Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Boeing unlikely to meet FAA’s 90-day deadline for new safety program April 18, 2024
- Focus on quality not slowing innovation, says GKN April 18, 2024
- Boeing defends 787, 777 against whistleblower charges April 17, 2024
- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
- Bjorn’s Corner: New engine development. Part 3. Propulsive efficiency April 12, 2024
787, A350 “way over-ordered,” says UBS
In an analysis that might create heartburn for any number of people at any number of levels, David Strauss and his aerospace team at UBS Securities issued a report Tuesday (April 27) that concludes the next-generation of airplanes–the Boeing 787 and Airbus A350–are “way” over-ordered.
The “good” news (tongue-in-cheek, for those who don’t pick up on our odd humor) doesn’t stop there. UBS concludes that the Boeing 777, Airbus A330 and Airbus A320 are also over-ordered.
The Boeing 737 is under-ordered, in the UBS view, but this doesn’t relieve the concerns about this order-book, either, according to UBS.
KC-X: price dumping and assessing risk
Now that EADS said it will bid after all for the KC-X contract, questions have been raised about the possibility EADS will offer pricing that is below its costs (or “price-dumping”) to win the contract. Boeing supporters, and Boeing itself, have raised this concern.
On the other side, EADS is focusing on the fact its KC-45 is in production and in flight tests while Boeing’s proposed KC-767 NewGen is a conceptual airplane that is a riskier prospect.
How are these two particular concerns dealt with?
EADS confirms KC-X bid
Update, 500 PM PDT: Innovation Analysis Group has a 24 minute podcast on this development featuring Flight Global defense writer Steve Trimble, TEAL Group aerospace analyst Richard Aboulafia, IAG’s Addison Schonland and us.
Original Post:
EADS North America and Airbus have scheduled a press conference for 2pm EDT today. EADS NA CEO Sean O’Keefe, former EADS-NA CEO Ralph Crosby (who remains in charge of obtaining the KC-X contract) and Airbus Americas Chairman Allan McArtor are scheduled to appear.
Clearly this is the kick-off for the return of EADS to the competition.
Update, 0945AM PDT: Boeing already is on the offense, issuing a statement that the WTO ruling that Airbus, and the A330-200 on which the KC-45 is based, benefited from illegal subsidies should be considered. The Department of Defense has stated repeatedly that the WTO ruling will not be considered.
The WTO Interim Report on the EU case against Boeing is expected to be issued in June, ahead of the extended deadline of July 9 for proposals to be submitted. It is widely anticipated that Boeing will likewise be found to have benefited from illegal subsidies.
We have all along cautioned about focusing on the subsidies issues because we believed both parties will be found to have violated WTO trade rules. The Airbus report is out and the Boeing report is coming. Boeing and its supporters already have said any Boeing violations will “pale” in comparison with launch aid provided Airbus.
Whether it does or doesn’t remains to be seen, but since the underlying thesis of Boeing and its supporters is that any WTO violation should disqualify a company seeking this contract, then any violation by Boeing would disqualify Boeing. This, of course, won’t happen and therefore neither should it happen with respect to EADS (or Northrop before it withdrew).
Furthermore, DOD has reaffirmed over and over that it will not consider the WTO rulings, so all this is for Congress. This makes a sham of the DOD procurement process. The debate should be on the technical and operational merits of the offerings.
The press conference begins:
EADS to bid on tanker
Reuters just moved this story that EADS is preparing to bid the contract alone. L-3 Communications appears to be definitely out of partnering with EADS and “for now” EADS is prepared to go it alone, Reuters says.
Sen. Jeff Sessions (R-EADS/AL) blasted US Rep. Norm Dicks (D-Boeing/WA) for what Sessions termed attempts to intimidate potential EADS partners. Here is this report.
From strictly a taxpayers’ point of view, the EADS competition should result in better pricing for the Pentagon whoever wins. The past competition has already seen the price driven down compared with the original Boeing lease deal from 2002-2004 and an improved airplane offering from Boeing.
US favors negotiating trade dispute
Crain’s Chicago Business reported yesterday (April 6) that US Trade Rep. Ron Kirk wants to negotiate an end to the EU-US trade dispute over Airbus and Boeing subsidies.
We only just spotted this–there hadn’t been any pick-up by the media that we saw.
The link to the story is here.
But Boeing still says launch aid has to end, a position Airbus continues to resist.
DOD is within its rights to extend tanker deadline
It was predictable that Boeing supporters would become apoplectic when the Defense Department said it will extend the May 10 deadline 60 days to July 9 should EADS decide to submit a bid for the KC-X program, but legally DOD is within its rights.
We talked with two people yesterday who have no skin in this game and both told us that at this stage, ie, before bids have been submitted, DOD has the full discretion to set the deadlines any time it wants. Or DOD has the discretion to cancel the competition altogether, to be extreme about it.
DOD to EADS: You’ve got 60 days
Update, April 1, 0800PDT: Boeing just issued this statement in response to the DOD announcement yesterday:
ST. LOUIS, April 1, 2010 – The U.S. Department of Defense on March 31 said it will extend the deadline to receive proposals in the U.S. Air Force KC-X Tanker competition from May 10 to July 9 if European Aeronautic Defence and Space (EADS) makes a formal request for an extension. The Boeing Company today responded with the following statement:
“We are deeply disappointed with EADS-Airbus efforts to further delay this vital warfighting program and tilt the U.S. procurement process in its favor. EADS-Airbus has been fully engaged in the competition for four years and was always expected to provide the vast majority of its team’s work content.
“We welcome the denial of EADS’s repeated requests to alter U.S. warfighting requirements, and we support the Air Force’s stated intent to provide a level playing field for qualified competitors. We do not see a legitimate reason for EADS’s bid deadline extension request, and we believe an extension that favors any individual competitor does not further the goal of ensuring fair competition.
“Boeing remains fully prepared to submit a competitive proposal by the May 10 deadline originally set by the Air Force. However, this latest development, along with the World Trade Organization’s recent final ruling that Airbus has been heavily and illegally subsidized for decades, requires Boeing to review all of our options for going forward while we wait for a final determination on a deadline extension.”
Original Post:
DOD just announced that it will extend the deadline from May 10 for 60 days to July 9 in order to give EADS the opportunity to submit a bid for the KC-X contract. This is contingent upon EADS notifying the Pentagon of its intent to bid.
EADS hoped for 90 days.
The Pentagon will compress its evaluation schedule to stay on its delivery date timeline for an early-fall contract award. No changes will be made in the RFP. The Pentagon also rejected questions whether political interference was involved.
Financing airplanes in 2010
Geneva, Switzerland: During the Aircraft Finance and Commercial Aviation Conference, we filed a couple of stories in aircraft finance with Commercial Aviation Online. Since CAO is a paid subscription service, our arrangement with CAO is that it gets exclusive use for a few days before we can post the stories here.
The stories are below the jump. In them, we report what panelists had to say about the “funding gaps” in 2009 and 2010 and about aircraft values.