Pontifications: Boeing 777 production rates

By Scott Hamilton

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?

59% or 74%, but not 90%

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%.

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Boeing company uses A321 in website promo

Feb 23, 2017, (c) Leeham Co.: A Boeing company, Inventory Locator Service, yesterday posted an Evolution of Boeing graphic on its website that traces key points in Boeing’s history.

There was a problem, however: the airplane at the top of the graphic, which was photo-shopped with Boeing 737 identification, was an Airbus A321.

A Twitter storm immediately commenced after one person saw the Evolution and posted it on his Facebook page.

It isn’t the first time an Airbus airplane showed up in a Boeing-focused promo piece. The promo piece was still up last night, but may not be when the company opens for business in the Midwest today.

The graphic is posted below the jump in this post.

The A321 wasn’t the only problem. A 747-8 was used to represent the first flight of the 747-100. A 737NG freighter represented the first flight of the 737, which was the -100 series. A 787–which didn’t even exist at the time–was used to represent the 1997 merger with McDonnell Douglas. And a 777F was used to represent the first flight o the 78.

This isn’t the first time an Airbus A320 was used to promote Boeing.

In November 2013, the Washington Aerospace Partnership (“WAP,” as in upside the head, somehow seemed fitting) used an A320 in a full page Seattle Times advert touting the state as the best place in the US to do aerospace business.

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CSeries trans-Atlantic capability

By Bjorn Fehrm

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Introduction

February 23, 2017, © Leeham Co.: We previously described how new generation engines make the Boeing 737 MAX 8 a trans-Atlantic aircraft. The MAX 8 is smaller than the Airbus A321LR, but not the smallest single-aisle with trans-Atlantic capability. This distinction goes to the Bombardier CSeries.

We wrote about the CS100 capability to cross the Atlantic from London City Airport last year. After the article, we received new and improved data from Bombardier. The CS100 can now fly directly to US East Coast on the difficult westward leg with a business cabin of 42 seats. The updated article is here.

When we look at the improved capabilities of the CS300 (announced at Farnborough Air show last summer), this aircraft can also cross the Atlantic with a full cabin of 130 passengers.

Bombardier arranged so we could discuss this deeper with the VP CSeries program, Rob Dewar.

Summary:
  • We use our aircraft performance model to compare the CS300’s suitability for long-haul to the Airbus and Boeing competition.
  • The aircraft have similar range and seat mile costs. The smaller aircraft have lower trip costs.
  • With Rob Dewar, we explored the potential for additional capability for the CS300.

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Ryanair: cheapest and most profitable airline in Europe

By Bjorn Fehrm

February 22, 2017, ©. Leeham Co: Ryanair is Europe’s airline with the lowest fares. And it’s the most profitable, despite growing faster than even the Middle East carriers (growth needs money).

It’s time to dive deep in this locomotive. I even flew their business class before writing the report, to understand what is going on. Read more

ExIm Bank still at risk despite Boeing effort with Trump

US Sen. Richard Shelby of Alabama.

Feb. 20, 2017, © Leeham Co.: Boeing may have won over President Trump about the virtues of ExIm Bank (it’s not entirely clear), but he’s the wrong target.

It’s US Sen. Richard Shelby (R-AL) who’s been holding up appointments to the ExIm Board of Directors, blocking a quorum needed to approve aircraft financing guarantees on anything more than $10m.

Shifting support

Shelby was the chairman of a key US Senate committee which had direct authority over ExIm Bank appointments. Shelby blocked appointments under President Obama, claiming ExIm is an agency of corporate welfare, of which Boeing was the principal beneficiary.

However, Shelby was once a supporter of ExIm. After Obama was elected, the rise of the so-called Tea Party (largely to oppose all things Obama) targeted ExIm as a wasteful government agency. (Never mind that ExIm returned a surplus to the Treasury since its Depression-era inception though its fees.)

More to the point: Boeing rival Airbus selected Mobile (AL) for a new assembly site, first for the planned US Air Force tanker, the KC-330 based on the Airbus A330-200. The contract award was vitiated after it was determined the USAF treated Boeing unfairly.

Boeing won the re-bid. Airbus then chose Mobile as its US assembly site for the A320 commercial jet family.

As LNC reported in November, it’s hardly a coincidence that Shelby—a supporter of Airbus in Mobile—blocked the ExIm appointments ever since.

