Leeham News and Analysis
There's more to real news than a news release.
Legendary analyst Cai Von Rumohr retires after 55 years
By Scott Hamilton
Dec. 19, 2024, (c) Leeham News: It is rare that LNA takes special note of aerospace analysts. Too many of them cozy up to the companies they cover because if they don’t, they’re access may be cut off or curtailed. For most reports, we look at them for information rather than analysis and we’re happy to cite the details rather than the conclusions.
Today, we’re making an exception. Cai Von Rumohr, an analyst of 55 years, has retired. He ended his career with TD Securities, more commonly known as Cowen. In his final note to investors, Von Rumohr provides an entertaining lessons learned and rules he followed during his long career. We don’t publish full reports without permission (after all, analysts sell their reports just like LNA sells subscriptions) but in this case, we don’t think Cai will mind offering his farewell for download. It’s available below.
Boeing, Airbus still struggle with supply chains and personnel shortages
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By Scott Hamilton
Dec. 13, 2024, © Leeham News: It’s been two years since the generally accepted end of the COVID-19 pandemic. But the aerospace industry hasn’t fully recovered. Nor will it do so for some time to come.
Predictions suggest another year or two will be required to restore pre-pandemic employment levels within the supply chain. This isn’t even certain. What is certain is that the impact of inexperienced new hires in the meticulous aerospace requirements will linger on for years to come.
Michael Haidinger, President of Boeing European and Middle Eastern regions. Credit: Boeing.
Michael Haidinger, president of Boeing’s European and Middle Eastern regions, and Juergen Westermeier, chief procurement officer for Airbus, agree challenges remain in the near future.
“There is always a shortage of skilled aerospace talent intensified by the pandemic,” Haidinger said this month at the annual Aviation Forum (2024) in Munich, Germany. “As all the professionals retired, fewer new employees entered the field. Our industry needs more people who not only bring expertise but also embrace the mission of advancing aerospace.”
Haidinger added, “The deficit of skilled engineers, technicians, and other aerospace workers has made ramping up production more challenging. Attracting and retaining talent has become a top priority for us. [We are] with many companies investing in workforce development, partnerships with universities, training programs, and apprenticeship programs.”
How Trump tariffs affected, and could affect, Airbus, Boeing and Embraer
By Scott Hamilton
Dec. 6, 2024, © Leeham News: President-elect Donald Trump vowed to immediately impose a 25% tariff on “ALL” imports into the US from Canada and Mexico, and 10% from China.
Last week, he threatened to impose a 100% tariff on imports from the BRIC-aligned nations if they move away from the US dollar in international economics.
The BRIC nations begin with Brazil, Russia, India, and China (the “BRIC” part of the group). Egypt, Ethiopia, Iran, South Africa, Iran, and the United Arab Emirates round out the group.
There is widespread criticism of the potential damage the Trump tariffs could impose on the US economy. The targeted countries would be certain to impose tariffs on US goods.
The impact could be significant for commercial aviation—and Boeing in particular. Before its repeated self-inflicted wounds began with the 2018/19 737 MAX crisis, which continues today, Boeing was by far the largest US exporter. Deliveries of its 7-Series airplanes outside the US helped balance the trade deficit the US usually has.
Before Trump’s first term, China was the largest customer for Boeing airplanes. Deliveries accounted for 25% or more of Boeing’s annual deliveries. After
Trump took office in 2017 and imposed tariffs on China, Beijing stopped ordering Boeing airplanes. China was the first country to ground the MAX after the two fatal accidents. It was the last to recertify the airplane. And there still remains a sizeable inventory of undelivered 737s awaiting Beijing’s approval for delivery, one by one.
Trump also imposed tariffs on Airbus imports into the US as part of the two-decade-long World Trade Organization (WTO) trade dispute between Airbus and Boeing.
However, imposing tariffs is a complicated process. LNA extensively reported on the WTO battle (see related articles). We explain this further below.
Related Articles
Leeham News articles:
- Boeing files trade complaint vs Bombardier with Trump Administration 4-27-17
- Boeing C Series trade complaint is no surprise 5-1-17
- Boeing-Bombardier trade complaint revisited 7-31-17
- Decision was expected, tariff is a shocker in Boeing-Bombardier case 9-26-17
- Assessing the impact of the Bombardier tariff decision 9-27-17
- No harm to Boeing, what happened and what’s next 1-26-18
- Insignificant impact from steel tariff 3-2-18
- China tariffs on Boeing airplanes unlikely 3-14-18
- Boeing yields on C Series tariff case; what’s next for Bombardier? 3-26-24
- Trump proposes tariffs on Airbus; EU likely to retaliate 4-9-19
- EU ready to instantly retaliate if US imposes tariffs in WTO case 9/29/19
- US imposed $22m in Airbus tariffs in 2019 3/3/20
- EU tariffs on Boeing airplanes in effect 11/16/20
- US to tax fuselage, wings, tail imported for Airbus’ Mobile plant 12/31/20
Books to consider for Christmas
By Scott Hamilton
Nov. 29, 2024, © Leeham News: In America, it’s the day after Thanksgiving and this means the official start of Christmas shopping season.
