Leeham News and Analysis

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There's more to real news than a news release.
Leeham News and Analysis

Boeing launches PFS 2.0

Update, 0815 PDT July 7: Boeing Corporate Headquarters responded to our questions. The transcript has been added to the article below.

Boeing LogoJuly 7, 2016, © Leeham Co.: Boeing’s controversial Partnering for Success (PFS) drew ire from its suppliers and scorn from observers for its heavy-handed, threatening cost-cutting demands: shave your costs to Boeing 15%-25% or be put on our own no-fly list of companies that we won’t do business with.

Boeing wasn’t shy about who it targeted, or punished. Even supply-chain giant United Technologies was placed on Boeing’s no-fly list when it balked at the onerous demand.

Now Boeing is moving forward with PFS 2.0, a second round of demands.

Summary
  • PFS 1.0 focused on price.
  • PFS 2.0 focuses on terms and conditions.
  • Boeing wants to stretch accounts payables; some suppliers balking.
  • Suppliers get credit for investing in technology.
  • Threats cease in PFS 2.0.

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 21 Comments

 Posted on July 7, 2016 by

 air force tanker, Boeing, Leeham News and Comment, Pacific Northwest Aerospace Alliance, United Technologies

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IATA, Lufthansa cargo reports are discouraging

July 6, 2016, © Leeham Co.: Going into the Farnborough Air Show (#FIA16 on Twitter) next week, ominous signs continue to emerge about the health of the air cargo

Photo via Google images.

industry.

The International Air Transport Assn. (IATA) Wednesday said yields and traffic remain under pressure. Freight tonne kilometers fell 0.9% year-over-year, IATA reported.

“Yields remained pressured as freight capacity measured in available freight tonne kilometers (AFTKs) increased by 4.9% year-on-year,” IATA said. “reight demand decreased or flat lined in May across all regions with the exception of Europe and the Middle East. These regions recorded growth in air cargo volumes of 4.5% and 3.2%, respectively, in May, compared to the same period last year.”

Lufthansa Cargo saw yields in a “landside” drop, according to a Bloomberg report.

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 5 Comments

 Posted on July 6, 2016 by

 Airbus, Airlines, Boeing, Farnborough Air Show, IATA, Paris Air Show

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Farnborough Preview #3: Analysts weigh in

July 6, 2017: The industrial portion of the Farnborough Air Show (#FIA16 on Twitter) officially begins Monday and runs through Thursday. There are also some special events Sunday. LNC will be reporting from the Show throughout the week.

Below are a few final previews from aerospace analysts, followed by other analyst reports for the last week. There will be no Weekly Analyst Synopsis next week because of the Show.

Highlights below:

  • Expectations for orders modest-to-slow. (Credit Suisse, JP Morgan).
  • Southwest MAX deferral (Credit Suisse).
  • Airlines face softer environment. (JP Morgan.)
  • MOM Aircraft and 777X. (Buckingham Research.)
  • Spirit Aerosystems looks to A350 charge.

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 10 Comments

 Posted on July 6, 2016 by

 Airbus, Boeing, Farnborough Air Show

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Book Review: The Crash Detectives

 

Crash DetectivesJuly 5, 2016, © Leeham Co.: The Crash Detectives, by Christine Negroni, © 2016. Penguin Books. Available on Amazon.com.

As an avid follower of The Smithsonian Channel’s “Air Disaster” series and The Weather Channel’s “Why Planes Crash,” as well as knowing Christine Negroni, I was anxious to read her new book, The Crash Detectives. (Negroni is also the author of Deadly Departure, about TWA Flight 800.)

Negroni is no wanna-be aviation disaster geek. Her resume qualifies her to understand aviation accidents and speak and write with knowledge about them.

Negroni writes about dozens of aviation accidents and mysteries. Some of these are well known (the de Havilland Comet I accidents, for example). Some were miraculous outcomes (United Airlines 232, US Airways 1549, Qantas Airways 32). Some are ancient history (pre-World War II, including the disappearance of Amelia Earhart.)

Among the most interesting are the accidents in which hypoxia of the pilots are involved. These make fascinating reading. And it is hypoxia that is the leading cause of Negroni’s theory of one of commercial aviation’s most infamous mystery.

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 12 Comments

 Posted on July 5, 2016 by

 Airbus, Boeing, Malaysian Airlines, MH370

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Pontifications: Boeing is back

Hamilton ATR

By Scott Hamilton

July 4, 2016, © Leeham Co.: It’s looking like all the pain and agony of the 787 development is behind Boeing. (Except for the deferred production costs, of course.)

Boeing is back into airplane development mode.

To be sure, only one of these is a new airplane. The others are derivatives. But at least Boeing seems to be on the move after slowing the train (to mix the metaphors) considerably following the 787 debacle.

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 98 Comments

 Posted on July 4, 2016 by

 Airbus, Boeing, Farnborough Air Show, GE Aviation, MOM, Pontifications

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Farnborough Air Show preview: expectations and possible surprises

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Introduction

July 4, 2016, © Leeham Co: The Farnborough Air Show begins next Monday and predictably, focus will be on orders.

With new airplanes from Airbus and Boeing past their development stages, conventional wisdom says there won’t be much new in this arena.

Don’t be so sure.

