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
Papers play catch up on 787 delays
The Wall Street Journal, The Seattle P-I and other papers are only now playing catch-up to aerospace analysts who last week forecast the first deliveries of the Boeing 787 won’t be until summer of 2010.
We also forecast this on Tuesday.
Airbus critique of 787
Jon Ostrower of FlightBlogger has a stunning coup: a 48 page critique of Boeing’s 787 by Airbus. His blog link is here. He has a link to the full report.
Profiles of Airbus Financial, Boeing Capital
With the capital market crunch, Airbus and Boeing each said it is prepared to step up and help with customer financing. Below are two stories we did for Commercial Aviation Online, a subscription-only service, about Airbus and Boeing financial arms. Each is reprinted here with permission. The stories appeared on CAO’s website November 3.
Profile: Boeing Capital Corp.
Industry officials and observers fret that the capital market crunch will make it difficult for airlines to finance airplanes through the rest of this year and well into next. Accordingly, analysts predict that OEMs will have to step up next year with $5bn in financing support.
The Boeing Co. said its Boeing Capital Corp. (BCC) finance arm stands ready to provide $1bn in financing next year. Airbus, engine makers and regional airliner producers can be expected to pick up the rest of the OEM, based on history.
BCC’s federal 10Q filing with the US Securities and Exchange Commission shows that BCC has $1.9bn in financing commitments for 2009 out of $9.5bn in total on its books (see Table).
Boeing officials are clear that they want BCC to be the lender of last resort for its customers, and BCC officials are pounding the pavement looking for financing for its customers so BCC doesn’t have to step up.
The pressure on BCC is building, however. BCC received “a number of requests from both domestic and foreign airlines to reduce lease or rental payments or otherwise restructure obligations,” the company said in its 10Q filing. BCC did not provide any details, other than agreement to restructure the terms on 16 717s leased to Midwest Airlines. Midwest is hanging on by its flaps, returning these 16 airplanes to BCC and downsizing by contracting with regional airlines to operate the Embraer 170 jets. All 717s are to be returned by the end of this year.
787 update due shortly
In this week’s column:
- 787 Update Due Shortly
- Other program issues at Boeing
- The decline and fall of the Chinese aviation sector
- The impact of the Global economies on Airbus and Boeing
787 Update Due Shortly
Boeing plans an update of the 787 program by mid-December, with expectations that a new timeline for first flight and first delivery will be forthcoming. Aerospace analysts diverge on these predictions right now.
JP Morgan forecasts first flight in the first quarter while Goldman Sachs predicts 2Q09 or 3Q09. Based on conversations we’ve had with Boeing insiders, the unions and others, we believe the first flight is likely in the June-August 2009 period.
When, then, will be the first delivery? Cowen & Co. predicts 2Q10; JP Morgan and Goldman predict delivery will be a year after the first flight. Boeing has consistently maintained that it can complete flight testing within 6-9 months after first flight, but given the track record of its predictions so far, we’re inclined to side with JP Morgan and Goldman and go with one year after first flight.
Hazy has deal to buy ILFC
Bloomberg News has a story quoting the head of mega-lessor saying he has a deal to buy International Lease Finance Corp. from insurance giant AIG.
ILFC is the largest customer of Airbus and Boeing. It owns and manages a fleet of slight more than 1,000 planes with a value of $55 billion.
This is a highly positive development for the airline industry. But as is often the case, the devil is in the details. The deal has to close (next year) and it remains to be seen how it is structured and what flexibility the company has in the future.
Boeing and the Southern strategy?
Steve Wilhelm of the Puget Sound Business Journal (Seattle) has a long story about Southern states “eyeing” Boeing in the wake of the IAM strike. Speculation has been rampant (in peaks and valleys) that Boeing might be fed up with its unions in heavily unionized Washington State and be looking South when it comes time to build its next airplane (or two).
One quote from the story that is filled with irony is:
“If I was a Boeing executive, I’d look at the state of Alabama and see there’s a qualified work force … I’d take a look at the assets we have,” said Stephen Nodine, president of the Mobile County Commission, whose offices are in Mobile, Ala.
Alabama, of course, is the proposed site for the Northrop Grumman/Airbus KC-30 tanker proposed in competition with Boeing’s KC-767, which will be assembled in the Seattle area if Boeing ultimately wins the contract. But what is more ironic is that Boeing’s Integrated Defense Systems denigrated the skills of the Alabama workers during the tanker competition, suggesting they might have trouble building a tricycle if Northrop got the tanker contract. (It apparently mattered not that IDS has a large facility in Huntsville, AL.) Boeing’s Commercial unit cringed at the IDS statement because the Northrop/Airbus production model isn’t that different from BCA’s assembly model, including the high-profile 787 program (in which case IDS may have a point) but to a lesser degree with the 767 itself.
