Leeham News and Analysis
There's more to real news than a news release.
Assessing the 25 YOA aircraft factor
Subscription Required
Introduction
Click on image to enlarge.
Sept. 21, 2017 © Leeham Co.: Airbus and Boeing look ahead to 2021 and the next several years when wide-body aircraft begin turning 25 years old to spur orders for this sector.
Boeing specifically points to this period as one reason for the announcement last week that it will boost production of the 787 to 14/mo beginning in 2019.
Summary
- There already are 1.4 times more wide-body airplanes scheduled for delivery in 2021-2025 than there are aircraft turning 25 years old.
- The next surge in aging aircraft comes ~2030.
- Middle of the Market aircraft isn’t factored in.
CSeries economy up to 3% better than advertised
Sept. 19, 2017, © Leeham Co., Montreal: The Bombardier CSeries has proved to be 1% to 3% more fuel efficient in service than advertised, the company revealed last week at its Media Day.
The improvements depend on the mission: 1% on shorter routes and 3% on the longer ones.
Better-than-advertised performance had been rumored, and reported, for months but this is the first time Bombardier confirmed the reports.
It also depends on the model. The CS100, a shrink design, is slightly better than advertised; the CS300—the optimized design—is the better performer.
Assessing the 787 production rate increase
Subscription Required
Introduction
Sept. 18, 2017, © Leeham Co.: Boeing last week announced it will take the production rate of the 787 from 12/mo to 14/mo in 2019.
Boeing 787-9. Source: Boeing.
The decision to do so was couched in a strong backlog and strong forthcoming demand by CEO Dennis Muilenburg at a Morgan Stanley conference.
But analysts think the move is more about boosting free cash flow and hitting margins than it is about demand.
Summary
- Boeing sees demand surging from 2019 for widebodies generally and the 787 specifically.
- Muilenburg says Boeing is working “skyline” positions in 2019 and 2020 (LNC saw these years as already filled).
- Widebody jets hitting 25 years old early next decade.
- Airbus concurs.
Pontifications: Next steps in Boeing-Bombardier trade complaint
By Scott Hamilton
Sept. 18, 2017, © Leeham Co.: The US Department of Commerce is due next Monday to hand down its preliminary decision on whether to impose tariffs on Bombardier’s C Series sold to Delta Air Lines.
The price dumping complaint, filed by Boeing earlier this year, cleared the US International Trade Commission on a 5-0 vote. The ITC found probable cause (my words) to proceed with the complaint. From there, investigation shifted to the DOC.
- Update: Boeing UK responds to UK criticism.
- Update: Bombardier responds to Boeing’s response.
The details are complex and need not be recapped here. What is important are the next steps, assuming—as widely expected—DOC sides with Boeing.
Bombardier concedes likely loss in trade complaint, looks to next phase
Sept. 14, 2017, © Leeham Co., Montréal: Bombardier officials conceded Tuesday that they are likely to lose the price dumping complaint filed by Boeing with the US Department of Commerce.
Fred Cromer. Photo via Google images.
This is the phase in which DOC determines if tariffs (penalties) should be imposed because Bombardier sold its CS100 to Delta Air Lines at a price so low it constitutes dumping under US law. Boeing is asking the department to impose a tariff of 79%, the difference between the sales price estimated by Boeing (which Bombardier and Delta dispute) and the production cost. Boeing cited LNC’s cost estimate, which was made before BBD wrote off several billion dollars of the program and cut costs through a financial restructuring.
Boeing ignored the well-known fact (which itself experiences) that production costs for early orders exceed sales price. DOC seems unlikely to make this distinction, based on filings reviewed by LNC.
A preliminary decision is expected Sept. 25.
Boeing to boost 787 rate to 14/mo
Sept. 13, 2017, (c) Leeham Co.: Boeing announced today it will boost the production rate of the 787
to 14/mo in 2019, confounding analysts who believe the rate is not warranted.
LNC‘s own analysis agrees. The backlog through Aug. 31 is 700, down 20 airplanes from Dec. 31. The book:bill rate has not exceeded one since 2013.
The rate is not sustainable, LNC believes, beyond 2020.
British PM seeks Trump help in Boeing-Bombardier complaint
Sept. 12, 2017, © Leeham Co.: Montreal: Bombardier is holding a media day today and an investors day Thursday, focusing on its commercial airplane division.
Theresa May
Today The Times of London revealed that British Prime Minister Theresa May called President Donald Trump asking him to intervene in the trade complaint by Boeing over the Bombardier C Series.
The story is largely behind a paywall, but other outlets picked up the story.
May is concerned because Bombardier makes the C Series wings in Belfast, Northern Ireland, which is part of the United Kingdom.
A preliminary decision on the complaint is due from the US Department of Commerce Sept. 25. LNC and most others predict a decision in favor of Boeing.
Boeing asked Commerce to impose penalties of more than 79% under each of two provisions concerning anti-dumping, the basis for Boeing’s complaint.
Pontifications: Boeing’s sense of invincibility
By Scott Hamilton
Sept. 11, 2017, © Leeham Co.: I can’t help but get the feeling that Boeing feels it’s invincible these days.
And why not?
Boeing racked up some impressive victories and took some hardline positions in recent months that move it forward for its corporate goals.
Costs for IAG’s low-cost airlines
By Bjorn Fehrm
Subscription required
Introduction
September 07, 2016, ©. Leeham Co: Yesterday we described International Airlines Group’s (IAG) Vueling and LEVEL LCCs. Now we look at their cost and compare these to the direct competition; Ryanair, easyJet, Norwegian and Eurowings.
For Vueling and its competition, we have cost data from 2016 and 1H2017. For LEVEL, it’s too early. It started operations in June 2017. Here we compare the seat-mile costs of the chosen Airbus A330-200 to Norwegian Air Shuttle’s (Norwegian) Boeing 787-8.
Summary:
- Vueling has higher operating costs than its direct competition, mainly caused by lower load factors and lower fleet utilization.
- At present fuel prices, the A330-200 used by LEVEL does not have a Direct Operating Cost (DOC) disadvantage compared with Norwegian’s 787-8.
Boeing claims WTO victory; not so fast, claims Airbus
Sept. 3, 2017: Boeing once more claimed a sweeping victory in the endless battle over illegal subsidies at the World Trade organization.
Boeing issued a press release today touting a victory at the appellate level in which the WTO body rejected an earlier finding that Washington State tax breaks for the Boeing 777X were a “prohibited” subsidy.
Airbus countered that a parallel case found the tax breaks to be “illegal and actionable.”
The dueling press releases are below.