Leeham News and Analysis
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Leeham News and Analysis
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- Bjorn’s Corner: Air Transport’s route to 2050. Part 20. May 2, 2025
- Supplier Howmet exceeds expectations despite tariffs May 1, 2025
- Airbus 1Q2025 results: So far, so good, but US tariffs make future results unpredictable May 1, 2025
- Does an Airbus A220-500 need a new wing and engines? May 1, 2025
Is COVID-19 a Force Majeure event?
Editor’s Note: Airbus, Boeing and Embraer and other OEMs face requests for deferrals and perhaps cancellations of orders as a result of COVID-19. In addition, Boeing now faces cancellation requests for the 737 MAX grounding, now in its 13th month. While Boeing’s contracts generally allow Boeing or the customer to cancel the order after the 12th month, the COVID crisis raises a new element: canceling by Force Majeure and something called the Doctrine of Frustration.
The following analysis appeared March 12, 2020, on the website of the law firm Shearman & Sterling law firm. The authors are listed at the end of this article. It is reprinted here with permission.
Following the rapid spread of the novel coronavirus (“COVID-19”) that was first reported in Wuhan, China at the end of 2019, the World Health Organization declared COVID-19 to be a pandemic on March 11, 2020.
In this note, we consider how force majeure provisions in commercial contracts and the related common law doctrine of frustration may be engaged in the context of the COVID-19 outbreak. While this analysis focuses primarily on the position under English law, we have included a PRC law perspective because of the significant impact COVID-19 has had on business in China. We also suggest steps that parties may take to safeguard their positions in view of the evolving situation.
Airbus cut production rates by a third
By Scott Hamilton
Production of the A320 and A220 in Mobile is paused. Airbus hasn’t decided what to do about A220 rates, yet.
April 8, 2020, © Leeham News: Airbus today said it will cut production of the A320, A330, and A350 lines due to COVID-19.
The new rates are:
- A320 to rate 40 per month (from 60-63);
- A330 to rate 2 per month (from 3.5)
- A350 to rate 6 per month (from 10)
HOTR: American sees virtually no travel for up to 7 months
By the Leeham News staff
April 7, 2020, © Leeham News: “Nobody’s traveling in the next 30 or 60 days,” said Vasu Raja, American Airlines Group Inc.’s senior vice president for network strategy. “But nobody is really making any plans to go travel in the next 90 to 150 days, either.
So reported the Wall Street Journal Sunday.
That basically takes you through the end of the year.
Singapore will suspend its Changi Airport Terminal 2 for 18 months from May 1. (Associated Press.)
Pontifications: Assessing the impact of COVID-19: today’s take
By Scott Hamilton
April 6, 2020, © Leeham News: It’s going to be quite a while before there is a clear understanding how coronavirus will change commercial aviation.
LNA already touched on impacts to Airbus, Boeing and Embraer. None of it is good. For Boeing, burdened with the additional stress of the 737 MAX, is in the worst position. Even when the MAX is recertified, there won’t be many—or any—customers in a position to take delivery of the airplane.
Bearing in mind that what’s true today will change in a day, or even an hour, let’s take a rundown of where things seem to stand now.
Shall passenger airliners run as freighters during the COVID-19 crisis?
By Bjorn Fehrm
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Introduction
April 6, 2020, © Leeham News: With the COVID-19 pandemic, the passenger traffic has ground to a halt in many countries. The airliners are parked and their crews sit idle.
At the same time, the air freight market booms. From a decline in demand in the first months of the year, there isn’t enough freighter capacity right now. The freight that traveled in the bellies of the passenger jets had to find new ways and as this was almost half the world’s air cargo, the dedicated freighters can’t absorb the volumes.
Is it time to fly passenger airliners as substitute freighters? Some airlines are doing this on a spot basis. Apart from injecting capacity for needed medical supply freight, does it make economic sense? We run a series of articles on the subject.
Figure 1. Delta flies an A350-900 as a belly freighter between Shanghai and Chicago three times a week from March 30. Source: Delta.
Summary:
- Freight prices soar as capacity collapses when airlines ground passenger jets.
- For the airlines, the cost equation changes with an abundance of free capacity at remaining fixed costs.
- Does it make economic sense to run passenger airliners as freighters in this situation?
