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?
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%.
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.
By Bjorn Fehrm
January 17, 2017, ©. Leeham Co: Union contract Scope Clauses–the provision limiting the weight, capacity or number of aircraft operated by airlines for major carriers–are unlikely to be modified any time soon, panelists at the Air Finance Journal conference in Dublin said.
The restrictive Scope Clauses are predominate in the US. These limit the ability of small airplane manufacturers to sell aircraft in the US. Most affected are Embraer, Bombardier and newcomer Mitsubishi.
Contract negotiations in December, concluded before Christmas, resulted in no changes, surprising some. This will impact planned purchases of aircraft.We sat with Bombardier’s Ross Mitchell, vice president of commercial operations, to understand why the scope clauses are so important and why they did not change. Read more
Dec. 5, 2016, © Leeham Co. Last weeks’ approval by the US Department of Transportation of a license for Norwegian Air Shuttle to operate long-haul, low-cost service to and from the US drew immediate fire from labor unions over anticipated US job losses.
But their view is too narrow.
It means more jobs for Boeing and its supply chain, which are also heavily unionized. It means benefits to US exports.
But overlooked is the next evolution in long haul travel that starts next year.
Note: Nov. 24 and 25 are Thanksgiving Holidays in the US. Our next post will be Monday.
Nov. 23, 2016, © Leeham Co.: The 50-seat regional jet market is dead.
That’s the conventional wisdom.
Well, not quite.
Piedmont Airlines, a unit of American Airlines, is adding the 50-seat Embraer ERJ-145 to its fleet. Eleven joined so far and next year the company plans to add 24 more.
CommutAir, an operator for United Airlines, is adding the same aircraft type to its fleet. Forty of them.
Why the mini-resurgence?
Low fuel prices and cheap airplanes.
Nov. 17, 2016, © Leeham Co.: The deferral by United Airlines of 65 Boeing 737-700s announced Tuesday caused some observers to conclude this has a negative impact on the manufacturer, but this may well overlook a larger issue.
UAL is the latest “quality” airline to announce deferrals to reschedule capital expenditures or because of not needing the aircraft now.
Softening yields, particularly among US airlines, indicate over-capacity despite load factors of 85% or more, say industry observers.
While the backlogs of Boeing and Airbus remain solid today, do the actions of several major airlines indicate the leading edge of a global economy that’s beginning to soften?
Part 2. Part 1 may be found here.
Oct. 10, 2016, © Leeham Co.: Regional aircraft are much riskier assets for lessors than mainline aircraft.
Until recently, Bombardier and Embraer were the only two regional jet Original Equipment Manufacturers (OEMs).
Today, the Sukhoi SSJ100 and the Mitsubishi MRJ90 join BBD and EMB in this arena.
Now open to all readers.
Sept. 22, 2016, © Leeham Co.: Early this year Boeing officials began a new message in pushing back against market data that show Airbus captured about 60% of the single aisle market in the A320neo vs 737 MAX sector.
There’s plenty of time, Boeing said, for the MAX to catch up to the neo. Just look, officials said. Southwest Airlines and Ryanair ordered only a fraction of the MAXes they need to replace the 737s they currently operate.
Airbus, on the other hand, has hundreds more neos ordered by the likes of new airlines such as AirAsia and Indigo.
The implication is that the AirAsia and Indigo orders are not as solid as the potential for Southwest and Ryanair.
It’s a fair point.
But it’s not the whole story.
Aug. 30, 2016, © Leeham Co.: Will Scott Kirby’s move from president of American Airlines to the same position at United Airlines lead to a major shift in fleet acquisition at the Chicago-based carrier?
This is an intriguing question that may take some time to answer.
Kirby spent 20 years with American CEO Doug Parker through their careers at America West Airlines, US Airways and American.
Updated with analyst reports.
By Bjorn Fehrm
27 July 2016, ©. Leeham Co: Airbus Group presented its first half year results today, posting strong results in the face of delivery troubles with the A320neo and A350; and more charges on the ailing A400M. It has been a troubled start to 2016 with deliveries in key programs (A320, A350, A400M, Super Puma H225) being far behind targets. In total only the space segment is going well in Airbus Group at the moment.
The key commercial aircraft segment is still enjoying a vast backlog (6,700 aircraft) and sales which point to a book to bill of one for the year. But deliveries are not going well. Twenty A320neo “gliders” are just now getting their first engines and the A350 delivery problems are dragging on.
On top of that, the A400M program has hit new problems in the engine area where the propeller gearbox needs a redesign. An interim fix is needed to keep customers flying.
Airbus helicopter side has also hit trouble. The large Super Puma H225 helicopter suffered a fatal off-shore area crash in April and is still grounded as the investigation to what broke in the helicopter is taking time.
The financial results for the Airbus Group for the first half of 2016 (1H 2015) were revenue €28.8b (€28.9b) with net profit €1.8b (€1.5b). These figures includes €1.9b in write offs (A400m €1b, A350 €0.4, Currency €0.5b) and €2.1b in capital gain one offs (Launchers JV valuation €1.1b, Dassault shares €0.9b, Divestitures €0.1b). This means that one time effects kept the result up for 1H 2016 but these will not be there the next quarters should the troubles continue. Airbus Group maintains 2016 guidance for Revenue, EBIT and Free Cash Flow.
Here the details of the Airbus Group divisions results for first half 2016: