Leeham News and Analysis
There's more to real news than a news release.
Odds and Ends: Refusing to fly 787; 787 AD was wrong; KC-46A cost analysis; Battery fix certification?
Refusing to fly 787: This is a stunning survey by the website Travel Insider: 32% of frequent fliers will refuse to fly the 787 even after it is fixed for the first year or two and another third would prefer to avoid the 787. The numbers are huge. We knew there would be some who refused to fly the plane–the same thing happened to the McDonnell Douglas DC-10 after it was grounded in 1979–but the numbers are stunning.
We also recognize that we’re still at the height of the press coverage of the still-grounded aircraft. Once it returns to service, it will be interesting to see results if the survey were re-run.
There was no doubt Boeing received a black eye over the grounding. It now appears both eyes are blackened.
FAA 787 AD was wrong: The FAA should have pulled the 787 type certificate, argues a former member of the National Transportation Board.
KC-46A Costs: The Blog by Javier (Irastorza Mediavilla) has a detailed analysis of the contract price performance so far of the Boeing KC-46A. although the blog is mostly about his personal activities, Javier works for Airbus Military on the A400M program. (Note: he does not speak for nor represent Airbus through his blog). This might make some of his aerospace analysis suspect in the minds of some, but we have found his commentaries and analysis to be well researched and thought out. And he has a good sense of humor.
FAA reliance on OEMs: Reuters has a detailed piece about the Federal Aviation Administration’s reliance on OEMs (and specifically Boeing) in aircraft development, all triggered of course by the 787 issues. We wrote about this relationship shortly after the now-infamous joint press conference by the FAA and Boeing in which the FAA, Boeing and the Department of Transportation said the 787 was safe.
Re-certifying the battery fix: We keep getting told whatever Boeing does to fix the battery issue will require re-certification of the battery and/or system–that it will be more than simply complying with the Airworthiness Directive. This, of course, would add time to getting the 787 back into revenue service. Does anyone have some insight on this?
“Of all time:” Airbus Tweeted last Friday (referring to its website): The A320 (soon to be made in Mobile) is undisputed best selling aircraft product line of all time.” (Emphasis added.)
We don’t think so. “Of all time”? “Aircraft product line”? 737 All Series 10,501. A320 family: 9,142. DC-3/C-47/Others under license: 16,079.
We know what Airbus was trying to say: It’s A320 family vs the equivalent technology Boeing 737NG and 737 MAX, for which through January sold 7,369. But the claim, as worded, just isn’t so.
Furthermore, the A320 first entered service in 1988 and the 737NG in 1994. A true comparison needs to knock six years of sales off the A320.
To quote the controversy of a recent Washington (DC) tempest in a teapot, “[We] know [Airbus] may not believe this, but as a friend, [we] think [Airbus] will regret staking out that claim.”
US Airways’ 757 problem
Notation: Lan Chile has canceled Boeing 787 flights through June.
US Airways has a large fleet of aging Boeing 757s it needs to replace. The problem is, a carrier official says, neither the Airbus A321neo nor the Boeing 737-9 MAX can do what needs to be done: Phoenix-Hawaii non-stop in both directions with maximum payload under all conditions.
The distance is 2,910 miles, well within the advertised range of 4,200 miles for the A321neo and 4,137 for the 9 MAX. But Derek Kerr, executive vice president and chief financial officer says fleet planners have yet to be convinced either plane can replace the 757W, which is uniquely able to handle the hot, summer conditions at Phoenix, where temperatures often soar to 110F degrees or more.
US Airways is one of only two legacy airlines in the US that has yet to order the MAX or the NEO (Delta Air Lines is the other). A year ago, US Airways CEO Doug Parker told us that the value proposition of ordering the neo still was unconvincing given the price premium sought by Airbus. Kerr told us last week that the large, outstanding order for the current generation A320 family as replacements for the oldest jets–and the lack of a true replacement for the 757–meant the airline wasn’t in a hurry to place an order for re-engined aircraft.
Odds and Ends: A350 production boost; 787 ‘Super Box’ and political influence; Boeing’s JAL monopoly
A350 production boost: Airbus wants to boost production of the A350.
787 ‘Super Box‘: In the harshest assessment we’ve seen so far of the Boeing 787 situation, BB&T Capital Markets analyst Carter Leake characterizes the proposed containment box for the lithium ion battery as a “super box” and Boeing’s entire proposed solution as a Rube Goldberg approach.
Leake writes:
We view Boeing’s “Super Box” proposal as a reverse Rube Goldberg contraption that attempts to solve a very complex problem with an overly simple solution. We believe there is no doubt that Boeing’s proposal is the fastest way to get the 787 flying again, but if the NTSB plays the safety card in its upcoming interim report (which we think they will), the Super Box strategy will be a hard sell for weak-kneed politicians who will care less about the arcane rules of aircraft certification, and more about the open-ended political exposure of supporting a rush job. Worse, we believe the very powerful, but instantly credible, pilot unions will soon weigh in against any solution that contemplates a “contained fire” of any kind. This issue has unfortunately become very political, and we believe the 787 crisis is far from being resolved.
