Leeham News and Analysis
There's more to real news than a news release.
Odds and Ends: S&P; C-17; AA-US merger (again); 777X wing work; WA aerospace future
S&P says don’t pay attention to our ratings: On the same day Delta Air Lines was named to the S&P 500, The Los Angeles Times had this article commenting on Standard & Poor’s legal defense of its investment grade credit ratings of companies involved in the 2008 financial collapse in the US that led to the global recession in 2008, affects of which are still felt today.
S&P’s defense included the argument that nobody should pay attention to its ratings, according to the article.
The ratings issue is important because airlines, lessors (and, of course, others outside aviation) covet investment grade ratings for the capital-intensive aerospace industry. Airlines and lessors need “cheap” money to buy airplanes. Air Lease Corp recently obtained its first investment grade rating, for example, something for which it issued a press release. Delta gained headlines for its return to investment grade status. Airlines have long used S&P, Moody’s and Fitch for rating equipment trust certificates used to finance airplanes.
The columnist for the LA Times is incredulous that S&P’s legal defense in the federal lawsuit is, essentially, nobody should pay attention to its ratings. It is indeed remarkable.
Final C-17 for US Military: Boeing’s C-17 program has been struggling to stay alive for the past several years and the challenge will get worse when Boeing hands over the final order to the USAF. The airplane’s survival depends now entirely on non-US sales, and these come few and far between. It’s also the last program of McDonnell Douglas; Boeing killed the MD-11, MD-80, MD-90 and MD-95 lines not that long after the two firms merged, though it did keep the MD-95 alive for a short time, renamed the Boeing 717.
The Long Beach Press-Telegram has a couple of additional stories here and here.
Why States opposes AA-US merger: Micheline Maynard writes in Forbes why she thinks states have joined the US Department of Justice lawsuit to block the merger between American Airlines and US Airways. The actions have nothing to do with consumer protection, the alleged motive of the DOJ, she opines. Rather, the states’ interests are far more parochial.
ElectroImpact competes for 777X work: ElectroImpact makes wings for the Airbus A380 and A350 XWB and it’s headquartered in Boeing’s back yard at Everett (WA). Now it’s hoping to build wings for the 777X. This Seattle Times report tells the story.
Washington State’s future in aerospace: The Pacific Northwest Aerospace Alliance hosts its second annual series of luncheons with members of the Washington State Legislature to talk about what needs to be done for the future of aerospace in this state. The first lunch is in Bellevue (WA) September 24 and the second is September 26 in Spokane, the other major aerospace cluster in the state.
Confirmed Bellevue Panelists
• Sen. Nick Harper (D), District 38 – Everett
• Sen. Paull Shin (D), District 21 – Lynnwood
• Rep. Mike Sells (D), District 38 – Everett
• Rep. Bruce Chandler (R), District 1 – Yakima
• Rep. Larry Springer (D), District 45 – Kirkland
Confirmed Spokane Panelists
• Sen. Michael Baumgartner (R), District 6 – Spokane
• Rep. Timm Ormsby (D), District 3 – Spokane
• Rep. Kevin Parker (R), District 6 – Spokane
• Rep. Mark Schoesler (R), District 9 – Ritzville
Information and registration for Bellevue is here.
information and registration for Spokane is here.
Clever headline: The Street.com column has a clever headline this morning in a post written by Ted Reed concerning the on-going sales battles between Airbus and Boeing.
Odds and Ends: Slowing sales; Airbus in Japan; MRJ delay; Crandall on merger
Slowing Jet Sales: Within a few days, Bloomberg, Reuters and The Seattle Times each had stories about slowing jet sales.
Here is the Bloomberg story, focusing on cargo sales.
Here is The Seattle Times story.
The theme of each is worrisome, but with Richard Aboulafia’s comments to The Times, we disagree with his view on American Airlines. American has an ancient fleet of Boeing MD-80s and aging Boeing 757s that have to be replaced, and we believe the Airbus and Boeing orders won’t go away if the merger with US Airways is blocked.
Airbus still trying Japan: Airbus, which has never had a lot of luck penetrating the market in Japan, still appears to have an uphill battle, according to this article. The Reuters piece quotes Airbus’ John Leahy at the Paris Air Show; when we spoke with Leahy by phone from the IATA AGM immediately before the PAS, Leahy wasn’t quite as upbeat as quoted in the Reuters article. Leahy tamped down speculation that he’d have a Japanese order for the A350 at the PAS (and he did not) but neither was he ready to predict any timeline when one might be forthcoming.