Engine maker, lessor see Boeing’s next airplane as a single-aisle design
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Now open to all readers.
By Scott Hamilton
“The NMA is gone. Long live the NMA.”–lessor CEO. Photo: Leeham Co.
April 2, 2020, © Leeham News: Boeing’s New Midmarket Airplane, or a new concept, is the last thing on the plate right now.
But Boeing’s future product strategy nevertheless requires long-term thinking even as the short- to medium-term is in chaos.
Interviews were conducted March 2 at a major aerospace conference in Austin (TX), just days before the coronavirus crisis exploded exponentially across the globe.
The CEO of the major lessor, Avolon, declared the NMA dead and predicted a new single-aisle airplane will be Boeing’s next project.
An executive of Pratt & Whitney offered a similar view.
Summary
- “The NMA is gone. Long live the NMA. That moment has passed.
- Back to the 757 replacement concept and, now, A321XLR competitor.
- Single-aisle vs light twin-aisle is part of the challenge.
- New airplane must be “dramatically” more efficient than MAX, neo.
- 2030 decade is the quickest this dramatic improvement can be achieved.
Pratt & Whitney committed to advanced GTF for Airbus
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Now open for all readers.
By Scott Hamilton
March 30, 2020, © Leeham News: Pratt & Whitney is concurrently developing what might be termed the next generation GTF. This is an advancement over the current engine, but with more thrust and better fuel economics.
Deurloo eschews the usual Performance Improvement Package (PIP) moniker, however.
“We have been discussing with Airbus for some time, an improvement to the current configuration or our expected configuration,” Deurloo said. “I think that’s a testament to the geared architecture. It’s given us some runway to do a little bit more on that engine.
PW has been in conversation with Airbus for the last few years about an engine that will take configuration at the end of this year, and put in an improvement.
Summary
- New name, better economics, better durability.
- Designed for the A321XLR, but greater flexibility.
- Fixing current issues.
Pontifications: Critical step in Boeing MAX recertification target: May
By Scott Hamilton
March 30, 2020, © Leeham News: Barring further issues, the FAA Type Inspection Authorization for the MAX is targeted for the second half of May, LNA learned.
This is a critical step in recertifying the airplane.
Also barring more unexpected events in a year filled with them, Boeing should resume production of the 737 MAX in May, LNA confirmed.
Can the A321XLR fly trans-Oceanic routes, Part 2?
By Bjorn Fehrm
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Introduction
March 26, 2020, © Leeham News: We are checking if the Airbus A321XLR is usable for trans-Oceanic routes. It’s a credible trans-Atlantic aircraft, but can it be used effectively over the Pacific Ocean as well?
Last week we found a one-stop routing that worked. Now we compare the economics of flying the A321XLR on a one-stop route versus a longer-range aircraft like the Airbus A330-900 non-stop.
Summary:
- The A330-900 covers our US West Coast to Japan trip in almost half the time of our single-aisle route over Honolulu.
- Will it also have a lower per-seat cost? We find out using our airliner operating cost model.
HOTR: Boeing has options to federal bailout, CEO says
By the Leeham News Staff
March 25, 2020: First, Boeing CEO David Calhoun said he wasn’t an insider (after 10 years on the Board of Directors, and as lead director for many of them). No, he merely had a front row seat in the movie theatre.
Then he trashed his predecessor, Dennis Muilenburg, for stock buyback and dividend policies (that the Board approved).
Next, Boeing said it needs a portion of the $60bn in federal aid it requested for the aerospace industry.
Now, Calhoun appears to have put his foot in his mouth again. Or did he?
When asked about the possibility of the government taking an equity position in Boeing as a condition to a bailout, Calhoun said Boeing has options to federal money.
The Wall Street Journal wrote yesterday, “I don’t have a need for an equity stake,” Boeing CEO Calhoun said Tuesday on Fox Business Network. “If they forced it, we’d just look at all the other options, and we have got plenty.”
There’s a very practical reason for Boeing to object to government taking an equity stake. It would effectively shut down bidding on some key defense contracts.
But wait a minute: if you’ve got all these other options, why ask for a federal bailout for Boeing?
Or was this a message to the street that Boeing is OK?
Still, on CNBC’s Squawk Box, Calhoun said if the credit markets stayed closed for eight months, it would be tough for Boeing to remain healthy.