Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Five for Five: Air India crash points to systemic problems at Boeing that CEO Ortberg must fix June 15, 2025
- Airbus sees Boeing as medium-term competitor, with Comac next June 14, 2025
- Boeing bullish on 20-year forecast, despite short-term headwinds June 14, 2025
- Embraer’s 20-year market forecast under 150 seats: fewer turboprops, jets about the same June 14, 2025
- Airbus Canada CEO: Airbus is here to stay in Canada June 14, 2025
Fewer A350s in 2017-18, says Cowen & Co.; not so, says Airbus
April 21, 2016: Airbus will assemble fewer A350s than planned in 2017 and 2018, according to a short note to clients by the Cowen & 
Co. obtained by LNC.
Not so, says Airbus.
The investment bank was commenting on supplier Hexcel.
Airbus, Boeing 1Q earnings ahead
April 20, 2016: Airbus and Boeing will report their first quarter earnings April 28 and 27 respectively.
Year-to-date, Boeing is clobbering Airbus in orders and deliveries. It should be noted that last year, Boeing jumped to an early lead in orders and Airbus came roaring back by mid-year and year-end to outsell Boeing by a wide margin. Each company has guided at least 1:1 book-to-bill. This suggests Boeing would outsell Airbus this year because of a higher production rate: more than 740 compared with fewer than 700. Given Airbus’ propensity to have a stronger second half sales than first half, the outcome of the sales race is anything but iffy to call at this early juncture.
Pontifications: Airbus, Boeing, Bombardier and export credit support
By Scott Hamilton
April 18, 2016, © Leeham Co.: Export Credit for airliners was back in the news last week, with the US taking aim at the prospect of Canada’s agency supporting sales of the Bombardier C Series to the US and France and Germany suspending export credit support for Airbus airplanes.
The week before, Dennis Muilenburg, the CEO of The Boeing Co., testified before Congress that although the US ExIm Bank was reauthorized, Senate action—or more accurately, inaction—on confirming members of the ExIm Board of Directors has kept the agency shut down for new deals. There isn’t a quorum of members on the Board to approve new deals.
Bjorn’s Corner: The role of a Flight Management System
By Bjorn Fehrm
15 April 2016, ©. Leeham Co: In several of my Corners when describing flight control systems and autopilots for airliners, I have written about the aircraft’s Flight Management System (FMS) without actually describing its role completely.
The first complete FMS was introduced with the Boeing 767 in 1982. Before the Boeing 767, aircraft cockpits had at least three flight crew members, the third being the navigator or flight engineer. This third person managed a number of tasks. He surveyed the aircraft’s systems/engines and performed the navigation for the aircraft.
With the introduction of computerized support systems for system monitoring and warning (EICAS for Boeing, ECAM for Airbus) and navigation (FMS for both Boeing and Airbus), the third person could be replaced and two flight crew cockpits became the norm.
When flying a modern airliner, the FMS has a central role in both flight preparations and during flight. We will therefore describe what an FMS does in more detail. Read more
Can Bombardier extend CS300 to a CS500?
By Bjorn Fehrm
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Introduction
April 14, 2016, ©. Leeham Co: Bombardier is working hard to get additional mainline airline customers for its C Series project. The latest discussion is whether Delta Air Lines would replace its fleet of Boeing MD-88s with the C Series.
Figure 1. C Series largest model, CS300. Source: Bombardier.
In this context, it’s also discussed if the largest model, the CS300, Figure 1, is large enough for Delta. This aircraft seats 135 passengers in a two class configuration and up to 160 passengers in an all economy high density version.
The question is whether this is sufficient for Delta and other mainline customers, or if a still larger version is needed in the program, the oft-discussed CS500. We decided to use our proprietary aircraft model to see if a CS500 would be straight forward for Bombardier to develop, should Delta or any other customer ask for a three model C Series program.
Summary
- The C Series aircraft program was developed with the CS300 as the main model. The wing, engine and landing gear were dimensioned with the CS300 in mind.
