Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: New engine development. Part 5. Turbofan design problems April 26, 2024
- Airbus 1Q2024 results: Airbus CEO: “A350 in-service experience drives positive reputation and orders” April 25, 2024
- A350-1000 or 777-9? Part 3 April 25, 2024
- Boeing CEO promises company is turning around…again April 24, 2024
- Solid start for stand-alone GE Aerospace despite cuts to LEAP output April 23, 2024
Boeing’s third quarter/9 month profit; raises 787 production target
Boeing today announced its third quarter and nine-month financial results, repoting strong profits. It also announced plans to raise 787 production to 12/mo by 2016 and 14/mo before the end of this decade, confirming our report from last June. We have rate 14 beginning in 2019, after 787-10 EIS in 2018.
Boeing’s earnings call is at 10:30 EDT and will be webcast here.
Odds and Ends: Repairing the Ethiopian 787; more on A350-1000 stretch; new RR engine study
Ethiopian 787: Dominic Gates at The Seattle Times has a detailed story about how Boeing is repairing the Ethiopian Airlines 787 damaged by a fire at London Heathrow Airport earlier this year. Boeing doesn’t comment for the story–nor for any others–but Gates’ detail in his piece makes for quite interesting reading.
Stretching the A350-1000: More on this topic from Aviation Week. Aside from the technical considerations for the airframe, Rolls-Royce would need to bump up the thrust of the engine to around 104,000 lbs, we’re told. Also: there is the matter of production. Airbus is considering a second production line for the A350, but no decision has been made.
Rolls-Royce studies new engines: Rolls-Royce is studying a new line of engines, according to this Bloomberg article.
Is tide ready to turn for CSeries?
CS100 first flight, September 16, 2013. Photo via Seattle Times.
Is the tide ready to turn for the Bombardier CSeries?
Following a nine month delay, the CS100 Flight Test Vehicle #1 took to the air September 16. It’s flown only twice since and has been undergoing ground vibration tests and more software upgrades. BBD is pretty mum about the testing program, which causes speculation about whether some issue emerged during the three flight tests. But we’re told by a source familiar with the program, but who is not with BBD, that BBD is being conservative in its pace, counting on the fact that it will eventually have seven FTVs to bring entry-into-service on time. A few Canadian aerospace analysts think EIS will slip to 1Q2015.
Then there are the orders, just 177 firm, which is more than those for the Airbus A319neo and the Boeing 737-7 MAX combined, but which the market perceives as low and a slow-selling program. Bombardier points out that the firm sales are about on par with other new airplane programs at this stage, but the market–dazzled by the thousands of orders placed for the NEO and MAX–won’t make these distinctions.
But it’s possible the tide is ready to turn for the CSeries. Here’s why.
- Potential customers have been waiting for the first flight and to see whether the program will be more or less on time with the new, implied schedule emanating from first flight. We believe a few more months have to pass before any conclusions are drawn on this score.
- Likewise, a few months have to pass before Bombardier and Pratt & Whitney will know whether the economic promises will in fact be achieved.
- There are some key sales campaigns for which decisions should be made in the coming months, both this year and into next, that if BBD wins will serve to build significant momentum.
- Airbus is running out of delivery slots for the entire A320 family. The VivaAerobus order announced October 21 includes deliveries beginning next year. The backlog goes to 2019-2020, and while John Leahy, COO-Customers, is adept at finding slots through juggling the skyline, there simply aren’t too many left mid-term. Bombardier is sold out into 2016 and is a better position to offer deliveries in quantity. This makes it difficult for Leahy to “buy” a deal, which he has done on several occasions, to under-price CSeries to a point where BBD can’t play in the sandbox.
- Boeing remains more focused on the 737-8/9 than on the 737-7, leaving BBD to largely fight its war against the diminishing Airbus and the forthcoming Embraer E-190/195 E2, the latter with a planned EIS of 2018, a good three years after CS100 enters service.
