Leeham News and Analysis
There's more to real news than a news release.
Odds and Ends: Yields vs growth; 757RS continued; 787 wind tests; airport vs environment
Yields vs growth: AirAsiaX, the long-haul, low cost unit of AirAsia Group, faces that perpetual problem: yields vs growth. Reuters has this story about the conundrum of sacrificing profits now for a long-term growth strategy. It’s always a risky bet. AirAsiaX relies on the Airbus A330 today and has the A350 on order.
757RS, continued: Aeroturbopower has now weighed in on the Boeing 757 replacement discussion.
787 wind tests: We’ve all seen cross-wind landing videos, but where does Boeing go to test landing in high wind conditions for its new 787-9? Lubbock (TX), of all places. This local TV report explains why but unfortunately the TV station muffed showing the landing itself.
Airport vs environment: It’s an age-old story, but this one has a bit of a different twist. The New York Times reports about the conflict between the Westchester County (White Plaines) Airport in New York vs trees on an adjacent property.
Passenger Experience: As nice as it is to have lie-flat seats in Business Class (we haven’t had the pleasure of First Class), this photo from the Boeing Stratocruiser days makes even today’s upper-grade passenger experience seem like it falls short.
757 replacement not in the cards any time soon
The unexpected attention earlier this month on the prospect of a Boeing 757 replacement, possibly in the form of a 777X-style concept of composite wings and wingbox, new engines and some system upgrades, brings into focus the Boeing 737-9 and the Airbus A321neo.
- Aspire Aviation has its analysis of the next New Small Airplane here.
Boeing quickly denied, in an unusually firm manner, that it was planning on a “757 MAX” and reiterated it doesn’t currently plan to bring another new airplane to market until the middle of the next decade. We’ve previously reported that based on our information, Boeing will wait until the 777X enters flight testing, estimated for 2018, before launching a new family of airplanes to replace the 757 and 737 MAX—with entry-into-service of the 757 replacement around 2025 and the MAX replacement about two years later.
Odds and Ends: Airbus ponders PIPs for A320neo, says AvWeek; Boeing moves more jobs; MH370 search
A320neo Plus: Airbus is pondering a Performance Improvement Package (PIP) for the A320neo family even before the airplane enters service, according to Aviation Week. The improvements would include an upgraded interior and several systems, designed at providing more carry-on cargo space, more seats and better economy. This fits with a desire to focus on product improvements rather than launching another new airplane program. The prospect of launching the much-discussed A330neo is also referenced in the AvWeek article.
Boeing moves more jobs: The Seattle Times reports that Boeing is moving more jobs out of Seattle, this time also to Southern California. This time these are defense jobs. Boeing has been migrating defense jobs out of Seattle for many years.
Separately, Boeing named its Suppliers of the Year for 2013. These companies are profiled in short videos here.
MH370 search: The Wall Street Journal has a good update of the search for Malaysian Airlines MH370 using the Bluefin 21 unmanned submarine.
Airline food: Here’s an irreverent look at why airline food is bad.
Odds and Ends: No to 757 MAX; Fallout from Boeing job transfer; 8,000th 737; Fire sale pricing on 777LR
No to 757 MAX: Steve Wilhelm of the Puget Sound Business Journal writes that Boeing has no plans to build a 757 MAX. This refutes the Motley Fool article we linked Tuesday. Then yesterday a different Fool write wrote why Boeing won’t build a 757 MAX. That may be, but as we wrote we had heard rumblings that Boeing was at least talking to the market about the prospect of such an airplane. But this could be nothing more than what we term, “Boeing being Boeing” exploring everything.
Fallout on engineer shift: The Seattle Times wrote that the fallout over Boeing’s plan to shift another 1,000 engineering jobs out of the Puget Sound area is pretty bad among the local work force. The morale at Boeing, The Times writes, is bad among its white collar engineers and technicians. We’re also told the IAM 751 membership continues to have poor morale in the wake of the Jan. 3 contract vote related to the 777X, with a major retirement expected among workers just in advance of the 2016 switchover to the 401(k) style pension plan. There seems to be a growing belief Boeing may face a workforce shortage just at a time when it’s ramping up production the following year on the 737NG, preparing production for the 737 MAX, in the early stages of production for the 777X and ramping up production again for the 787 as it prepares to introduce the 787-10 in 2018–as well as the KC-46A production ramp up and perhaps on the P-8A Poseidon.