Aspire Aviation continues to believe Boeing may place the 777X wing production in Japan as a means to secure 777X orders and block the A350.
Mitsubishi’s delay: Mitsubishi’s latest delay on the MRJ90 program is being blamed on not following FAA process, according to this article.
Poor South Carolina 787 deliveries: All Things 787 reports that Boeing’s Charleston (SC) 787 assembly plant has delivered only four 787s this year.
Crandall on DOJ AA-US lawsuit: Former American Airlines CEO Robert Crandall (who retired in 1998) has a very good analysis of the faults of the Department of Justice lawsuit to block the American-US Airways merger in this Bloomberg TV interview. He’s first up in the 22 minute segment.
Desperation: Kingfisher sued International Aero Engines for $236m over allegedly defective and poorly designed engines on the Airbus A320. This doesn’t pass the laugh test and smacks of desperation. The V2500 has been on the A320 for decades and seems to have been designed just fine and performing well.
Irkut makes 10% fuel advantage claim over NEO, MAX for MC-21
Russia’s Irkurt claims its MC-21 mainline jet, a direct competitor to the Airbus A320/321neo and Boeing 737-8/9 MAX, will be some 10% more economical. Irkut claims the MC-21 will be up to 23% more efficient than the current engine-powered Airbus and Boeing products.
Thanks to a reader who is at the MAKS air show, we received this photo from a slide presentation. Although others may have seen this information before, this is the first time we have.
Other MAKS news:
- Sukhoi inked orders for some more Superjet 100s.
- Still no announcements from Airbus, Boeing or Embraer.
- Ilyushin Finance Corp and Bombardier announced that the first Russian operator of the CSeries CS300 will Vim Airlines. IFC ordered 32 with 10 more options at the Paris Air Show.
In other news, Boeing and Canada’s WestJet announced a letter of intent for 65 737 MAXes: 25 MAX 7s and 40 MAX 8s. This will enable WestJet to expand and replace its 737 NG fleet. Delivery begins in September 2017, making WestJet one of the first operators.
Odds and Ends: Why new planes are delayed; Hazy profile; first 787-9
It’s Actually is Rocket Science: It’s a clever headline from Bloomberg News, explaining why new airplane programs are delayed.
Focusing on smaller airplanes: Steven Udvar-Hazy, one of the craftiest executives in commercial aviation, is profiled in this LA Times story. He discusses his focus on smaller aircraft for his Air Lease Corp.
Boeing 787-9: Boeing rolled out the first 787-9 and is readying pre-flight tests.
Boeing photo
More analysis on DOJ vs AA-US: Here is Part 2 of Airchive’s analysis of the Department of Justice case seeking to block the American Airlines-US Airways merger.
Replacing the 747-400
Replacing the venerable Boeing 747-400s remaining in passenger service is a prime objective of Boeing and of Airbus. The business case for their respective 747-8Is and A380s rests in large part on this approach, though for Airbus the A380 business case also rests on passenger traffic doubling every 15 years and restricted airport slots.
Replacing the 747-400, in fact, doesn’t leave a lot of room. There are just 306 passenger models remaining in service, including VIPs and government uses, according to data provided Leeham News. There are another 23 747-400C (Combis) remaining in service.
Data at July 2013.
Fully 42 747-400 passenger models are in storage. Many 744 “Ps” have been converted to cargo airplanes, supplementing new-build 747-400Fs (above). The 744Ps in storage and in service are obvious candidates for conversion to freighters, and there are a number of 744Fs in storage ready to return to service when the slow-moving global cargo demand recovers–which has proved to be a maddening slow process.
Date as of July 2013
Airbus has been more successful selling its A380 to 747-400 operators than Boeing has in selling its 747-8I. Airbus has likewise been more successful at selling the aircraft to non-747-400 operators, though the customer quality in several cases was dodgy. Kingfisher Airlines has collapsed and it’s unlikely Hong Kong Airlines will take delivery of the A380, openly talking about swapping these orders for smaller aircraft.
And therein lies the rub.
Sources: Airbus, Boeing, Ascend at July 2013
Update: Typo on the Lufthansa remaining orders for A380s: 7, not 17.