GTF’s troubled history hurting future orders

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By Scott Hamilton and Bjorn Fehrm

May 8, 2023, © Leeham News: India’s GoFirst Airlines filed for bankruptcy last week. The carrier pointed to around 29 of its 50 Pratt & Whitney Geared TurboFan-powered Airbus A320neos being grounded as the reason.

The aircraft have been grounded for months. Despite negotiations with PW and a favorable arbitration ruling, GoFirst says PW failed to provide replacement engines. As a result, GoFirst paid about $196m in lease rates for the grounded aircraft, without being able to fly them for revenue.

Lufthansa Group last week complained that a third of its Swiss Airbus A220 fleet, also powered by the GTF, are likewise grounded with technical issues. As LNA previously reported, Air Baltic, Egyptair and Air Senegal also have A220s grounded. Iraqi Airlines has some A220s that are grounded. And now there’s news that Embraer E195-E2s at KLM’s regional airline are also grounded due to GTF issues.

India’s Indigo Airlines also has a large number of A320neos grounded with GTF problems. About 11% of the nearly 3,000 A320neos in service are grounded or fly one a week, an Aviation Week analysis revealed.

PW’s reputation was already badly damaged before the GoFirst bankruptcy. However, an LNA analysis shows that forward orders for engines on the A320neo already were suffering.

Summary

  • CFM’s LEAP has a consistently larger market share, boosted by exclusivity on Boeing 737 MAX.
  • Initially PW won more orders for A321neo; CFM has overtaken in the order backlog.
  • Including A220 (exclusive GTF power) and MAX, plus neo split, CFM’s in-service market share is 66% to 34%.
  • But going forward, CFM has 60% of the backlog across all types to PW’s 19%–with 22% of the A320neo family orders undecided on engines.

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Airbus 1Q2023 results: Supply chain problems persist

By Bjorn Fehrm

May 4, 2023, © Leeham News: Airbus has presented its results for the first quarter of 2023. The supply chain problems that lowered the 2022 production targets and that Airbus thought would subside in 2023 persist.

The company sticks to its 2023 guidance of delivering 720 commercial aircraft but now adds that the year will be more backloaded than thought. Guidance of EBIT adjusted of €6bn and Free cash flow of €3bn remains.

Airbus delivered 127 commercial aircraft in the quarter, compared with 140 last year. Net orders increased from 83 for 1Q2022 to 142 for the quarter.

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Open Skies in Africa: a jump start to post-covid recovery?

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By Judson Rollins

May 1, 2023, © Leeham News: Could Africa’s first real “open skies” implementation boost its aviation recovery? So far, the continent’s rebound from covid has been anemic as food and energy crises, surging inflation, and debt tightening have battered consumers and producers alike.

Source: Wikipedia.

A December report from the International Air Transport Association (IATA) showed Africa’s post-covid traffic recovery on a trajectory like Europe or Latin America, with 2019 passenger volumes not expected to return until 2025. Industry economists believe the average African airline profit margin this year will be -1.7%. The US dollar’s continued strength hasn’t helped, given its impact on most non-labor airline costs, and looms as an even greater threat to profitability in coming years.

Summary
  • African aircraft order books are relatively thin
  • Flag carrier troubles, limited affordability continue to dampen growth
  • Single African Air Transport Market: a new chapter?

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Pontifications: A contrarian view of Stock Buybacks

By the Leeham News Team

April 25, 2023, © Leeham News: Airbus and Boeing last week held their annual shareholders’ meetings. Boeing continues to suspend dividends and stock buybacks as it struggles to recover from the grounding of the 737 MAX and delivery suspensions of the 767/KC-46A, 787, and 737 (again); and the years-delayed certification of the 777X. Losses and charges at its defense unit mount as well, hurting profits and cash flow.

Before the MAX grounding in March 2019, Boeing spent more than $60bn in stock buybacks since the 1997 merger with McDonnell Douglas. “Shareholder value” became a priority—and dirty words to those who long for the days of a Boeing based on engineering excellence vs focus on Wall Street and the stock price.