Air Wars
- Air Wars, The Global Combat Between Airbus and Boeing, by…me. Sorry, I can’t help putting my
own book at the top of the list. Published in September 2021 while Boeing was still dealing with the grounded 737 MAX and the whole industry with the COVID-19 pandemic, Air Wars covers 33 years to September 2021 of the product and marketing strategies between Airbus and Boeing. There is special focus on Airbus’ super-salesman, John Leahy. But there is plenty of on-the-record input from Boeing executives like Scott Carson, Jim Albaugh and Ray Conner (all retired CEOs of Boeing Commercial Airplanes), Boeing and Airbus salesmen, and customers. The book tells the story about Boeing squandering its dominance and of mistakes by both companies. The book was rated Number 1 buys in the aviation sector by Amazon for a time, and on the recommended Buy lists of the year by the Royal Aeronautical Society and the Puget Sound (Seattle) Business Journal. Available in the US, select Europe and Asian Amazon outlets.
Flying for Peanuts
- Flying for Peanuts, by Frank Lorenzo. I also had a hand in this book, collaborating with Lorenzo on
the project for a time. But this is not why I’m recommending it. This is Lorenzo’s memoirs. He was a key player in the US airline industry for 25 years and, yes, he left the industry in 1990. Lorenzo was among the first to recognize the opportunities and the threats US deregulation of 1978 represented to the airline industry. He owned the smallest “local service” airline and faced going out of business unless he grew Texas International exponentially and rapidly. Even before deregulation became law, he persuaded the regulator to grant him the ability to adopt very low, unrestricted, system-wide fares branded Peanut Fares (hence the name of the book). Traffic and profits exploded. He sought to grow by making tender offers for other airlines. He lost some and won some and, in the process, incurred the wrath of the labor unions who understood all too well that his business model would infect the other airlines. This is a great read and history of that era, which transformed US airlines and eventually spread to the rest of the world.
Slow, methodical process to restore Boeing’s trust, efficiencies
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By Scott Hamilton
Nov. 28, 2024, © Leeham News: Boeing’s path forward will be slow progress, as the company recovers from a 53 days strike by its largest union, the International Association of Machinists and Aerospace workers, official said Tuesday.
“Where do we stand as Boeing today? Now that our IAM teammates are back, we have the task of resuming production. And it’s much harder to turn things on than to turn lines off,” said Michael Haidinger, president of Boeing’s European and Middle Eastern regions.
Michael Haidinger. Credit: Boeing.
Haidinger appeared before the Aviation Forum 2024, a suppliers-oriented conference held this year in Munich.
“It’s critical for us and for [suppliers] that we do that right. We cannot afford another mistake in our production system. Therefore, our safety and quality management system will guide us and determine the speed through this production restart in the Seattle region in the very near future.”
Embraer goal: $10bn in revenues by 2030, nearly doubling YE2023
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By Scott Hamilton
Nov. 21, 2024, © Leeham News: Only a few years ago, Embraer was struggling. Airbus acquired Bombardier’s C Series program for US$1 and rebranded it the A220. Instead of competing against a financially distressed Bombardier with its E2 jets, Embraer faced the global might of Airbus.
In a defensive move, Embraer agreed to create a joint venture with Boeing as the junior partner, with a mere 20% share of the JV.
Francisco Gomes Neto, President and CEO of Embraer. Credit: Embraer.
Sales of the E2 stalled while the market awaited Boeing’s takeover of Embraer’s commercial unit. All regulatory authorities quickly approved the JV except the European Union, which stalled interminably. Embraer believes Airbus was behind the stall, and it may have been. The USA’s new President, Donald Trump, imposed a 20% tariff on Airbuses delivered to the US, and the EU was in a retaliatory mood.
Then Boeing’s global 737 MAX fleet was grounded beginning on March 10, 2019, after two fatal crashes revealed a design flaw of a flight control system. A year later, the COVID-19 global pandemic began. Sales and deliveries from all manufacturers, including Embraer, immediately tanked.
A month later, Boeing withdrew from the JV. Embraer cried foul and this year won a $150m arbitration break-up fee claim.
Today, it’s clear Embraer’s operational and financial performances have recovered from these difficult years. The stock price is up 147%. Deliveries of the E-Jets are nearing pre-pandemic, pre-JV levels. The defense, executive jet, and services divisions are on upward swings. And now, Embraer’s goal is to hit $10bn in revenues by 2030, almost double what it reported for the full year of 2023.
Executives outlined the company’s progress and ambitions at an investors’ day conference in New York on Monday. This is the first in a series of reports from this event.
Boeing strike post mortem: Ortberg has work to do
- Teamsters contract expires in April 2025.
- IAM’s contract with Boeing’s defense unit follows in July.
