Leeham News and Analysis
There's more to real news than a news release.
Boeing to support MAX simulator demo (Update)
- Boeing CFO meetings show confidence in recertifying MAX sooner than later.
- Returning to pre-grounding production rates will be “gradual.”
- FAA clearance anticipated in 4-5 weeks.
- Boeing will urge pilots, regulators to witness simulations of MCAS flight characteristics.
- NMA, 777X delays likely.
UPDATE: Cowen & Co issued a revised note today, with new language concerning simulations of the MCAS flying characteristics. Boeing is not urging sim training. Rather, it is urging regulators and pilots to go to sites where MAX MCAS flying characteristics may be witnessed and understood. Cowen tells LNA it misunderstood what Boeing said.
May 10, 2019, © Leeham News: In a sign that Boeing is confident it’s on track with the fix of the MCAS for its 737 MAX, the chief financial officer of the company Wednesday and Thursday made the rounds in New York and Boston with aerospace analysts and key institutional investors.
Greg Smith
Coming out of these meetings is news that Boeing will support simulator training for pilots to fully understand MAX handling characteristics, one analyst reports.
Greg Smith gave the financial analysts Boeing’s latest thinking about progress in returning the MAX to the skies across the globe. He also said Boeing is using the production slowdown (from 52/mo to 42/mo) to allow suppliers, notably engine maker CFM, to catch up from their own delays and strains. The suppliers maintained the 52/mo rate.
Spirit Aerosystems said it hopes that CFM, which has been running two-three weeks late with engines–will return to rate 52 in June. This is faster than suppliers were told by Boeing when the rate was cut in April. At that time, June’s rate ramp up was goal was 47/mo, with 52 in August and 57/mo in September. Boeing last year planned rate 57 in June this year.
FAA prepared to act alone to lift MAX grounding
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Introduction
May 9, 2019, © Leeham News: Boeing hopes that the Federal Aviation Administration will lift its grounding order for the 737 MAX as early as next month. It is prepared to act alone, LNA has confirmed, rather than waiting for a consensus from global regulations.
Some airlines and aerospace financial analysts, as well as others like LNA, consultants and observers, wonder if global regulators will agree with the FAA or move more slowly.
The FAA already initially concluded simulator training won’t be necessary for pilots to understand the now-infamous MCAS system and its upgrades. After one round of comments for the proposal, which is common in the FAA process, the agency is accepting a second round of comments.
Transport Canada, however, already indicated it wants simulator training before lifting the grounding order affecting nearly four dozen MAXes at Canada’s two largest airlines, Air Canada and Westjet.
Other agencies haven’t publicly weighed in.
There were some reports the FAA may wait for all regulators to agree before lifting the grounding order.
But LNA confirmed the FAA will act on its own review, while fully briefing global regulators, who will make their own decisions.
Summary
- “Regulatory power grab” in focus, writes aerospace analyst.
- Some hope for early lifting of grounding order, others don’t see return to service until September.
- Is the Joint Authorities Technical Review panel the precursor to a new global regulator for certification?
The decline and fall of Bombardier
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Introduction
May 6, 2019, © Leeham News: Bombardier was once the leader in providing regional airliners to the industry.
Today, it’s all but exited the industry.
With the announcement that its Belfast manufacturing facility and a smaller one in Morocco are for sale, only the CRJ regional airliner remains.
Expectations are that that, too, will be gone before too long. Bombardier has been weighing its “strategic options” of the CRJ since last year, when it agreed to sell the Q400 turboprop to Canada’s Viking Air. This deal is to close mid-year.
Here’s a look back how Bombardier went from a leader to an also-ran.
Summary
- Bombardier pioneered the regional jetliner and dominated the turboprop sector.
- Embraer surpassed the former and ATR the latter.
- A bold move to jump into the lower end of the market dominated by Airbus and Boeing, coupled with bad management and over-extending the balance sheet, nearly bankrupted the company.
Pontifications: Rebuilding the MAX and Boeing brands
By Scott Hamilton
May 6, 2019, © Leeham News: Boeing has a big job ahead of it to restore faith in the 737 MAX with flight crews and the flying public.
Recertification is still weeks or perhaps months away. The return to service may be anywhere from July to August or even longer, depending on how global regulators proceed with review and approval of the revised MCAS software and pilot training.
Pilots at airlines seem split whether a “simple” computer training protocol is sufficient or whether a flight simulator training is required.
Let’s set all this aside on the safe assumption this will work itself out, whether sooner or later.
So, the question then becomes: how does Boeing repair the MAX brand—and its own.