Bombardier is now on an upward trajectory, but don’t look for a big splash at #FIA16 (for those looking for this year’s Twitter handle). Embraer will have its E190-E2 at the show.

It’s Boeing’s 100th Anniversary and the company is rolling out the history for the show.

Summary

  • No new products from Airbus.
  • Boeing may have a surprise.
  • Low number of orders anticipated.

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 1 Comment

 Posted on July 4, 2016 by

 Airbus, Boeing, Bombardier, CFM, Comac, Embraer, Farnborough Air Show, Irkut, Mitsubishi, Pratt & Whitney, Premium, Rolls-Royce

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Southwest’s MAX deferral

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Introduction

Southwest Airlines deferred 67 Boeing 737 MAX deliveries and some viewed this as a negative for the program. Photo via Google images.

June 29, 2016, © Leeham Co.: News last week that Southwest Airlines deferred 67 Boeing 737 MAX deliveries three year caused some to conclude that this is a harbinger of bad news for Boeing and the MAX program.

LNC disagrees with this conclusion.

Summary
  • Southwest says it’s about not having a “subset” fleet of the 737 Classic when the MAX enters service.
  • The airline also says it needs to spend more on technology, an area where WN has long lagged its competitors.
  • Accelerated retirement of the 737-300/500 is a key reason for the fleet planning changes.
  • Long-standing fatigue issues with the Classic remain a problem.

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 Posted on June 30, 2016 by

 Airlines, Boeing

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Analysts opine on Airbus, Boeing, Iran and Brexit

Analyst Synopsis

Click on image to enlarge.

June 24, 2016: Brexit continues to creep into US analyst reports for the potential impact of companies doing business in the United Kingdom.

But there are other issues as well. Highlights this week:

  • Spirit Aerosystem is a supplier to Airbus and Boeing. Deliveries to Airbus for the A350 continue despite program delays. Negotiations continue with Boeing over new contract terms. (Buckingham.)
  • Don’t freak out over the Southwest Airlines deferral of Boeing 737 MAX. (Credit Suisse.)
  • The Iran deal isn’t a big deal yet for Boeing. (Goldman Sachs.)
  • Brexit may benefit B/E Aerospace. (JP Morgan.)
  • US trans-Atlantic airlines likely will be hurt by Brexit but purely US domestic carriers are fine. (Morgan Stanley.)

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 32 Comments

 Posted on June 29, 2016 by

 Airbus, Airlines, B/E Aerospace, Boeing

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Brexit special: analyst reaction

Brexit

Source unknown. Via Twitter.

June 27, 2016: Aerospace and airline analysts are reacting to Thursday’s vote in Britain to leave the European Union. Below is a synopsis of some of the analyst notes we receive.

Credit Suisse

We are forwarding the analysis our European Transports team put out this morning on Brexit and have a few observations as it relates to US Airlines.

  • GBP Exposure: For the US network carriers (UAL, DAL, AAL), GBP exposure averages ~2-3% of total revenues with overall UK exposed revenues ranging 4-6%.
  • Impact to High Yield Transatlantic Traffic Primary Concern: For US network carriers, we see the primary concerns post-Brexit on the demand implications on the Transatlantic. Last week IAG issued a profit warning which worries us on corporate demand weakness. Given scheduled seat growth in the Transatlantic continues to outpace demand (H2 seat growth US-EU scheduled at 8.6%), capacity cuts are needed to stabilize pricing particularly since UK GDP is likely to slow even further. We look to Q2 earnings calls next month for additional color from carriers.
  • AAL Viewed Most at Risk Given Partnership with IAG, but Our Team Believes IAG is Least at Risk [among EU airlines] from Future UK-EU Air Service Negotiations: Our European analyst believes IAG’s airlines would see limited effect from the UK exiting the EU Open Skies agreement as long as renegotiated UK-EU bilaterals do not limit service levels. This suggests that AAL’s relative underperformance was overdone on Friday; however, we expect Brexit-related uncertainty to continue to weigh on network carriers, and reiterate our confidence in domestic carriers (Outperform on LUV & SAVE).

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 70 Comments

 Posted on June 27, 2016 by

 Airbus, Airlines, Boeing, IATA

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Pontifications: Time to calm down from last week’s news cycle

Hamilton ATR

By Scott Hamilton

June 27, 2016, © Leeham Co.: Last week turned out to be one of the busiest in aviation in quite some time.

  • Details of the Iran Air Boeing “order” emerged. Everyone overlooks that this is really a “Memorandum of Agreement,” which is subject to who-knows-how-many contingencies.
  • Frothing occurred over news that Volga Dnepr (Air Bridge Cargo) may firm up 10 orders for the 747-8F, an MOU announced at the Paris Air Show last year, at this year’s Farnborough Air Show. This, along with the Iran Air “deal,” was viewed as savior for the 777 Classic and 747-8 lines. Not so fast.
  • Southwest Airlines announced it’s deferring 67 Boeing 737 MAX deliveries until well into the next decade. This prompted some to claim this is a harbinger of bad things to come for Boeing.
  • Brexit was viewed as a disaster for the global economy, Airbus, Boeing, Europe’s airlines and all mankind.

As you can see from my sarcasm, I disagree with each of these. Here’s why.

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 113 Comments

 Posted on June 27, 2016 by

 Airbus, Boeing, Farnborough Air Show, Paris Air Show, Pontifications

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