Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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HOTR: Porter confirmed as customer in E195-E2 deal
By the Leeham News Team
May 19, 2021, © Leeham News: Embraer got a big boost for its E-Jet E2 order book in April when it announced a firm deal for 30 E195 E2s.
“On April 23, the Company signed a firm order for 30 E195-E2 jets with an undisclosed customer, with deliveries starting in 2022. The 30 firm
orders will be included in Embraer’s second quarter backlog,” Embraer said in its April 29 earnings release.
Embraer delayed E-Jet deliveries because of the COVID-19 pandemic. Thin backlogs for the E2 pre-date the pandemic. This order, with deliveries starting next year, illustrates Embraer’s thin skyline.
Airfinance Journal on May 13 first reported the customer is Canada’s Porter Airlines. Porter, pre-pandemic, operated De Havilland Dash 8-400s exclusively from Billy Bishop Airport, Toronto’s downtown in-city airport. AFJ cited multiple sources. Porter Airlines denied it ordered the airplane or that it had signed lease deals to acquire the E2. The carrier told the Toronto Globe and Mail it isn’t going to “switch” fleet types.
However, LNA confirmed this week that the airplanes are going to Porter. Porter declined to answer any questions from LNA.
“Our response to this speculation has been provided to others and published. We do not have anything further to add,” Porter said in an email.
HOTR: Boeing’s “historic” production advance
By the Leeham News Team
May 18, 2021, © Leeham News: Boeing’s Defense unit last week said it joined the front fuselage of the first Boeing-SAAB T-7A Red Hawk trainer with the aft section “perfectly,” in less than 30 minutes.
It was, Boeing said, an “historical moment.”
It was “a testament to the digital heritage of the U.S. Air Force’s first ‘eSeries’ aircraft and witness to the benefits of model-based engineering and 3D design,” Boeing said. “The digital splice was completed in 95% less time than traditional splices and with substantial quality improvements.”
Why is this a big deal for Boeing Commercial Airplanes?
Because the T-7A, along with the MQ-25 unmanned aerial refueler for the Navy, are Boeing’s pilot programs, if you will, for production of the next Boeing commercial airliner.
This is in part what former Boeing Co. CEOs Jim McNerney and Dennis Muilenburg and current CEO David Calhoun alluded to each time they talked about advanced production.
2021 fleet trends: small jets get bigger, bigger jets get smaller – and the old makes way for the new
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By Judson Rollins
Introduction
May 13, 2021, © Leeham News: Aviation data provider Cirium said last week that just under 7,850 commercial aircraft were still in storage, down from 8,684 at the beginning of the year and a peak of 16,522 at the apex of the COVID-19 crisis last April.
Although there was an initial spike in aircraft retirements in March and April 2020, the total number has stayed in line with historical norms to date. However, order books for most types have stagnated or even gone backward since the start of the pandemic.
A few trends are becoming clear: larger single-aisles are thriving, larger twin-aisles are disappearing, and sub-100-seat orders are flatlining. Not surprisingly, older-generation aircraft are disappearing at an accelerated rate.
Summary
- Airlines are upgauging their single-aisle orders in anticipation of lower yields and competitive battles.
- Widebody order books continue to struggle; the bigger the airplane, the worse the demand.
- Regional jet and turboprop order backlogs have stagnated.
HOTR: Airbus’ view on recovery from COVID; why Southwest stayed with MAX 7
By the Leeham News staff
May 11, 2021, © Leeham News: Domestic traffic throughout the world is returning to 2019 levels, but at different rates, according to an Airbus analysis.
Robert Lange, Head of Business Analysis and Market Forecast, said today that the fragmented cross-border travel regulations and uneven vaccinations continue to inhibit passenger traffic recovery from the COVID-19 pandemic.
Pontifications: A330-300 could be great deal ahead
May 10, 2021, © Leeham News: The COVID-19 pandemic prompted airlines to ground more than 8,000 aircraft at the peak.
By Scott Hamilton
Among widebodies, no aircraft was hit harder than the Airbus A330ceo.
Traffic within China, the US and Asia recovers with narrowbody airplanes. European short- and medium-haul traffic is not recovering as quickly due to continued boarder closings. International traffic, for the same reason, remains awful.
But in chaos some see opportunities.
Jep Thornton, managing partner of the boutique lessor Aerolease, last week said the A330-300 could be a great trading opportunity.
At April 1, there were 267 -300s and 286 A330-200s (of all types) in storage, according to data reviewed by LNA.
Calhoun says next new airplane isn’t about engines, it’s about production
David Calhoun, Boeing CEO. Boeing photo.
