By Scott Hamilton
April 19, 2020, © Leeham News: When it comes to a decision by an aircraft manufacturer whether to develop an entirely new airplane or a derivative, these multi-billion dollar decisions involve hundreds of thousands of considerations.
Sometimes derivatives will do the job. Sometimes a new airplane is the better choice.
Given that Boeing faces a decision whether to launch the Next Boeing Airplane (NBA) and Airbus must decide how to respond, all within the next few years, looking at the considerations and some history is timely.
Today’s examination is going to focus at the 40,000 ft level. We’re not going to delve down into the decisions over suppliers or the minutiae into production. Rather, we’re going to look at general strategy.
April 19, 2021, © Leeham News: There appears to be progress in resolving the 16 year long trade dispute between Airbus and Boeing. Finally.
The dispute officially is between the European Union and the United States. But neither political entity would have pursued a dispute but for complaints by Boeing and Airbus.
No recap of the trade dispute is required for LNA readers.
April 15, 2021, © Leeham News: Boeing CEO David Calhoun turns 64 on April 18. This means he is in his final year on Boeing’s Board of Directors and as an employee, unless the Board extends his contract beyond the mandatory retirement age of 65.
In a new feature, the Aviation Writers Bloc, LNA’s panel discusses Calhoun’s legacy, whether he’ll launch a new airplane program and whether Boeing Commercial Airplanes will remain headquartered in Puget Sound.
By Judson Rollins
April 15, 2021, © Leeham News: Late last month, the aerospace and defense analysis team at Credit Suisse (CS) published its view on the future of the Airbus-Boeing duopoly, as well as an introduction to COMAC’s market position and future.
CS’s main thesis struck a decidedly upbeat note: “As a result of excess retirements due to [COVID-19], significant [sustainability investor] pressure on decarbonization, and the appeal of new warrantied aircraft, we might actually expect a period of solid new aircraft demand in a year or two.”
In terms of specific manufacturers, the team was unsurprisingly more bullish on Airbus than Boeing. They cited Airbus’s “strong market positions in narrowbodies” and their expectation that Boeing’s “recovery will be encumbered by the realities of its product portfolio.” CS did see room for longer-term optimism on Boeing, arguing that while spend on new product development “would pressure numbers this decade, it could also shift the competitive pendulum back … helping anchor a higher terminal [share] value.”
However, CS’s view seems to be more optimistic than that reflected in the two manufacturers’ equity prices. Airbus and Boeing shares are down 23% and 26% from their respective early-2020 highs.
A deeper look into their analysis raises several questions about the future trajectory for commercial aircraft sales.
By Scott Hamilton
April 12, 2021, © Leeham News: The Boeing 737 MAX reentered service in December after a 20 month grounding.
Determining values post-grounding and during the COVID-19 pandemic was complicated. The question over values is further confused by steep discounts given by Boeing as part of its need to compensate customers for the grounding.
There have been few “free market” MAX transactions to establish a solid current market value (CMV). The appraisal firm Aviation Specialists Group (ASG) last week issued its April Guide, listing values of virtually every jet airplane in service—and some that aren’t, yet. (ASG lists the Boeing 737-10 MAX, which is not even in flight testing, but not the 737-7 MAX, which was the lead test airplane for recertification.)
April 12, 2021, © Leeham News: Boeing’s annual shareholders’ meeting is April 20.
The entire Board of Directors is up for election. Boeing sets terms for one year. In theory, this prevents entrenchment. In Boeing’s case, Board members historically are reelected year after year after year.
There are several members who were appointed after the 737 MAX crisis. Still, there are major gaps in the Board’s makeup.
By the Leeham News Team
April 8, 2021, © Leeham News: Some people believe Boeing should launch a new single-aisle airplane about the size of the 757-200/300 to compete with the Airbus 321neo.
Others believe the new airplane should be a twin-aisle aircraft. A few, including LNA, believe the new airplane must be a three-member family and must be a twin-aisle.
Whatever the new airplane is, the general specifications are aircraft up to 250 passengers in two classes and a range of up to 5,000nm.
There is also agreement the airplane must start across from the A321neo. Configurations vary widely, but 190-200 seats in two classes are common.
Boeing CEO David Calhoun said on an earnings call that the next new airplane will compete with the A321 and cover the Middle of the Market.
By Scott Hamilton
April 6, 2021, © Leeham News: As if Boeing didn’t have enough challenges these days, its near-exclusive dominance for new-build freighter may be threatened.
Airbus is showing airlines and lessors a freight version of the A350 that is midway in length between the -900 and -1000 passenger versions. If enough orders are lined up—50 is said to be the magic number—Airbus could launch the program as early as this year.
But the Airbus threat isn’t the only one to Boeing’s decades’ long leadership in new-build freighters.
International regulations that take effect in 2027 mean the 777-200LRF and 767-300ERF that Boeing builds today can no longer be produced from 2027. The two aircraft won’t meet new, strict noise and emissions regulations. The engine designs and technology on the 777F date to the 1990s. Those on the 767s date to the 1980s.
The 777-8F was to be Boeing’s next generation freighter. However, program delays, financial pressures, and certification challenges cast doubts whether the -8F will be launched.
April 5, 2021, © Leeham News: Southwest Airlines didn’t ask Airbus to submit a commercial bid for the A220-300, three knowledgeable sources tell Leeham News.
Southwest conducted an internal technical analysis of the A220-300 vs. the 737-7 MAX. The A220-300 offered better economics. But this competed against the costs of retaining a common 737 fleet.
“Southwest acknowledged the merits of the A220, but there was no competition” for a commercially-based bid, LNA is told.
The airline placed an order on March 29 for 100 737-7s. Southwest said the order was an outgrowth of talks with Boeing for compensation due to the 20-month grounding of the MAX.
By the Leeham News Team
The order was expected. The carrier also considered the Airbus A220-300. But any prospect of diverging from the 50-year relationship with Boeing was at best a crapshoot.
Despite the flowering language in the press release, the key reasons are buried.