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 27. June 20, 2025
- 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
Pontifications: Fare and market share wars
By Scott Hamilton
May 25, 2015, c. Leeham Co. Airline stocks took a dive last week when it appeared fare wars and eroding capacity discipline is beginning among US carriers.
Southwest Airlines said it will be adding capacity at the rate of 6%-7% compared with recent increases of 2%-3% and American Airlines said it will begin matching the prices of Low Cost and Ultra Low Cost Carriers rather than see its market share erode.
And the markets went into a tizzy.
I’m old enough to remember when American aggressively matched the low fares of the emerging new entrant airlines after deregulation in the 1980s. The matching spread and the 1980s became a bloodbath. Read more
Open Letter to Members of Congress on ExIm
To Members of the US Congress:
There will be a vote soon on whether to reauthorize the US ExIm Bank. You should do so.
Arguments by some that this is a form of corporate welfare are unfounded. Suggestions that ExIm Bank merely supports The Boeing Co. are misguided.
To be sure, Boeing airplanes received the majority of ExIm Bank commitments and guarantees. This is because Boeing makes the most expensive things ExIm supports. But plenty of small businesses benefit from ExIm as well.
Supporting ExIm for Boeing airplanes creates jobs in America. LionAir of Indonesia ordered hundreds of Boeing 737s. ExIm Bank support was pledged to support this order. LionAir also ordered hundred of Airbus A320s. If ExIm weren’t supporting the 737s, it’s a fair conclusion LionAir would have ordered more A320s instead of Boeing. Why? Airbus gets active support from the ExIm’s equivalent agencies in Europe.
LionAir is but one such example.
Boeing is one of the top exporters (if not the top) of US products. These exports help the US balance of trade.
If ExIm is not reauthorized, Airbus will have an international advantage over Boeing. My market intelligence tells me that Airbus has already used the ambiguity over ExIm’s reauthorization in sales campaigns against Boeing.
If there are specific problems with how ExIm is administered, fix them, but don’t kill the program that has been around–and successfully supporting American businesses–for decades.
ExIm returns a profit to the US Treasury with its fees and other charges supporting its work. How many government programs can say this?
Stop playing games with and holding hostage ExIm Bank. It’s time to grant long-term reauthorization.
Very truly yours,
Scott Hamilton
Editor
Leeham News and Comment
Pontifications: Boeing spin
By Scott Hamilton
May 18, 2015: Boeing has always been masterful with spinning its message, but the spin last week strains credibility with its explanation over how it will bridge the production gap for the 777 Classic into production of the 777X.
Leeham News last week examined Boeing’s detailed explanation, emerging from its May 12 investors day. Reports from aerospace analysts recounted Boeing’s assertion that when “feathering” in 777X production on the 777 Classic, because production of the X will be slow (normal for a new model and the ramp-up/learning curve), the X will be the equivalent of producing two or three Classics–and thus today’s production rate of 8.3/mo (100/yr) will be preserved, as claimed from the launch of the X program.
Poppycock. Read more
Boeing details 777 bridge plan
May 13, 2015: For the first time Boeing has detailed how it plans to bridge the production between the 777 Classic and 777X, according to aerospace analysts attending the May 12 investors day.
Boeing previously said it needs to sell 40-60 777s a year to maintain current production rates of 100/yr (8.3/mo) to the introduction of the X. This pledge has drawn a great deal of skepticism from analysts and this column.
Boeing’s detailed explanation, its first, does little to lessen doubts.
Boeing said it will feather the X into current production rates, with the X becoming the equivalent of two or three Classics, thus, it claims, maintaining current rates, according to Wells Fargo.
Boeing also claims that it will maintain rates by managing its skyline, advancing deliveries, according to Buckingham Research.
There are several problems with these claims.
ISTAT Asia day two: home for the elderly
Introduction
May 12, 2015, c. Leeham Co: As you would have guessed we are talking Asian civil airliners, where planning in the region for the fast growing older generations is inadequate. This was the subject of several sessions during day two of the ISTAT Asia (International Society of Transport Aircraft Trading) conference in Singapore.
The problem is new, as up to now a newly established airline fleet in Asia has not had any numbers of older aircraft. But the expansion over the last 20 years is now producing the first transition waves of aircraft and the planning around the problems this generates is inadequate.
The result will be surprising write-downs of airline assets as aircraft being replaced cannot be transitioned out at booked residual values. The scale of the problem was highlighted by a survey of the 500 gathered ISTAT industry experts. The question posed to them was “There are 4700 aircraft coming up for replacement until 2033, has Asian airlines planned adequately for this?”:
- 49% of the delegates responded a few airlines have.
- 45% answered there are only some that do it.
- 5% of the delegates answered most airlines does it.
- 2% thought all Asian airlines have done it.
Boeing investors day
May 12, 2015: Boeing held its annual investors day May 12. Note in particular the Buckingham and Wells Fargo commentary on the 777 bridge to 777X. Read more
Bjorn’s Corner: China’s civil aviation, from nothing to world’s largest in 2030
Introduction
By Bjorn Fehrm
14 May 2015, C. Leeham Co: In my ISTAT Asia reports, I wrote about how China will overtake USA as largest civil aviation market in 2030. Airbus China Group chairman, Laurence Barron, and I had a chat after his ISTAT presentation where he described China’s evolution as a civil aviation market and how Airbus gradually worked itself from a late and hesitant start to today’s split of the market with Boeing.
Barron provided his slides, some of which we will use to review how China grew from virtually no civil aviation after the Chinese revolution in 1949 to the world’s largest market by 2030. We will also look at what aircraft have made up this growth and finally describe how Airbus progressed from a latecomer in 1985 to sharing the market with Boeing today.
Read more
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Posted on May 14, 2015 by Bjorn Fehrm
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