Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: Air Transport’s route to 2050. Part 19. April 25, 2025
- How good is the C929? Part 2. April 24, 2025
- Boeing First Quarter Results Update: China is 10% of the backlog, with 500 in “Unidentified” April 24, 2025
- Boeing First Quarter Results: Tariffs, Return flights, $10.55bn asset sale April 23, 2025
- RTX Q1 2025 Earnings: GTF Talk Takes A Back Seat To Tariffs April 22, 2025
Trends in cabin amenities
By Bjorn Fehrm
05 April 2016, ©. Leeham Co: We are at the Aircraft Interior eXpo, AIX 2016, to check out what’s new where the aircraft meets the passenger. We got to the expo in Hamburg on a full Lufthansa A320 flight. It was the usual struggle for the last passengers boarding to find place for their roller bags in the overhead bins.
Airbus showed the new overhead bins for the A320 at the show, Figure 1. They will be a big relief for the airlines and passengers, just like the Space-bins announced by Boeing at last year’s show.
Figure 1. Airbus new A320 overhead bins. Photo: Leeham News.
As can be seen in the picture the passengers don’t get quite the nice airy feeling which is part of Boeing’s Sky interior. The shape of the bins are rather like the present day product but with the A350 style curvature to the other section.
It thereby will bring a bit lighter feel to the cabin but most importantly more space for carry on luggage. Roller bags can be stored standing on the side and this increases the capacity with over 50%. The first delivery of the new bins was to Delta for their new A321 last month. As can be seen in the picture mood LED lighting is also part of the A320 cabin upgrade. Read more
Alaska, Virgin confirm merger
April 4, 2016, (c) Leeham Co.: Alaska Air Group and Virgin America confirmed weekend reports that they reached a deal to merge.
The replay of the Alaska webcast/conference call, with slide show, is here.
Rationale includes what LNC outlined in our March 29 post: growth, access to more gates and slots. Alaska officials said Virgin’s presences in California, combined with Alaska, will give Alaska to #1 market share position on the US West Coast, passing Southwest Airlines’ 21% by one percent.
Here are some highlights from the conference call:
Boeing has lost neo/MAX battle; time to refocus goals
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Introduction
April 4, 2016, © Leeham Co.: Boeing should forget about competing with Airbus for market share.
The Airbus A320neo. Airbus has won the single-aisle battle between the neo and Boeing 737 MAX. Boeing needs to refocus its goal. Photo via Google images.
Airbus already has won the neo/MAX battle. This is a battleground Boeing will not retake for the lives of these airplanes.
Airbus has led Boeing in wide-body, passenger airplane sales for most of the past several years. (Boeing smashes Airbus in wide-body cargo aircraft sales.) This sector will remain competitive.
Instead, Boeing should concentrate on profit margin and roll the dice on a clean-sheet, new single-aisle airplane as its best hope of recovering the dominance it long held over Airbus.
Summary
- Airbus has won the single-aisle competition with the A320neo family. Boeing has no hope of catching up in the next 10 years.
- Airbus is competitive in wide-body sales (excluding freighters). This is the new battleground.
- Boeing should “maintain” 737 market share and focus on margin across the 7-Series instead.
- Boeing’s hope to regain the leadership in the single-aisle sector is the next generation aircraft.
Pontifications: Boeing’s 8,000 employee reduction isn’t nearly enough
By Scott Hamilton
April 4, 2016, © Leeham Co.: Boeing’s plans to reduce head count at Boeing Commercial Airplanes by 8,000 jobs this year dominated the news last week. Comparing employment figures with Airbus Commercial shows this reduction isn’t nearly enough.
BCA has 22% more employees per airplane than Airbus. BCA is a bloated organization. Some of this undoubtedly is inherent to being a 100 year old company, compared with Airbus being less than 50. Airbus is more automated than Boeing as well.
Bjorn’s Corner: Flight control, Part 4
By Bjorn Fehrm
1 April 2016, ©. Leeham Co: Last week we described the computer augmented flight controls that are possible with Fly-By-Wire (FBW) systems. We described the most common flight control laws by discussing the two most common control law implementations in the market, the Airbus and the Boeing ones.
Today we will finish the series by discussing how an autopilot, or as the OEMs call it, an Autoflight or Automatic flight system, is added to the aircraft’s control system. An autopilot is most of the time combined with a flight director and a Flight Management System (FMS).
We will mention how these fit in the picture but focus on the autopilot, once again to keep it simple and avoid trying to cover too much. The autopilot subject is large enough. Read more
Airbus only one reason for Boeing cost-cutting
- The bigger danger at Boeing is not Airbus pricing, but the potential for up to 15,000 early retirements this year by engineers, technicians and touch-labor. See Scott Hamilton’s column at Forbes online.
- Job cuts drive margin at Boeing, analyst concludes.
March 31, 2016, © Leeham Co.: Boeing has to cut costs. So it’s cutting 10% of its work force.
The reason?
Ray Conner, CEO of Boeing Commercial Airplanes. Photo via Google images.
Pricing pressure from Airbus, says Ray Conner, the CEO of Boeing Commercial Airplanes (BCA). The Seattle Times, which reported March 30 that it obtained an internal memo citing the 10% number, quoted Conner extensively from a Feb. 10 internal webcast that Boeing is losing orders to Airbus over price.
