By Bjorn Fehrm
January 16, 2017, ©. Leeham Co: Oil has now doubled in price since the lowest point a year ago, with a present level of $50-$60/barrel. What is the trend going forward?
We are at the Growth Frontiers 2017 conference in Dublin, where Paul Horsnell, Head of Commodities research at Standard Chartered and Mike Corley, Mercatus Energy Adviser, gave their view on the future of oil prices.
The air transport market has seen a worldwide passenger and profitability growth over the last 12 months. The driving factors are increased appetite for air travel, especially in Asia, and cheap fuel.
Introduction
Jan. 12, 2017, © Leeham Co.: There are a growing number of articles around the Emirates airline that points to recent weaknesses in the airline’s operating model. Here are just two:
We decided it was time for a deeper look at this locomotive from the Arab Emirates. Is Emirates in trouble? How solid is it?
We studied the economics for the last decade and took a deep look at the fleet needs, including, has Emirates committed to too many aircraft being delivered over the next several years?
They have just deferred Airbus A380’s for the first time. Used to be they could not get them fast enough?
By Bjorn Fehrm
January 5, 2017, ©. Leeham Co: The last two years have seen increased profits for the airline industry. Lower priced fuel gave the industry time to breath and to finally earn a reasonable Return on Invested Capital (ROIC).
Earnings as a percent of revenue for the industry has been increasing from 5% on a worldwide basis in 2014 to around 10% for 2016, Figure 1.
The US and European airlines have been topping the earnings with 18% on revenue for the third quarter of 2016. There are many signs this will not continue in 2017, especially for European airlines. Read more
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Jan. 4, 2017, © Leeham Co.: The top 25 Airbus customers that are identified account for 63% for the current backlog, an analysis of the company’s order list shows.
For Boeing, its Top 25 customers account for 69% of its identified backlog.
Both companies have hundreds of Unidentified orders for which no customer is disclosed.
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Jan. 4, 2017, © Leeham Co.: Despite a rosy picture painted by Boeing about the future of the 787 and the ability to recover more than $29bn in deferred production
and tooling costs, there are signs that cause concerns over the next 3-5 years.
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Introduction
Dec. 22, 2016, © Leeham Co.: When it comes to comparing backlogs of Airbus and Boeing, the latter likes to point to what it calls a better quality of customers.
The fact is, both companies have large orders with airlines that may be characterized as less than top quality, or which appear to have over-ordered.
Summary
Dec. 12, 2016, © Leeham Co.: Airbus and Boeing continue to cut costs with internal reorganizations.
These are needed efforts. And they trickle down to the supply chain.
The new CEO at Boeing Commercial Airplanes, Kevin McAllister, is expected to ratchet up the cost-cutting at BCA, in part because he comes from the cost-cutting environment of GE Aviation.
He’s got a lot of work to do.
It takes Airbus Commercial about 85 employees to produce one airplane. It takes Boeing about 107.
Dec. 11, 2016: Iran and Boeing reached an agreement on the 80-airplane order that includes 50 737 MAX 8s, 15 777-300ERs and 15 777-9s.
The final contract still has unspecified contingencies before it can be booked as firm orders, Boeing said. One of those contingencies is clearly President-Elect Donald Trump, who criticized the larger Iran-US-allies deal of which the Boeing order is a part.
Airbus has 116 orders pending that could also be upended if Trump, upon taking office, vitiates the deal.
Boeing’s mix of aircraft changed slightly from the original news in June. The original mix included 40 737 MAXes and six 737NGs. Also included then were four 747-8s.
Deferrals grow as airlines fight to keep bottom line
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Introduction
Jan. 09, 2017, © Leeham Co.: Airlines have deferred or are thinking about deferring more than 400 airplanes in the near term, a review of decisions and deliberations that have been made during the last 12 months.
LNC tracked announcements last year of deferrals and statements by airlines that they are thinking about doing so.
We began identifying macro-level issues last week in our posts about emerging concerns for the 787 and LNC’s Outlook for 2017.
Reasons vary widely for the deferrals, these reports indicated. Low oil prices. Slowing economies. Declining financial results. Worries about two of the three top Middle Eastern carriers. A capital squeeze in China. Pressure on long-haul carriers from the emerging sector of low cost, long-haul airlines. Preserving capital expenditures to keep the bottom line in the black.
Today we detail the deferrals we tracked.
Summary
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Posted on January 9, 2017 by Scott Hamilton
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