Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- The BWB has a long way to go before flying passengers, freight May 12, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 21. May 9, 2025
- Does an A220-500 need a new wing and engines? Part 2. May 8, 2025
- Embraer downplays tariff impact on 2025 results May 6, 2025
- JetZero readies effort for private equity fund raising May 5, 2025
Boeing, Embraer differ on the future of upgauging
By Judson Rollins
Introduction
July 30, 2024, © Leeham News: Embraer’s new 20-year Market Outlook, released during the Farnborough Air Show, forecasted the demand for jets with more than 150 seats for the first time. This comes as market observers speculate the Brazilian jet maker is mulling a move into aircraft larger than its current flagship E2 family.
However, the Brazilian jet maker delivered temperate commentary on the future of upgauging, citing one-time developments it believes are unlikely to repeat. It said, “The market environment that led to [an] increase in average aircraft size will not be the same in the future. Consequently, the growth trend likely will not continue.”
For instance, a typical two-class Boeing 737-800 Layout of Passenger Accommodations (LOPA) in the mid-2000s comprised approximately 150 seats. By the late 2010s, this shifted to 160-166 seats. A similar Airbus A320 LOPA went from 140 to 150 seats.
Source: Embraer Market Outlook (data from Sabre).
Will the pre-COVID upgauging trend continue, and what are its implications for future aircraft selection? Boeing and Embraer have decidedly different views, and the latter’s view will drive its decision whether to enter the market for 150+ seaters.
Summary
- Boeing says upgauging will continue, driven equally by cabin densification and aircraft size selection.
- Embraer believes upgauging is largely over.
- Both OEMs’ views have key flaws.
- The upshot: “Bigger” doesn’t always equate to “more profitable.”
Boeing Estimates: How accurate and clear are the predictions?
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By the Leeham News Team
Analysis
July 29, 2024, © Leeham News: Annual projections for the upcoming year are an important piece of information released to the world at large for any publicly traded corporation, on what can be expected for the near and extended future.
Boeing (BA) reports its 2Q2024 earnings this Wednesday. An update of its guidance may be forthcoming as Boeing continues to work through additional costs following the Jan. 5 accident involving a 737-9 MAX with Alaska Airlines.
Boeing relies heavily on the use of estimates when filing its annual report and this information is crucial to investors when considering whether to invest, hold, sell or short stock in the company. Not only are estimates used in its financial reporting system, generally known as Program Accounting, but each year BA puts out an expected value of revenue to be generated in the future.
This prognostication is based on converting a percentage of the backlog for the following year and for a total period of four years to come. The 2023 projection is as follows:
“Our total backlog includes contracts that we and our customers are committed to perform. The value in backlog represents the estimated transaction prices on performance obligations to our customers for which work remains to be performed. Backlog is converted into revenue, primarily based on the cost incurred at delivery and acceptance of products, depending on the applicable revenue recognition model. Our backlog at December 31, 2023 was $520,195 [million]. We expect approximately 16% to be converted to revenue through 2024 and approximately 62% through 2027, with the remainder thereafter,” Boeing wrote.
There is also a caveat:
“There is significant uncertainty regarding the timing of when the backlog will convert into revenue due to timing of 737 and 787 deliveries from inventory and timing of entry into service of the 777X, 737-7 and/or 737-10,” Boeing writes in its 2023 annual report.
Farnborough, Day 4: Airbus comes from behind to win order contest
July 25, 2024, © Leeham News: Airbus came from behind today with a big order from flyNAS, a Saudi Arabian low cost carrier, for 75 A320neo family members and its first widebody order, for 15 A330-900s.
The announcement is a Memorandum of Understanding.
Airbus ends the show with 139 orders and commitments. Boeing ends the show with 118 orders and commitments.
ATR announced its only order for the show yesterday, for four ATR-72s from Air Tahiti.
De Havilland Canada ended the show with 22 orders and commitments for the Twin Otter and Certified Refurbished Dash 8-400s.