And speaking of tankers, Northrop didn’t even wait for the new Congress and the new president to take office before resuming the tanker wars with an advertisement that got the Pentagon’s chief purchaser up in arms (so to speak). Read about this one here and here.
We criticized Northrop for being slow off the PR and advertising mark in 2007, letting Boeing’s well-oiled machine set the agenda and frame the debate. (Once Northrop got running, it did make up for lost ground and scored some great PR/advertising hits.) But this advertisement, and more so it’s timing, strikes us as very premature. Nobody knows who the decision-makers in the Pentagon will be (and in any event, they shouldn’t be influenced by ads) and we doubt Members of Congress are paying much attention to the tanker debate right now anyway. With four million people expected for the inauguration of Barak Obama and the organization of the power structure in Congress, we suspect the Members of Congress might just be focused on something else right now.
Delta to buy from Boeing–and Airbus
James Wallace today confirmed what we predicted from the get-go when Delta Air Lines and Northwest Airlines announced its merger months ago: that Delta, long a solid Boeing customer, will buy from Airbus.
Wallace is the aerospace writer for The Seattle Post-Intelligencer; his story may be found here.
Airbus, Boeing news from around the world
Update, November 6:
2:40 PM PST: Boeing is to make its contract offer to SPEEA today, with plans to conclude talks next week.
Armed Forces Journal: We wrote this article for this magazine’s November issue taking a look at the next competitive battle between EADS and Boeing over a military program.
Seattle Post-Intelligencer: UBS’s aerospace analyst thinks Boeing stock hasn’t hit bottom, due to the downturn in the aviation industry. He echoes Goldman Sachs and other analysts in a growing consensus that the worst is yet to come.
London Guardian: Airbus foresees Chinese deferrals.
Bloomberg News: There could be 200 whitetails next year as airlines find they can’t pay for airplanes.
AeroNews: Embraer considers jumping into larger airplanes.
China Daily: China looks to build 150-200 seat jets.
Update, November 4, 11:30 AM PDT: James Wallace of The Seattle P-I reports that Boeing officially told him the 787 won’t make its first flight until 2009.
November 4:
A sampling of news about Airbus and Boeing.
Seattle Post-Intelligencer: Slow restart on production, 787 first flight to February or March.
London Guardian: Lessor BOC Aviation orders 20 A320s.
Defense News: Airbus suspends A400M production.
International Herald Tribune: IAM strike delays 80 Boeing airplanes.
ATWOnline: New fastener problems with the 787.
Bad news for Northrop?
With Pennsylvania Congressman John Murtha (D-Foot-in-Mouth) suddenly in danger of defeat in Tuesday’s election after calling his constituents racist and rednecks, Norm Dicks (D-Boeing/Washington) is in line to succeed Murtha as chairman of the House Appropriations Committee.
This would be bad news for Northrop Grumman and its effort to sell the Airbus-based KC-30 to the USAF instead of Boeing’s KC-767. Regular readers need no reminder of the dynamics here.
Update, 10:15 PM EST, November 4: Northrop can breath easier; NBC News just declared Murtha was reelected.
Back to the Tanker: Price Competition
A new strategy for the competition to award an Air Force contract for the aerial tanker might be a compromise for the next president, according to this article.
A sidebar to the home page has the following item, which does not have its own URL and may disappear after a few days. So with full credit to the USAF Aimpoint:
AMC: Securing Today’s Energy, and Fueling Tomorrow’s Mission
A 2006 study revealed 82 percent of the Air Force’s total energy consumption is aviation fuel. Air Mobility Command, through its fleet of tankers and airlifters, used 27 percent of that total, or roughly $1.5 billion. For over a year, AMC has undertaken an ambitious fuel efficiency program making use of the best airline industry programs/practices. Doing so not only ensures our mobility fleet operates more efficiently, but will secure today’s energy in order to fuel tomorrow’s missions.
Our Airmen aggressively identified and implemented numerous initiatives to reduce aviation fuel consumption and operate the fleet more efficiently. Here are just a few:
-Removed standard ramp fuel loads using only the required fuel for the mission
-Reduced weight by eliminating excess equipment carried on our aircraft
-Enhanced flight planning with accurate computer programs and shorter, direct routes
-Streamlined ground operations through engine shutdown and taxi procedures while minimizing APU usageTransferred additional aircrew training, including practice emergency procedures, to more capable simulators
-Continuously improved data collection tools and metrics to capture improvements
-Standing up a fuel efficiency office to oversee all fuel efficiency initiatives and policy
Although these initiatives are helping to avoid an extra $120M annual fuel bill, we can’t rest on these accomplishments. Other efficient initiatives can be identified, implemented and performed not just by our aircrews, but by Airmen at all levels — throughout the entire Air Force. From commanders, aircraft maintainers, flight planners, to the aircrews who execute the missions, we all need to ensure we do our part to be able to “Secure Today’s Energy, and Fuel Tomorrow’s Missions!”