Leeham News and Analysis
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Leeham News and Analysis
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IRKUT MC-21; we look at the MC21-300.
By Bjorn Fehrm
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Introduction
July 28, 2016, ©. Leeham Co: In February we did a first analysis of the new Irkut MC-21 single aisle aircraft that Russia is developing. We found that the aircraft has its own profile; it’s not a copy of a Western design. Irkut is the company within Russia’s United Aircraft group which is developing MC-21 (or rather, its design bureau, Yakovlev, is). Irkut has also gone its own way in sizing the aircraft.
Figure 1. MC-21-300 at the roll out in June 2016. Source: Irkut.
In our February analysis, we found that the first aircraft being developed, the MC-21-300, is larger than both the Airbus A320 and Boeing 737 MAX 8, the present top sellers in the single aisle market. At the time, we decided to analyze the aircraft which was closest to those two in size, MC-21-200, which is the second variant in development. We will now look at the larger MC-21-300 (Figure 1), the aircraft which rolled out in June and which will fly early next year.
Summary:
- The MC-21 has its own profile; it is not a copy of a Western aircraft. It has a wider cabin than the A320 and a higher capacity in its base variant, the MC-21-300.
- The MC-21-300 is smaller than an A321. It most closely resembles a Boeing 737 MAX 9 in size. We will therefore conduct the analysis of the MC-21-300 by comparing it to the largest Boeing MAX variant.
747 production may end: Boeing
July 27, 2016: For the first time in a Securities and Exchange Commission filing, Boeing said production of the iconic 747 may end.
In a 10Q quarterly filing today, concurrent with the 2Q2017 earnings release, Boeing said:
Boeing: program charges right course to de-risk finances
Dennis Muilenburg, CEO The Boeing Co.
July 27, 2016, © Leeham Co.: Boeing officials termed charges against the 787, 747-8 and KC-46A as the right course while reaffirming the underlying strength of the company.
CEO Dennis Muilenburg said the charge against the 787 was the right decision to reduce the financial risk going forward.
He also said the write down of the remaining deferred production costs of the 747 significantly de-risk the program. Boeing reaffirmed its belief in the future of the program, despite challenges with the cargo market.
Despite continued charges against the tanker, Boeing saw the first flight of the first production aircraft during the year.
Boeing posts loss on charges
July 27, 2016: Boeing posted a loss for the second quarter on more than $2bn in after tax charges, announced last week, and amounting to $3bn in before-tax charges.
The press release is here.
With advance warning last week, Boeing stock was up $2.95 in pre-market trading today an hour before its earnings call.
Boeing’s press release synopsis:
- Revenue increased to $24.8 billion on strong commercial deliveries and services growth
- Loss of $0.37 per share (GAAP) and core (non-GAAP)* loss of $0.44 per share reflect $3.23 per share impact related to previously announced 787 R&D reclassification and 747 & Tanker charges
- Strong operating cash flow of $3.2 billion; repurchased 15 million shares for $2.0 billion
- Backlog remains robust at $472 billion with nearly 5,700 commercial airplane orders
- Cash and marketable securities of $9.3 billion provide strong liquidity
- Reaffirmed cash & revenue guidance; EPS reflects reclassification, charges, solid performance & tax
Some initial analyst takes:
Boeing accurate on pax forecast, missed cargo by 22%: Wells Fargo
Sam Pearlstein
July 26, 2016: Boeing’s 1996 20-year Current Market Outlook was an accurate forecast for passenger airplanes but overstated demand for freighters, a new analysis by Wells Fargo Securities indicates.
Aerospace analyst Sam Pearlstein took issue with “skeptics” (notably, Airbus, though Pearlstein didn’t name names) over Boeing’s forecast of greater demand in the small wide-body sector. Airbus believes the number spiked to convince the Boeing Board of Directors that there is demand for the Middle of the Market airplane. Pearlstein notes that Boeing’s forecast “has proven remarkably accurate.”
