Production assessment, Round 3

Some interesting items came out of the Boeings 1Q09 earnings call yesterday (April 22) with regard to production and deferrals.

Oversales of the 737 have been a key element in Boeing being able to maintain current production levels of 31/mo, despite the global recession. As was previously acknowledged by Boeing, 2009 737 oversales were about 100. On the year-end 2008 earnings call in January, CEO Jim McNerney acknowledged that oversales for 2009 had been reduced to about 15% over the production (which mathematically equated to about 55-56 737s).

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More on the funding gap

A Calyon bank official said at the annual Airfinance Journal conference that Airbus and Boeing may have to increase funding more than the companies expected this year because the funding gap is larger than thought. This Bloomberg story has the details.

Calyon has been one of the most active lenders worldwide.

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Gates on split tanker buy: over my dead body

US Defense Secretary Robert Gates said there will be a split buy on the KC-X tanker program over his dead body.

“I’m laying my body down across the tracks,” Aviation Week quotes as saying in this short article.

It’s not Robert Gates but you get the point.

Airbus details Watchtower Committee

We previously wrote a story for Commercial Aviation Online about Boeing Capital Corp.’s War Room methodology in tracking the “funding gap” for 2009 deliveries. We posted that story on this website at this link.

We followed that CAO story up with a profile of the Airbus BCC equivalent, the Watchtower Committee. Here is that story:

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Boeing cuts production

Boeing just announced it is cutting production of the 777 from seven to five a month and delaying plans to increase rates on the 767 and 747, effective next year, it was announced today. No rate adjustment is planned for the 737 at this time. The rate for the 737 is 31 a month.

The decision comes a month before BCA President Scott Carson previously said it would.

The full press release is here.

GE Boss seeks tanker compromise

The head of GE backs a plan to split the acquisition of the KC-X USAF aerial tanker between Northrop Grumman and Boeing, according to this interview done by the Cincinnati Enquirer.

GE Aviation will supply the engines on Northrop’s KC-30; Pratt & Whitney was selected to power Boeing’s KC-767.

And now, a plug for a conference organized by Air Transport World and Leeham Co.

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Airbus predicts 480 deliveries in 2010

Airbus’ COO-Customers, John Leahy, predicts 480 deliveries in 2010, about the same number as this year, according to this Aviation Week article by Robert Wall.

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Boeing takes hard hit on DOD budget

Boeing took a hard hit on the Defense budget announced today by Sec. Robert Gates. The C-17 program will be canceled after the current contract is filled. The CSAR-X helicopter procurement is canceled. The Airborne Laser system based on the 747, is reduced to research only. The Next Gen bomber is off the table. There are other programs in which Boeing was involved that are gone, too.

This makes the recompete for the KC-X aerial tanker all that much more important. Gates said this will proceed in the summer.

Update: Defense Industry Daily has this superb recap of the winning and losing programs.

We did a podcast with Addison Schonland of IAG and George Talbot of the Mobile Press-Register about the implications for the tanker procurement.

Here is a link to Gates’ formal statement.

Major shift on split tanker contract

Update, April 3: The New York Times has this long piece on the prospect of a split procurement.

Original post:

It is a subtle but major shift on the controversial proposal to split the KC-X aerial tanker contract between Northrop Grumman and Boeing.

KIRO TV (CBS) in Seattle interviewed US Rep. Norm Dicks (D-Boeing/WA), who throughout the previous competitions has been dogmatically in favor of a single contract to Boeing. Dicks is #2 on the House Appropriations Committee, where any funding bill will have to originate. The chairman of the committee is US Rep. John Murtha (D-PA), who came out solidly in favor of a split contract as the only way to break the logjam over an award.

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Airbus may scrap A400M

Airbus may scrap the troubled A400M program, according to this London Telegraph report of a Der Spiegel interview with Airbus CEO Tom Enders.

Peugeot Citroen fired Christian Streiff, who designed the Power8 restructuing program for Airbus but then resigned after three months in a power struggle. Here is the report picked up by The New York Times.

Update, 4:00 PM March 30: Airbus discounted the London Telegraph/Der Spiegel report and says the company remains committed to building the A400M. Here is the Reuters report.

The picture about the future of the A400M is about as clear as this one.

Source: EADS