Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- RTX Q1 2025 Earnings: GTF Talk Takes A Back Seat To Tariffs April 22, 2025
- Tariffs Tumult Takes Over GE Aerospace Q1 2025 Earnings Call April 22, 2025
- Boeing reports mixed results of latest employee survey, but middle management and officers remain key obstacles April 22, 2025
- Hopes for 1Q financial progress turns into bumpy ride for Boeing April 21, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 18. April 18, 2025
Oil doubles, it’s good for Airbus and Boeing
The price of oil has doubled off its low of only a few months ago, closing Friday (May 23) at around $61bbl. This is actually good news for Airbus and Boeing (and Bombardier and Embraer) as these companies struggle to protect their skyline (order backlog) over the balance of 2009 and in 2010.
Based on the forecasts that the airline industry will recover in 2010 and 2011, and on the hope that the financial markets will improve next year, Airbus and Boeing have been engaged in high-profile efforts to maintain production rates of the A320 and 737 lines in particular and the A330 and 777 lines as well.
777 answer to A350
Flight International has a May 14 story we’ve just seen (we were out of town) about Boeing’s possible response to the Airbus A350-1000. This may be found here.
The most interesting thing to us is the timeline: within three-four years after Boeing gains clarity on the A350-1000, or perhaps by around 2018-19. Or, Boeing suggested, three or four years after the A350 EIS, currently forecast by Airbus as 2013 for the -900 model (the -1000 EIS is slated for 2015 and the -800 in 2014).
Can split tanker buy save money?
Here is an interesting think piece about the controverisal proposal by some Members of Congress to split the KC-X tanker procurement between Boeing and Northrop Grumman.
Aviation Week reports the FAA has certified Boeing’s Wedgetail, the 737-based electronics airplane ordered by the Australian services. The program, which includes electronics from Northrop Grumman, is years behind schedule.
A320 v 737
We’re back from two days at Airbus for its Innovation Days presentations, and the timing couldn’t have worked out better. Less than two weeks before we attended Boeing’s 737 enhancements day, followed by the 787 update day.
Both Airbus and Boeing events were highly informative. The 737 day announced things that we wrote about in December for Aviation and the Environment: an entirely new interior, based on 787 features; making standard Required Navigation Procedures (RNP) in the cockpit—80% of customers were already adding this as an option—and aerodynamic improvements that are intended to decrease drag and fuel consumption by 1%. Also announced was the next step in engine tweaks by CFM for the CFM 56-7B. This is project to provide for a 1% improvement in fuel burn.
Enders on “internationalization”
Tom Enders, the CEO of Airbus, vowed to continue “internationalization” of its production while protecting intellectual property rights and avoiding Boeing’s mistakes with the 787 program.
Speaking to a small group of the 90 journalists attending the Airbus Innovation Days in Hamburg, Enders told us that the international plan is “strategic” and that Airbus “will do this in a responsible way.”
Airbus sees recovery in 2010
Airbus officials see a recovery in the global economy and passenger traffic next year, they said this week at the Airbus Innovation Days in Hamburg.
We were among about 90 journalists to attend the event, formerly known as the Technical Briefing and held in Toulouse.
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There was little new technically to talk about-after all, what else is there to say about the A380, A350 and A400M programs that isn’t well known? (Just a few things, which we’ll get to later.) So the news really came from non-technical items.
Boeing production cut?
FlightGlobal reported yesterday (May 7) that supplier GKN’s CEO predicted Boeing will cut production next year of the 737 to 21 a month. This would be 32%, roughly in line with a forecast made in January by Steven Udvar-Hazy, CEO of mega-lessor ILFC. He also forecast Airbus will have to do likewise.
Most people scoffed at Hazy’s prediction, including many in Boeing and Airbus, who said Hazy was talking out of self-interest. Whether he was or wasn’t, Hazy has an uncanny knack of accurately predicting things. He also predicted that cancellations and deferrals will outpace orders and so far, he’s correct about that at Boeing and pretty close at Airbus.
Tankers: to split or not to split
Update, May 4: Veto threat over split tanker effort: read all about it.
Update, May 3:
US Rep. John Murtha (D-PA), chair of a House appropriations committee, has dropped (for the moment) his effort to insert into the FY2010 budget language requiring a split buy between Boeing and Northrop for the KC-X tanker. See this story.
Original Post:
Well, blow us down. Loren Thompson, the defense analyst, now favors a split buy.
He’s been all over the map on this procurement. A big defender of the Boeing KC-767 lease deal when that was on the table. For the KC-767 vs. the Northrop KC-30. Defending the KC-30 award after it was given. Supporting the Boeing protest. Now this.
Followers (including this column) of Thompson, who is quoted frequently as a defense expert, respect his thinking but can’t help be a little baffled on this program.
Thompson’s rationale is what we’ve been advocating since we began following the competition several years ago: split the buy for operational reasons. The two tankers are differently sized: some missions are better suited for the KC-767 and some are better suited for the KC-30. Double the procurement, retire the old KC-135s more quickly.
On the other hand, US Rep. Norm Dicks (D-Boeing/WA), claims he was quoted out of context by KIRO TV a while back, which reported Dicks could “live with” a split buy. Now Dicks is back on his sole-source band wagon (for Boeing), even though Boeing now is fine with the idea.
And now, a plug for our Eco-Aviation conference. More information may be found here.
Production assessment, Round 3
Some interesting items came out of the Boeings 1Q09 earnings call yesterday (April 22) with regard to production and deferrals.
Oversales of the 737 have been a key element in Boeing being able to maintain current production levels of 31/mo, despite the global recession. As was previously acknowledged by Boeing, 2009 737 oversales were about 100. On the year-end 2008 earnings call in January, CEO Jim McNerney acknowledged that oversales for 2009 had been reduced to about 15% over the production (which mathematically equated to about 55-56 737s).
More on the funding gap
A Calyon bank official said at the annual Airfinance Journal conference that Airbus and Boeing may have to increase funding more than the companies expected this year because the funding gap is larger than thought. This Bloomberg story has the details.
Calyon has been one of the most active lenders worldwide.