Read more
Boeing customer compensation for MAX already at $1bn and climbing, estimates aviation lawyer
May 2, 2019, © Leeham News, New York: Boeing faces huge claims from airlines with grounded 737 MAXes, the amount of which will depend on the time the airplanes are out of service, an aviation lawyer tells LNA.
The lawyer, who is not involved in any litigation from the Lion Air and Ethiopian Airlines MAX 8 crashes, has reviewed scores of Boeing purchase contracts in the ordinary course of his practice. It’s based on terms and conditions under the Service Life clause that he concludes Boeing could face about $1bn in claims for a grounding lasting five months—or until mid-August, as three key US airlines estimate before the MAX returns to service in the US.
The amount climbs the longer the groundings are in place but could be smaller if the global grounding is lifted sooner.
MAX impact on Boeing NMA beginning to emerge
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Introduction
May 2, 2019, © Leeham News: There was indication last week Boeing’s decision on whether to approve the New Midmarket Airplane program will slide.
CEO Dennis Muilenburg said on the company’s first quarter earnings call the focus is returning the grounded 737 MAX to service.
A decision on authorizing the sales force to offer the NMA for sale is ambiguous. For the first time, targeting 2025 for entry into service appears to be acknowledged as iffy.
The statements confirm LNA’s analysis and our reports that the 2025 EIS is unlike.
Summary
- Advanced manufacturing is key to NMA production, but all elements need to fall into place—a “production moonshot.”
- For more than a year, LNA and others predicted the NMA EIS in 2025 is not possible.
- Engines won’t be ready by 2025 EIS. See here and here from March 2018.
- Latest woes from CFM on the LEAP add to uncertainty; CFM is the favorite for NMA. See here.
- Engine selection by Boeing put off until after MAX problems solved, grounding lifted.
- Authority to Offer for sale at Paris Air Show unlikely and 2025 EIS now in doubt.
Ascend takes a close look at MAX values, future
April 30, 2019: Aviation consultancy Ascend took a close look at the Boeing 737 MAX in a 30 minute Youtube video.
The consultancy begins and ends the video talking about other airplanes, but the middle focuses on the MAX, lease rates, values and considerations about the grounding.
The video is below.
Boeing suppliers ramp up schedule for MAX: 52/mo by July, 57/mo by August
Source: Boeing.
April 29, 2019, © Leeham News: Boeing reduced the production rate on the 737 line in mid-April from 52/mo to 42/mo in response to the grounding of the airplane by regulators worldwide.
The company and others said they didn’t know how long the airplane would be grounded.
But Boeing told suppliers to keep producing parts, components and the fuselage at rate 52.
The announcement was made April 5. At the same time, Boeing gave suppliers the rate ramp-up schedule.
Impact of MAX grounding emerges with earnings reports
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Introduction
April 29, 2019, © Leeham News: With first quarter financial results beginning to be reported, the impact of the grounding of the Boeing 737 MAX is beginning to emerge.
Boeing 737 MAXes stored at Everett Paine Field. Photo by Jennifer Schuld.
The first out was from Boeing itself, followed by a few of the airlines that operated the MAX before it was grounded March 13.
Boeing reported the grounding cost it about $1bn, for just the two weeks the airplane has been on the ground.
Norwegian Air Shuttle, which was using the MAX on new trans-Atlantic services, lost millions of dollars.
American Airlines will take a $350m hit from the groundings.
Southwest Airlines surprised many with a stronger-than-expected first quarter despite having 34 MAXes on the ground and a cost of $200m.
Air Canada extended the removal of its MAX fleet from its schedules another month, to Aug. 1.
Summary
- JP Morgan doesn’t predict deliveries resuming until the fourth quarter.
- The investment bank sees 200 MAXes in inventory accumulating and cash losses of $1.5bn per month while the plane is grounded.
- Wall Street hopes that 2020 will be a normalized year.
- If simulator training is required by regulators before the MAX can return to service, JP Morgan estimates more than 4,400 pilots need to be trained.
Pontifications: “We own it, but…”
By Scott Hamilton
April 29, 2019, © Leeham News: Boeing got roundly thumped for blaming the pilots in the Lion Air flight 610 crash involving the 737 MAX last October.
It took months before Boeing CEO Dennis Muilenburg issued a video in which, among other things, he said, “We own it.” He was referring to safety of the MAX.
This was widely interpreted as Boeing stepping up and taking responsibility for at least some of the causes of the Lion Air and Ethiopian Airlines crashes.
Last Wednesday, he took it all back.
On the first quarter earnings call, Muilenburg denied there was any “technical slip or gap” in designing the now famous MCAS system. He said “actions not taken” contributed to the crash, a thinly veiled reference once again to pilot error. (More on this below.)