- SPEEA engineering contract negotiations come up, too.
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By the Leeham News Team
Analysis
Nov. 15, 2024, © Leeham News: Boeing CEO Kelly Ortberg’s performance during the IAM strike is getting low marks from the men and women who will do the work that turns Boeing around-–the mechanics, techs, and engineers in the factories, according to those LNA has spoken with.
Kelly Ortberg, Boeing CEO. Credit: Boeing.
Ortberg came in talking about a “reset” in the company’s relationship with its unionized workforce. He took a good symbolic step by announcing he’d relocate to Seattle and work from there.
But while Wall Street hailed the move, it didn’t land as well as it could have.
Ortberg spent one day in the Renton factory before the strike. Boeing got a good photo of him touring the factory floor, but it’s unclear if he met with many workers.
Likewise, it’s unclear how much Ortberg was involved in one of the biggest crises his new company faced when he took over: the Machinists Union negotiations.
- Ortberg went with Calhoun’s plan
- Boeing bureaucrats believed their own spin
- Behind-the-scenes hardball
- Boeing’s billion-dollar blunder
- Absent Ortberg
- Furloughs and layoffs
- Looking ahead
Production ramp-up goals ambitious; exceed historical trends
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By Karl Sinclair
Nov. 14, 2024, © Leeham News: Airbus (AB) and Boeing (BA), the two largest commercial aircraft makers in the world, have a combined backlog of over $1tr in orders to deliver.
Both OEMs announced plans to increase production rates in the upcoming years to satisfy demand.
Airbus issued guidance for an increase to the A320neo family delivery rate of 75/mo by 2027. It is also targeting a rate of 14/mo on the A220 program by 2026.
Boeing previously projected a return to 50/mo on the 737 MAX family by mid-2025. However, LNA is told that internally, Boeing sees 2028 as a more likely timeframe. The consulting company Accenture thinks it will be five years (ie, 4Q2025) before Boeing achieves rate 50/mo.
Boeing’s 737 production rate was 52/mo on March 9, 2019, the day before the second MAX crash. Regulators worldwide began grounding the MAX on March 10. The Federal Aviation Administration grounded the US-registered MAXes on March 13 for what turned out to be 21 months.
Just how realistic are projections by Airbus and Boeing?
Boeing’s Investment-Grade Rating; Not just for bondholders
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By Karl Sinclair
Nov. 11, 2024, © Leeham News: The Boeing Company (BA) has repeatedly reaffirmed its commitment to retaining an investment-grade rating in comments from management. Many have taken that stance as an attempt to avoid an increase in interest rates on the $57bn in debt Boeing carries on its balance sheet.
However, there is another reason that is broadly overlooked by the market, analysts, observers, and media. Maintaining Boeing’s investment grade rating is important to a good portion of its supply chain that requires Boeing’s financial help.
Buried in Boeing’s filing with the Securities and Exchange Commission is this relatively innocuous paragraph:
“At September 30, 2024, trade payables included $2.7bn payable to suppliers that elected to participate in supply chain financing programs compared with $2.9bn at December 31, 2023. In future quarters, our suppliers’ access to supply chain financing could be curtailed or more expensive if our credit ratings are further downgraded.”
Boeing uses the supply chain to finance operations. Accounts Payable as of September 30, 2024, totaled $12.267bn, while Accrued Liabilities – an expense incurred but not yet paid for, hit $22.628bn (up from $11.964bn and $22.331bn year-end 2023, respectively).
Ortberg taps Mulally, Conner about Boeing’s recovery
By Scott Hamilton
Nov. 8, 2024, © Leeham News: When Kelly Ortberg assumed the chief executive’s slot at the ailing Boeing Co., he knew the company well as an outsider.
Ortberg had been CEO of Rockwell Collins, a major supplier to Boeing. After Collins was acquired by United Technologies (now RTX Corp.), he still had the vantage point of supplying Boeing. But he was and is nevertheless an outsider. He’s faced with the herculean task of fixing an American icon that’s descended into the abyss.
Being an outsider has its advantages and disadvantages. He brings fresh eyes and fresh perspective. But Ortberg doesn’t know inside Boeing, its processes, its culture (at least not intimately), or many other important things to fix the company.
Kelly Ortberg. Credit: Boeing.
To help mitigate this, Ortberg has consulted two Boeing “lifers” for background and input: Alan Mulally and Ray Conner. Mulally is a legend at Boeing, revered by many to this day for his engineering prowess and leadership style. His last position was CEO of Boeing Commercial Airplanes. Conner began working for Boeing on the shop floor and worked his way up to become CEO of BCA.
Ortberg knew both men from his supplier days. However, seeking their advice contrasts sharply with his predecessor, who was also tasked with fixing Boeing (and failed). David Calhoun didn’t reach out to these “wise men.” Instead, sources told LNA during his tenure that Calhoun believed he didn’t need and certainly didn’t want outside advice from them.