Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Pontifications: A Personal Note June 19, 2025
- Airbus books 142 firm orders as Boeing retracts from the Paris Air Show June 19, 2025
- AIN Media Group Agrees to Acquire Leeham News & Analysis June 17, 2025
- 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
ExIm Bank expires, Boeing, hundreds more hope for a Lazarus
July 1, 2015, c. Leeham Co. The ExIm Bank is dead.
At least for now.
Click on image to enlarge.
Boeing, and hundreds of smaller companies, hope for a Lazarus miracle. Though nobody expects a revival of the Bank in four days, as in the Bible, they think resurrection is possible this month.
“There is a strong majority in the House and the Senate to reauthorize ExIm,” Tim Neale, Boeing’s Washington (DC) spokesman, told us Monday. “The problem is getting a Bill to the floor.” The Bill has been bottled up in committees, where Republicans/Tea Party members are chairmen and opposed to renewing the Bank.
Cost cuts remains priority, challenge at Boeing
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Introduction
Dennis Muilenburg, president and CEO of The Boeing Co., from July 1. Photo via Google images.
June 29, 2015, © Leeham Co. Cost control is going to be one of the top priorities of Dennis Muilenburg, the new chief executive officer of The Boeing Co.
Muilenburg, the president and chief operating officer for the past 18 months, was named last Tuesday CEO. Current chairman and CEO Jim McNerney relinquishes the latter title on July 1 but remains chairman.
We outlined many of the challenges Muilenburg faces as CEO in this post from January. Now that it’s official, an update is in order.
Summary
- Deferred production costs on the 787 continue to weigh down the company.
- Pricing pressure from the Airbus A330neo add to the 787’s woes.
- Production gaps for the 747-8, despite the announcement last week to lower rates from 15/yr to 12/yr in March next year, and the 777 Classic remain a major concern.
- The 737-9 MAX is failing to contribute its share to support profits and Free Cash Flow (FCF).
- Pressure to sell the 777 Classic is lowering prices, profits and cash flow on this line.
- Boeing’s commitment to huge stock buybacks for shareholders requires strategies to boost cash flow.
Pontifications: Passenger experience and the WOW factor
By Scott Hamilton
June 29, 2015, © Leeham Co. Back on June 1, I wrote in this column I had yet to experience traveling on the Airbus A380, which entered service in 2007. The A380 doesn’t serve Seattle, where I live, and I really didn’t have a desire to add hours and a connection to my travels just to fly the A380 if I could go non-stop. Note that this is precisely the argument advanced by Boeing, but this is a coincidence. I have yet to fly on the Boeing 787, either, and it does fly into Seattle from Asia.
A reader Tweeted to me his incredulity that in all these years I hadn’t flown the A380. I replied, All in good time. I knew when I wrote that I would be returning from the Paris Air Show on an A380 via Los Angeles. The time had come for me to experience the airplane. (Interestingly, Dominic Gates of The Seattle Times, unbeknownst to either of us, wrote he’s doing the same thing via New York on Air France. I would be flying Air France. Friends warned me that the passenger experience on Air France, however, was hardly what the A380 is all about.
They weren’t kidding.
I had been on the test A380 during static displays before, but never in a passenger-configured model. At the PAS, Qatar Airways had its own little air show, displaying more airliners than any OEM: the A319, A320, A350 and A380 plus the 787. The A350 and A380 were open to the press. As with anyone in the industry, I had long-heard of how the Middle Eastern airlines went over the top on outfitting their cabins, but I wasn’t remotely prepared for the Qatar A380. Walking on board, into the first class section, was a jaw-dropping “wow” moment.
Bjorn’s Corner: What Paris Air Show taught us about East and West.
By Bjorn Fehrm
25 June 2015, © Leeham Co: With a few days in the office one can look back at Paris Air Show with a bit of perspective. So what are the impressions?
It was surprising how many orders Airbus and Boeing landed. Both had played down the expectations, telling that it will be a decent show but nothing close to record. Yet both were booking orders or commitments which were better than expected going into the PAS. Read more
Boeing’s MOP and Iran’s nuke program
June 25, 2015: We don’t often stray into military topics, usually confining ourselves to commercial derivative programs like the Boeing P-8 Poseidon, KC-46a, Airbus KC-330 and the like. But, of all places, Politico has an interesting three-screen piece about President Obama’s “Plan B” in case the talks with Iran fail over curbing its nuclear program.
Plan B calls for the prospect of a Northrop Grumman B-2 stealth bomber dropping a series Massive Ordnance Penetrators, or MOPs, on targeted Iranian nuke facilities to destroy them. The MOP is a super-bomb, but of non-nuclear design, that is so big and so powerful it can penetrates some 200 feet under ground before it blows up. Boeing designed the MOP.
Muilenburg becomes Boeing CEO, McNerney non-executive chairman and leaves a mixed legacy
June 23, 2015, c. Leeham Co: Dennis Muilenburg has been named chief executive officer of The Boeing Co., elevating him from president and chief operating officer, the company announced today. Jim McNerney, chairman and chief executive officer of The Boeing Co. since 2005, was named chairman of the board. He will leave the company next February.
McNerney leaves a legacy of bitter fights with Boeing’s biggest labor unions, a runaway cost overrun on the 787 and 747-8, sour relations with the supply chain and settling to be second fiddle in the single-aisle sector to Airbus.
He also leaves a legacy of attacking costs that had to be cut, increasing production rates to record levels and restoring Boeing’s stock price from a low of 2009 during the depths of the 787 program difficulties to more than $150.
Last January we posted a think piece about the challenges facing Muilenburg on the assumption he would become CEO.