Airbus has taken over the lead in airplane engineering and innovation. Boeing in November deemphasized new product development and pointed to its guidance of $10bn in free cash flow by 2025. However, Airbus now puts shareholder value as an important business goal. At its annual meeting, Airbus continues its dividend and stock buyback programs. But Airbus buybacks and dividends are a fraction of what Boeing has spent and Airbus committed to a €10bn war chest for future contingencies.

Stock buybacks remain a target of criticism. While our view of over-emphasis on shareholder value is well known—we favor a balance on free cash flow expenditures between shareholder value and new product development—there is another side to stock buybacks that haven’t been discussed.

Leeham News is going to take a step back and dig into the details of the buybacks, analyzing the numbers behind the repurchase program, its results, and possibilities for the future.

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Boeing offers bonuses up to $10,000 as it searches for scarce talent

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By Bryan Corliss

April 17, 2023, © Leeham News: The Boeing Co., which has talked of making significant production rate increases “very soon,” is offering bonuses of up to $10,000 as it recruits workers in touch-labor positions in both South Carolina and Puget Sound.

In Charleston, Boeing is offering $5,000 signing bonuses specifically for experienced painters and interiors installers as it tries to first stabilize, then increase, production of 787s. Boeing wants to reach a rate of 5/mo by the end of this year and 10/mo by 2025/26.

In Puget Sound, the company isn’t offering signing bonuses, but it is offering hefty payouts of up to $10,000 to current employees who refer experienced aerospace workers to openings in a number of job categories, including structures mechanics and general machinists.

The moves come as analysts continue to sound alarms about workforce shortages across the industry. 

“We continue to remain cautious on the supply chain’s ability to support the planned production rate increases in 2H23 and into 2024,” wrote Ken Herbert, with RBC Capital Markets, in a report earlier this week. “We continue to see labor availability and training as the largest headwind facing the sector.”

  • Boeing hiring as it prepares to ramp up
  • Boeing offers hiring incentives
  • Northwest aerospace labor market is tight
  • S. Carolina: Lockheed-Martin offers $10K

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Pontifications: Airbus grows in China while Boeing remains on the sidelines

By Scott Hamilton

April 11, 2023, © Leeham News: Airbus last week firmed up an order for 150 A320neos and 10 A350-900s with China. The deal was announced last year.

Additionally, Airbus and the Chinese government agreed to add to the A320 family assembly site in Tianjin, increasing the capacity of the plant. This will be another step in Airbus’ goal to achieve a production rate of 75 per month by 2026 for the A320 family.

And that’s not all. Airbus and the China National Aviation Fuel Group (CNAF) signed a Memorandum of Understanding to increase the development of Sustainable Aviation Fuel.

Meanwhile, Boeing remains essentially frozen out of China. Deliveries of the 737 MAX remain stalled. Although China Southern Airlines outlined expected deliveries this year and through the next few years, we’ve seen this sort of thing before. Until an official announcement comes from Beijing authorizing deliveries, or some of the stored airplanes are delivered, words are just words.

That said, there are some solid indications we’re seeing that Boeing deliveries to China may well resume in the not-too-distant future, but on a glacial pace. The financial viability of some airlines within China, while opaque to outsiders, is monitored by the CAAC, China’s regulator. Some airlines are deemed too financially risky now to accept delivery of any new aircraft, whether the OEM is Boeing or Airbus.

While Boeing’s 140 MAXes originally ordered by China remained in a Twilight Zone of sorts, delivery of some Airbus A320neos also has been blocked. Generally, though, Airbus continues to tender airplanes and win orders while Boeing sits on the sidelines.

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Bjorn’s Corner: New aircraft technologies. Part 7. Propulsion

By Bjorn Fehrm

April 7, 2023, ©. Leeham News: This is a summary of the article New aircraft technologies. Part 7P. Propulsion. The article discusses how developments in the next-generation airliner propulsion system will be the second most important area for improved efficiency and lower emissions after we have decided on the fuselage type.

