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
Analysts weigh in on Airbus investors day #1
Airbus announced on Day 1 of its two-day Investors Days that it will shift the A350 program to contract accounting for the first few airplanes, reports UBS Ltd. in its research note wrapping up Day 1.
“Airbus has changed the accounting treatment for the early A350 deliveries from unit to IAS 11 contract accounting, using average costs over the contract for each aircraft delivery. This boosts group profits by 50bps in 2015 and 2016 (about €300m benefit) and reduces profits by the same in the later years of the early contracts (est 2017-18),” write UBS.
This is similar to Boeing’s program accounting method, but Boeing uses this for an entire program rather than the first few airplanes.
UBS also wrote, “We have increased our 2015forecasts by €70m or 2% to €4,042m, brought 2016down by 5% to €4,069m and reduced 2017 by 15% to €4.3bn and 2018 by 10% to€6.1bn. The five main drivers were (1) €300m benefit to 2015 and 2016 and €300mdrag to 2017 and 2018 from an accounting change tothe A350, (2) Pricing at Airbus,mainly on the A330; (3) weaker civil helicopter markets; (4) €200m reduction in EBIT from the expected Dassault disposal; (5) A330 production rates could fall further than the 9 per month rate in Q4 2015 (we had already factored in this final point,forecasting 6.4 per month in 2016 and 5 per month in 2017).”
Bernstein Research wrote the following: Read more
Airbus stock hammered on airplane news, Boeing caught in the downdraft
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Introduction
Dec. 10, 2014: As company investors’ days go, Day 1 of Airbus Group didn’t go well. Airbus stock traded off 10% on news that the A330 production rate, already to reduced from 10/mo to 9/mo in 4Q2015, will be further reduced in 2016. No number was given.
Then Airbus acknowledged it may decide by 2018 whether to terminate the A380 program. There were no sales this year.
And true to form, the CEO of Qatar Airways, Akbar Al-Baker, did another one of his famous U-Turns. Only a short time ago he was singing the praises of the A350, the first of which was to be handed over to his airline on Saturday. Today he announced delivery was postponed “until further notice,” with no explanation for the delay.
The stock reverberation didn’t end there; it migrated across the Atlantic, sending Boeing stock down on Wednesday at a rate twice that of the Dow Jones index.
Summary:
- A330ceo sales have dried up in advance of the A330neo introduction. A large Chinese order appears to be going nowhere.
- The A380 program is supposed to finally hit cash break-even in 2015, but no sales put this program in doubt.
- The only way to boost the A380 is to do a neo and the business case is iffy.
737 MAX 8 could be enabler for some LCC Long Haul
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By Scott Hamilton and Bjorn Fehrm
Introduction
Figure 1. Nominal range of 737 MAX 8 from Oslo Source: Great circle mapper, Boeing. Click on Image to enlarge
Dec, 8, 2014:The Boeing 737-8 MAX is the successor to the 737-800 and has largely been thought of in this context.
Our analysis, prompted by Norwegian Air Shuttle (NAS) plans to use Boeing 737-8 MAXes to begin trans-Atlantic service on long, thin routes, comes up with a conclusion that has gotten little understanding in the marketplace: the 8 MAX has enough range and seating to open a market niche below the larger, longer-legged 757, and the economics to support profitable operations for Low Cost Carriers interested in some trans-Atlantic routes or destinations beyond the range of the -800.
Summary
- We based our analysis on our proprietary, economic modeling, assumed Norwegian cabin configuration standards.
- We compared the operating costs of the 737-8 with Norwegian’s present long haul aircraft 787-8 in a similar cabin configuration.
- The comparison range is the max endurance range for an LCC long haul 737-8, eight hours or 3,400nm air distance (no wind included).
Boeing and Washington State; and: Congressional meddling may threaten KC-46A
The Washington State Legislature may consider implementing a mechanism to track the benefits of the Boeing 777X tax incentives granted last year, according to the on-line news service Crosscut. Boeing opposes the measure, according to the report.
USAF moves up AF One replacement, reports Inside Defense
Dec. 7, 2014: The US Air Force is moving up the the Presidential Aircraft Replacement program to seek Requests for Proposals next year, according to the specialty newsletter Inside Defense.
The Boeing 747-8 is viewed as the certain selection to become the next Air Force One. Source: Flight Global.
An airframe purchase will occur in 2016, according to the newsletter. Delivery would be in 2018. Boeing, which supplied the two 747-200-based VC-25 aircraft that comprise today’s Air Force One fleet, already has assembled a team for the proposal, Inside Defense reports.
The USAF previously had talked about acquiring replacements in 2021.
Notably, Airbus–which previously said it won’t compete for a new AF One–hedged when asked by the newsletter. Read more
Boeing retains net order lead going into last month of year
Dec. 5, 2014: Boeing retains the lead in net orders going into the last month of this year, although the gap has narrowed considerably–and there are a couple of public campaigns and commitments Airbus has announced or talked about that could shift the year-end balance.
Boeing has been less open about pending campaigns, so it is harder to gauge potential orders this month.
Figure 1. Click image to enlarge.
Year to date, Airbus reports 1,031 net orders and 297 cancellations, including the 70 A350s canceled in June by Emirates Airlines. Boeing 1,274 orders net of 106 cancellations, for a net advantage of 234 orders over Airbus. Airbus previously announced a commitment from Indigo Airlines of India for 250 A320neos and it continues to press China for an order of 70-200 A330 Regionals. Airbus also said it expects an order before the end of the year for the A321neoLR, but the quantity has not been specified. Read more
Boeing remains confident it will fill 777 production gap; cash flow to remain strong
Dec. 3, 2014: Boeing remains “confident” it will be able to bridge the 777 Classic production line at current rates to the introduction of the 777X in 2020, including some “feathering” of the two airplanes.
Boeing president and COO Dennis Muilenburg also said cash generation and free cash flow will remain strong even as Boeing invests in research and development, hikes stock dividends and buys back shares to boost shareholder value.
Muilenburg made the remarks today in a wide-ranging question-and-answer format during the annual Credit Suisse Global Industrials Conference in New York.
Fundamentals of airliner performance, Part 5; Approach and landing
By Bjorn Fehrm
Dec. 2, 2015: The time has now come to cover descent and landing in our articles around airliner performance. As many aspects of descent are similar to climb we will repeat a bit what we learned in Part 4:
- For high speed operation the pilots fly on Mach as this gives him maximum information around possible effects on the aircraft when he is close to the high speed limit, the maximum Mach number. Beyond this the aircraft gets into supersonic effects like high speed buffeting or unsteady flight.
- For operations under the cross over altitude for Mach 0.78 to 300 kts IAS the pilot flies on Indicated Air Speed (IAS) which gives him maximum information how the aircraft reacts should he go close to the aircraft’s lower speed limits.
Lets now start to go through the steps that our 737 MAX 8 performs after leaving its cruise altitude.
Air Canada: 787s have 29% lower costs than older 767s (before the latter’s reconfiguration)
Dec. 2, 2014: Air Canada says its new Boeing 787s will have 29% lower fuel, maintenance and per-seat costs than the old Boeing 767-300ERs being replaced.
Part of this is because the 787s seat more passengers.
But the airline has found new life in the 767s through increased density, shifting them to its low cost carrier, Rouge, which has lower labor costs and overhead. Rouge’s 767s have 30% lower CASM costs than the same airplane at mainline Air Canada. Read more