New position, same blocking action

With the elections last year, Shelby moved on from his chairmanship of the Senate committee oversight of ExIm.

But he still will block ExIm Board appointments, an Alabama city official who knows Shelby told LNC.

Under US Senate rules, a Senator can put a “hold” on nominations for any reason that require Senate approval.

Shelby appears ready to continue his hold.

Ironically, Boeing is a big employer in Alabama—but in defense, not commercial aerospace.

Pontifications: Boeing’s long-term message doesn’t resonate

By Scott Hamilton

Feb. 20, 2017, © Leeham Co.: Boeing’s long-term messaging that all is well isn’t resonating with a number of industry analysts and observers.

To be sure, today and in the short-term, Boeing’s stock is on a steady upward trajectory.

But aerospace analysts are not buying into the long-term message.

Neither did three speakers at last week’s annual Pacific Northwest Aerospace Alliance (PNAA) conference in Lynnwood (WA), including me.

Consider:

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Singapore 777-9 order pressures, but does not kill A380

Feb. 16, 2017, © Leeham Co.: Last week’s order by Singapore Airlines for 20 Boeing 777-9s and 19 Boeing 787-10s immediately was viewed by some as the death

Boeing 777-9.

knell for the Airbus A380.

The 777-9 order would start the final spiral down for the A380, some contend.

This overstates the case and misunderstands the nature of the order.

The A380 is in trouble, there no doubt about that. The 777-9 is putting pressure on the A380. There’s no doubt about this, either. But the contention the Singapore 777-9 order sends the A380 on a death spiral is wild fantasy.

An Airbus official appears today at the annual conference of the Pacific Northwest Aerospace Alliance (PNAA) in Lynnwood (WA). Undoubtedly, he will maintain the party line that the future of the A380 is solid. This, too, overstates the case. There can be a future for the airplane, but some major decisions must be made.

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Norwegian’s risky fleet expansion

By Bjorn Fehrm

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Introduction

February 15, 2017, © Leeham Co.: In our review of Norwegian Air Shuttle last week (Norwegian from now on), we pointed out the company’s relatively weak balance sheet. It’s considerably weaker than its direct competitors.

At the same time, Norwegians’ fleet expansion is the most aggressive outside of boom markets like India or Indonesia.

Norwegian ordered 200 narrow body aircraft in 2012. It ordered 100 Boeing 737 MAX 8s in January and 100 Airbus A320neos in June.  This compares to a narrow body fleet of 70 at the time and a fleet of 100 today (mainly 737-800s). In addition, Norwegian has 30 Boeing 787 long haul aircraft on order on top of the 12 it operates today.

How much risk do these 230 incoming aircraft pose to Norwegian?

Summary:
  • Presently, Norwegian absorbs 50% of incoming single aisle aircraft for own needs (Boeing 737-800 and later MAX 8).
  • The other 50% (deliveries of Airbus A320neo) are leased to external operators.
  • The financing need for incoming aircraft, be it for own or other’s use, is $15bn over the coming years.
  • With a balance sheet of of only twice that size and 10% own equity, the going can get rough if the market weakens.

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Huge win for Boeing in union vote

Feb. 15, 2017, (c) Leeham Co.: It wasn’t even close: 74% percent of the Boeing hourly touch-labor workers at the 787 plant in North Charleston (SC) voted against the International Association of Machinists to represent them.

It’s a humiliating defeat for the IAM that will have negative repercussions for IAM 751 in the Seattle-Everett (WA) area.

Boeing will be able to continue to hold non-union Charleston over Seattle’s IAM when it comes time to select the site for the New Mid-range Airplane (NMA) for the Middle of the Market sector. LNC calls this the 7M7.

Program launch for the NMA is widely expected next year. Site selection could come next year or in 2019.

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IAM loses union vote at Boeing SC

Update: IAM got thumped: 75% to 25% for unionization, 2,097 to 731. Kawabunga!

Feb. 15, 2017: The International Association of Machinists lost its effort to unionize Boeing’s Charleston (SC) 787 plant.

The result was announced about 8:30pm EST by the IAM, but no vote or percentage totals were included.

LNC infers that the absence of the vote totals means the IAM lost by a wide margin.

More to come….

The press release is below.

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