Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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The MAX flies ahead of time
By Bjorn Fehrm
2 February 2016, ©. Leeham Co: The Boeing 737 MAX flew for the first time Friday. On Saturday it was in the air again. Boeing has communicated they will deliver the first aircraft to Southwest next year in the third quarter. We doubt it.
Boeing 737 MAX 8 takes off for first flight. Picture: Seattle Times.
It will be earlier, barring a major problem cropping up (and the chances are good there will be none).
Delivery of aircraft projects ahead of time is almost unheard of. And when it is Boeing that looks like being early, people start to think about the Dreamliner debacle. It was over three years late.
We would say: absolutely be skeptical, but in this case, there is reason for optimism.
A380 order welcome, but may not add to Airbus backlog
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Introduction
The news of orders by Iran Air and ANA for 12 and three A380s respectively is good news for Airbus, but 
these probably don’t do much to boost the backlog in practical terms.
These orders will likely replace some of those in the A380 backlog that are unlikely to be delivered.
In our annual examination of the backlogs of Airbus and Boeing, little has changed for the A380—until the Iran Air and ANA orders, there hasn’t been a sale of the A380 in more than two years.
Summary
- As deliveries continue, the backlog shrinks.
- Orders from Virgin Atlantic are deferred and unlikely to be delivered. Look for a swap to another Airbus aircraft.
- Amedeo has yet to place any of its orders. First deliveries in 2017.
- Air Austral orders deferred, unlikely delivery.
Pontifications: Bad week for aerospace stocks
Feb. 1, 2016, © Leeham Co. Ouch.
By Scott Hamilton
Boeing stock tanked about 10% last Wednesday when the company surprised analysts with unexpected news and below expectations 2016 guidance.
Bombardier became a penny stock.
What the heck happened?
Bjorn’s Corner: Exciting 2016
By Bjorn Fehrm
29 January 2016, ©. Leeham Co: In the corner of two weeks ago we did a retrospective of 2015. Time for looking ahead. The year of 2016 will be quite interesting. We had entry into service of the first re-engine single aisle aircraft this week, the Airbus A320neo, the same week as we expect first flight from its main competitor, Boeing’s 737 MAX 8. We will also see first flight of the Embraer E190E2 and A350-1000 before the year is over.
The Mitsubishi MRJ shall go test flying in earnest and Bombardier’s CSeries 100 and 300 shall enter service. On top of that, the COMAC 919 will probably start ground roll tests this year and we should see roll out of Irkut’s MC-21. I would say 2016 is a busy year for civil aviation.
In the 2015 corner we talked a lot about engine technology as a key driver to further efficiency of air transportation. Now will dissect the airframe technology that all these new projects will bring us. Read more
Worry over Boeing 737 production rate ramp up overblown
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Introduction
Jan. 27, 2016, © Leeham Co. As Airbus prepares to hike production rates of the A320 family to 60/mo by the end of the decade and Boeing mulls whether to boost 737 
rates above the announced 57/mo announced today, some question whether the companies should do so.
The questions become more frequent as falling fuel prices make the need for the fuel efficient A320neo and 737 MAX appear to be less compelling. The economic turmoil in China adds to uncertainties.
Today we take a look at the 737 order book, based on Dec. 31 data, and extrapolate this to announced and potential future production rate hikes, and draw conclusions whether the rates announced and those under study make sense.
We will look at the A320 backlog in a future post.
Summary
- Looking at firm orders only with actual delivery dates shows minor production gaps.
- Large MAX TBD, unidentified customers make drawing firm conclusions difficult.
- Options and LOIs from solid customers show some years oversold.
Boeing Outlook: 777 rate cut, 737 hike (Update 2)
- Due to technical problems with the webcast, Boeing ended the earnings call this morning before Q&A and rescheduled at 1pm EST.
- The original, short post is updated with the re-do of the earnings call.
- The PDF slide show is here.
- See Scott Hamilton’s column on Forbes.
Jan. 27, 2016: Boeing’s outlook for 2016 disappointed Wall Street for lower-than-expected revenue, earnings per share and delivery projections, spurring a sell-off in the stock by almost 10% in the first hour of trading before the earnings call.
Because of a late Tuesday night story in The Seattle Times that a production rate cut in the 777 Classic line was coming, analysts expected this news. Boeing made it official: the 777 rate to 7/mo in 2017, a figure that was telegraphed in pre-Paris Air Show briefings last year. Boeing says it is confident of maintaining this production rate until entry-into-service of the 777X in 2020.
The production of the 737 will increase to 57/mo in 2019, which was forecast by LNC last year.
Boeing 2015 earnings: Good year, good forecast, shares plunge anyway
Jan. 27, 2016: Boeing posted solid financial results for 2015 and forecast a good 2016, but shares plunged in early morning trading on a forecast for fewer deliveries this year than last.
The press release is here.
Shares dropped more than 6% in pre-market trading, off $8 at one point. (Update: After the bell, the trade off exceeded 12% and more than $12.)
Goldman Sachs (Sell) had this initial reaction:
Boeing earnings call: will Muilenburg be more forthcoming than McNerney?
- See Scott Hamilton’s new column with Forbes on-line, It’s time for hard questions for Boeing.
Jan. 26, 2016, © Leeham Co. Boeing’s earnings call tomorrow could have additional revelations about the 777 production rate and how its cash flow is being enhanced by continued maneuvering of advances and accelerated pre-delivery deposits (PDPs).
Whether it will or not remains to be seen. Under former CEO Jim McNerney, Boeing’s penchant for obfuscation was legendary among the aerospace analysts.
Dennis Muilenburg, who took the CEO title last summer in addition to his Chief Operating Officer position, has already shown he’s different than McNerney, evidenced by the surprise, early contract agreement with the engineers union, SPEEA.
Boeing last week announced a further rate cut, effective in September, for the ailing 747-8 program. Along with this came a pre-tax charge of nearly $900m.
Major questions to be answered revolve around the future production rate for the 777 and the cash flow.
Boeing 777 Classic production gap closing
- See Scott Hamilton’s new Forbes on-line column, It’s time for hard questions for Boeing.
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Introduction
Jan. 26, 2016, © Leeham Co. Boeing needs to sell more than 200 777 Classics, all with delivery dates through 2021, to bridge the gap to full production of the 777-8/9, according to an updated analysis by Leeham Co.
Boeing firmed up an order for six 777 Classics early this month there are at least two campaigns in which Boeing hopes to land orders for around 20 777-300ERs.
But it’s the all-important delivery stream that isn’t announced with orders which raise the question of whether Boeing can bridge the gap.
The last 747-8 that is not a white tail is scheduled for delivery in May 2017—hardly enough to match the production rate in 2016 of one per month through August–or even the newly announced reduced rate of one-half per month from September.
Boeing booked a net of two 747-8F sales last year, but these were white tails sold to Boeing Capital Corp. for lease to Air Bridge Cargo.
The outlook for the 747-8 is very bleak. The outlook for the 777 Classic program remains challenging, to put it charitably.
Summary
- Annual update shows 777 production gap narrowing, but still remains.
- Aerospace analysts think 777 rate has to come down to six or lower.
- Pinning hopes on recovering air cargo market increasingly a reach.
Alaska Air’s brand refresh after 25 years
Jan. 25, 2016: Alaska Airlines announced its first rebranding in 25 years today, revealing a new livery and 
new logo font.
The airline is in a fierce battle with Delta Air Lines, as the latter develops Seattle into a major hub, adding domestic flights to feed its international routes. Seattle is Alaska’s principal hub and with its sibling Horizon Air continues to maintain a 51% market share. Read more