Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- JetZero readies effort for private equity fund raising May 5, 2025
- 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
WTO affirms non-compliance in Airbus-WTO case; another appeal expected
Dec. 2, 2019, © Leeham News: Boeing and the US won another round at the World Trade Organization today when the compliance panel 
upheld a decision to impose tariffs on the European Union, including Airbus airplanes, in the 15-year trade dispute between the US and the EU.
The compliance panel did hand a minor win to Airbus and the EU by reducing the impact of “harm” to Boeing over the A380. Airbus argued that there should be no impact because the program is being terminated in 2021. In a partial victory, the WTO compliance panel agreed that the impact of the A380 is reduced with the decision to terminate the program in 2021.
But, according to a Reuters report, because the airplane continues to be delivered into 2021, the impact is not entirely eliminated.
Understanding Rolls-Royce’s financials
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By Vincent Valery
Introduction
Dec. 2, 2019, © Leeham News: Rolls-Royce continues to be in the spotlight for the Trent 1000 durability issues, with no end in sight. The engine manufacturer recently increased the total disruption cost estimate to £2.4bn.
The engine-related charges and substantial research and development expenditures have raised questions about Rolls-Royce’s fin
ancial health. As of the end of 2018, the company had a net negative £1bn equity on its balance sheet.
However, the company has a market capitalization of around £14bn and holds a credit rating comfortably in Investment Grade territory.
This article analyzes the reasons for the disconnect between the company book value and market capitalization. Accounting differences between the USA’s GAAP and Europe’s IFRS play a significant role.
Rolls-Royce’s strategic choices in the early 2010s will have ramifications for engine development on future commercial aircraft programs.
Summary
- A tumultuous history;
- From cash cow to binge development spending;
- Brexit and IFRS accounting paint bleaker pictures than reality;
- Strategic decision bites back;
- A lifeline and future engine programs.
Pontification: A320 production challenges may extend to 2022/23
By Scott Hamilton
- Update of Boeing 737 NG Pickle Fork cracking issues.
Dec. 2, 2019, © Leeham News: Airbus sees struggles for A320 production continuing throughout next year, into 2021 and spilling into 2022/23 as the Air Space cabin is introduced on the A321XLR.
Executives also see lower margins than the target 15% for the A350 and losses on the A220 continuing into the middle of the next decade.
Even so, profit targets are expected to be met and officials still want to ramp up production rates on the A320.
This mixed picture was presented by Airbus CFO Dominik Asam during series of investors meetings last month in Asia, arranged by Citi Research’s London office.
In a research note issued Nov. 22, Citi summarized the three days of meetings with investors in Australia, New Zealand and Tokyo.
Converting customers to the FSA
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By Vincent Valery
Introduction
Nov. 28, 2019, © Leeham News: As Boeing works its way through the 737 MAX crisis, all consideration whether to launch the New Midmarket Aircraft (NMA) is on hold.
But the Boeing sales force has been testing the market with a single-aisle concept, the Future Small Airplane (FSA) to replace the MAX.
This highly confidential effort has been underway for months. Some lessors have been approached to swap some MAX orders for the FSA—there was a supply-demand imbalance for lessor-ordered MAXes even before the grounding—and airlines across the globe have been approached to gauge interest.
Summary
- Solving a lessor placement headache;
- Older 737 NG replacement;
- Accommodating airlines that over-ordered;
- Brand new (non) metal for old carriers.
Several aircraft programs beset by engine woes
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By Judson Rollins
Nov. 25, 2019, © Leeham News: Nearly every manufacturer of jet engines is experiencing problems with various models, which is causing delays for several prominent Boeing and Airbus programs. The Airbus A220, A320neo, A330neo and Boeing 787, 777X are all experiencing engine-related setbacks.
Grounded 787s at London Heathrow. Source: Twitter / Alex Macheras.
Summary
- Pratt & Whitney geared turbofan (GTF) operational limitations on A220, A320neo.
- CFM LEAP said to be causing renewed A320neo delivery delays.
- Multiple new airworthiness directives on Trent 1000, 7000.
- GE9x component issues causing delays to first 777X test flight.
Pontifications: Good, and Bad, news from the Dubai Air Show
By Scott Hamilton
Nov. 25, 2019, © Leeham News: The Dubai Air Show proved to be a mixed bag for Airbus and Boeing.
Each company picked up important orders and commitments.
But each company saw some previously announced commitments reduced in the process, including, for Boeing, a reduction in the backlog for the slow-selling 777X.
Airbus: We should fly like geese to save fuel and CO2
By Bjorn Fehrm
November 19, 2019, ©. Leeham News: Airbus presented a real innovative idea yesterday at the Dubai Air Show to reduce the environmental footprint of civil air transport. In the future we should fly like geese, it saves both fuel and CO2 emissions.