Figure 1. The CFM LEAP engine gained 15% efficiency compared to the engine it replaced, the CFM56. Source: CFM.

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Bjorn’s Corner: New aircraft technologies. Part 7P. Propulsion

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By Bjorn Fehrm

April 7, 2023, ©. Leeham News: This is a complementary article to Part 7. Propulsion. It discusses in detail the next-generation propulsion systems and what to expect from their possible increase in performance and efficiency.

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MCAS, The Aircraft Certification Act and the unintended consequences of Congressional Intervention

First in a Series of Articles

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 By the Leeham News team

March 30, 2023, © Leeham News: Boeing is suffering delays getting the 737-7, 737-10, and 777X certifications completed.

Airbus delayed the certification of the A321XLR over the design of its integral fuel tank. Boeing has gotten the brunt of the blame for its delays, a stance not without some merit. Airbus is fully responsible for the design and integration of the XLR fuel tank. But, unlike Boeing, less has been said about the certification delays of the XLR than the Boeing aircraft.

These delays may not be completely the fault of the manufacturers.

A brief history. We know that two 737 MAXes were lost due to the Maneuvering Characteristics Augmentation System (MCAS) overpowering the flight crew’s ability to hand fly the airplane, although there were contributing factors. Congress got involved and demanded that the industry refocus on the safety of the flying public. The end result was the creation and passage of the Aircraft Certification, Safety and Accountability Act (ACSAA). This legislation mandated changes to how the Federal Aviation Administration oversees the manufacture of Transport Category Aircraft and set timelines for implementation.

We also need to remember that the industry is much larger than Boeing and Airbus. All manufacturers from those building agricultural aircraft and piston-powered helicopters and bizjets all the way through to Large Tier 1 subcontractors such as Spirit Aerospace and avionics manufacturers must respond to these changes. The Act affects everybody.

The addition of EICAS

We have seen references to the act and how it set a timeline for a monitoring program called Engine Indicating and Crew Alerting System, or EICAS, and its implementation. A deadline of last December was included in the ACSAA, adopted two years before. The inclusion of EICAS was adopted on the assumption Boeing would certify the MAX 7 and MAX 10 before the deadline. Exempting these two MAXes at the time was approved because the MAX 8 and MAX 9 were already certified without EICAS, and cockpit commonality was considered important among the four types.

But Boeing was unable to complete certification of the MAX 7 and MAX 10 in time. Steeped in controversy, Congress in January continued the exemption to September this year.

Certification by the deadline of the MAX 10, the last in the family, was always deemed a challenge because the -10 hadn’t entered flight testing at the time of the legislation’s approval. But the MAX 7 was well into its flight testing. People couldn’t understand why Boeing was unable to certify the MAX 7 before the end of last year.

An analysis by LNA lifts the veil on this mystery.

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An uneven financial recovery among OEMs and Suppliers

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By Vincent Valery

Introduction  

March 27, 2023, © Leeham News: In an article last year, LNA highlighted the divergence in the post-Covid-19 recovery among OEMs and select Tier 1 suppliers. Airbus had higher profits than before the Covid-19 pandemic, while all others lagged. Revenues were well below 2019 levels.

Commercial Aviation OEMs were severely impacted last year by supply chain disruptions. Airbus and Boeing ramped up production significantly slower than envisioned on all programs. The war in Ukraine and tighter financial conditions are complicating the situation further.

LNA collected financial information on the big three aircraft manufacturers and 10 major commercial aircraft suppliers to assess how quickly they recovered. There will also be an analysis of the numerous charges Airbus and Boeing have taken since 1999 through 2022.

Summary
  • Significant differences among the three major aircraft OEMs;
  • One engine OEM lagging;
  • Some OEM suppliers are struggling financially;
  • Twelve-digit accumulated charges at Airbus and Boeing combined.

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