However, Pearlstein concludes that Boeing’s cargo demand forecast missed actual demand by a whopping 22%.
Pontifications: Boeing softens 747-8F recovery
By Scott Hamilton
July 25, 2016, © Leeham Co.: Boeing July 21 announced it is taking an after tax charge of more than $800m against the 747-8 program. It also canceled plans to increase production of the 747-8F from the current 0.5/mo to 1/mo in 2019 on the long-held belief demand for the 8F would recover as 747-400Fs age.
In an email to LNC, a Boeing Commercial Airplanes spokesman wrote, “We have consistently said that while there is a cargo market recovery – it is not as robust as we had expected. Our new long term forecast projects cargo traffic to grow at 4.2% per year over the next two decades. But in the short term, the cargo market continues to struggle.
“The 747-8 is closely tied to the cargo market. There is an opportunity starting around 2019 when many 747-400 Freighters will be retired. Some of that replacement could go to the 747-8F, some to 777F, but some of those airplanes won’t be replaced at all. The decision we announced reduces future risk for the program and the company– and allows us to see how that replacement cycle plays out.”
With that, years of forecasts of a solid recovery for the 747-8F that ran counter to many outside Boeing was softened considerably.
Boeing announces $2bn in new charges
July 21, 2016, © Leeham Co.: Boeing today announced $1.66bn in new after tax charges to its 787 and 747-8 commercial programs and a $393m after tax charge for its KC-46A USAF tanker program.
“On a pretax basis at the segment level, Boeing Commercial Airplanes will now record an earnings impact totaling $2.78 billion and the Boeing Military Aircraft segment of Boeing Defense, Space & Security will report an earnings impact of $219 million,” Boeing said in a statement.
Boeing also announced that a planned production rate increase for the 747-8 from 0.5/mo to 1/mo in 2019 has been cancelled.
Boeing KC-46A completes Milestone C
Boeing KC-46A refueling Boeing C-17. Photo via Boeing. Click on image to enlarge.
July 20, 2016, © Leeham Co.: Boeing and the USAF last week announced that the KC-46A tanker successfully completed Milestone C in the refueling flight testing program.
The KC-46A completed refueling of five aircraft, a requirement under Milestone C: the F16, F18, AV8B Harrier, A10 Warthog and the C17. Additionally, the KC-46A itself was refueled from a Boeing KC-10.
The C17 previously proved to be a problem when aerodynamics for the refueling boom revealed more stress than was permissible.
Weekly analyst synopsis: Farnborough recap
July 20, 2016: Aerospace analysts had somewhat different takes on the commercial aviation portion of the Farnborough Air Show. This week’s analyst synopsis includes some of the analyst reports. Between now and the end of the month, earnings season begins reporting the second quarter results. Airbus reports July 27. So does Boeing. Bombardier and Embraer report after July.
Dearth of wide-body order hang over Airbus, Boeing
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Introduction
July 25, 2016, © Leeham Co.: It wasn’t a good two weeks for wide-body airplanes.
Airbus, responding to a leak to the Paris newspaper La Tribune, confirmed it will reduce production for the A380 from 20/yr in 2017 to 12/yr in 2018—returning the program to a loss.
Boeing firmed up an MOU announced at the Paris Air Show with Volga Dnepr for 20 747-8Fs, but wouldn’t say how many are firm orders and how many are options.
Week 2: Boeing took nearly $1.7bn in after-tax write downs for the 787 and 747-8 programs.
And, while not directly tied to wide-bodies per se, Delta Air Lines announced it will reduce its trans-Atlantic services for a variety of reasons. Most of these services are performed with wide-body aircraft.
Summary
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Posted on July 25, 2016 by Scott Hamilton
Airbus, Airlines, American Airlines, Boeing, Delta Air Lines, Leeham News and Comment, Premium
747-8, 787-10, 787-9, A350-900, A380, Airbus, American Airlines, Boeing, Delta Air Lines, Emirates Airline, Volga-Dnepr