The airframer is starting a program to explore how the geese reduce their energy consumption while flying long distances. They fly in each other’s up-wash. This is to date the most innovative idea in the airframer’s quest to reduce air transport’s environmental footprint. Is it the most unrealistic? Perhaps not.
Figure 1. An A350 follows an A380, flying like the geese to gain from the upwash of the A380. Source: Airbus.
A tangled web at the HNA Group
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Now open to all readers.
By Vincent Valery
Introduction
Nov. 18, 2019, © Leeham News: The HNA Group, a Chinese conglomerate with a heavy focus on aviation, has been in the spotlight for a few years as its financial condition deteriorated.
Its current state came from its debt-fueled global acquisition spree, then the challenges in deleveraging.
At some point, the group owned stakes in 20 airlines in Mainland China and abroad. Other notable acquisitions include lessor Avolon, Swissport, Servair, SR Technics, and stakes in two foreign airports.
The HNA Group does not publish accounts. LNA went through the financial statements of its flagship subsidiary Hainan Airlines, since 2000, with the goal of better understanding the group structure and assess the airline business profitability.
Summary
- HNA’s relentless growth;
- A buying spree bites back;
- Domestic and foreign airline ownership model;
- Hainan Airlines accounting.
Pontifications: A new setback for Boeing
By Scott Hamilton
Nov. 18, 2019, © Leeham News: Boeing suffered another setback last week, and this time it’s unrelated to the 737 MAX.
Boeing abandoned a robotic riveting/fastener system awkwardly called Fuselage Automatic Upright Build, or FAUB, intended to speed production.
Bloomberg first reported the abandonment. The Seattle Times has an extensive story detailing the history and objectives.
Doing these processes manually is incredibly labor intensive. FAUB, when it works, dramatically cuts the time, improves the accuracy and reduces injuries.
FAUB is but one element of a production transformation Boeing has been doing for years under the code name Black Diamond.
Converging technologies in NMA
Various automated and digital processes technologies have been in place on various 7-Series programs for years. FAUB, as The Seattle Times reported, was added to the 777 Classic line ab0ut six years ago. Part of the mission was to de-risk FAUB for application to the 777X.
Then, FAUB and the other processes were to converge for the first time on one Boeing Commercial Airplanes program with the New Midmarket Airplane, or NMA.
Boeing CEO Dennis Muilenburg said on several earnings calls that the NMA was as much about production as it was about a new airplane program (or words to this effect).
But Boeing couldn’t make FAUB work.
Why not?
This is a good question and one for which there isn’t a clear answer.
It works elsewhere
FAUB, or a system very similar, is used by Airbus and other aerospace companies. It works for them, says Jessica Kinman, a senior manager for Dassault Systemes.
Kinman spoke Friday at a seminar sponsored by the Pacific Northwest Aerospace Alliance (PNAA) at North Seattle College about advanced manufacturing and other transformative production processes. This was just two days after the Boeing FAUB news broke.
Among the processes illustrated: robotics working on an upright fuselage. In other words, FAUB—although this was not identified as Boeing’s FAUB.
With the NMA business plan relying in part on Black Diamond processes, of which FAUB is an element, losing FAUB isn’t going to help an already-struggling business case.
But, then, NMA is on hold at Boeing until the MAX returns to service and cash flow resumes. So, from this perspective, losing FAUB at this time isn’t especially critical.
Longer term
But longer term, Boeing needs to understand why it couldn’t make FAUB work whereas Airbus and others can.
It’s all part of the digital factory Dassault and its competitors consult on as aerospace (and other industries) transform in the future.
I’ll have more about this in a subsequent post.
Airlines look toward another peak season without the MAX
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Introduction
Nov. 11, 2019, © Leeham News: Airlines are beginning to make plans for another peak summer season either without the Boeing 737 MAX in their fleets, or a reduced number.
With the recertification of the MAX continually sliding, like an airline’s creeping delay at the airport, this is stating the obvious. Airlines keep shifting the true return to service (RTS) (not recertification) from 2019 into 1Q2020.
Source: Boeing.
American and Southwest airlines, the two carriers with more MAXes grounded than any other airline, now target RTS March 5 next year—just a week short of the global grounding of the airplane.
Boeing’s chairman, David Calhoun, acknowledged in an interview with CNBC Nov. 5 RTS will now fall into 2021.
This was two days before the Federal Aviation Administration and EASA rejected Boeing’s documentation that is required before recertification is granted. According to media reports, this could add an inconsequential number of days to the process or a significant number of weeks.
Concerns are beginning to emerge that recertification may not come until after the first of the year.
All this increases the uncertainty for the airlines.
Summary
- Creating Plan B—no MAX in the peak season.
- Stored MAXes may face a “calendar” deadline, requiring C Checks before RTS.
- Lessors offering new, year-long leases on A320s and 737 NGs.