Declining market share, especially for the 737, is a major concern, The Times quotes Conner.
“Their biggest weapon that they’re using in the competitions today is price,” Conner told employees. “They are attacking us with price in every single campaign. And as a result of that, you know, we’re being pushed to the wall,” Dominic Gates of The Seattle Times wrote, citing a transcript of Conner’s internal comments.
Gates went on to write that “In justifying the anticipated cuts to employees in last month’s internal webcast, Conner was unusually frank as he invoked a dire threat from Airbus.
“He said that Airbus winning 63 percent of single-aisle sales last year with its A320 jets going against Boeing’s 737 jets was ‘alarming … because the 737 is the biggest contributor to the earnings of the Boeing Company.’”
Gates went on to extensively quote Conner in his article and the defensive posture Boeing is now in vis-à-vis Airbus.
Dreamliner cash positive or not?
By Bjorn Fehrm
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Introduction
31 March, 2016, ©. Leeham Co: Boeing will present its first quarter 2016 results in about three weeks. One area which will be carefully scrutinized by the aerospace analysts will be the progress of the 787 program towards making money instead of consuming it.
Boeing gives the detailed information about the health of the 787 program in the comments by Boeing’s CFO, Greg Smith during the quarterly conference call. In the last call, he puzzled the analysts (and us) by saying that the 787 program was cash positive in 4Q2015 yet the program increased its deferred production and tooling costs by $191m. This means it still pushed about $5m per aircraft into the balance sheet as production loss.
At the time we assumed that the 787-9 was cash positive whereas the 787-8 was negative. This was most probably correct but not the whole picture. With some further poking around we think we are the elusive loss making cash positive on its tracks.
It has to do with the peculiarities of program accounting.
Summary:
- It’s important for the 787 program to start amortizing the $32b in deferred production and tooling costs that has been amassed.
- The 787 production should be cash positive yet Boeing does not expect the deferred costs to be going down before 3Q
- We explain how something can be cash positive yet still defer costs. The answer is to find in how program accounting defines what is the cost of goods sold.
Middle of the Market or Mirage of the Market: Boeing’s lose-lose situation
Enthusiast concept of Boeing Middle of the Market airplane. via Google images.
March 30, 2016, © Leeham Co.: Boeing is unlikely to develop a Middle of the Market airplane for a sector that could be a “mirage,” write two aerospace analysts.
Buckingham Research, in a note issued yesterday, did a “deep dive” into the MOM potential and concluded there isn’t a big enough market to support development of a new airplane. Buckingham recently upgraded Boeing stock to Neutral (Hold) from a Sell.
Bernstein Research, in a note published March 15, ventured that the MOM demand could be a “Mirage of the Market.” Bernstein is a Buy on the stock.
Goldman Sachs remains in the camp that Boeing may well proceed with development of a MOM airplane, at the cost of billions of dollars. Goldman concludes Boeing is in a lose-lose situation with the MOM. Goldman is a Sell.
Sales slowing for larger, Airbus, Boeing twin-aisle jets
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Introduction
Boeing 777. Photo via Google images.
March 28, 2016, © Leeham Co.: A downturn in the order cycle, low fuel prices and backlogs extending to 2020 and beyond combine to reduce the likelihood of much in the way of wide-body orders this year, say commercial aviation officials.
A preference for smaller twin-aisle jets could also hurt sales of larger twin-aisle airplanes, according to observers.
These factors spell challenges for Airbus and Boeing for the A350-1000, the 777-300ER and the 777X.
Summary
- “Nobody’s talking about the A350-1000 or the 777X,” says the president of a leading lessor.
- Preference indicated for the smaller Boeing 787-9 over the larger 777-300ER for new routes.
- Low fuel prices reduce the need for new technology jets.
Pontifications: Airbus USA321 a milestone for US aerospace
By Scott Hamilton
March 28, 2016, © Leeham Co.: The first US-built A320ceo family member took to the skies for its first flight last week. The A321ceo, destined for JetBlue, is the first assembled at the new Airbus A320 plant in Mobile (AL).
This is a milestone for Airbus, obviously. The Mobile plant was first proposed as the assembly site for the KC-330 MRTT (Multi-Role Tanker Transport) proposed for the US Air Force to replace the aging Boeing KC-135s. Northrop Grumman, which paired with Airbus parent EADS (as it was then known) to offer the KC-330, won the contract. The celebration was short-lived. The Government Accountability Office overturned the award. Northrop bowed out of the next round of competition, which Boeing won.
Airbus subsequently decided to create an A320 assembly site at the same Mobile location planned for the KC-330. (I visited the site for grand opening last September.)
This is the fourth A320 assembly site, after Toulouse, Hamburg and Tianjin. Airbus hopes the Mobile site will help spur sales in the US, where it still trails Boeing in market share.
Milestone for US Aerospace
While this plant is a milestone for Airbus, it’s a milestone on a much more macro level, too. This is the first commercial airplane assembly site by a second airplane manufacturer since Boeing closed the McDonnell Douglas MD-11 and MD-95 (aka Boeing 717) assembly lines in Long Beach (CA) in 2000 and 2006, respectively. The last legacy MDC assembly site, for the military C-17, closed early this year.