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By Scott Hamilton
Introduction
May 3, 2021, © Leeham News: The Next Boeing Airplane (NBA) will not be driven by propulsion. Rather, a transformation in design and production to dramatically lower the cost will be the driving factor.
At least this is what Boeing CEO David Calhoun said last week in his final remarks on the 1Q21 earnings call.
While brief on this topic, his remarks are the most expansive yet in the public domain by a Boeing CEO or CFO.
LNA first was tipped to the importance of an entirely new approach to production years ago. That’s when a Boeing corp com official said the proposed Middle of the Market Airplane would be as much about production as it would be about the aircraft. LNA’s investigation subsequently revealed Boeing’s effort to revolutionize its engineering and production under the code name Black Diamond. LNA was the first media to write about this in detail. Even today, few recognize the code name.
Summary
- The NBA, whatever form it takes, won’t wait for revolutionary new engines.
- A transformation in design, engineering, and production will be key.
- Calhoun believes Boeing has the advantage, but Airbus isn’t standing still.
Pontifications: Long road ahead, but Boeing will recover
By Scott Hamilton
May 3, 2021, © Leeham News: Cowen Co. called the Boeing 1Q21 financial results “messy” with questions unanswered.
Credit Suisse characterized a “challenging 1Q, though recovery should begin to accelerate.”
My take falls in line with Credit Suisse. It was a challenging first quarter and lots of variables overhang Boeing going forward. But I was struck by the confidence displayed by CEO David Calhoun and CFO Greg Smith going forward. And I’m not one to drink the Kool-Aid by any stretch.
To be sure, many challenges lie ahead for Boeing. Returning the 737 MAX to service has been anything but smooth. New issues popped up that resulted in Boeing (not the regulators) grounding the airplane again. Deliveries were suspended once more.
After 10 years of production, Boeing suspended deliveries of the 787. The KC-46 tanker still isn’t performing as required after nearly two years of delivery delay and limited operations with the US Air Force.
This is not The Boeing Co. of decades past.
Why the MAX isn’t back – yet
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By Judson Rollins
Introduction
April 29, 2021, © Leeham News: Much virtual ink has been spilled in recent weeks over an apparent surge in demand for Boeing’s 737 MAX, as a slow drip-drip-drip of cancellations finally reversed into net new orders.
The Boeing team must be grateful to see a shift toward positive headlines for its single-aisle family. Longtime 737 customers provided badly needed votes of confidence with top-ups to their previous orders.
However, such momentum has been slowed by a continuing wave of cancellations. Boeing logged just 12 net orders in February and 40 in March. More cancellations are due to be announced; Turkish Airlines recently said it would cancel or convert to options 50 of its previous MAX orders, and ch-aviation says a single unidentified customer cancelled another 45 in March. Aeromexico swapped MAX orders for other MAX orders, saving $2bn in the process – a revenue hit for Boeing down the line.
The total backlog, net of orders in doubt under ASC 606, is down from a high of 4,708 to just 3,240 as of this week. This is enough to support average production of just 30 airplanes per month through 2029. Boeing CEO David Calhoun said on yesterday’s earnings call that he remains confident the MAX demand will recover from this point forward.
Summary
- New orders are mostly from large existing MAX customers, and likely include mitigation discounts for delivery delays.
- Boeing has 400 undelivered aircraft in storage, some of which were due for delivery to now-defunct airlines.
- Pricing trends are quite negative, depriving Boeing of badly-needed free cash flow.
(Updated) Airbus 1Q2021, a strong quarter in difficult times
April 29, 2021, © Leeham News: Airbus presented its results for the first quarter of 2021 today. It was a reassuring result when other aircraft manufacturers suffer.
The Airbus operations delivered an operational profit of €0.7bn with a net profit of €0.5bn, reflecting good progress in sizing the company for the new reality and a solid performance in operations. Commercial aircraft delivered 125 planes during the quarter against 122 last year. The outlook for 2021 from the 2020 results briefing in February was maintained.
Pontifications: Balance shareholder value with product development and strategy
April 26, 2021 © Leeham News: Balance shareholder value with the long-term strategy of The Boeing Co.
By Scott Hamilton
This is what Boeing needs to do. But there were conflicting signals from the 2020 annual shareholders meeting held April 20 via virtual webcast and dial-in participation.
“We want to get back to a dividend policy. I can’t give you a date and we need a return in our commercial aviation department to support that.” So said David Calhoun, CEO.
Yet Calhoun was circumspect about a new airplane program.
When asked about developing a new airplane, Calhoun said—as he has before—that Boeing’s current research and development focus is on refining engineering modeling and production methods. These will be the “real differentiators” for the next new airplane.
“Calhoun vowed to return Boeing to its engineering roots,” reported Bloomberg News.