Boeing 777-200LR/LRF and 777-300ER.
Future programs include the CFM LEAP, GEnx and GP7200. Past programs, in decline, are the first generation CFM56 and the CF6 on earlier wide-bodies.
ExIm and Airbus: In a statement surely to inflame those opposed to renew ExIm Bank authority, the president of the bank said it’s possible it could back funding of the Airbus A320 family built in Mobile (AL).
Paine Field future: It’s a little parochial but The Everett Herald has an article looking at the future of Paine Field, where Boeing’s wide-body airplanes are assembled. The article necessarily looks at the future of the Boeing 747, 767 and 777 Classic production.
Congress is now talking about a nine month extension of ExIm.
Final A330neo analysis; cabin improvements gives the A330neo gains over today’s A330
When we did our analysis of the A330neo after the Farnborough launch we limited our checks to trip fuel efficiency as we did not have enough clarity of the cabin improvements that Airbus announced. After a meeting in Toulouse last week with Airbus cabin experts we know have the missing information.
Airbus gives the A330 cabin an interesting update for the A330neo. It comprises A330 ideas (improved crew rests), A350 ideas (improved lighting and IFE) and finally ideas tried out on the A320 (SpaceFlex and SmartLav lavatories). Combined they give the A330neo cabin a better passenger experience and improved utilization of cabin space. Read more
Odds and Ends: Boeing leads net orders YTD; A320neo; ExIm Bank; Frontier Air
Airbus vs Boeing orders: Airbus reported its order tally through August and while it surpassed 1,000 gross orders, it’s net orders trail Boeing significantly. This article sums things up nicely, though it doesn’t include Boeing’s last four days of August. Boeing reports weekly and the latest report is due out today. Through August 26, Boeing trails Airbus slightly in gross orders but leads in net orders.
Update: Boeing just posted its weekly order tally: 1,004 gross orders (to Airbus’ 1,001) and 941 net orders, still well ahead of Airbus’ net orders.
A320neo first flight: Airbus will launch the first flight of the A320neo this month for the airborne test program. This is powered by the Pratt & Whitney GTF; the CFM LEAP A320neo is supposed to follow by about six months. Entry-into-service for the GTF neo is planned for October 2015.
ExIm Bank: Members of Congress are looking at a short-term extension of the ExIm Bank‘s authority (read: until after the November election).
Frontier Airlines: This carrier is rapidly converting to an Ultra Low Cost Carrier business model, a process begun several years ago and accelerated last year. Aviation Week has an article that takes a look.
Go Seahawks: The NFL season opens tonight with the 2014 Superbowl champs Seattle Seahawks hosting the Green Bay Packers. Go Hawks!
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.