Embraer didn’t announce any commercial orders, but added nine C-390s to its order book.
New Boeing plea deal filed with court
By Scott Hamilton
July 25, 2024, © Leeham News: The new, second plea agreement between Boeing and the US Department of Justice (DOJ) has been filed with the US federal court in Northern Texas. Boeing agreed to plead guilty to criminal charges. The DOJ proposes a criminal penalty of $243.6m and requires Boeing to spend $455m on internal safety protocols.
The criminal penalty matches the amount in the first plea agreement of January 2021. Under the terms of that agreement, Boeing had three years to shape up, or the DOJ could pursue criminal charges. The three-year monitoring period was due to expire two days after the Jan. 5, 2024, door plug blowout of an Alaska Airlines Boeing 737-9 MAX on climb out from the Portland (OR) airport. This incident occurred at 16,000 ft. Nobody died but there were minor injuries.
The airplane was damaged throughout the cabin and into the cockpit with the sudden depressurization. Boeing bought the airplane back from the airline.
The 2021 fine and the proposed current fine have been roundly criticized as inadequate.
Farnborough, Day 2: Boeing dominates again
July 23, 2024, © Leeham News: Boeing dominating Day 2 of the Farnborough Air Show with a new, direct order for 20 737-8s from lessor Macquarie AirFinance, and a follow-on order from Qatar Airways for 20 777-9s.
Airbus announced a new order for seven A330-900s from Virgin Atlantic Airways and firmed up a previously announced order from Japan Air Lines for seven A321neos and 20 A350-900s.
Airbus, Pratt & Whitney, and Cebu Pacific Airlines of The Philippines celebrated a Memorandum of Understanding for an order of up to 152 Airbuses announced on July 2. This celebration is not in LNA’s table below.
De Havilland Canada announced orders for 11 DHC-6 Twin Otters.
Farnborough, Day 1: Boeing jumps to orders lead; De Havilland puts new life into the Dash 8-400
July 22, 2024, © Leeham News: Boeing was the clear winner in the orders announcements today at the Farnborough Air Show.
The beleaguered company announced orders, options, and commitments for 78 aircraft (see chart). Rival Airbus announced a Memorandum of Understanding for just five airplanes.
Tiny De Havilland of Canada announced firm orders and commitments for 11 “Certified Refurbished” Dash 8-400s.
The Certified Refurbishment Program is a multi-step process to rework used Dash 8-400s “to keep the fleet flying.” DHC terminated production of new -400s during the COVID pandemic when the old Bombardier factory at Downsview, Toronto, was closed. The airport there is being redeveloped. DHC is building a new plant in Calgary in Western Canada. It’s unclear if production of new -400s will resume. When the factory is complete.
“DHC has actively been acquiring aircraft in the marketplace and has begun upgrading these aircraft for delivery to customers looking to expand their fleets or become Dash 8 customers for the first time,” the company said in a statement.
DHC says refurbishments include:
- Aircraft configuration to match the customer’s existing fleet
- Completion of overdue maintenance, integration of Airworthiness Directives, and Service Bulletin upgrades
- Airframe life extensions through our ESP (Extended Service Plan) to extend the lives of Dash 8-100/200/300 to 120,000 cycles, or the ESP+ which can take the Dash 8-100 to 160,000 cycles
- Freighter conversions, including the introduction of the new Dash 8-400 Large Cargo Door and Quick Change between cargo and passenger missions
- Avionics upgrades
DHC has acquired 28 -400s for the program so far.
IAM members throw down gauntlet to Boeing, overwhelmingly back strike
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By the Leeham News Team
July 22, 2024, © Leeham News: Boeing’s (BA) largest union in Seattle, the International Association of Machinists and Aerospace Workers (IAM) District 751 – voted overwhelmingly to authorize a strike if contract negotiations fail.
Thousands of members attended a rally at T-Mobile Park, home of the Seattle Mariners baseball team, during which “nearly” 99.9% voted to empower the union to strike, according to IAM representatives.
