Leeham News and Analysis
There's more to real news than a news release.
HOTR: Alaska Air still have A320neos on order; working with Airbus on best path forward
Dec. 29, 2020, © Leeham News: Stories and headlines shouted that this month’s Boeing order by Alaska Airlines adding 23 orders and 15 options to an existing agreement meant the death knell for the Airbus fleet.
Alaska indeed announced that all the A319s and A320s inherited from its acquisition of Virgin America will leave the fleet by 2024. But 10 Airbus A321neos remain at least through their lease terms in 2029.
The airline now has 68 Boeing 737 MAX 9s on order and 52 on option.
This is exactly as LNA suggested several times: rotate out the smaller Airbuses as leases expire and keep the larger A321neos.
COVID-19 accelerated the retirement of the smaller Airbus family members by a couple of years. But it never made sense to keep them in lieu of the 737-9 once Alaska committed to this plane several years ago.
But what of the old Virgin America order for 30 A320neos? These are still on the books.
Bjorn’s Corner: The challenges of hydrogen. Part 18. Airliner hydrogen tank
By Bjorn Fehrm
December 18, 2020, ©. Leeham News: After discussing the risk-reducing research programs we need to do before a program launch in 2027, we focus the next Corners on the hydrogen airliner’s biggest problem, the liquid hydrogen tank.
In this Corner, we start with the placement and discuss how it affects aircraft performance.
Figure 1. Airbus ZEROe turbofan airliner concept. Source: Airbus.
The A350, Part 1: Intro and A350-800
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By Vincent Valery
Introduction
Dec. 17, 2020, © Leeham News: After running a series on the Dreamliner, LNA will now start a series on Airbus’ latest-generation twin-aisle aircraft, the A350. Airbus should deliver its 400th A350 this month.
After a delayed ramp-up to 10 units per month, Airbus had to cut the A350 production rate to five per month after the COVID-19 pandemic. The European OEM might have to follow Boeing’s footsteps and reduce twin-aisle production rates further.
The A350 program has an official backlog of 532 orders: 415 for the -900 and 117 for -1000. Once passenger traffic recovers, Airbus should ramp production back up of its best-selling twin-aisle aircraft.
Despite its success, the A350 program wasn’t without hiccups. There were several and sizable iterations before Airbus finalized the A350 platform, and the -800 variant is non-existent but not officially canceled.
Summary
- A few iterations before launch;
- Development without significant issues;
- An in-favor aircraft family;
- The aborted A350-800.
HOTR: Narrowbody delivery recovery in 2025
By the Leeham News Team
Dec. 15, 2020, © Leeham News: “We do not expect Airbus or Boeing to get back to planned narrowbody deliveries (adjust for MAX grounding) before 2025, with widebody deliveries taking much longer.”
That’s the view of Bernstein Research in a note published Dec. 14. It is a pessimistic view that belies the hopes of others in the industry.
Boeing officials said they hope to deliver about half the ~450 stored MAXes in 2021. Most of the remaining stored aircraft will deliver in 2022. There will be some spillover into 2023, Boeing said.
On this basis, Bernstein’s forecast suggests Boeing will deliver about 208 new-production MAXes in 2021. This computes to a production rate of 17/mo. The current rate is 6/mo, according to a Wall Street analyst. A rate break to 10/mo is expected soon.
In 2022, the Bernstein data suggests Boeing will deliver about 378 new-production MAXes. This is a production rate of about 31/mo. Boeing said it hopes to be at rate 31 in “early 2022.”
Pontifications: Lessons of the Titans: Book review
By Scott Hamilton
Dec. 14, 2020, © Leeham News: If you want a good business book to read over the Christmas holidays, get Lessons from the Titans by three analysts at the independent Melius Research Co.
The subtitle, a mouthful, aptly describes the book: “What companies in the new economy can learn from the great industrial giants to Drive Sustainable Success.”
Yes, I know. The first reaction to a “business book” is, how boring. Not so, this one.
The analysts are Scott Davis, Carter Copeland and Rob Wertheimer. They provide first-hand and often insider accounts of their coverage of some of the USA’s most significant industrial companies.
Bjorn’s Corner: The challenges of hydrogen. Part 17. Hydrogen airliner program
By Bjorn Fehrm
December 11, 2020, ©. Leeham News: We use this Corner to define the time table for our hydrogen airliner program and for what areas we need to conduct risk-reducing research before we embark on an actual design.
