Leeham News and Analysis
There's more to real news than a news release.
Boeing receives first contracts for KC-46A production
Aug. 18, 2016: Boeing received the first two contracts for production of the KC-46A aerial refueling tanker, the company announced.
From the press release:
ExIm remains blocked by one US Senator
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Introduction
Aug. 18, 2016, © Leeham Co. The US Congress reauthorized the ExIm Bank after a long effort to kill the institution. But the Bank remains out of business for transactions for more than $10m. This means Boeing can’t use the Bank for export financing for purchasers of its 7-Series airplanes.
Why?
Because the Bank doesn’t have a quorum for its Board of Directors.
Why?
Because one US Senator is blocking appointments that would put the Bank back in business.
Who is this Senator?
US Sen. Richard Shelby (R-AL) is the lone senator blocking the US ExIm Bank from approving credit support for more than $10m. Boeing was a large beneficiary of ExIm support. Shelby is a supporter of the Airbus A320 plant in Mobile (AL). Photo via Google images.
Richard Shelby of Alabama. Shelby once supported ExIm Bank. Now he doesn’t.
According to news reports, Shelby became a convert to the extreme right’s view that ExIm is a form of corporate welfare and Boeing is its primary recipient. Boeing doesn’t need this support, Bank opponents say.
LNC believes there might be another reason.
Alabama is where Boeing rival Airbus opened an A320 assembly plant last year.
Summary
- Airbus had an advantage over Boeing with ExIm Bank shut down—until Airbus ran into its own export financing issues.
- Boeing has a defense unit in Huntsville (AL).
- Emerging Boeing rival Bombardier retains export credit financing support.
Weekly analyst report: Hold on Bombardier
Aug. 17, 2016: Bombardier’s first-half orders from Air Canada and Delta Air Lines for the C
Bombardier got a needed boost for C Series orders in the first half, but some analysts need more. Photo via Google images.
Series helped, but didn’t eliminate skeptics.
Canadian securities firm GMP issued a note Aug. 5 (though we received it only Aug. 12) that maintains a Hold rating.
Goldman Sachs worries about wide-body production rates and overall supply and demand. Morgan Stanley also points to supply-demand.
WTO near decisions on Airbus, Boeing compliance
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Reuters reports that the World Trade Organization (WTO) is nearing decisions on whether Airbus and Boeing complied with previous rulings to fix subsidies the WTO found were illegal in the production of their commercial airliners.
In the meantime, the United Kingdom’s Serious Fraud Office (SFO) investigation into improper use of consultants by Airbus appears to be spreading to the US Department of Justice, according to press reports.
The website AL.com (for Alabama) his this report, focusing on the potential impact to the Airbus’ presence in Mobile (AL). AL.com referred to an original report in The Times of London.
Boeing is not without its own problems. The Us Securities and Exchange Commission is said to be probing alleged improprieties in its use of program accounting for the 787 and 747-8. Program accounting is an approved method of cost accounting. The reported SEC probe is looking into whether Boeing improperly applied costs in the two aircraft programs.
What’s happened to the VLA sector?
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Introduction
Aug. 15, 2016, © Leeham Co.: Boeing says it may discontinue the 747 program.
Airbus put the A380neo on indefinite hold. Qantas Airways says it doesn’t want its last eight orders. The OEM will reduce the production to 12/yr in 2018.
There haven’t been any Boeing 777X sales since June 2015. There are only six identified customers and there has been a new, identified customer added since July
Boeing is considering a larger 777-10, which will carry 50 more passengers than the 777-9. But is there a market? Boeing photo via Google images.
2014, when ANA ordered the X.
Sales have dried up for the 365 passenger Boeing 777-300ER and only a smattering of orders have come in for its competitor, the Airbus A350-1000.
What’s happened to the Very Large Aircraft sector? What’s happened to the large, medium twin aircraft sector?
Summary
- The VLA market pioneered by Boeing and pursued by Airbus is virtually nonexistent.
