Europe to Boeing: Not so fast on your WTO move; tariffs still likely

By Scott Hamilton

Feb. 24, 2020, © Leeham News: Not so fast, Europe says about Boeing’s claim it is curing illegal tax breaks from Washington State.

The World Trade Organization has to agree to Boeing’s interpretation. This will take at least a year. In the meantime, be prepared for tariffs to be levied on Boeing airplanes by this summer, just as the company hopes the 737 MAX is recertified and deliveries can resume.

Boeing must get the WTO’s approval that the move to suspend the tax breaks will bring the US and Boeing into compliance with a ruling they are illegal.

This process could take a year, said a person familiar with the process. He spoke on the condition of anonymity in order to speak freely.

In the meantime, tariffs that have been authorized for the European Union to impose on Boeing, and other US products, may take effect once the amount is approved. This decision is due in May or June.

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Why the A321XLR makes sense for Alaska Airlines

By Scott Hamilton

Feb. 23, 2020, © Leeham News: Alaska Airlines last week said it will place an order, perhaps this year, for 200 aircraft for delivery over the next decade.

The carrier exclusively operated Boeing 737s until its acquisition of Virgin America. Officials repeatedly put off a decision whether to return to an all-Boeing fleet.

Alaska Airlines Boeing 737-900ER. Source: Alaska Airlines.

Virgin leases for Airbus A319s/320s extend to 2025. The ex-Virgin fleet numbers 61. Leases for Airbus A321s extend to late this decade.

Alaska has 30 A320neos on order from the Virgin merger. However, cancellation rights have small penalties.

The carrier ordered 37 737 MAX 9s. Three were built last year but are stored in the grounding. Seven more are due this year.

Alaska plans to aggressively grow in the next 10 years.

Here’s why converting the 30 Virgin orders to A321neos makes sense.

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Boeing finds debris left in new 737 MAXes, now in storage

By Scott Hamilton

Exclusive

Feb. 18, 2020, © Leeham News: Boeing recently discovered some of its stored 737 MAXes have foreign objects in the fuel tanks.

The entire fleet of 400+ newly produced but undelivered MAXes is being inspected.

Foreign objects, called foreign object debris (FOD) in aviation parlance, consist of tools or rags. FOD has been found in the fuel tanks of some MAXes. MAXes are stored at four locations in Washington State and in San Antonio (TX).

It’s unlikely that the FOD inspections will delay recertification or testing of the MAX.

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Pontifications: In chaos there is opportunity for Boeing during MAX grounding

Feb. 17, 2020, © Leeham News: Boeing executives said that while the 737 MAX production is suspended, efficiencies are being implemented on the assembly lines.

By Scott Hamilton

At a Cowen & Co. conference last week, EVP and CFO Greg Smith outlined some of the efficiencies that are being put in place.

But another area that could be improved, not addressed by Smith, while the lines are shut down is supply chain tracking. This has huge ramifications for cost savings and streamlining. It’s part of the business plan for the next new airplane, whatever this is.

This process is called ERP, or Enterprise Resource Planning. Boeing is transitioning to a more advanced method, called SAP, or Systems Applications Projects.

Boeing Australia and Boeing Global Services have made the transition. But Boeing Commercial Airplanes’ transition is stalled due to middle management inertia, said several people who attended the Pacific Northwest Aerospace Alliance annual conference Feb. 4-6.

Boeing should use the production halt and slow ramp up to implement SAP, they said.

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Boeing 737 MAX 2020-23 backlog will require to 2026 to deliver: analysis

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Introduction

By Scott Hamilton

Feb. 14, 2020, © Leeham News: It will take Boeing years to deliver new production airplanes scheduled for delivery in 2020-2023 because the restart of the 737 MAX production will fall far short of delivery commitments.

There are an estimated 2,682 deliveries scheduled in this timeframe. Boeing’s production restart and ramp up provides delivery positions for an estimated 1,827 aircraft. This leaves an estimated 855 aircraft that will have to be rescheduled into the future, from 2023.

These will compete with Boeing sales for new order delivery slots. For example, the MOU for 200 MAXes from IAG, the parent of British Airways and other carriers, has delivery slots in these periods.

An analysis by LNA indicates it will take at least until 2026 to deliver these 855 airplane if no other orders are slotted in through 2025.

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Boeing sued in Seattle over 737 MAX

Feb. 13, 2020, © Leeham News: A Seattle law firm filed what is believed to be the first lawsuit over the Boeing 737 MAX crisis in King County Superior Court.

King County includes Seattle and Renton, where Boeing’s Commercial Airplanes division is headquartered.

Lane Powell PC filed the lawsuit (20-2-04003-7) naming The Boeing Co. and BCA as defendants. The plaintiffs are two special purpose companies (SPC) that own two 737-8-based MAX BBJs (business jets.) This is believed to be the first BBJ owners to file suit against Boeing.

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MAX, 777X certification questions abound at Singapore Airshow

By Judson Rollins

February 13, 2020, © Leeham News: Despite depressed turnout at this year’s Singapore Airshow, there was still plenty of conversation around the return to service for Boeing’s beleaguered 737 MAX – and potential impacts on the certification of the 777X.

Summary
  • Ungrounding will take ~30 days from certification flight; operators also have work to do
  • Every MAX produced to date will require its own validation flight
  • FAA will gradually hand back some oversight to Boeing
  • 777X, other future certifications will be different; regulators still figuring out how

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CAE readied MAX simulators, prepared to boost production

Feb. 9, 2020, © Leeham News: The principal provider of airliner simulators sold six for the Boeing 737 MAX since the first of the year.

CAE Inc. now sold 56.

In the third quarters earnings call Friday, Marc Parent, president and CEO, said that a “high majority” of airlines that ordered the MAX have ordered a simulator from CAE.

CAE has about 80% of the simulator market.

There are 36 MAX simulators across the globe now from all providers. CAE, as of the end of the year, provided 23 of them.

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Pontifications: A few rays of sunshine emerge in MAX crisis

Feb. 10, 2020, © Leeham News: The was plenty of angst among suppliers last week at the annual Pacific Northwest Aerospace Alliance conference.

By Scott Hamilton

Worries about the production shutdown, its duration and lack of communication from Boeing prevailed.

But there were in fact rays of sunshine beginning to break through the dark clouds of the last year.

Some suppliers—not many—reported that they’ve been told to begin shipping parts and components as early as March 1.

This gives hope that production will resume in April.

To be sure, the good news is mixed with a lot of bad news for suppliers. Some laid off workers and more layoffs are yet to come.

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Boeing will proceed with NMA. Or FSA. Take a poll

By Scott Hamilton

Feb. 6, 2020, © Leeham News: Boeing will decide to proceed with the launch of the New Midmarket Aircraft (NMA).

Or it won’t and instead launch a single-aisle replacement for the 737 MAX that essentially reinvents the long-gone 757.

These are the two popular options discussed yesterday at the annual conference of the Pacific Northwest Aerospace Alliance in Lynnwood (WA).

Aerospace analyst Ken Herbert of Canaccord Genuity believes Boeing will launch the NMA.

Analyst Rob Epstein of Bank of America Merrill Lynch believes Boeing will go with the Future Small Airplane (FSA), a fresh design that is similar in size to the 757-200 and 757-300.

Consultants Kevin Michaels of Aerodynamic Advisory and Michel Merluzeau of AIR voted for the NMA. Consultant Richard Aboulafia of The Teal Group voted for the FSA.

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