And then there is the continued overhang of the potential NLRB action related to the 751 vote. Although a long shot, what happens if the NLRB requires a new vote and this time it fails? Boeing is already committed to building the 777X in Seattle: ground has been broken and the timeline too late to go elsewhere. Bonuses have been paid out. This could become a real mess.
8,000th 737: On the plus side, Boeing delivered its 8,000th 737, to United Airlines this week. It’s quite the accomplishment.
Fire sale pricing on 777-200LR: Air India, a financial basket case, plans to sell three more Boeing 777-200LRs, apparently for whatever it can get, in order to raise cash. It previously sold five 5-year old -200LRs for $335m–an average of a mere $67m each. According to the appraisal firm Collateral Verifications, a five year old -200LR should have a current market value of about $98m.
Inmarsat to offer free tracking: Inmarsat, the satellite company that proved key to tracking Malaysian Airlines flight MH370, will offer free tracking service, The Wall Street Journal writes.
Odds and Ends: Composites in future airplanes; Boeing and Hillary Clinton; 757 MAX; AA swaps A321neo orders; Delta RFP
Composites in future airplanes: Composites World has a post about the use of composites in the future, with a good graphic detailing the increasing use of this material in airliners.
Boeing and Hillary Clinton: The Washington Post has a long story about the relationship between Boeing and Hillary Clinton, while she was US Secretary of State. While the story raises some interesting issues with respect to the prospective presidential candidate in 2016, the points focusing on her advocating for Boeing aircraft purchases doesn’t bother us a bit: that’s what politicians do on behalf of Airbus. As far as we’re concerned, our government should be supporting our industries, too.
757 MAX: The Motley Fool raises the prospect of a Boeing “757 MAX,” which is a restart of the 757 line but with a composite wing and new engines–something along the lines of the 777X in concept. We’ve been hearing rumblings about this, too.
American swaps A321neo orders: American Airlines swapped 30 A321neo firm orders into options, leaving 100 firm orders for this sub-type left. The deliveries were for 2021/22. American told us it retained this flexibility in the original contract and the new management elected to do so in order “to maintain flexibility.”
Delta’s RFP: Airchive has a good analysis of the Delta Air Lines Request for Proposals to replace its wide-body fleet. We were especially interested in the cost analysis of the 787 vs the A330, which is close to our own numbers (there was no collaboration between Airchive and Leeham).
Boeing slammed for moving jobs to Southern California, WA state for naivete
Boeing took two hits over the weekend from Seattle Times columnists for the announcement that 1,000 engineering jobs will move from the Puget Sound area to Southern California.
Columnist Danny Westneat interviewed a “lonely, ignored voice” who predicted Boeing would go ahead and move jobs despite the $8.7bn tax breaks proposed by Gov. Jay Inslee that were then before the Legislature in hearings prior to approval. (SPEEA Executive Director Ray Goforth also warned of the loopholes in the proposed legislation, but he was ignored, too.) Washington State was criticized for being snookered on jobs once again.
Satirist Ron Judd also took Boeing to task in his Sunday column.
We got our knuckles rapped by a state official because we opined our coverage that the “state” tends to sit back and relax after wins.The state official wrote:
The diminishing market for main deck freighters
At the IATA Cargo symposium last month Fred Smith laid it on the line – there is currently over-capacity in the market, the Industry is undergoing what he described as a profound transformation and he warned that the good old days will not return.
This message was supported by IATA that warned its members that the air freight portion of the pie is continuing to shrink and air freight is losing market share to other modes of transport. There needs to be significant improvements in execution and delivery of the air freight offer – transaction costs are too high and little improved since the 1950’s in terms of a door-to-door transaction.
What is the impact for the freighter business – new builds and conversions? Old fuel inefficient platforms are out and what Fred Smith described as ‘low cost belly space’ is in. Airline cargo managers are moving out of main deck freighters (IAG, JAL, United, American, Delta to name a few) and befriending their passenger colleagues for space below the main deck to accommodate their cargo which they can sell at rates and profit margins not dreamed of before.
Boeing to move engineering jobs to California
Boeing will move 1,000 engineering jobs from Washington State to California, The Seattle Times reported today. Predictably, the engineers union, SPEEA, is having fits about this.
Washington State probably won’t be too happy, either, especially after giving Boeing nearly $9bn in tax breaks to build the 777X here.
We’re going to set aside the debate with the union and Boeing and the Washington impact and try to take a larger view.