- Yet there are those in Boeing who want to launch a 450-passenger 777-10 into a dubious market demand.
- 777 Classic sales dried up, but A350-1000 isn’t doing great, either. Are these too big, too?
Pontifications: Mitsubishi ramping up flight testing for MRJ
By Scott Hamilton
Aug. 15, 2016, © Leeham Co.: Mitsubishi Aircraft Corp. (MAC) is about to dramatically ramp up its flight testing of the MRJ-90.
Media has been alerted to an all-day event next month, complete with a tour of the Moses Lake (WA) facility, where test airplanes will be based.
The program is two years behind schedule for the brand new design, the first commercial airliner produced by Japan since the YS-11 turboprop more than 50 years ago.
Boeing KC-46A cleared for production
Click on image to enlarge. Image via Google.
Aug. 14, 2016: The Pentagon cleared Boeing’s KC-46A aerial refueling tanker for Low Rate Initial Production (LRIP) after the aircraft completed Milestone C refueling tests.
All that remains now is for the US Air Force and Boeing to execute the contracts.
This is welcome news for Boeing and the USAF.
Boeing lays ground to cut 777 rates again
Greg Smith, CFO of The Boeing Co.
Aug. 11, 2016, © Leeham Co.: Boeing is laying the groundwork to further reduce the production rate on the 777 Classic and scrap a planned rate increase for the 787 from 12 to 14/mo.
Greg Smith, CFO of The Boeing Co., reiterated a message from CEO Dennis Muilenburg during the 2Q2016 earnings call that these rate adjustments may be forthcoming.
Smith made his remarks at an investors day conference sponsored by Jefferies & Co.
Boeing slightly leads Airbus in YTD orders
Aug. 8, 2016, © Leeham Co.: Boeing continues to lead Airbus in the race for orders post-Farnborough Air Show (FIA), but there are key orders announced there that haven’t been booked on the two OEMs order books.
Boeing hasn’t booked most of the firm orders yet from Volga Dnepr/Air Bridge Cargo announced at the show for 747-8Fs. Airbus hasn’t booked the 100 announced orders for A320s from AirAsia. Boeing also announced some 737 MAX orders that need to be firmed up into contracts before booking to its website.
The AirBridge orders will be closely watched. Boeing said at Farnborough that the MOU for 20 747-8Fs announced at the Paris Air Show a year earlier were now a firm contract, over six years. But Boeing and AirBridge did not say how many were firm orders, other than to identify four aircraft that were previously delivered under leases as part of the 20.
Reuters believes that 13 of the 20 are firm. Those four previous deliveries appear to be part of the 13, but this is unclear. Airfinance Journal reported that seven of the 20 will be taken by Boeing Capital Corp and leased to AirBridge. If true, this adds about $1bn to the Boeing balance sheet for customer financing.
This detail is important because AirBridge is very possibly the last customer that will order the 747-8. Boeing said it now has a backlog to 2019, but because the Airbridge transaction remains murky at best, the details are equally murky.
Drilling down into details of the orders placed through July:
Air Lease sounds caution note for Airbus, Boeing
Air Lease Corp. made the predictions on its 2Q2016 earnings call Friday.
ALC also predicted Boeing will further lower the production rate of the 777 Classic from the announced 5.5/mo in 2018. ALC did not specify a rate, but some aerospace analysts believe a rate of 4/mo is coming.
They also believe neither Boeing nor Airbus will increase production rates of the 737 to 57/mo or A320s to 60/mo. Boeing announced previously that it is considering increasing the 737 rate from the announced 52/mo, effective 2018, to 57/mo. Airbus previously announced it will increase the production rate of the A320 to 60/mo and is considering a rate of 63/mo.
Airbus is bringing the rate up from 44/mo to 60 by 2018.
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Posted on August 10, 2016 by Scott Hamilton
Airbus, Boeing, Leeham News and Comment
737, 777 Classic, 787, A320, Air Lease Corp., Airbus, Boeing, John Plueger