Leeham News and Analysis
There's more to real news than a news release.
Emirates feels low-cost, long-haul competition
Note: Nov. 24 and 25 are Thanksgiving Holidays in the US. Our next post will be Monday.
By Bjorn Fehrm
23 November 2016, ©. Leeham Co: Emirates Airline president Tim Clark says the carrier “has to change its approach to long-haul pricing to combat increasing competition” after presenting a half year 2016 profit which plunged 64% on 9 November.
The reason is that traditional mainline carriers are entering the low-cost, long-haul market in addition to the established LCC entrants: Norwegian Air Shuttle, AirAsiaX and Wow Air.
Figure 1. Emirates long-haul A380. Source: Emirates.
Emirates will add new low-cost fares to keep its growing fleet of Airbus A380 and Boeing 777 filled. Clark states this is necessary and that the airline will not back down on its plans for additional aircraft. It will be a period “of fierce competition as more and more international network carriers are entering low-cost, long-haul,” declares the COO.
What has changed? Isn’t Emirates the Kings of competitive long-haul travel? Read more
Boeing aims to triple services unit; exec changes support goal
Kevin McAllister, the new CEO of Boeing Commercial Airplanes. Boeing photo.
Nov. 22, 2016, © Leeham Co.: Boeing hopes to triple its global services businesses from $15bn in revenues to nearly $50bn in the next five years. A corresponding increase is targeted in market share from today’s 7% in commercial aviation and 9% in defense.
Two moves in the executive ranks yesterday are clear signals of the increasing importance of services to The Boeing Co.’s business strategy, revenue growth and profits.
Boeing’s Conner steps down, successor named from GE Aviation
Kevin McAllister, the new president and CEO of Boeing Commercial Airplanes. Boeing photo.
Nov. 21, 2016: Boeing today announced that Ray Conner will retire as CEO of Boeing Commercial Airplanes well ahead of his Dec. 31, 2017, contract date.
Kevin McAllister of GE Aviation Services was named as his successor.
Boeing said Stan Deal was named president and CEO of Boeing Global Services, a new business unit “to be formed from the customer services groups within the company’s existing commercial airplanes and defense, space and security business units.”
Conner’s message to employees is below.
Pontifications: Airbus, Boeing still can sell planes to Iran Air
By Scott Hamilton
Nov. 21, 2016, © Leeham Co.: The vote last week by the US House of Representatives to block Airbus and Boeing from selling airplanes to Iran Air doesn’t do this, even if the US Senate goes along and if President Obama changed his mind to veto the legislation and signed the bill instead.
The House bill only prevents US-sourced financing.
Is a Boom SST good business for Virgin Atlantic?
By Bjorn Fehrm
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Introduction
November 21, 2016, ©. Leeham Co: The emergence of Boom Technology and Virgin Atlantic’s plans to offer supersonic business class passenger traffic over the Atlantic is intriguing.
Figure 1. Boom Technologies Boom Mach 2.2 airliner with 45 seater. Source: Boom
Enough of the business plans and data around the aircraft are known to enable us to do a first economic analysis.
There will have to be a lot of assumptions in such an analysis but having modeled around 100 different airliner types economics’, we have some data to base our assumptions on.
We think the accuracy will be enough to get a first feel if the Virgin Atlantic venture is tight on margin or a slam dunk (should it become reality).
Summary:
- The operating costs of a supersonic airliner will center on fuel and maintenance.
- These costs will be considerably higher than for a normal widebody airliner.
- The Virgin Atlantic venture targets the higher yield of a business passenger to cater for these costs.
- We check if this is true and if a SST venture is good use of invested capital.
Airbus, Boeing deferrals may indicate slowing global economy
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Introduction
Boeing 737 flightline at Boeing Field: 737s awaiting delivery. Seattle Times photo via Google images.
Nov. 17, 2016, © Leeham Co.: The deferral by United Airlines of 65 Boeing 737-700s announced Tuesday caused some observers to conclude this has a negative impact on the manufacturer, but this may well overlook a larger issue.
UAL is the latest “quality” airline to announce deferrals to reschedule capital expenditures or because of not needing the aircraft now.
Softening yields, particularly among US airlines, indicate over-capacity despite load factors of 85% or more, say industry observers.
While the backlogs of Boeing and Airbus remain solid today, do the actions of several major airlines indicate the leading edge of a global economy that’s beginning to soften?
Summary
Boeing stock sell-off on United news appears misplaced
Nov. 16, 2016, © Leeham Co.: The market sell off yesterday of Boeing stock appeared on the surface to be a reaction to the news that United Airlines is deferring 61 737-700s and switching these to four larger 737-800s and the balance to either the 737-8 or 737-9.
Figure 1. Boeing stock traded down on news that United Airlines is deferring 65 737s. The price stayed flat through early today. But stock for Spirit Aerosystems, which makes the 737 fuselages, recovered after a short dip (Figure 2). This suggests the Boeing sell-off was for other reasons. Click on image to enlarge.
Boeing’s stock today remains flat-to-down slightly.
An odd thing happened concurrent to Boeing’s stock decline.
After a short dip, stock of Spirit Aerosystems recovered to the level before the UAL news and remained there through the time of this writing. Spirit makes the 737 fuselages. If Boeing’s stock was hit by the United decision, then logic suggests Spirit’s stock should have been, too.
This suggests the Boeing’s sell off has other reasons.
Pontifications: Leahy’s retirement from Airbus
By Scott Hamilton
Nov. 14, 2016, © Leeham Co.: News emerged last week that Airbus super-salesman John Leahy has a new deputy, Kiran Rao.
A new title for Rao wasn’t revealed in the Bloomberg story. He currently is EVP-Strategy and Marketing, so he already was right up there behind Leahy.
But the report, which is presumed true (Bloomberg has a good track record on this sort of thing) is pretty clear indication that the 66-year old Leahy is soon to retire and Rao is almost certainly his successor.
Leahy is Chief Operating Officer-Customers for Airbus Commercial.
Clouds overhang Bombardier ahead of earnings call
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Introduction
Nov. 9, 2016, © Leeham Co.: Bombardier reports its 3Q2016 and nine month earnings Thursday and as the year prepares to enter its last 45 days, disappointment 
hangs over the company and the stock.
Summary
- Despite winning firm orders for the CSeries from Air Canada and Delta Air Lines early in the year, no other new orders have been announced.
- Deliveries of the CSeries will only be about half those projected, due to engine delivery delays from Pratt & Whitney.
- The $1bn investment from the federal Canadian government hasn’t been achieved, but an announcement may come as early as next week that an agreement has been reached.
- Boeing revised the design of the 737-7 to sit “right on top of” the CS300.
- Embraer (Brazil) is taking the government bailout of CSeries to the World Trade Organization (WTO) in inquiries, with the USA lending support.