Leeham News and Analysis
There's more to real news than a news release.
Thoughts on the Boeing-IAM deal
We couldn’t be more delighted.
The agreement announced Nov. 30 between the IAM 751 local and Boeing is an outstanding development.
Who wins? Basically, everybody.
The Company gets:
- Production stability through most of 2016 without the pain and agony of protracted negotiations and all the uncertainty associated with this process;
- No-strike through most of 2016;
- The NLRB case goes away., by all indications. How this specifically relates to Charleston and the Surge Line remains to be seen;
- A contented workforce; and
- Stability for ramping up production of all the 7-Series, most particularly the 737.
The union gets:
- The 737 MAX;
- More work on the KC-46A tanker if Boeing Wichita closes;
- An economic package with no apparent “take-aways;” and
- No stress over contract negotiations or a strike.
Customers get:
- No strike;
- No interruption of deliveries; and
- Certainty over deliveries.
Suppliers get:
- Pretty much the same thing as customers.
Washington State gets:
- The 737 MAX and all the jobs and supply chain benefits there from.
Losers:
- Everybody else who salivated over the prospect of winning the 737 MAX, but more or less you don’t miss what you don’t have; and
- Airbus: it can ‘t play on the uncertainty of a Boeing strike and delivery reliability.
We’re delighted management and labor set aside the antagonism of the decade-and-a-half and all the testosterone that went with it and realized that a partnership is more beneficial than being in their corners ready to fight.
A note of interest: Boeing Commercial Airplanes CEO Jim Albaugh was asked at the Credit Suisse conference Wednesday morning about the prospect of labor negotiations next year. (This during the 8am hour, EST.) Albaugh, in his characteristic understated way merely opined he was optimistic a successful negotiation could be achieved.
Six hours later, the deal was announced.
American bankruptcy may prompt US Airways bid
American Airlines’ bankruptcy filing may at long last prompt a bid by US Airways to make a bid for the carrier.
Doug Parker, CEO of US Airways, has a long history of bidding for Chapter 11 carriers. He was successful when, as America West Airlines, he bid for US Airways. He was unsuccessful as US Airways in bidding for United Airlines and Delta Air Lines. He is on record as saying a bid for American made no sense without a bankruptcy by the Ft. Worth (TX)-based carrier.
We won’t be surprised in the slightest if Parker makes a bid
China won’t be competitor for 20 years: Leahy
China’s emerging commercial aerospace industry won’t be a viable competitor to Airbus and Boeing for 20 years, predicts John Leahy, COO Customers of Airbus.
Speaking at the Credit Suisse Aerospace conference in New York, Leahy noted the challenges COMAC has with the ARJ21 regional jet; and the development of the C919 mainline aircraft, neither will commercially be an effective aircraft compared with today’s aircraft from Western companies.
Boeing’s Jim Albaugh, CEO of Commercial Airplanes, speaking separately at the same event, agreed. He also said Boeing has erected “high walls” around its technology, and will maintain its lead over China by building “tomorrow’s airplane” while China is building “today’s airplane.”
Albaugh acknowledged there is some technology transfer of today’s generation.
American, parent, subs file Chapter 11
It’s done: American is the last legacy carrier to file for bankruptcy. Press releases here, here and here.
Our discussion last week of what a bankruptcy would mean to orders is here.
Bankruptcy fears swirl again around American Airlines
With bankruptcy fears swirling again around American Airlines, some questions arise what happens to the orders AA has with Airbus and Boeing if the carrier goes into Chapter 11.
This hand-wringing piece paints a dire picture for Boeing. There is a lot to argue with over this particular writing, but the piece’s headline is particularly off-the-mark. (Note that the writer of the piece and the headline writer may not be the same person.)
Odds and Ends: A380 cost, American’s engine order, ‘war on Boeing’
A380 cost: Flight Global reports that Air France–a launch customer of the Airbus A380–just concluded a lease deal for one of the giant airplanes for a rental of $1.8m per month.
For an airline of Air France’s credit, lease rates are typically on the 0.80% range and sometimes as low as 0.72%. This, then, infers a purchase price of $216m-$230.4m.
American Airlines: It was announced Monday AA split its engine order between CFM (for the Airbus A319) and IAE (for the A321). Given American’s large CFM-powered Boeing 737 fleet, some might think CFM should have won the entire engine deal. But the IAE V2500 is viewed as the better engine for the larger A321–more thrust and lower fuel burn–and American follows Lufthansa Airlines in splitting the engines for the smaller and larger Airbus family.
Aviation Week has an article that provides some other interesting information about the leases for the Airbuses.
Pratt & Whitney: Does the American deal mean PW has a good change of placing the GTF on the A320neo order by American? PW’s buyout of the Rolls-Royce share of IAE certainly gives PW the ability to do a “global” deal involving V2500 and GTF engines, something CFM has been able to do for CFM56 and LEAP engines from inception. While Rolls-Royce was involved in IAE, there was no incentive for RR to be flexible on V2500 sales that might lead to GTF transactions. Now PW can wheel and deal all it wants.
War on Boeing? Aviation Week has a speculative piece that US airlines have declared “war on Boeing.” This think-piece relates to the Air Transport Association suing the US Export-Import Bank over plans to finance 787s ordered by Air India, a financial and management basket-case.
While AvWeek raises some interesting points, we’re told this has more to do with a dispute between Delta Air Lines–instigator of the ATA action–and India. We think Boeing is merely getting mugged in the process and that this is not a “war on Boeing.”
Turboprops: Jets always draw the most attention but Aspire Aviation has a long piece about turboprops, specifically the Q400 vs the ATR series, that merits reading. Turboprops are slowly regaining favor in some quarters.
The Beauty of it: From Randy Tinseth’s blog, here is a photo that is just a beauty, from the Dubai Air Show:
Do airframers listen to customers?
Aviation Week has an interesting story asking whether airframers truly listen to customers when designing airplanes.
The question is not an idle one. Airbus and Boeing constantly say they do, but Airbus is getting loads of flak from Qatar Airways and Emirates Airlines (both of whom like to negotiate in the press) over the revamped A350-1000 announced at the Paris Air Show. Qatar says the changes came as a surprise (we were told otherwise at the time by Airbus).
Airbus CEO Tom Enders since said Airbus won’t keep changing the A350’s design in response to customer comments. One can appreciate how he might be tired of this. The A350 went through five or six iterations in response to customer comments, a somewhat awkward display.