Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: New engine development. Part 5. Turbofan design problems April 26, 2024
- Airbus 1Q2024 results: Airbus CEO: “A350 in-service experience drives positive reputation and orders” April 25, 2024
- A350-1000 or 777-9? Part 3 April 25, 2024
- Boeing CEO promises company is turning around…again April 24, 2024
- Solid start for stand-alone GE Aerospace despite cuts to LEAP output April 23, 2024
Why the MAX isn’t back – yet
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By Judson Rollins
Introduction
April 29, 2021, © Leeham News: Much virtual ink has been spilled in recent weeks over an apparent surge in demand for Boeing’s 737 MAX, as a slow drip-drip-drip of cancellations finally reversed into net new orders.
The Boeing team must be grateful to see a shift toward positive headlines for its single-aisle family. Longtime 737 customers provided badly needed votes of confidence with top-ups to their previous orders.
However, such momentum has been slowed by a continuing wave of cancellations. Boeing logged just 12 net orders in February and 40 in March. More cancellations are due to be announced; Turkish Airlines recently said it would cancel or convert to options 50 of its previous MAX orders, and ch-aviation says a single unidentified customer cancelled another 45 in March. Aeromexico swapped MAX orders for other MAX orders, saving $2bn in the process – a revenue hit for Boeing down the line.
The total backlog, net of orders in doubt under ASC 606, is down from a high of 4,708 to just 3,240 as of this week. This is enough to support average production of just 30 airplanes per month through 2029. Boeing CEO David Calhoun said on yesterday’s earnings call that he remains confident the MAX demand will recover from this point forward.
Summary
- New orders are mostly from large existing MAX customers, and likely include mitigation discounts for delivery delays.
- Boeing has 400 undelivered aircraft in storage, some of which were due for delivery to now-defunct airlines.
- Pricing trends are quite negative, depriving Boeing of badly-needed free cash flow.
Did Airbus miss opportunities with Alaska, Southwest?
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By Scott Hamilton
Introduction
March 22, 2021, © Leeham News: Airbus lost an order from Alaska Airlines, which means the carrier will essentially revert to an all-Boeing fleet.
Alaska Airlines ordered more Boeing 737 MAXes instead of Airbus A321neos. Southwest Airlines appears ready to order the 737-7 MAX instead of Airbus A220-300s. Were these real opportunities? Photo by Boeing.
And despite the apparent high-profile loss of a potential order from Boeing loyalist Southwest Airlines, Airbus is holding its ground in the USA.
Did Airbus miss opportunities to gain ground?
It all depends on how you look at it.
Summary
- Alaska Airlines chose to eliminate the Airbus A319s and A320s inherited with the 2016 acquisition of Virgin America. It’s not going to retain the orders for A320neos. And it passed on ordering more A321neos when it recently placed a follow-on order for Boeing 737-9s.
- It looks all but sure Southwest Airlines will pass on ordering the Airbus A220-300 for its sub-150-seat fleet requirement. Boeing looks poised to win a big order from Southwest for the slow-selling 737-7 MAX.
- Neither outcome, however, was unexpected.
Suppliers remain hunkered down as pandemic recovery may stall
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By Scott Hamilton
Introduction
March 8, 2021, © Leeham News: Aerospace suppliers continue to struggle even as passenger airlines begin to gingerly place new aircraft orders and 
Boeing resumes production of the 737 MAX.
Airbus continues to produce the A320, A330 and A350 at lower production rates than the pre-pandemic era. Boeing is at low-rate production for the 737 MAX, after a 20-month grounding. The 777 is down to 2/mo and the 787 goes to 5/mo this month. At least two aerospace analysts on Wall Street think the 787 rate could come down further.
Airbus and Boeing each received a handful of orders so far this year.
But suppliers continue to struggle.
Summary
- Airbus, Boeing continue to extend payments.
- Smaller suppliers seek bankruptcies.
- Larger suppliers remain in “hunker down” mode.
The 737 MAX – A Tragedy 60 years in the Making
This is the first in a series. Special to Leeham News.
By Peter W. Lemme
Twitter satcom_guru
Part 1: Min to the Max
- The Customer is Always Right
- Heredity
- Boeing 757 Misses the Mark
- Where were you when the 737 hit the fan
- Idiot Lights
- Finding a Way
- Equivalent Safety – Flying Qualities
Feb. 2, 2021, © Leeham News: The Boeing 707 entered service in 1958. 60 years later, a Boeing 737 MAX, the model’s fourth generation, crashed into the sea with all lives tragically lost. After, the 737 entered service in 1968, every subsequent 737 model was carefully crafted with the minimum changes necessary to deliver performance and reliability improvements. Differences were discouraged in order to reduce pilot training requirements, holding dear to visible family traits pioneered by the 707.
Figure 1. The Boeing 737 MAX became Boeing’s most controversial commercial aircraft. Its development was 60 years in the making. Source: Boeing.
Changes that jeopardized an amended Federal Aviation Administration Type Certificate were culled. A new type certificate is a costly and lengthy process, with considerable risk.
The 757 should have saved Boeing from endless 737 generations, but the will of the customer changed its trajectory from the start, in the end leaving no mark at all.
The 737-100 was a marvel by fitting the engine tight under the wing, and every generation since has marveled at how to fit the latest engine under the wing.
Every swept wing air transport suffers growing pains, working out issues with flying qualities.
The 737 seems to have diverged from the other Boeing airplanes progressively. Should the 737 MAX’s now-infamous Maneuvering Augmentation Characteristics System (MCAS) implementation have been applied to the stabilizer? Did Boeing have a better choice?
Flying qualities approved “to the letter”, quantitatively, are balanced by qualitative measures, with latitude in judging acceptable performance.