As we said in last week’s Corner, we aim to develop a hydrogen airliner for the heart of the domestic market after the COVID-19 Pandemic. It’s a 160 to 180 seat single-aisle turbofan driven airliner, using liquid hydrogen as the fuel.
Figure 1. Airbus ZEROe hydrogen-fueled airliner concepts. Source: Airbus.
The 717 and A220, Part 2: Operational economics comparison
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By Bjorn Fehrm
Introduction
December 10, 2020, © Leeham News: Last week, we introduced the Boeing 717 and its closest replacement size-wise, the Airbus A220-100. Delta, a major 717 customer, is accelerating the replacement of the 717 with the A220-100 under the pressure of the COVID19 pandemic.
We use our performance model to understand why. What are the gains when going from the 717 to an A220-100?
Delta Airlines Boeing 717-2BD landing at LaGuardia. Source: Wikipedia.
Summary
- The 717 version of the DC-9 architecture produced a rugged and well-liked short-haul airliner. It’s five abreast cabin is preferred over the six-abreast Boeing 737 and Airbus A320.
- It’s size-wise in the same 115 seat bracket as the 15 years younger Airbus A220-100. It’s 40 years old airframe architecture holds up well compared to the modern A220.
- The engines of the two are also 15 years apart. But the Rolls-Royce BR715 of the 717 was originally designed to fly on fast business jets, necessitating a low by-pass ratio design. This is a handicap when used on lower speed airliners. It shows against the high bypass ratio Pratt & Whitney PW1500G of the A220.
Pontifications: Don’t lose sight of the future, says top Boeing exec
By Scott Hamilton
Dec. 7, 2020, © Leeham News: “It’s really important that we stay in tune with the market dynamics, making the adjustments we need to do and not lose sight of the future. Which is absolutely we are not doing.”
Greg Smith, the of Enterprise Operations and chief financial officer for The Boeing Co., added, “We haven’t lost sight of the importance of making investments that are critical to the future of the business. So, when we think about future product strategy, we’re continuing to reprioritize and streamline our R&D investments to CapEx.
“When we were in pursuit around the NMA, we asked the team to step back and reassess the commercial development strategy and determine what family of aircraft to be needed for the future. And that team continues to work and they’re building off the work that we did on NMA.”
Smith made the remarks at last Friday’s Credit Suisse annual conference.
Enhancing the Dreamliner, Part 8: Wrap Up
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By Bjorn Ferhm and Vincent Valery
Introduction
Nov. 26, 2020, © Leeham News: After analyzing the three members of the Dreamliner family on several routes out of San Francisco to Asian destinations, we conclude the series with a wrap- up of what we learned.
Summary
- A guinea pig for new technologies and processes;
- After a long slough against problems, a resounding commercial success;
- Size-wise, ideally-positioned for the post-COVID world;
- Future enhancements.
Updating Airbus and Boeing Orders At Risk
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By Vincent Valery
Introduction
Nov. 23, 2020, © Leeham News: It’s time to update the analysis on Airbus and Boeing orders at risk for delivery under the “weak customer” doctrine.
Under a US accounting rule known as ASC 606, Boeing must identify the number of orders that are unlikely to be delivered because the customer’s financial condition is weak. Airbus does not do this because there is no ASC 606 rule in Europe.
LNA wrote a few months ago an article that attempted to apply ASC 606 adjustments to Airbus’ order book.
Boeing publishes an estimation by the program of orders subjects to material cancellation risks, or ASC 606. The tally increased from 183 to 782 for the 737 between the end of 2019 and October 2020.
While Boeing has disclosed 1,020 net orders year-to-date canceled or subject to ASC 606 (393 canceled without accounting for ASC 606 adjustments), Airbus lists 308 net new orders. Airbus’ tally does not reflect a European equivalent to ASC 606 adjustments. The European OEM only publishes an overall outstanding value of its order book that accounts for customer risks in its annual report.
Despite last week’s news about progress on developing a COVID-19 vaccine, LNA’s Judson Rollins wrote that the timeline of a return to normalcy remains elusive. The lingering pandemic means that more airlines will run into financial difficulties, resulting in more orders that will be deemed risky.
LNA provides an updated tally of the orders at risk for both Airbus and Boeing, with minor changes to the methodology.
Summary
- Identifying customers at risk;
- Explaining differences with Boeing’s ASC 606;
- Applying adjustments to Airbus’ order book;
- Estimation of adjusted market shares;
- A digression to tariff exposures.