Workers in Washington State are seeking a 40% pay increase in an attempt to claw back concessions previously given to the company by the union. The Local represents over 30,000 members in the region, which includes the plants in Renton and Everett, where the 737 Max and 777 aircraft are assembled.
The current labor contract will expire on Sept. 12, 2024. With a successful mandate granted by the rank and file, leverage will be applied to Boeing in upcoming negotiations. “We want the company to take our proposals seriously and bargain earnestly,” said Jon Holden, President of IAM District 751.
It’s been 10 years since the last contract was approved. The basic contract was entered into after a 57-day strike in 2008. Boeing’s CEO at the time, Jim McNerney, then demanded concessions the following year in return for locating a second 787 assembly line in Everett (WA), the assembly plant for widebody airplanes. The IAM offered concessions, which Boeing said were inadequate, and the second line went to the production facility in Charleston (SC).
Boeing sees traffic recovery from pandemic, growth for future in latest forecast
By Scott Hamilton
July 19, 2024, © Leeham News: Boeing sees airline traffic recovery to near-pre-COVID pandemic levels in its latest 20-year forecast for aircraft demand.
It also sees growth through 2043 along similar lines announced by Airbus last week in its 20-year forecast. The numbers between Airbus and Boeing are inconsequentially different. Boeing includes regional jets in the 70-90 seat sector; Airbus doesn’t forecast the RJ market. Over the next 20 years, Boeing forecasts deliveries of just over 1,500 RJs—a market that has been shrinking for years.
Embraer, the sole manufacturer outside of China and Russia of RJs, hasn’t announced its 2024 forecast (this usually comes during the international air shows—Farnborough is next week). Nor does it break out the RJs in its forecast, which is for single-aisle jets up to 150 seats.
In its 2024 20-year forecast released last month, the Japan Aircraft Development Corp. (JADC) forecasts deliveries of 1,584 new RJs in the 61-100 seat sector—very close to the Boeing number for RJs and the Boeing and Airbus numbers overall. The JADC forecast is the only one to provide details for sub-sectors within the RJ, single-aisle, and twin-aisle markets.
Aircraft Certification: How the Max crashes changed everything
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By the Leeham News Team
The Airbus A321XLR got caught up in the new aircraft certification environment created by the Boeing 737 MAX crisis. Source: Airbus.
July 18, 2024, © Leeham News: Much of the attention in the airline industry has recently been focused on the production issues faced by both major OEMs, Airbus (AB) and Boeing (BA). Supply chains are snarled, airlines had to re-jig their fleets, keeping less efficient aircraft in service longer than they planned and financial performance suffered.
LNA recently drilled down and detailed the long-term effects on Southwest Airlines, which is dealing with jet certification delays and must make do with a less-than-ideal fleet mix.
One of the overlooked aspects are the consequences of the Boeing 737 Max 8 accidents and subsequent Alaska Airlines 737 Max 9 door plug blowout is the effect it is having on getting new, more efficient variants certified into service to replace older aircraft.
Both OEMs have been affected. Airbus had to push back the introduction of its A321XLR by about a year, but a detailed inspection by LNA reveals that Boeing is suffering more from the increased scrutiny of the FAA and Congress.
To what extent can the A321XLR replace the Boeing 757, Part 3
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By Bjorn Fehrm
July 11, 2024, © Leeham News: We are comparing the Airbus a321XLR to the Boeing 757 to understand to what extent it can replace the 757 on the longer routes it operates for major airlines like United, American, and Delta.
We have looked at the development and operational history of the aircraft, their Apples-to-Apples capacity and range. Now, we use Leeham’s Aircraft Performance and Cost Model (APCM) to compare the operational costs of the aircraft.
Summary:
- The Boeing 757-200 has the same passenger capacity as the A321LR/XLR and a larger cargo capacity.
- Its range can compete with the A321LR but not the XLR. Both beat the 757 on operational economics.