Boeing doubled down on its Lithium Ion battery system by proposing modifications that purportedly address the risk of thermal runaway and the more critical issue of smoke and fire containment. Using a “Super Box” concept (our term), Boeing hopes to divert attention from how the previous system performed—or did not— and instead focus on a fortress approach that can deal with worst-case battery fires, regardless of their cause. Congressional sources cited in media reports state that Boeing is adamant that this is a permanent fix and no alternative solution is being pursued. Given the original battery system is being modified, even if for the better, some degree of re-certification will be required.
Kudos to Boeing engineers for constructing this kludge in short order, but we view the Super Box as a reverse Rube Goldberg contraption that attempts to solve a very complex problem with an overly simple solution. We believe there is no doubt that Boeing’s proposal is the fastest way to get the 787 flying again, but if the NTSB plays the safety card in its upcoming interim report (which we think they will), the Super Box strategy will be a hard sell for weak-kneed politicians who will care less about the arcane rules of aircraft certification, and more about the open-ended political exposure of supporting a rush job. Worse, we believe the very powerful, but instantly credible, pilot unions will soon weigh in against any solution that contemplates a “contained fire” of any kind.
All we can say is, “wow.”
Sole sourcing not preferable, says JAL: The grounding of the 787 may provide an opportunity for Airbus in Japan, where it has had decades of poor sales, if this article is any indicator.
SPEEA-Boeing contract vote count underway-and we are there
It’s Tuesday evening, Feb. 19, and we are at SPEEA headquarters to watch the ballot counting on the contract vote offered by Boeing.
It’s 6:25pm and it’s too soon to spot a trend. However, as we watched the ballots separated from he envelopes were could see a lot of “Accepts” and a lot of “Rejects.” As can be expected, the Accepts do not approve of a strike authorization and those rejecting the contract OK a strike.
Final results aren’t expected until after 9pm. Stay tuned here for updates as well as on Twitter @leehamnews
6:45pm PST: Counting underway, tilt toward Accept at one table.
7:00pm PST: Can see several stations; it’s too close to call a trend.
7:15pm PST: As we scan the room at the counting tables we can see, it looks like this vote will be close. Caveat: we can only see perhaps 25% of the voting stations. Best we can see, it looks like the tilt is toward Accept. This is not at all like the IAM 751 vote in 2008, in which the Reject was obvious and clear early in the evening.
7:20pm PST: SPEEA reminds us there are two employee groups voting tonight, the Professional engineers and the Technical group. One group could Accept and one group could Reject. One could OK a strike, the the might not.
7:25pm PST: In response to Shuper, “Accept” or “Reject” refers to the contract itself. “Do” or “Do Not” Authorize a strike is the other vote. We’re not trying to identify the Do or Do Not because these are basically tracking Accept or Reject. There is no visual on ballots (as there was with the IAM): both questions are on the same ballot (they were separate at the IAM, so a visual card stacking was obvious). The votes are tallied by the old-fashioned five-count hash marks on a sheet of paper. That’s what we are spotting.
8:00pm PST: Kind of quiet. One Professional vote counter says his table is neck-and-neck. A Techie tells us his group tends to be more militant but he doesn’t have a feel for the vote.
8:15pm PST: A bit of a surprise: several vote counting stations appear to be done.
8:30pm PST: Results will be coming “soonish.”
9:00pm PST: SPEEA first told us 20-25 min, now saying 45-60 min.
Twitter: The Herald @EverettHerald
RT @chcktylr: For you engineers, that’s 79.17068889864% of membership. RT @sbhatt: 18,043 ballots cast in #speea vote on #boeing contract
9:15pm PST: While we are killing time here at SPEEA, there is speculation that the FAA may not approve the temporary fix of the 787 (no news there) and this means a full replacement of the battery design might take as long as 18-24 months. We don’t have enough data to give credence to this timeline but–if it were to be this long, the Airbus A350 might enter service before the 787 re-enters service. Think about that.
The results are here.
Odds and Ends: 787 likely grounded to May; More Batteries; Boeing’s 10K
787 Battery short-term fix: The Seattle Times has this story which recounts Boeing’s effort to design a short-term fix to get the 787 fleet flying again. The scenario outlined in the article suggests the 787 will be grounded at least until May. The story also paints a picture that if the grounding lasts nine months, production would have to slow and financial impacts will start to hurt Boeing.
More on Batteries:
The A350: Reuters has this story on Airbus’ switch from lithium-ion to current technology batteries.
The New York Times has this story about the different directions Airbus and Boeing are taking.
The Puget Sound Business Journal has a good story about the evolving technology of lithium ion batteries and even though the 787 is currently the world’s most advanced airplane, battery technology has advanced beyond the 787. PSBJ787Batteries
On Other Stuff
Boeing issued its annual 10K report on February 11. We were already engaged in the PNAA conference Feb. 12-14 and didn’t have a chance to read it until after the conference. The following excepts are from the 10K.
747 Program: The accounting quantity for the 747 program increased by 25 units in 2012, reflecting the normal process of estimating planned production under existing and anticipated contracts. We continue to incorporate changes identified during flight testing into previously completed airplanes. First delivery of the 747-8 Intercontinental occurred in February 2012.
