Pontifications: Boeing 777 production rates

By Scott Hamilton

Feb. 27, 2017, © Leeham Co.: When Boeing announced it will reduce 777 production to 5/mo, with actual deliveries of the 777 Classic to 3.5/mo beginning in 2018, the aerospace analyst at Goldman Sachs immediately concluded Boeing will have to reduce the rate to 2-2.5/mo.

Since then, and other analysts (whether publicly or privately) reached a similar conclusion.

On the 4Q/YE2016 earnings call in January and again last week at a Barclays conference, company executives said 90% of the positions in 2018 and 2019 are sold.

Shortly after the Barclays conference ended, one analyst called me to challenge the assertion by Greg Smith, Boeing’s CFO, about 2019. By his assessment, the analyst could only get to 60% in 2019. Did I see anything differently?

59% or 74%, but not 90%

At that point, I hadn’t looked. When I did later, I got to 59% based on firm orders. I could get to 74%, giving Boeing every benefit. But I couldn’t get to 90%.

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CSeries trans-Atlantic capability

By Bjorn Fehrm

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Introduction

February 23, 2017, © Leeham Co.: We previously described how new generation engines make the Boeing 737 MAX 8 a trans-Atlantic aircraft. The MAX 8 is smaller than the Airbus A321LR, but not the smallest single-aisle with trans-Atlantic capability. This distinction goes to the Bombardier CSeries.

We wrote about the CS100 capability to cross the Atlantic from London City Airport last year. After the article, we received new and improved data from Bombardier. The CS100 can now fly directly to US East Coast on the difficult westward leg with a business cabin of 42 seats. The updated article is here.

When we look at the improved capabilities of the CS300 (announced at Farnborough Air show last summer), this aircraft can also cross the Atlantic with a full cabin of 130 passengers.

Bombardier arranged so we could discuss this deeper with the VP CSeries program, Rob Dewar.

Summary:
  • We use our aircraft performance model to compare the CS300’s suitability for long-haul to the Airbus and Boeing competition.
  • The aircraft have similar range and seat mile costs. The smaller aircraft have lower trip costs.
  • With Rob Dewar, we explored the potential for additional capability for the CS300.

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Ryanair: cheapest and most profitable airline in Europe

By Bjorn Fehrm

February 22, 2017, ©. Leeham Co: Ryanair is Europe’s airline with the lowest fares. And it’s the most profitable, despite growing faster than even the Middle East carriers (growth needs money).

It’s time to dive deep in this locomotive. I even flew their business class before writing the report, to understand what is going on. Read more

Singapore 777-9 order pressures, but does not kill A380

Feb. 16, 2017, © Leeham Co.: Last week’s order by Singapore Airlines for 20 Boeing 777-9s and 19 Boeing 787-10s immediately was viewed by some as the death

Boeing 777-9.

knell for the Airbus A380.

The 777-9 order would start the final spiral down for the A380, some contend.

This overstates the case and misunderstands the nature of the order.

The A380 is in trouble, there no doubt about that. The 777-9 is putting pressure on the A380. There’s no doubt about this, either. But the contention the Singapore 777-9 order sends the A380 on a death spiral is wild fantasy.

An Airbus official appears today at the annual conference of the Pacific Northwest Aerospace Alliance (PNAA) in Lynnwood (WA). Undoubtedly, he will maintain the party line that the future of the A380 is solid. This, too, overstates the case. There can be a future for the airplane, but some major decisions must be made.

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Norwegian’s risky fleet expansion

By Bjorn Fehrm

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Introduction

February 15, 2017, © Leeham Co.: In our review of Norwegian Air Shuttle last week (Norwegian from now on), we pointed out the company’s relatively weak balance sheet. It’s considerably weaker than its direct competitors.

At the same time, Norwegians’ fleet expansion is the most aggressive outside of boom markets like India or Indonesia.

Norwegian ordered 200 narrow body aircraft in 2012. It ordered 100 Boeing 737 MAX 8s in January and 100 Airbus A320neos in June.  This compares to a narrow body fleet of 70 at the time and a fleet of 100 today (mainly 737-800s). In addition, Norwegian has 30 Boeing 787 long haul aircraft on order on top of the 12 it operates today.

How much risk do these 230 incoming aircraft pose to Norwegian?

Summary:
  • Presently, Norwegian absorbs 50% of incoming single aisle aircraft for own needs (Boeing 737-800 and later MAX 8).
  • The other 50% (deliveries of Airbus A320neo) are leased to external operators.
  • The financing need for incoming aircraft, be it for own or other’s use, is $15bn over the coming years.
  • With a balance sheet of of only twice that size and 10% own equity, the going can get rough if the market weakens.

