Boeing earnings call: still hopes for 4Q recertification

Oct. 23, 2019, © Leeham News: Boeing reaffirmed its belief that the Federal Aviation Administration will authorize a return to service for the grounded 737 MAX this quarter.

The FAA certification flight will occur soon, said Dennis Muilenburg, president and CEO.

He made the remarks during the third quarter earnings call today.

“We look forward to regulatory approval for return to service this quarter. This may include a phased approach” with other global regulators, Muilenburg said.

Boeing has hosted 545 participants more than 140 customers and regulators around the world to understand the technical changes. Meetings with more than 1,100 others, including the finance community which funds MAX acquisitions, also have been held.

At this defining moment, Boeing must take a leadership role to increase safety, he said.

We expect to maintain the current production rate of 42/mo, followed by incremental rate increases to 57/mo by the end of next year.

Majority of deliveries of stored production should be delivered in the first year, but it is clear deliveries will spill into 2021. Muilenburg was not more specific.

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Boeing to cut 787 production rate, cites global trade environment

Oct. 23, 2019, © Leeham News: Boeing will cut the 787 production rate from 14 to 12 for two years beginning next year, the company said this morning.

“Given the current global trade environment, 787 production rate will be reduced to 12 airplanes per month for approximately two years beginning in late 2020,” it said, an apparent reference to the Trump Administration trade wars.

Boeing raised the 787 production rate in part in anticipation of orders from China. Donald Trump’s trade war with China has frozen orders by the giant country since 2017.

Boeing CEO Dennis Muilenburg previously said slow 787 orders were tied to China’s lack of them.

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McAllister out, a new Deal at Boeing Commercial Airplanes

By Scott Hamilton

Analysis

Oct. 23, 2019, © Leeham News: Kevin McAllister’s departure yesterday as CEO of Boeing Commercial Airplanes comes as no surprise.

Only the timing—now instead of next year, as was widely surmised—caught people off guard.

Kevin McAllister, left, and Stan Deal, right, at an order signing. McAllister is out and Deal is in. Credit: Azal.az.

Reports conflict whether he resigned, was fired or (as one report put it), it was a “separation;” it really doesn’t matter.

Word was circulating for months, long before the 737 MAX grounding, that his was a fading star.

He was replaced by Stan Deal, CEO of Boeing Global Services.

That McAllister is the first high-profile casualty of the MAX grounding and recertification crisis is also not a surprise. That he would be sacrificed had been rumored for weeks. The New York Times openly wrote about this prospect 10 days ago.

But tying McAllister to the MAX crisis is to some degree scapegoating.

As I wrote Oct. 7, the fingers of blame for the crisis point much higher than McAllister.

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Boeing recaps actions ahead of earnings call

Oct. 22, 2019: Boeing today recapped its actions to bring the 737 MAX back to certification and service, ahead of its earnings call tomorrow.

The company has taken huge hits since Friday when the information about pilot text messages were revealed by Reuters. The Seattle Times today has a detailed report that makes an independent assessment of the context of the text messages. The story, by Dominic Gates, who’s reporting has been ground-breaking,  supports Boeing’s narrative in this case.

Boeing’s press release recapping its actions to fix MAX and return it to service it below. LNA doesn’t publish press releases except in extraordinary circumstances. Given the bashing Boeing has been under–including by LNA–we’re making an exception in this case.

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NMA off the table in 2020–and maybe entirely

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Introduction

Oct. 21, 2019, © Leeham News, New York: What is the impact of the 737 MAX grounding on Boeing’s plan for the New Midmarket Airplane (NMA)?

This question was common along the sidelines last week of the Wings Club and two conferences in New York City. (See Pontifications.)

There is, of course, no definitive answer today.

But the plurality of opinion is that the NMA is off the table for the indefinite future.

Summary
  • There is no clear picture when the MAX will be recertified, either by the FAA or other regulators.
  • There is no clear picture how long Boeing will maintain production rate at 42/mo, which depends on how much longer it must wait for recertification.
  • With turmoil in the executive suite (the CEO lost his chairman’s title Oct. 11), there is no clear picture how long Dennis Muilenburg has a job.
  • With, apparently, Boeing Commercial CEO Kevin McAllister also in the cross hairs, there is no clear picture of executive suite stability at Longacres, the BCA HQ.
  • Any successors for Muilenburg and/or McAllister will want to review Boeing’s entire product strategy.
  • Therefore, do not expect any go-forward for NMA in 2020.

Other than that, everything is fine.

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Pontifications: To no surprise, MAX was major topic at 3 NYC events

  • Media, Twitter go mad over text messages.
  • Recertifying MAX now looks like December or January.
  • Boeing’s initial compensation offers.

By Scott Hamilton

Oct. 21, 2019, © Leeham News: New York: The grounding of the Boeing 737 MAX was expected to be a hot topic of conversation on the sidelines of the Wings Club event here Friday as well as two aviation conferences in town at the same time.

And it was.

How long would the grounding last? What’s the long-term impact on MAX values? How many cancellations might there be?

And then the media frenzy began and the Twittersphere went wild.

Reuters reported that a pilot at Boeing experienced, in 2016—two years before the Lion Air crash—the symptoms of a runaway MCAS in a simulator.

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The new focus in aircraft development, the production

By Bjorn Fehrm

October 17, 2019, ©. Leeham News: Over the last decades the focus for new airliner projects has been technological advancements in aerodynamics, structures, engines, and avionics. This has offered 15% efficiency gains for the new airliners over the aircraft they replace. While still important, the next airliner projects have an additional focus which has moved to the top of the list. The production phase and how to improve its many parts.

The parts include development for automation, efficient partnering/sourcing and how to reduce the expensive learning phase of the production. We will cover this change in a series of articles around the 9th Aviation Forum, an up-and-coming Munich conference that focuses on these themes.

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Is re-engining the Boeing 767 a good idea?

By Bjorn Fehrm

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Introduction

October 17, 2019, © Leeham News: FlightGlobal writes Boeing is investigating re-engining the 767-400ER with GE GEnx engines to produce a new freighter and perhaps a passenger aircraft as a replacement for the NMA project. Development costs would be lower and it would be easier to get a business plan which closes for the upgraded 767 than for the NMA.

We commented on the idea earlier in the week and here follows a technical analysis of what re-engining the 767 would bring.

Summary:

  • The 767 is 40 years old in its base design. We look at the fundamentals to understand the trades involved in extending its life with new engines.
  • We also compare the 767 technologies with those for the NMA to understand the compromises of an updated 767RE compared with a clean sheet NMA.

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737 MAX special report

Oct. 16, 2019: AlJazeera produced a 30 minute special report on the Boeing 737 MAX.

Unlike the hour-long hit piece on the 787 several years ago, undertaken with questionable tactics, this one is well done.

See the report below.

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Pontifications: Muilenburg loses chairman’s title; are his days numbered?

By Scott Hamilton

Oct. 14, 2019, © Leeham News: Look for Boeing CEO Dennis Muilenburg to leave in 2020.

At least this is my view.

But some aerospace analysts I spoke with over the weekend are split. Some believe Friday’s action by the Boeing Board of Directors “stripping” (as most media headlines and stories positioned it) the chairman’s title from Muilenburg, while his retaining the president and CEO titles, is the first step in easing him out the door next year. This is my view, too.

Muilenburg also remains on the Board.

Others think handing the non-executive chairman’s title to lead director David Calhoun is actually an effort to save Muilenburg’s job.

Here’s the divergent thinking. None of the analysts wanted to be identified because by investment bank policy, their remarks hadn’t been cleared for quotation and none had yet issued research notes in reaction.

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