The production rate increased from 1.5 to 2 airplanes per month in May 2012. Ongoing weakness in the air cargo market and lower-than-expected demand for large commercial passenger aircraft have resulted in pricing pressures and fewer orders than anticipated in 2012. We have a number of unsold Freighter and Intercontinental production positions beyond 2013. If we are unable to obtain orders for multiple Freighter aircraft in 2013 consistent with our near-term production plans, we may be required to take actions including reducing the number of airplanes produced and/or building airplanes for which we have not received firm orders. We also remain focused on reducing out-of-sequence work, improving supply chain efficiency and implementing cost-reduction efforts. If market and production risks cannot be mitigated, the program could face an additional reach-forward loss that may be material.
[787 Information]
[787 test airplanes]: During the fourth quarter of 2012 we finalized an order for one of the three remaining flight test aircraft. We continue to believe that the other two 787 flight-test aircraft are commercially saleable and we continue to include costs related to those airplanes in program inventory at December 31, 2012. If we determine that either of the remaining aircraft cannot be sold, we may incur additional charges.
[787 grounding]: We are unable to reasonably estimate a loss or a range of loss at this time because such estimates are dependent on the ultimate finding as to cause and the timing and conditions surrounding a resolution and return to flight. Any such resolution could have a material effect on our financial position, results of operations or cash flows.
Airbus drops lithium battery for A350
Airbus, A350 and Lithium battery: Airbus has dropped plans to use the lithium-ion battery in the A350. An Airbus official told us, “We confirm we are opting for nickel cadmium for the A350 main batteries to protect the programme schedule. This decision is about protecting the integrity of our program schedule… (it’s not about any safety concerns about Li-ion batteries, we continue in parallel to mature for the A350. With so much uncertainty raised by the Boeing 787 investigation, we are being prudent in order protect our programme schedule. This is business as usual.”
“As a result of making this decision now, Airbus does not expect it to impact the A350 XWB Entry Into Service schedule,” an Airbus statement added.
PNAA conference, Pt 1: Traffic data; AA-US merger thoughts, 787
Each airline region of the world is different and many going through transitions US went through previously, says Bob McAdoo, the airline analyst for Imperial Capital (a boutique investment banking company in California).
McAdoo is speaking at the Pacific Northwest Aerospace Alliance conference in suburban Seattle today. Highlights:
- IATA traffic data doesn’t make a lot of sense any more. I can always get traffic–all I have to do is charge $19. Without knowing the data behind the numbers, traffic data is meaningless. People say US isn’t a growth market, but it’s making money.
- American Airlines-US Airways: Turn back clock to 2005/6: America West took over US Airways and in less than a year had best profit margins in the industry. Boeing is on AA creditors committee and I think there will be MD-80s coming out sooner and these guys (Doug Parker) will run it like a business. These guys will look at a route structure and say what works and won’t work, not a route planning department that likes the look on a map. I think you will see a lot of markets shut down.
- These guys have been in the top one or two in profit margin. US carries more people out of Philly than AA does out of New to Europe.
- This is a non-growth world in many respects.
- McAdoo recalls when he was at Texas International and his job was to put Southwest out of business. “I wasn’t very good at that.”
- Allegiant and Spirit are, in effect, next Southwest. Tells a story of a friend who rode Spirit once and will never ride them again, “but I’ll buy their stock.”
- 737-400 rent $65,000, 737NG (older) $135,000.
Odds and Ends: ICAO says no to lithium batteries;Dendrites and the 787; Deleting Flightblogger
ICAO says no to lithium-ion batteries: The UN organization ICAO apparently will reverse itself and say that lithium-ion batteries should not be shipped as cargo on passenger airliners. This seems like a prudent move, considering the history of fires involving this battery type, even before the Boeing 787 incidents.
Dendrites and the 787: It sounds like something out of your biology class. Microscopic things called Dendrites might be the root cause of the lithium-ion battery fires on the 787, according to the first reporting from The Wall Street Journal. (Subscription required. Here is a Reuters story on the same topic.)
Deleting Flightblogger: Alas, we deleted Flightblogger from our bookmarks. Jon Ostrower created this blog and built it into a major aviation resource. When he departed Flight International for The Wall Street Journal, Flight half-heartedly (if that) continued the column, but there hasn’t been an entry since August.
Rolls-Royce Certifies Trent XWB: Rolls-Royce received certification for the Trent XWB, which will be used for the Airbus A350.
Airbus still ponders battery future: Airbus is still considering what to do about the plans to use the lithium-ion battery in the A350. A Seattle TV station reported Airbus made the decision to drop these batteries in favor of older, proven technology. Airbus told us this isn’t so (yet). Says a spokesman:
We are following the 787 investigation closely and will evaluate whether any recommendation applies to us.
We have a robust design. If this design has to evolve, we have the time to do that before first delivery.
Nothing prevents us from going back to a classical plan that we have been studying in parallel.
We have all options open, which we keep evaluating in pace with the ongoing investigation.