Leeham News and Analysis
There's more to real news than a news release.
Boeing,insurance firm stole trade secrets, launched ExIm Bank funding replacement, lawsuits charge
Sept. 11, 2018, © Leeham News: The Boeing Co., Boeing Capital Corp, Marsh & McLennan and its subsidiary, Marsh, a major insurance firm, have been sued for trade secret theft in lawsuits filed in Chicago and New York.
The dispute centers around the roles of Boeing, BCC and the insurers in creating Aviation Finance Insurance Consortium (AFIC). AFIC was created following years of the US Congress’ refusal to reauthorize the US ExIm Bank.
Thatcher Stone
Robert Morin
Kostya Zolotusky
Xavian Holdings and Xavian Insurance Co. allege in the lawsuits that The Boeing Co., through its Boeing Capital Corp unit, and Marsh signed trade secret and confidentiality agreements that precluded the companies from acting on the concept for an ExIm replacement financing guarantee vehicle.
“Boeing and BCC waited until their need for those trade secrets became critical – and then
misappropriated them,” the Boeing lawsuit charges.
Xavian was founded by several Wall Street professionals in aircraft finance and some bankers from ExIm, led by attorney Thatcher A. Stone. Stone now lectures on aviation law at the University of Virginia School of Law. Xavian was backed by venture financiers and had received a significant financing commitment from Lightyear Capital, led by Don Marron, former chairman of Paine Webber and UBS.
AFIC was launched in June 2017. In its first seven months, it provided financial guarantees for 16 Boeing aircraft to four airlines and a lessor. The aircraft had a value of $1.5bn in financing guarantees.
One person told LNC that Boeing’s profits from the sale could be around $800m. The lawsuits don’t specify a damage claim, which is normal in federal courts.
Despite the trade secret and confidentiality agreements, Xavian charges in the lawsuit that BCC’s Kostya Zolotusky, Tim Myers, now president of BCC but a VP at the time, and Robert Morin, then still employed by ExIm but a part of Xavier’s effort, were privy to then Xavian plans. Also privy was BCC officer Scott Scherer, now retired, the lawsuit says.
Morin now works for Marsh, the insurance manager for AFIC.
With a month to elections, Embraer bolsters backlog
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Introduction
Sept. 10, 2018, © Leeham News: With the Brazilian elections less than a month away, the outcome of the presidential race will determine whether the proposed joint venture between Embraer and Boeing will be approved.
Embraer is Brazil’s most visible and prestigious international company. The government has a “golden share,” giving it veto power over certain transactions, including the Boeing deal. Boeing will own 80% of the new JV that will be for EMB’s commercial business only. Embraer will own 20%.
The incumbent government says it will approve the joint venture; the opposition party says it will veto the deal.
Summary
Including orders, options and LOIs:
- Production slots are oversold through 2023.
- The skyline quality has some challenges.
- Only three dozen firm orders were announced at Farnborough; the balance has to be firmed up.
What costs dominate an airliner’s operation?
By Bjorn Fehrm
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Introduction
September 6, 2018, © Leeham News.: Last month we put the question if rising fuel prices will revitalize new aircraft sales. We now continue the analysis of an airliner’s costs by looking at other parts of the cost equation.
Is fuel the dominant operational cost also in the future? What’s the difference in the different costs between a legacy carrier and an LCC? We use our aircraft cost model to gain more insights.
Summary:
- To compare costs for an airliner’s operation we must distinguish between carrier types and geographies
- While keeping the modelling relatively simple, it will be possible to single out the cost drivers beside fuel and understand their importance
Pontifications: Boeing aid to Jet Airways uncommon but not unusual
By Scott Hamilton
Aug. 27, 2018, © Leeham News: Boeing is giving financial help to India’s Jet Airways, according to a news report.
This doesn’t come as a surprise.
Jet Airways has 225 737 MAXes on order (50 direct, the rest listed via lessors). It’s also in what appears to be dire financial straits.
Media reports indicated the airline was possibly going to be out of business in 60 days and it deferred releasing its financial results “indefinitely.” The government is going to probe the airline, according to a press report.
The Boeing aid is not common but it’s not unknown, either.
Analysis: Bombardier continues to improve Q400 model
Aug. 21, 2018, © Airfinance Journal: Bombardier Commercial Aircraft is gradually introducing more features in its Q400 turboprop aircraft as the Canadian manufacturer continues to see appetite in the 70-90-seat market.
Improvements under development include a 2,000lb increase in payload capacity. The model’s current maximum payload is 18,716lb, while maximum take-off weight varies between 61,700lb and 67,200lb.
Other changes the manufacturer is introducing include the extension of A-check and C-check intervals from 600/6,000 to 800/8,000 flight hours, giving a 20% direct maintenance cost saving.
Bombardier Q400. Source: Bombardier.
Airbus Business Line Services ramping up
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Introduction
Aug. 13, 2018, © Leeham News: While Boeing aggressively pushes its new business unit, Boeing Global Services (BGS), on a trajectory for a $50bn revenue target 
in 10 years, Airbus quietly has its own services operation.
Airbus services has a goal to reach $10bn in revenue over the next decade for its commercial services. In 2017, the Airbus Group revenue of $9bn was split roughly evenly between commercial, helicopters and defense.
BGS’ revenue target includes all services.
Unlike BGS, Airbus services are not a separate business unit/profit center. Ironically, the Airbus website describes the airliner-part as “commercial aircraft services.” Boeing’s airliner services operation was called Commercial Aviation Services, or CAS, before CAS merged with the Boeing defense operation to form BGS. The business line is promoted as Services by Airbus in collateral material.
First mover or not, that is the question: A321XLR vs NMA
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Introduction
July 23, 2018, © Leeham News: First mover or not first mover, that is the question.
In a pre-Farnborough Air Show interview with another publication, Airbus Group CEO Tom Enders said Airbus had the advantage of being the “first mover” by acquiring majority control of the Bombardier C Series program.
But when it comes to responding to the prospective Boeing New Midmarket Airplane (NMA, or 797), Airbus officials say they are content to wait and watch, willing to let Boeing make the first move.
At the same time, Airbus is proceeding with studies to further extend the range of the A321neo, in the form of the A321XLR. The airplane would have a range of 4,500nm, up from 4,100nm, according to information widely leaked at the air show.
Summary
- Airbus looks to squeeze Boeing from the bottom of the NMA market with A321neo improvements.
- Boeing sales chief dismisses A321XLR as a sub-set of a sub-set.
- But others see the basic A321 design as more flexible than the 737 MAX.
- Airbus CEO Guillaume Faury
Related stories
Farnborough: First day order recap
By Alex Derber
July 16, 2018, (c) Airfinance Journal: Day One of Farnborough 2018 belonged firmly to Boeing in terms of firm orders, although the US manufacturer saved up many of its largest announcements from deals done earlier in the year. Airbus, meanwhile, almost achieved parity if one includes softer commitments from airlines and lessors, although there were some speculative deals, notably a memorandum of understanding (MoU) for 17 A350s from Starlux, a Taiwanese start-up not yet in business.
Other noteworthy deals included lessor Jackson Square Aviation’s first new aircraft order and United decision to buy E175s rather than the newer E2 variant.
Farnborough: Boeing reconsiders metal fuselage for NMA as cost remains major challenge
July 16, 2018, © Leeham News: Farnborough: Boeing has returned to considering a metal fuselage for the New Midmarket Aircraft as an alternative to the ovoid-based composite design that has been the focus for the past two-three years, multiple sources tell LNC.
Boeing hasn’t been able to narrow the cost of the composite design to a point where selling the aircraft in the $70m-range is feasible, sources say.