Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Solid start for stand-alone GE Aerospace despite cuts to LEAP output April 23, 2024
- SPEEA, Boeing at impasse over safety program, union says April 23, 2024
- Better transparency needed on Boeing’s 1Q earnings call April 22, 2024
- Bjorn’s Corner: New engine development. Part 4. Propulsive efficiency April 19, 2024
- Boeing unlikely to meet FAA’s 90-day deadline for new safety program April 18, 2024
Odds and Ends: $500k per plane to fix 787, says FAA; China’s Airbus order
Cost of 787 fix: It will cost nearly $500,000 per aircraft to install the battery fix in the Boeing 787, documents released by the Federal Aviation Administration indicate. The actual math is $466,666. Analysts believe the 787 grounding cost Boeing about $600m, which the CEO said yesterday was absorbed in the R&D budget. Jim McNerney also said there are no contractual obligations to compensate customers for the grounding, but something will likely be worked out.
LOT will resume flying the 787 June 5, it was reported today.
China’s Airbus Order: It appears China is satisfied with the European Union’s about face on carbon taxes. Readers may recall China opposed the EU’s attempt to levy taxes on foreign airlines over carbon emissions. China vowed not to buy any Airbus aircraft–particularly the A330–in retaliation. Several other countries opposed the tax, though these didn’t go so far as to boycott Airbus. Today an $8bn order for Airbuses, including the A330, was announced by China.
Odds and Ends: Scrapping young aircraft; NTSB Battery hearing, Day 2
Aviation Week has a story about the scrapping of relatively young aircraft. There has been a long-running debate over whether the useful lives of aircraft have been shrinking. The focus has been on the Airbus A320 and Boeing 737NG families, though some attention has also been paid to twin-aisle aircraft.
Historically useful lives have been 25-35 years for operation by passenger aircraft before potential cargo conversion, if at all.
With the forthcoming re-engined single-aisles, there has been a lot of speculation that the useful lives will be sharply reduced, and there have been several examples of early scrapping of early-model A320s and some but not as many of 737NGs. Lessors are particularly sensitive to the prospect of shorter useful lives due to the depreciation curve assumptions. Irish lessor Avolon even held an international webcast on the topic. Boeing has published a white paper on it. Both companies argued there has been no change.
Thus, the Aviation Week story is of interest.
Separately, here are a couple of stories following Day 2 of the NTSB hearing on lithium batteries. The hearing on the Japan Air Lines Boeing 787 fire will be April 23-24.
The Seattle Times-a report from Day 2.
Odds and Ends: Tit for Tat; Lockheed in crosshairs of—Embraer; 787 return to service
Tit for Tat: Airbus announces a big order from LionAir. The next day Boeing announces a big order from RyanAir. Airbus has a big press day for its groundbreaking at Mobile (AL). The next day Boeing announces a $1bn expansion at Charleston.
Lockheed in crosshairs: Embraer is going after Lockheed Martin. Aggressively.
787 Rescheduled: United Airlines put the 787 in its schedule from May 31. The FAA hasn’t cleared the airplane for flight yet, but Boeing has been telling customers to expect the plane’s return to service in May through June.
Washington State Senate budget kills Office of Aerospace; attention turns to House
The Washington State Senate budget adopted last Friday killed funding for the Office of Aerospace, which was created less than a year ago.
The move was driven by the need to find more than $1bn to fund education and the State’s long-running budget shortfalls, brought on by the 2008 global fiscal crisis.
It’s understandable that the Senate, which is controlled by fiscally conservative Republicans and what we call here “Roadkill Democrats” (they’d be called Blue Dog Democrats in Congress), want to make drastic budget changes. The State, which has been controlled by Democrats in the Governor’s Mansion and in both houses of the Legislature, went on a spending binge following the election of Christine Gregoire and Democratic Super Majorities in 2004. The Ds increased spending by 33% on projected 16% increases in revenues. It was wholly irresponsible then and was perpetuated until the fiscal crisis began.
When the current Legislature was being formed, two Roadkill Democrats left their caucus and joined the Republicans in the Senate to form the first GOP control of the Senate since…well, we can’t recall specifically but it may have been around 1996, when we first moved here.