- The CS100 is a shrink of the CS300, and not vice versa (the CS300 a stretch of the CS100).
- A tentative CS500 stretch if therefore a first stretch of the program’s main model and not a double stretch of a CS100.
- This is evident when one starts to analyze how a CS500 would be designed. There are rather modest changes that need to be done to create an extended model that seat up to 180 passengers.
Alcoa lowers guidance, cites slowing jet sales, production ramp up
April 13, 2016, © Leeham Co.: Alcoa, a major supplier to Airbus and Boeing, lowered its 2016 guidance on anticipated lower demand for aluminum on lower orders for legacy commercial airliners and a slower than expected transition to new airplanes.
In a first quarter earnings call Monday, Alcoa didn’t specify which of the Big Two OEMs it was thinking of, or whether these might have been Bomabrdier and Embraer, for which it also is a supplier. But Sam Pearlstein, the aerospace analyst for Wells Fargo, believes it is Airbus and the A320/A350 programs.
“Alcoa reduced 2016 aerospace global sales growth guidance to 6-8% from 8-9% with large commercial aircraft growth now expected to be about 9% (vs. 15% previous forecast) largely due to lower orders for legacy models and a ”more careful” ramp-up of new models (which we presume means A320NEO and A350),” Pearlstein wrote in a note published yesterday.
Prices set for years, Boeing cost-cutting goes straight to bottom line
April 12, 2016: Prices for Boeing and Airbus planes are set through the remaining decade, meaning any cost-cutting being pursued by Boeing will flow straight to the
bottom line, a new note issued yesterday from Bernstein Research concludes.
“Pricing on more than 80% of deliveries is already set through the decade,” the note says. “Despite the competitive pressures, however, the reality is that most of the competitive situations are about deliveries in the next decade. This creates a situation in which most of every dollar of cost savings will flow to margin during this decade because most of the planed deliveries are already priced. The same is true for Airbus.
“This has not been the case in prior cycles because backlogs then tended to be only about three years of production, rather than the eight years that we see today. In those cycles, Airbus and Boeing would cut costs, but then compete away the value. That price competition will now be happening primarily on deals for delivery after 2020,” Bernstein says.
Why Boeing won’t take a charge on 787s
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Introduction
Boeing 787-9. Source: Boeing.
April 11, 2016, © Leeham Co.: Boeing has $29bn in deferred production costs and another $3bn in deferred tooling costs for its 787. The accounting block, for its program accounting, is a record 1,300 aircraft. Many Wall Street analysts are skeptical whether Boeing will ever recover the huge deferred numbers.
Boeing insists it will.
Still, taking a charge of some number—as it has done twice for the 747-8 and twice for the 767-based KC-46A—is something Boeing repeatedly insists it doesn’t need to do.
Why not?
There are a few key reasons, say Wall Street analysts who follow Boeing: revenue, cash flow and the stock price.
Summary
- Bank of America Merrill Lynch estimates Boeing needs to post a profit of $30m on each of the remaining 900 787s to be delivered to recover the deferred costs. LNC figures this number is higher.
- Pricing pressure from Airbus makes it difficult to obtain this profit.
- The deferred costs limit Boeing’s ability to price down to meet Airbus’ offers to customers.
- Credit Suisse figures Boeing can recover only some $22bn of $29bn in deferred production costs.
- Boeing warns in SEC filings a forward loss might be required.
- But no forward loss is likely unless revenue falls short.
Bombardier’s Delta deal looking good, but don’t celebrate yet
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Introduction
Air Baltic will be the first operator of the Bombardier CS300. Source: Bombardier.
April 18, 2016, © Leeham Co.: Bombardier, if it didn’t dominate the news cycle in commercial aviation last week, must have come close. Consider:
While on balance, it seems likely Delta will order the C Series, Bombardier has been down this road before. Only a few months ago, the market and others were excited over the prospect that BBD was close to landing an order from United Airlines, only to see Boeing swoop in and grab the deal.
Summary
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Posted on April 18, 2016 by Scott Hamilton
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