By Bjorn Fehrm
April 20, 2017, ©. Leeham Co: We will start the series on keeping airliners operational by discussing how the structure is kept fit.
There are three areas that are more key to flight safety of an airliner than others. The aircraft’s structure, the engines (already discussed) and the flight control system. We will start with the structure.
April 27, 2017, © Leeham Co.: The Boeing Co. late today filed a petition with the US government, charging Bombardier with “dumping” the CSeries in its deal last year with Delta Air Lines for 75+50 CS100s. Delta can convert the order to the larger CS300, which competes with Boeing’s 737-700/7 MAX.
Boeing claims Bombardier sold the airplanes for about $20m, against a cost to build the airplanes of about $33m.
The 1,039 page complaint cites as one of its references Leeham News and Comment. A redacted, 147 page version may be downloaded here: BBD Complaint 042717.
Boeing’s press statement is below the jump.
Boeing competed in the Delta competition, offering a combination of used Boeing 717s and, LNC believes, new 737-700s. The fully amortized -700s can be offered at a very low price, compared with the new 737-7 MAX (which at that time was the 125-seat, two-class version, not the 149-seat configuration it has since become). Boeing beat Bombardier in a hot contest at United Airlines, predating the Delta deal, by offering the -700 at a rock-bottom price believed to be in the $24m range, a price Bombardier could not then match. (A United official denied the $24m price to LNC, but others cited this number.)
Since the United deal, Bombardier received investments from the Quebec provincial and federal governments specifically tied to the CSeries, and more than US$1bn from a quasi-government pension fund for a stake in Bombardier’s rail unit. The investments are widely considered to be bailouts that prevented Bombardier from declaring bankruptcy due to cost overruns and delays from the CSeries and Global corporate jet development programs.
Bombardier took a US$500m “onerous contract charge” in connection with the Delta order and one from Air Canada.
Rival Embraer immediately cried foul and alleged the government monies violate World Trade Organization rules. Bombardier says the financial structures comply with WTO rules. Brazil, at the behest of Embraer, filed a formal complaint with the WTO. Boeing, while not filing its own WTO complaint, joined in the action, according to press reports at the time.
Boeing’s action today so far is limited with the US government.
By Bjorn Fehrm
April 27, 2017, © Leeham Co.: We have in several articles gone through the sizing of an NMA (New Midrange Aircraft). We looked at the fuselage, cabin, wings and engines. Now we will sum the exercises and look at the performance of the resulting aircraft.
Boeing is seriously considering launching an NMA. The key to the launch decision will be the airplane’s economics: for development and production as well as operation.
The idea is the NMA shall have “twin aisle comfort with single aisle economics.” We will now use or performance model to analyze if the final aircraft has these characteristics.
April 26, 2017: Boeing today reported first quarter revenues that were lower in the year earlier period in part because of fewer commercial airplane deliveries, but the operating margin and net earnings were higher.
There were fewer 737 deliveries as Boeing transitions from the 737NG to the 737 MAX. First deliveries of the MAX are due this quarter.
Likewise, Boeing is beginning a transition to a third family member of the 787. The first 787-10 rolled off the production line this month, beginning flight testing. The first delivery is scheduled for next year.
Revenue was down 7% YOY, to $21bn. Operating margin was up 1.7 points to 9.6%.
By Bjorn Fehrm
April 26, 2017, ©. Leeham Co: In our third article about Aeroflot, we cover the period from 2010 to today. During this period, Aeroflot started a strategic change. The airline decided to grow to a global world leader.
To get there, the group needed a multi-brand strategy. The top brand, Aeroflot, should develop into a top tier premium airline. To understand the considerable changes Aeroflot needed to go trough for this strategy, we talked to Aeroflot’s Deputy CEO Strategy and Alliances, Giorgio Callegari, about the transformation.
Callegari took us through the journey to a Four-star airline and the ranking of Aeroflot as the world strongest airline brand in its area of operation. To validate the improved ratings, we contacted Skytrax and Brand Finance, the issuers of the ratings. Read more
April 25, 2017: Boeing’s first quarter earnings call is tomorrow. Focus is expected to be on its plans for expanding after-market services with its new business unit, Boeing Global Services.
Earlier today, LNC posted a Special Report from Kevin Michaels in which he believes it will be challenging for Boeing to meet its target of $50bn in revenues.
Separately, the aerospace analyst for Wells Fargo reached the same conclusion. His report is below, followed by other analyst previews of the earnings call.
Special to Leeham News and Comment
By Kevin Michaels, Managing Director, AeroDynamic Advisory
Business gurus Jim Collins and Jerry Porras coined the phrase “Big Hairy Audacious Goal” (BHAG) to describe a business objective which is highly ambitious,
galvanizes the organization, and is often met with skepticism from outside observers. Boeing recently created a BHAG that could transform aerospace MRO. Its goal is to triple its service revenue to $50bn within the next decade, and it is taking decisive action achieve its vision.
This is the second of two Parts looking at the wide-body market
April 25, 2017, © Leeham Co.: When lessors face re-leasing wide-body airplanes as lease terms expire, they face a far narrower market than for single-aisle airplanes.
While there may be a thousand operators which can be targets for Airbus A320s and Boeing 737s, there may be only a hundred operators interested in the most popular wide-body aircraft. When you get to the Very Large Aircraft sector, the potential market declines to the figurative, and perhaps literal, handful.
April 24, 2017, © Leeham Co.: Boeing faces growing challenges this year as airplane sales slow, production of the 777 Classic declines, its new Global Services unit prepares to formally launch and a decision whether to authorize a sales offering for the New Midrange Airplane looms.
We’ve spent a lot of time covering slowing sales and declining 777 production. Tomorrow, we’ll have a special report on the ambitious Global Services strategy.
We’ve also spent a lot of time on the Boeing NMA. LNC’s Bjorn Fehrm last week presented number three in a paywall series on the NMA, looking at it from a technical viewpoint. We’ll take a look at it from a strategic point of view today.
This is Part 1 of a series looking at wide-body aircraft demand.
April 24, 2017, © Leeham Co.: We’re in a five-year slump for wide-body aircraft orders, say veteran executives of a new leasing company.
This means airlines will hold onto Airbus A330s and Boeing 767s/777s longer than planned, deferring—but not canceling—orders for Airbus A350s and Boeing 787s.
Orders for Boeing 777Xs and even Airbus A380s will resume eventually—but not any time soon.
Ray Sisson, the chairman and CEO of the new lessor AVi8 Air Capital, and Ed Wegel, president of the company, told LNC in an interview last week that there is a solid market for the proposed Boeing 7M7 (the Middle of the Market airplane).
Sisson, who was CEO of the lessor AWAS until a large portion of its portfolio was sold, also sees a robust market eventually for the 777X.
A much more modest market is seen for the A380.