Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- FAA’s data of accident, incidents, often not shared May 19, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 22. May 16, 2025
- Services are driving revenues and profits in difficult times, Part I May 15, 2025
- The BWB has a long way to go before flying passengers, freight May 12, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 21. May 9, 2025
Bjorn’s Corner: Aircraft systems, the real nuts to crack
By Bjorn Fehrm
06 November 2015, ©. Leeham Co: COMAC’s C919 was rolled out in the week. We got to see a new shiny aircraft which looked ready to fly. The nicely curved fuselage and wings were immaculate, the paint was shiny and the CFM LEAP-1C engines were ready to go.
Yet many ask, when will it fly for the first time? It used to be that when the airframe was finished and the engines ran reliably it was time to fly. No longer! Today the most challenging part of an aircraft program is the integration of all the complex systems which hide under the skin. This is what kept the Bombardier CSeries on ground longer than it should and the Boeing 787 and Airbus A380 had the same flu (the latter also had to short wires).
It is the part of the aircraft which takes longest to get to work reliably. The A380 is known for its long period of nuisance warnings from the complex avionics system after entry into service and the reliability work for the 787 has to a large extent been one of software tuning of its system side.
As the system function of modern aircraft has grown more complex the whole architecture of how it was built had to be changed. Here’s how.
No fear of C919 for a generation
Nov. 4, 2015, © Leeham Co. The first COMAC C919 was rolled out of the factory over the weekend, China’s mainline entry into the fiercely competitive arena now “owned” by the Airbus-Boeing duopoly.
COMAC C919. Click on image to enlarge. Photo via Google images.
Although the two giants each has said China is the next competitor they will have to face, the Big Two have nothing to worry about for a generation to come.
Here’s why.
“MAD” at Airbus, Boeing?
Nov. 3, 2015, © Leeham Co. Aerospace analysts are weighing in on 3Q2015 Friday’s earnings call on the Airbus announcement that it will lift A320 production to 60/mo by mid-2019 and may go to 63/mo the following year.
Figure 1. Click on image to enlarge.
Way back in February we predicted Airbus and Boeing will take their single-aisle production rates to 63/mo. (Figure 1.)
Ken Herbert, the aerospace analyst for Canaccord, noted that even with the same higher rates, Boeing will still out-produce Airbus because Boeing works on a 12-month year and Airbus shuts down the assembly line for a summer vacation. His forecast production chart takes this into account (Figure 2.)
Pointifications: Wide-body orders; Bombardier’s $1bn
By Scott Hamilton
Nov. 2, 2015, © Leeham Co. Boeing gets an order for up to 26 787-10s.
Airbus firms up options to an order for 30 A330s, added to 45 previously announced by the same customer.
Boeing announces an order for nine 787-9s.
For all the talk of a wide-body surplus, this is shaping up to be a good year for wide-body orders.
Through September, Airbus recorded 90 firm wide-body orders, all but three for the A330 family. Boeing recorded 152 during the same period (these are net figures). Not included are any of the orders listed above, which have yet to be recorded as firm contracts.
Based on the YTD-September figures and those above, Airbus has a 42% share of orders this year; Boeing has 58%.
Bjorn’s Corner: Aircraft programs
By Bjorn Fehrm
30 October 2015, ©. Leeham Co: There has been dramatic news this week around Bombardier’s (BBD) CSeries program. I wrote a subscribers article about what to expect in terms of the cash flow problem that the BBD management has been wrestling with. The announcements yesterday and the following earnings call confirmed the financial modelling I did with our aircraft modelling tool.
Having watched experienced Wall Street analysts being hard pressed to understand what has happened with the CSeries, I thought I could use this week’s corner to explain the overall economical flow of an aircraft program like the CSeries (there will be details in a follow up subscriber article). I will also put it in context with how it affects a company like BBD and what one must think about when it comes to timing of such projects.
To give the timing aspect more colour, I will also compare with Embraer and their E-Jet E2 project and Boeing’s 787 program. The three programs are very different and they demonstrate in an illustrative way the challenges of making a new civil airliner and that one must adapt the project to the company’s position and its strength and weaknesses.
Northrop wins, Boeing/Lockheed lose bomber contract
Oct. 27, 2015: Northrop Grumman, builder of the B-2 bomber in the USAF inventory, was awarded the contract to build the next generation long-range bomber, which is yet to be named. For the moment, we’ll call it the “B-3.” For now it’s official name is the Long Range Strike Bomber (LRSB).
The Seattle Times has this story.
This is a big blow to Boeing, whose declining defense business was already in trouble from defense cutbacks and previous contract losses. The contract is worth $80bn.
Boeing’s strategy in acquiring McDonnell Douglas Corp back in 1997 was to even the revenue stream between commercial and military, in which Boeing then had a small portion and MDC was predominately military. Boeing was a sub-contractor to Northrop on the B-2, gaining a lot of its composite experience there which ultimately benefited development of the 787.
Unless Boeing finds grounds to challenge the contract award, prevails and wins a second competition, its Defense unit will continue to shrink.
Goldman Sachs, as with many other investment banks, called this a big win for Northrop.
Pontifications: Is the end in sight for program accounting?
By Scott Hamilton
Oct. 26, 2015, © Leeham Co.: Is the end of program accounting, the staple of The Boeing Co. profit and loss reporting, on its way out?
It is in Europe, where it is called contract accounting, the end of its use is required by January 1, 2018. (LNC’s Bjorn Fehrm has talked about contract accounting in the past.) Companies have the option to eliminate it in 2017.
The fundamentals between contract and program accounting are similar: defer costs of the goods or services, and recognize profits sooner.
Europe’s International Financial Reporting Standards (IFRS) 15 says this has to stop.
Do the Boeing 787 sums add up, Part 2
By Bjorn Fehrm
Subscription required.
Introduction
Oct. 22, 2015, ©. Leeham Co: This is an update on our article about Boeing 787 program costs now that Boeing has presented its 3Q 2015 results.
It was a good quarter for Boeing with solid performance in revenue and in cash generation. The results for deferred costs for the 787 program were also above Boeing’s guidance (guidance: same losses as for 2Q), with a $577m increase in deferred costs instead of $790m for 2Q.
Boeing’s CFO, Greg Smith, commented that this result and also gave new values for when the 787 goes cash positive and what the learning effects are for the 787-8 and 787-9. We update our analysis based on these further data points.
Summary:
- Boeing reports less deferred costs than expected but Greg Smith put this in perspective in his comments. We decode what this means for the deferral curve for the 787.
- Smith also gave new information regarding learning effects for 787-8 and 787-9 and when the 787 goes cash positive. We check if this changes any of our assumptions in our original article.
Boeing 3Q15 earnings call
Oct. 21, 2015: Dennis Muilenburg, Boeing president and CEO raised 2015 raised revenue and EPS guidance as a result of the strong third quarter results and he said $8bn in share buyback has been completed through the nine months.
Power on for the 737 MAX was achieved.
Dennis Muilenburg, Boeing president and CEO. Reuters photo via Google images.
Extensions of the KC-46A refueling boom and refueling drogues were achieved in the quarter.
Commercial unit business environment remains “healthy” but the cargo market continues to be watched. Demand for the 737 MAX “remains high.” Given the strong market demand, “we continue to see upward pressure on production rates above the [announced] 52/mo.” But Boeing is not yet ready to go forward.
On the 777 Classic, 44 orders and commitments have been received YTD.