Volga deal for 747-8Fs not as solid as assumed by some; production rate reduction likely
June 23, 2015, © Leeham Co. The Memorandum for Understanding for expansion of the Boeing 747-8F fleet of Volga-Dnepr announced at the Paris Air Show is somewhat less than met the eye at the time.
Despite a few orders subsequent to this chart’s creation in January 2015, the 747-8 production gap is insurmountable. The Paris Air Show announcement of Volga-Dnepr fleet “expansion” by 20 747-8Fs is more about options than firm orders, according to market intelligence, which does nothing to fill the gap unless exercised. The expansion is over seven years, which also fails to fill the gap at current production rates. Click on image to enlarge.
Although Boeing said the 20 airplanes will be added through a mix of direct purchases and leases over seven years, it didn’t indicate how many firm orders, options and leases were involved nor the delivery timeline. Market Intelligence indicates perhaps two of the 20 are white tails, aircraft that were built without customers. If correct, this won’t add to the backlog or production stream. Neither would options, unless exercised. Market Intelligence also indicates that firm orders are in the mid-single digits, which if correct is a far cry from what Boeing needs to fill the production gap
Some media and aerospace analysts concluded this deal meant 20 firm orders equal to a year-and-a-half worth of work for the struggling 747-8 production line, but Boeing said the fleet “expansion” is streaming the deliveries over seven years. If evenly spread, adds up to three aircraft in the production stream if all were new orders and not white tails, and options were converted to orders. Even this interpretation fails to fill the production gap.
A Boeing spokesperson said, “We are in discussion with Volga-Dnepr Group and will provide details when ready. There is nothing else we can add here.”
Accordingly, we expect Boeing to announce a reduction in the 747-8 production rate sooner than later. The current rate is 18/yr, declining to 16/yr from September. Boeing previously said it can still make money at 12/yr, so we expect the rate to be reduced to at least this level. However, as the chart shows, the current firm order backlog doesn’t support even this reduced rate.
The USAF indicated it wants to receive the first of two replacements for Air Force One in 2018.
What raised questions over the solidity of the Volga announcement was the way Boeing worded the press release last week at the PAS. All other press releases were specific about orders and options, except the Volga release, which contained highly unusual wording, a departure from Boeing’s standard boiler-plate. Excerpts of these releases are below the page break. We made inquiries in the market, and the results are outlined above.
Embraer CEO talks about risks
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Introduction
Embraer CEO Paulo Cesar Silva. Photo: AINOnline via Google Images.
June 22, 2015, Paris Air Show, © Leeham Co. Embraer has emerged as the#3 commercial aircraft producer over the years, behind Airbus and Boeing and overtaking Bombardier, by approaching risks carefully and conservatively. No other decision in recent years reflects this approach than what to do when events outside its control forced officials to decide what to do about the future of the E-Jet.
Bombardier launched the CSeries with a new design and a new engine. The larger of two models, the CS300, was a direct challenge to Airbus and Boeing and their smallest aircraft. Airbus responded with the New Engine Option family, forcing Boeing to react with the re-engined 737, the MAX.
With the smallest CSeries, the CS100, a competitor to the largest EJets, the E190 and E195, Embarer had to do something. The question was what.
Embraer could launch an entirely new, larger aircraft, following the Bombardier example. It could do a “simple” re-engine of the EJet. Or it could do something else.
Officials chose to stay away from confronting Airbus and Boeing with a CS-300-sized EJet. Instead, they drew the line at 133 seats in highest density, adding 12 seats to the E-195. The Pratt & Whitney GTF was chosen to power a fundamentally new airplane, one with new wings, new systems, aerodynamic upgrades and other improvements.
We met with CEO Paulo Cesar de Souza e Silva at the Paris Air Show to talk about EMB’s approach to global risk factors.
Summary
- Oil prices, over-ordering and over-expansion by airlines factor into Embraer’s market assessments.
- Airline focus on market share rather than profitability is bad decision-making.
- Asia is Embraer’s best opportunities today.
Pontifications: Final thoughts of the Paris Air Show
- Our interview during the Paris Air Show with Tom Williams, president and COO of Airbus Commercial, is now open to all Readers. Williams discussions production, supply chain issues, launch aid for the potential A380neo and more.
By Scott Hamilton
June 22, 2015, c. Leeham Co. The Paris Air Show was largely as expected, with a few small surprises. Boeing did better than expected via-a-vis Airbus, actually leading slightly in firm orders and tied in orders-and-options going into Thursday. This is virtually never the case, particularly at the Paris Air Show, Airbus’ “home” turf. At the same time, some Wall Street analysts noted the firm orders fell below expectations. I’m not especially concerned about whether an announcement was firm or a commitment, because the latter typically firm up, if not within the current calendar year then usually in the next. Note, for example, Boeing announced the launch of the 777X program at the 2013 Dubai Air Show was some 200 commitments, or thereabouts, but the orders didn’t firm until 2014. Airbus announced a commitment for 250 A320s from Indigo in 2014 and it will likely be firmed up this year.
Airbus wraps up Paris Air Show 2015
June 18, 2015, c. Leeham Co: Airbus traditionally wraps up the Paris Airshow with a Thursday review of their orders during the week. We have the major events captured in pictures, describing what was announced during the week. Boeing does not end the air show with a similar event.
Airbus President and CEO, Fabrice Brégier, opened the wrap up by saying that he was perhaps a little to conservative in the first briefing Monday where he said that he expected Airbus to book “a couple of hundred orders” during the show. In the end it became 421 orders/commitments, the fourth best result during air shows in Airbus history.