Leeham News and Analysis
There's more to real news than a news release.
Boeing 777 production gap remains challenging
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Introduction
May 5, 2015: c. Leeham Co. The order for 10 Boeing 777-300ERs last month by United Airlines was a welcome addition to the backlog for the Classic line, but it remains a struggle for Boeing to obtain enough orders, or convert options and LOIs, to bridge the production gap to the entry-into-service for the 777-9, currently planned for 1H2020.
Boeing would like to advance the EIS to late 2019, but this may be challenging.
Boeing currently has a backlog of 271 Classic 777s (including the UA order). Through the end of 2019, Boeing needs to deliver 466 Classics if it is to maintain the current production rate of 100 per year. Boeing is sold out this year, largely sold out next year, half sold out in 2017 and some delivery slots are taken up in 2018, according to CEO Jim McNerney.
But the need for more Classic sales doesn’t end on 12/31/19 because of the normal production cut-over and ramp-up of a new airplane type.
Summary
- Through 2019 Boeing needs to sell and/or convert options for 195 777 Classics, or an average of 43 per year from May 1.
- “Feathering” in production from the Classic to the 777X increases the challenge.
- Production rate cut remains inevitable, in our estimation.
Malaysia Airlines fleet restructuring
April 30, 2015: Malaysia Airlines is offering for sale or lease all six of its Airbus A380s, its two Boeing 747-400Fs and four Airbus A330-200Fs and four Boeing 777-200ERs as it seeks to restructure following a disastrous 2014.
MAS lost two 777s last year: MH370, the flight that disappeared and still hasn’t been found; and MH17, the flight that was shot down over Ukraine.
Elimination of the freighters wipes out MASCargo.
MAS, the passenger operation, has six A380s, 15 A330-300s, 57 Boeing 737-800s with 14 on order and 10 options and 13 777-200ERs, according to Wikipedia. Read more
Tipping point for supply/demand? We don’t think so
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Introduction
April 28, 2015, c. Leeham Co. Goldman Sachs over the weekend issued a research note, Is the new aircraft supply/demand equation nearing a tipping point?
GS cited the recent United and American airlines actions involving the Boeing 787 and Boeing 777 and other fleet activity or inactivity at Lufthansa Airlines and Virgin Atlantic as harbingers for its thesis.
Goldman has a Sell rating on Boeing stock, based on its belief the demand is leveling off and announced production rate increases by Airbus and Boeing will lead to oversupply.
Summary
- Goldman sees recent fleet actions indicating a softness in demand, driven in part by lower fuel prices.
- United, Lufthansa actions delaying retirement of older aircraft cited.
- Virgin Atlantic decision on Boeing 747 replacements delayed, says Goldman.
- We see other reasons for the above and no meaningful impact.
- Key wide- and narrow-body campaigns pending.
Pontifications: “Everyone” deferring Boeing 787s? Not hardly.
By Scott Hamilton
April 27, 2015: c. Leeham Co. With the announcement on the 1Q2015 earnings call that American Airlines is deferring Boeing 787s, I received an inquiry from a media person: what is it with the 787 that “everyone” is deferring the airplane?
I found the question puzzling.
True, this comes on the heels of United Airlines swapping 787 orders for 777-300ER orders, but this hardly counts as “everyone.” And the reasons for the maneuvering was well-stated and for very different reasons. Read more
United Airlines revises fleet plan
April 23, 2015: United Airlines announced its 1Q2015 earnings today (which will eventually be posted with commentary on SkyWriterAviation.aero). What caught our eye in the press release was the following. United will:
- Complete the removal of more than 130 50-seat aircraft from its schedule by the end of 2015. UAL will remove additional 50-seat aircraft in 2016 and beyond as aircraft come off lease.
- Exchange 10 787 orders with Boeing for 10 777-300ERs for delivery beginning in 2016. The new 777-300ER aircraft will provide attractive upgauge and range opportunities to the company at competitive economics.
- Extend the life of 11 additional 767-300ER aircraft. The company now plans to extend the life of all 21 767-300ER through investments in winglets, reliability improvements and interior modifications, which will improve financial performance and make the aircraft more customer pleasing.
- Reconfigure and transition 10 777-200 aircraft currently used in international markets into the domestic network, and position a number of its trans-Atlantic 757-200 fleet into the domestic and Latin markets, with the extension of the 767-300ER aircraft.
- Acquire additional used narrowbody aircraft. The company is in final negotiations regarding the lease of 10 to 20 used narrowbody aircraft for delivery over the next few years. In addition, the company plans to continue to seek other opportunities to acquire used aircraft to meet its needs as market conditions allow.
Pontifications: Wizz could be first face-off of 737 MAX 200 vs “A320neo 195”
By Scott Hamilton
April 13, 2015: A campaign that began last year between Airbus and Boeing for a large order of 100 airplanes at Europe’s Low Cost Carrier, Wizz Air, could be the first face off between the “A320neo 195” (our name) and the 737 MAX 200 (Boeing’s name).
Note I said “could be.” I know Boeing is offering the MAX 200. I know Airbus is offering the A320neo. What I don’t know is if Airbus is offering the A320 195.
We first discussed the A320neo 195 last week, after a tip off by Mary Kirby of Runway Girl Network.
Wizz Air, of Hungary, currently operates only A320s and A321s. The competition is for 100 aircraft of the re-engined generation. This is a hot contest, with Boeing looking not only to flip Wizz from the A320 to the 737 but also to get a second customer for the MAX 200. Ryanair was the launch customer for the airplane last year, but no new orders have been landed since. Boeing touts the MAX 200 as the perfect solution for LCCs.
The contest is hot enough that our Market Intelligence indicates the pricing is already comfortably below $40m.
Airbus hasn’t announced a marketing name for its high-density version of the 195-seat A320neo, which last month won regulatory approval of the 195-seat concept. This is at 27-inch seat pitch. The MAX 200, which Ryanair said it will configure for 197 seats, will have a mixture of 30-inch and 29-inch pitch. Airbus believes galley cart requirements means Ryanair will have to go to 194 seats. Read more
European airline industry: the restructuring patient
By Bjorn Fehrm
Introduction
April 7, 2015: There is not a month going by without a strike at some of the European airlines, big or small. The strikes are the tip of an iceberg, which is called “restructuring”; “restructuring for profitability,” “for survival” and for “having a future.”
European airlines are the most unprofitable next to African airlines, according to International Civil Aviation Organization (ICAO). The collected profits from all European airlines are less than one third of the profits in North America. The strikes are called from unions that are fighting managements as these try to change the fundamental cost structure of the airline to be able to compete, not only with Europe internal competitions from LCCs eating away on domestic traffic but now also from Gulf carriers taking away international traffic at an alarming rate. Read more
Pontifications: Remote control of airliners a bad idea
By Scott Hamilton
March 30, 2015: In the aftermath of what a French prosecutor said was the apparent suicide-mass murder of 150 people on Germanwings 9525, there have been some calls for and questions of creating a system of allowing ground controllers to assume command of airborne airliners in the event rogue pilot situation develops.
This is a bad idea. Read more
Bjorn’s Corner: Two in cockpit makes sense
By Bjorn Fehrm
March 27, 2015; As we informed yesterday, the Germanwing’s co-pilot had a pause in his training at Lufthansa’s pilot school in Bremen during 2009. Further details have since been revealed by, among others, the Dusseldorf’s prosecutors office. The leave for Andreas Lubitz, the co-pilot that flew 4U9525 to ground, due to sickness, from pilot training in 2009 was a long one; sources talk about 18 months.