We won’t get into the social cuts of the Republican budget, because that’s not the area we cover in this blog. The move cutting the Office of Aerospace is a big mistake.
Single-Aisle backlog market share between the Big Two
The rivalry between Airbus and Boeing intensified in recent weeks with Airbus landing another major order from a previously exclusive Boeing customer, LionAir. Boeing announced another major order just a day later, Ryanair, retaining exclusivity with this customer.
The market share battle between Airbus and Boeing was fierce and prolonged. The introduction of the A320neo family placed more pressure on Boeing, particularly when it became clear Airbus was going to land American Airlines as a major customer for Current Engine Option and the New Engine Option. Boeing, which had been dismissing the neo as a viable option and dithering about whether to proceed with a new design to replace the 737 NG, found its hand forced. Having no other choice, Boeing launched the MAX, a re-engined version of the 737 NG.
With all the recent orders, we’ve done the math and determined market share for the current generation and re-engined types and sub-types. This data is through March 31 and only includes orders that have been listed as firm contracts, not those that have been announced but not yet firmed up.
Sources are Airbus, Boeing and Ascend Worldwide.
US ExIm financing under attack again; killing it would aid Airbus
US Export-Import financing is under attack again by Delta Air Lines and Republicans.
We understand why Delta is opposed. It believes that ExIm financing of Boeing aircraft to competitors puts it at an economic disadvantage.
But fees charged by ExIm made financing more costly and “market rate,” a move intended to remove the financing advantages. Some airlines, in fact, chose alternative financing as a result.
Delta claims ExIm hasn’t taken into account the impact on losing American jobs. We find this a stretch, since Boeing out-sources thousands of jobs with its industrial partnerships (particularly on the 787) and supply chain contracts. At one time, we seem to recall Delta out-sourced jobs to non-US locations.
Be that as it may, at least Delta has its self-interest at stake and one can’t truly fault the airline for this. But the Republicans are another matter. Although ExIm finances a variety of US industries, Boeing is the prime beneficiary and some Republicans claim this is nothing more than corporate welfare.
ExIm, which has been around since the Great Depression, provides financing that is similar to European export credit support offer to Airbus customers. If Republicans succeeded in killing ExIm (or if Delta does), then Airbus will have a clear advantage.
This falls into the category of “what are they thinking??”
Separately:
McNerney on unions and other stuff; where will 777X be built?
Note to Readers wishing to comment: See this article and our Comment #35 and be forewarned.
Boeing CEO Jim McNerney is cited in the Puget Sound Business Journal on labor unions, China and other stuff from his appearance at an aerospace summit.
In the article, McNerney tries to take a moderate stance on unions. But just this week Boeing announced it is moving SPEEA and other union jobs out of Puget Sound, here and here. The moves resulted in a blast from Seattle Times columnist Jon Talton here, and our response here.
Production is booming in Seattle’s Puget Sound, but it’s clear to us that Boeing is engaged in a long-term strategy to build up Charleston as a major, second production plant–not just a 787 production line. We see Charleston-as-to-Seattle as Hamburg-is-to-Toulouse some day. We don’t see Everett shutting down (at least not in our lifetime) because there is too much there. We think Renton is more at risk, once there is a New Small Airplane finally designed to replace the 737–but this is well into the next decade.
The question over where the 777X will be be built is, to us, a little more vexing. Logic says build it here, given the similarities between the baseline 777 and the derivative 777X. This is no different in principal than the 737NG and the 737 MAX–it would have been silly to build it elsewhere.
But McNerney’s comments about labor in the Business Journal notwithstanding, the anti-union sentiment at Boeing Corporate is obvious for all to see.
The future of the 747-8 is in jeopardy. Boeing said as much in its 2012 10K:
Flaws escape FAA certification
Bloomberg has a good story looking beyond the Boeing 787 issues at the FAA’s reliance on industry to certify airplanes. The story details a number of cases where flaws crept through the system, leading to deaths–a circumstance, of course, that did not happen with the 787.
We have written a couple of posts about the relationship between the FAA and industry in response to focus following the 787 battery issues. We pointed out this relationship is nothing new.
The Bloomberg piece is well worth reading.