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Long, bitter history precedes union vote at Boeing Charleston today

Feb. 15, 2017, © Leeham Co.: Boeing’s touch-labor workers at its 787 assembly plant in North Charleston (SC) will vote today on whether to become represented by the International Association of Machinists (IAM).

It’s a vote with huge stakes for both sides.

Boeing vociferously opposes a Yes vote. The IAM, which represented workers on the property when it was owned by Vought before Boeing purchased the plant, was voted out by the workers, by then employed by Boeing, just days ahead of Boeing selecting Charleston for the second 787 assembly line. It is widely believed the vote throwing out the IAM was the capper in Boeing’s decision to locate line 2 in Charleston.

The IAM has been itching ever since to regain representation of the workers here. A previous vote was scrubbed when it became clear, via nose-counting, it would fail.

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Bad weather slows MRJ90 flight testing

Feb. 14, 2017, © Leeham Co.: When Mitsubishi announced that it would conduct nearly all the flight testing for its new MRJ90 in Moses Lake in Eastern Washington State, one of the reasons was its history of good weather.

  • Mitsubishi presents today at the Pacific Northwest Aerospace Alliance conference in Lynnwood (WA).

Hitoshi Isawa, EVP of Mitsubishi Aircraft Corp. Photo via Google images.

It turns out that this is the worst winter there in 20 years. Snow storms became blizzards, shutting down nearby Interstate 90, sometimes for days. Driving to Moses Lake from Seattle, where part of Mitsubishi’s engineering force is located, became impossible when three mountain passes were closed due to avalanches, rock slides and fallen trees. Temperatures reached an all-time low in Moses Lakes in two decades.

“I never experienced this kind of cold weather in Japan,” said Hitoshi Iwasa, Executive Vice President, Operations Support, in an interview with LNC last week. “Many people in Moses Lakes told me this is the coldest weather in 20 years.”

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Pontifications: Alaska’s A321neo test drive

By Scott Hamilton

Feb. 13, 2017, © Leeham Co.: It was subtle, but it was there: Alaska Airlines will take the Airbus A321neo for a test drive.

This will happen via its new sibling, Virgin America, which has 10 A321neos on order. VA is an exclusive A320 operator. Alaska flies only Boeing 737s. The acquisition of VA by Alaska immediately raised questions whether Alaska will retain the Airbus fleet and orders or phase them out in favor of the 737.

Of more interest to partisans than to me, the question over the future of the Virgin America brand also became a top question.

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Deferrals at historic low, say Boeing CEO

Dennis Muilenburg, Boeing CEO.

Feb. 9, 2017: Requests for order deferrals are at an historic low but there are still challenges in bridging the production gap between the 777 Classic and 777X, Boeing CEO Dennis Muilenburg said during a Cowen & Co. presentation today.

Deferral requests are at only 2% of the backlog of nearly 6,000 airplanes, compared with an historic rate of about 6%, Muilenburg said.

“There are no particular regional trends,” he said during a phone-in appearance; weather prevented Muilenburg from flying in for the event. “Deferrals remain very low. We have skyline flexibility to move things around.”

At the same time, Muilenburg acknowledged Boeing still faces a challenge of filling the bridge between the 777 Classic and 777X, even at the reduced production rates in place. The rate is now 7/mo, down from 8.3/mo. It goes to 5/mo in August. Actual delivery rate beginning next year through 2019 is 3.5/mo as production of the 777X is feathered in.

Muilenburg identified filling the bridge as a “risk.”

“We still have work to do to fill out the bridge,” he said. The line is virtually sold out this year, but only 90% sold out at the reduce rate next year and in 2019.

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Look for more KC-46A tanker orders soon

Feb. 8, 2017, © Leeham Co.: Boeing last month received a $2.1bn order for 15 more KC-46A tankers from the US Air Force, bringing the total so far to 34.

Look for more orders in the coming months.

Boeing has Letters of Intent for 152 more with delivery dates beginning in 2018, according to the Ascend data base.

Extending the line

The aerial refueling tankers are based on the 767-200ER, which is no longer offered by Boeing in a passenger version.

Boeing expects 400 sales of the tanker over the life of the program. Using the current LOIs as a base, the USAF commitment extends to 2028. At the current production schedule planned, the 767 line could be active until 2042.

But the USAF isn’t the only customer for the 767.

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