Boeing’s Calhoun completes first year as CEO
By the Leeham News Team
Jan. 13, 2021, © Leeham News: Today marks the first anniversary of David Calhoun becoming CEO of The Boeing Co.
Calhoun’s first year faced challenges unprecedented in Boeing’s history. There was the 737 MAX crisis. Sales of the 777X were stagnant. The balance sheet was stressed.
And then COVID exploded, all but destroying commercial passenger demand and with it, ability by airlines to take delivery of new airplanes.
David Calhoun. Source: CNBC.
Boeing’s balance sheet went further upside down. Production and quality control problems with the 787 emerged.
Finally, Calhoun was afflicted with a case of foot-in-mouth disease. This contrasted with his calm, well-received initial public face during the waning days of then-CEO Dennis Muilenburg’s stilted public persona.
Pontifications: Boeing’s exodus from Puget Sound
Jan. 11, 2021, © Leeham News: Last week appeared to be an ominous week for Washington State for aerospace.
By Scott Hamilton
On Monday, The Seattle Times reported that Amazon surpassed Boeing as Washington’s largest employer. The retailer now employs more than 80,000 in the state. Boeing, following COVID- and 737 MAX-grounding induced layoffs, employs just under 59,000 in Washington.
The Times reported Tuesday that Boeing’s research and development center at Boeing Field will be closed. At its peak, the center was to employ 900. The expansion began a mere 10 years ago.
Previously, Boeing announced Oct. 1 that it will close the Everett 787 production line and consolidate the final assembly at the Charleston (SC) plant.
The exodus by Boeing from Puget Sound and Washington State is underway. But was closing the R&D center as significant as it seemed?
Boeing to pay $2.5bn to settle criminal charges stemming from 737 MAX crisis
Jan. 7, 2021, © Leeham News: Boeing today agreed to pay $2.5bn to settle criminal charges with the US Department of Justice over the 737 MAX investigation.
The settlement comes in the form of a Deferred Prosecution Agreement (DPA).
In a filing with the Securities and Exchange Commission, Boeing synopsized the agreement:
The DPA contemplates that the Company will: (1) make payments totaling $2,513.6 million, which consist of (a) a $243.6 million criminal monetary penalty; (b) $500 million in additional compensation to the heirs and/or beneficiaries of those who died in the Lion Air Flight 610 and Ethiopian Airlines Flight 302 accidents; and (c) $1.77 billion to the Company’s airline customers for harm incurred as a result of the grounding of the 737 MAX, offset in part by payments already made and the remainder satisfied through payments to be made prior to the termination of the DPA; (2) review its compliance program for implementation of continuous improvement efforts; and (3) implement enhanced compliance reporting and internal controls mechanisms. Under the terms of the DPA, the criminal information will be dismissed after three years, provided that the Company fully complies with its obligations under the DPA. Of the payments described above, $1.77 billion has been included in amounts reserved in prior quarters for 737 MAX customer considerations. The Company expects to incur earnings charges equal to the remaining $743.6 million in the fourth quarter of 2020.
However, Dominic Gates of the Seattle Times points out that “Only $243.6 million, less than 10%, is a fine for the criminal conduct. And Boeing must pay an additional $500 million compensation to the MAX crash victim families. However, 70% of the $2.5 billion cited is compensation to airline customers that Boeing has already agreed to pay.”
Outlook 2021: Boeing needs boring, Airbus looks for recovery
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By Scott Hamilton and Vincent Valery
Introduction
Jan. 5, 2021, © Leeham News: What’s in store for Airbus and Boeing this year?
Boeing needs a boring year.
Airbus is clearly better positioned than Boeing.
Twenty-twenty one is a year of recovery for Boeing. It must dig out from a very deep hole.
Airbus reported that it hit cash break-even in the third quarter. But the company is not out of the woods yet.
Everything depends on something largely out of their control: how quickly the airline industry recovers from the COVID pandemic.
Summary
- Boeing hopes to deliver about half of the 450 stored MAXes this year.
- Low-rate production inches up for the 737.
- Widebody sales dried up for Airbus and Boeing.
HOTR: Alaska Air still have A320neos on order; working with Airbus on best path forward
Dec. 29, 2020, © Leeham News: Stories and headlines shouted that this month’s Boeing order by Alaska Airlines adding 23 orders and 15 options to an existing agreement meant the death knell for the Airbus fleet.
Alaska indeed announced that all the A319s and A320s inherited from its acquisition of Virgin America will leave the fleet by 2024. But 10 Airbus A321neos remain at least through their lease terms in 2029.
The airline now has 68 Boeing 737 MAX 9s on order and 52 on option.
This is exactly as LNA suggested several times: rotate out the smaller Airbuses as leases expire and keep the larger A321neos.
COVID-19 accelerated the retirement of the smaller Airbus family members by a couple of years. But it never made sense to keep them in lieu of the 737-9 once Alaska committed to this plane several years ago.
But what of the old Virgin America order for 30 A320neos? These are still on the books.
Podcast: 10 Minutes About Boeing’s Next New Airplane
Dec. 29, 2020, © Leeham News: As Boeing works to return the 737 MAX to service and clear its inventory of ~450 airplanes, it must look to the future.
CEO David Calhoun all but killed the New Midmarket Airplane when he took over from Dennis Muilenburg in January. A full product strategy review would be undertaken, he said.
Boeing always looks at alternatives. In addition to the twin-aisle NMA, Boeing also had a single-aisle airplane under study.
In this episode of 10 Minutes About, LNA discusses what Boeing’s Next New Airplane should be.
Boeing NMA concept, by Leeham News.