Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: Air Transport’s route to 2050. Part 25. June 6, 2025
- New RISE powerplant benefits from decades of GE research and development June 5, 2025
- Engine makers emphasizing durability, reliability June 4, 2025
- Boeing CEO: Lessons learned are key to certification of 737-7/10 and 777X June 2, 2025
- Digital twin is a key to JetZero’s hopes for Blended Wing Body entry June 2, 2025
(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.
“There’s light at the end of the tunnel, but the journey is just beginning.”
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By Scott Hamilton
Introduction
April 26, 2021, © Leeham News: Aerospace suppliers generally had worse delivery and quality control performance in 2020 than in 2019. By next year, executives think timeliness and quality will return to 95% of pre-pandemic levels.
Eighty-three percent of executives surveyed see delivery rates for narrowbody aircraft improving this year and next.
Forty-nine percent of executives surveyed see airline industry revenues returning to 2019 levels in 24-36 months.
And eco-aviation and sustainability drives will be an increasingly important topic over the next three years.
These are just some of the findings in the annual survey of aerospace and airline executives conducted by the international consulting firm Accenture.
Summary
- “There’s light at the end of the tunnel, but the journey is just beginning.”
- 6-18 month outlook. 2019 survey skipped as the pandemic spread.
- The shift in sustainability-driven is by today’s younger generation.
Unsustainable – and growing – airline debt load weighs on OEMs, suppliers
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By Judson Rollins
Introduction
April 22, 2021, © Leeham News: COVID-19 has forced every layer of the commercial aviation supply chain, apart from cargo airlines, to streamline their businesses and raise cash to survive. Nowhere has this been more true than for passenger airlines, the end-customers for most aviation products.
Before the pandemic, passenger carriers were taking advantage of cheap capital to invest in both new and used aircraft. However, most have stretched their balance sheets beyond imagination by pledging every unencumbered asset – even frequent flyer programs – to raise additional debt.
International Air Transport Association (IATA) economist Brian Pearce said in a February webinar that governments provided $101bn of repayable loans and tax deferrals in 2020 alone. Another $125bn was raised from banks, capital markets, and lessors. More will be required this year.
Governments and markets backstopping the world’s airlines, aided by central bank money printing, are why fewer than 50 have ceased operations since the start of the pandemic. This is not materially worse than a typical year, but it doesn’t begin to reflect the scale of the ongoing financial shock to airlines.
Summary
- Airline demand recovery is prolonged in most regions; new tax and cost pressures loom.
- Debt loads will continue to grow this year; interest expense is mounting.
- High leverage may depress airline capital expenditures through 2030.
- Governments may finally ground loss-making state carriers, adding to used aircraft inventory.
- Aircraft production cuts are already impacting the supply chain.
The conundrum of a new airplane design vs a derivative
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By Scott Hamilton
Introduction
April 19, 2020, © Leeham News: When it comes to a decision by an aircraft manufacturer whether to develop an entirely new airplane or a derivative, these multi-billion dollar decisions involve hundreds of thousands of considerations.
Airbus missed with its first A350 design, but has a winner with the A350 XWB. Source: Airbus.
Sometimes derivatives will do the job. Sometimes a new airplane is the better choice.
Given that Boeing faces a decision whether to launch the Next Boeing Airplane (NBA) and Airbus must decide how to respond, all within the next few years, looking at the considerations and some history is timely.
Today’s examination is going to focus at the 40,000 ft level. We’re not going to delve down into the decisions over suppliers or the minutiae into production. Rather, we’re going to look at general strategy.
Summary
- Airbus wins big gamble with A320neo decision.
- Boeing was victor with 787, while Airbus missed with first A350 design.
- Boeing missed with 747-8I and, it appears so far, with 777X.
- Next airplane decision by Boeing will drive Airbus response. Read more
Pontifications: End appears in sight for 16-year old US-EU trade dispute
By Scott Hamilton
April 19, 2021, © Leeham News: There appears to be progress in resolving the 16 year long trade dispute between Airbus and Boeing. Finally.
The dispute officially is between the European Union and the United States. But neither political entity would have pursued a dispute but for complaints by Boeing and Airbus.
No recap of the trade dispute is required for LNA readers.
Bjorn’s Corner: The challenges of hydrogen. Part 33. Wrap-up: The Eco-system
By Bjorn Fehrm
April 16, 2021, ©. Leeham News: Last week, we wrapped up the operational part of sustainable air transport using hydrogen as an energy source.
Now we look at where we are with the all-important Eco-system. It has many moving parts and risks a chicken and egg stalemate.
Figure 1. The prospective conversion of the European gas pipeline network to hydrogen. Source: EU.
Investors’ bull case on aircraft OEMs has gaps
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By Judson Rollins
Introduction
April 15, 2021, © Leeham News: Late last month, the aerospace and defense analysis team at Credit Suisse (CS) published its view on the future of the Airbus-Boeing duopoly, as well as an introduction to COMAC’s market position and future.
CS’s main thesis struck a decidedly upbeat note: “As a result of excess retirements due to [COVID-19], significant [sustainability investor] pressure on decarbonization, and the appeal of new warrantied aircraft, we might actually expect a period of solid new aircraft demand in a year or two.”
In terms of specific manufacturers, the team was unsurprisingly more bullish on Airbus than Boeing. They cited Airbus’s “strong market positions in narrowbodies” and their expectation that Boeing’s “recovery will be encumbered by the realities of its product portfolio.” CS did see room for longer-term optimism on Boeing, arguing that while spend on new product development “would pressure numbers this decade, it could also shift the competitive pendulum back … helping anchor a higher terminal [share] value.”
However, CS’s view seems to be more optimistic than that reflected in the two manufacturers’ equity prices. Airbus and Boeing shares are down 23% and 26% from their respective early-2020 highs.
A deeper look into their analysis raises several questions about the future trajectory for commercial aircraft sales.
Summary
- Aircraft retirements aren’t the overreaction they appear to be.
- Sustainability is already a priority for airlines and manufacturers; new regulations will only dampen commercial aircraft demand.
- The appeal of new aircraft, while boosted by low interest rates, must be balanced against the wide availability of used ones.
- A slow recovery in business travel will dampen yields, crimping investment in new aircraft.
Today’s 737 MAX, A320neo values vs 2019
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By Scott Hamilton
Introduction
April 12, 2021, © Leeham News: The Boeing 737 MAX reentered service in December after a 20 month grounding.
Determining values post-grounding and during the COVID-19 pandemic was complicated. The question over values is further confused by steep discounts given by Boeing as part of its need to compensate customers for the grounding.
There have been few “free market” MAX transactions to establish a solid current market value (CMV). The appraisal firm Aviation Specialists Group (ASG) last week issued its April Guide, listing values of virtually every jet airplane in service—and some that aren’t, yet. (ASG lists the Boeing 737-10 MAX, which is not even in flight testing, but not the 737-7 MAX, which was the lead test airplane for recertification.)
Summary
- MAX values this month compared with April 2019 are double-digit lower on a percentage basis, except for the MAX 10.
- A320neo values softened in the pandemic environment, but are better than the MAX.
- A321neo values went up slightly last month compared with 2019.
Bjorn’s Corner: The challenges of hydrogen. Part 32. Wrap-up: Going forward
By Bjorn Fehrm
April 9, 2021, ©. Leeham News: Last week we made a summary of the history of initiatives for sustainable aviation, now we look at the likely developments over the next 10 years.
What is the likely development for different classes of airliners and what technologies will be popular?
