Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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Pontifications: Avolon sees strong sales for Boeing 737-10
By Scott Hamilton
Aug. 14, 2017, © Leeham Co.: Avolon, one of the world’s largest aircraft lessors following the acquisition of the CIT Aerospace portfolio, believes Boeing will see 2,000 of the 737-10—doubling the internal figure Boeing used to launch the program.
In a new white paper, which Avolon periodically issues, the lessor “projects that the MAX 10 will account for approximately 20% of all 737 MAX family deliveries, which would equate to around 2,000 aircraft. This compares to the A321neo, which is forecast to account for 40% of the A320neo family, with over 4,000 deliveries,” writes Steve Mason, Avolon’s SVP of Strategy.
Mason joined Avolon from CIT acquisition, where he held a similar position and likewise issued periodic white papers.
“The value proposition of the MAX 9 has been impacted by the launch of the MAX 10. It is unclear what role remains for the aircraft, but it is likely to have a limited future,” Mason writes.
Delta asks Commerce to redefine scope of Boeing-Bombardier case
Bombardier CS100.
Aug. 8, 2017, © Leeham Co.: Delta Air Lines asked the US Department of Commerce to redefine the scope of the Boeing complaint of Bombardier price dumping in its CS100 order with the carrier, filings at DOC show.
Delta asked the DOC to redefine the aircraft definition from 100-150 seat to 125-150 seats, arguing that Boeing doesn’t make in airplane in the 100-125 seat size and therefore isn’t harmed by competition in the sale of the 110-seat CS100 that Delta ordered.
Key lessors see strong wide-body market despite worries
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Introduction
Aug. 7, 2017, © Leeham Co.: Amid talk that Middle Eastern airlines, which are the largest group of users for wide-body aircraft, may defer Airbus and Boeing airplanes, there are conflicting signs that the bleak view of the sector isn’t as weak as perceived.
Just last week, two big lessors—Air Lease Corp and AerCap–of widebody airplanes said they are confident in the sector.
Few orders have been received for the Boeing 777-8 ultra-long range airplane. Sales for its larger sibling, the 777-9, have stalled. Along with the Airbus A380 and Boeing 747-8, demand is seen as limited.
AerCap ordered 30 Boeing 787s at the Paris Air Show. ALC has a significant order of Airbus A330neos.
And, the chairman of Emirates Airline said in an interview with the region’s The National newspaper that despite the current challenges at the carrier, it expects to announce an order before the end of the year for either the 787 or the Airbus A350—and possibly the Airbus A380.
Quantities on the former weren’t discussed. Airbus is pitching 20 A380s, according to accounts.
Still, there are a large number of Boeing 777s and Airbus A330s coming off lease in the next few years that could slow orders if these aircraft are offered on the secondary market with low enough lease rates.
Summary
- Air Lease Corp.’s wide-body aircraft are placed. A330neo orders late due to engine delays.
- AerCap sees strong wide-body market, reaffirmed with 787-9 order.
- More than 100 A330ceos and 777 Classics potentially entering secondary market soon.
Pontifications: Context is everything
By Scott Hamilton
Aug. 7, 2017, © Leeham Co.: The quote appeared on Twitter, citing the chairman of Air Lease Corp, Steven Udvar-Hazy:
“I would simply but strongly encourage the OEMs to carefully review their production rate aspirations closely and realistically.”
Hazy, often (but erroneously) called the “Godfather of leasing,” is a voice to be reckoned with. He is enormously influential with Airbus, Boeing, lessors and the industry. He’s been a launch customer of several aircraft new aircraft models and, if he’s not the Godfather of leasing (this title really belongs to the late George Batchelor), Hazy raised aircraft leasing to a fine art.
So, when the quote appeared on Twitter, I sat up in my chair.
Was Hazy suggesting Airbus and Boeing will be producing too many airplanes, creating a supply-demand imbalance?
Etihad clears the decks
By Bjorn Fehrm
August 2, 2017, ©. Leeham Co: “Etihad, where to now?” was our headline on our May review of the Gulf airline. The 2016 revenue and earnings were not clear at the time.
Etihad group has now released the results, with a group loss of $1.9bn on revenues of $8.4bn. This is a shortfall of almost a quarter of the turnover, a dramatic change from a profit of $259m the year before.
. Read more
Pontifications: Boeing-Bombardier complaint revisited
By Scott Hamilton
July 31, 2017, © Leeham Co.: It’s been in a quiet period in the trade complaint between Boeing and Bombardier.
The issue moved over to the US Department of Commerce (DOC) after the US International Trade Commission (ITC) concluded there were grounds to continue the probe. Then Boeing moved for a two-month delay, to September. There it sits. But as July moves into August and with the September decision date around the corner, it’s time to revisit the issue.
How Boeing pays back the 787 debts
By Bjorn Fehrm
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Introduction
July 27, 2017, © Leeham Co.: Boeing held its 1H2017 call yesterday, giving further information on how the 787 deferred costs decline. The payback in 2Q2017 was $16m per aircraft.
Boeing needed to achieve a $36m per-plane reduction, based on our analysis, to not increase the payback amount per aircraft for the remaining aircraft in the current accounting block.
The $16m is still a low rate, although better than the $11m 1Q2017, given that the remaining $26.5bn deferred production costs must be amortized over the Program accounting’s remaining 735 units of a 1,300 units block.
The key to amortizing the costs is the different margins of the 787 variants. We compare costs and revenue of the 787-, -9 and -10 to understand the payback margins better.
Summary:
- Program accounting means deferred production costs shall be nil at the end of the accounting block.
- Right now, there is $26.5bn to amortize and not many aircraft left that can pay the sum.
- The key to a plausible payback scenario is the payback margins of the different 787s.
- We analyze the margins through modeling of net revenue and unit costs for the 787 variants.
Mid-year production update at Airbus
July 27, 2017, © Leeham Co.: It’s mid-way through 2017 and LNC is taking its second look at production and delivery stream flows for the Big Four airframe manufacturers.
We examined Boeing Monday in advance of its earnings call Wednesday. Today we look at Airbus in advance of its earnings call today. We look at Bombardier and Embraer next Monday.
We use the Airfinance Journal Fleet Tracker as the basis for our exam.
Boeing assumes 787 rate goes to 14/mo, but still working on it
Dennis Muilenburg. Photo via Google.
July 26, 2017, © Leeham Co.: Boeing posted strong earnings in the second quarter, with officials seeing continued strong demand, a recovering cargo market and strong commitment to returning cash to shareholders.
Financial guidance for the year was boosted. Boeing assumes that it will go to a production rate of 14/mo for the 787 program but there is still work to do to obtain the orders.
Boeing 2Q2017 earnings better than expected
July 26, 2017: Boeing reported better-than-expected 2Q2017 earnings today. Initial analyst reaction is below.
The press release is here.
The earnings call is at 10:30 am EDT. The link is here.