It will likely be next year before solid trends are noticeable. BBD retains its goal of reaching 300 firm orders and 20-30 customers by EIS, at least a year from now. We think this is easily achievable.
Update, Oct. 22: The Iraq-Business News reports that the government has approved the purchase of five CS300s at $40m each.
A350 program update: EIS date set (sort of); ambiguity over -800; talk of a -1000 stretch
Airbus provided a program update Monday to the international media. Here are links to initial stories.
Airchive: Airbus sees shift toward 250-300 seat aircraft. Airchive reproduces some of the illustrations Airbus presented. Airchive reports the planned EIS for September 2014 (as does the headline Aviation Week article below) but adds that EIS could slide to November or December. (We have it for early 2015.)
Aviation Week: September 2014 EIS targeted.
Bloomberg: Airbus will eventually seek certification with lithium batteries.
Bloomberg’s story has a couple of important points:
- While multiple -800 customers have moved to the longer A350-900, Airbus still has outstanding orders for 89 units and will build the plane if customers want it, Evrard said. He gave no indication when production of the -800 versions may begin. (Emphasis added.)
- Evrard said stretching the A350-1000 by adding panels to make the fuselage longer for additional passengers would be perfectly feasible from a technical point of view.“Stretching further is possible, there are no show-stoppers, but today it’s still in the pre-concept phase” he said.
On the first point, we previously reported that a change in production sequence was likely coming. An Airbus spokesperson denied it, but the comments above at the briefing certainly infer otherwise.
On the second point, Evrard’s comments about stretching the -1000 are, in our view, significant. We reported last night in our interview with Airbus Americas Chairman Allan McArtor that Airbus was looking at this hypothetical, though no internal proposal had been made. Still, it’s clear to us that Airbus is giving solid consideration and we predict that eventually will proceed.
The Airchive report of a market shift toward the 250-300 aircraft is also significant. With continued trends toward upgauging, this will soon shift to 300-350 and then to 350-400. The corollary is that the Very Large Aircraft sector continues to shrink.
Odds and Ends: Middle East carriers high on 777X; Airbus’ Japan ambitions; Low fare airlines
Boeing 777X: Reuters has this article on negotiations between Boeing and Etihad Airlines for the new 777X. Reuters reports that up to 30 777Xs could be ordered, along with a follow-on order for the 787. Emirates Airlines is expected to order between 75-100 777X. Qatar Airways will almost certainly place a 777X at some point.
The Boeing Board of Directors is expected to give the go-ahead for the 777X this month, with a public launch at the Dubai Air Show next month. Emirates is widely anticipated to place its order there, though its president, Tim Clark, has been quoted in the press that it’s possible he won’t be ready by the air show. Because this air show is in Dubai and the home base for Emirates, it’s quite possible the Etihad and potential Qatar orders would come outside the air show.
Lufthansa Airlines has already ordered the 777X, subject to formal program launch.
Airbus in Japan: Having achieved a major breakthrough with a large order for the A350 from Japan Airlines, Airbus has set some ambitious goals to increase its market share in this country, reports Bloomberg News.
Low Fare Airlines: Images and myths surround low fare airlines. We’ve written many times in the past that the USA’s Southwest Airlines, which built its image since its founding in 1971 at the low fare airline, often isn’t any more. (In fact, we were years ahead of the mainstream media in discovering this.) You can usually get lower fares on the legacy airlines, though bag fees and change fees, if you have check bags or change your flight, destroy the savings. If you don’t have to do either, it’s usually cheaper to fly the legacy airline than Southwest.
In Europe, Ryanair is viewed as the cheapest airline to fly. The base fare is ridiculously low but fees are imposed for everything except using the loo, though CEO Michael O’Leary would like to charge for this, too. This article calculates that in fact Ryanair isn’t the cheapest way to travel. The article rates the top 20 low fare carriers and Ryanair comes in #4.
Airbus’ McArtor on VLA, 777X, 757 replacement and Airbus future products
Airbus Americas Chairman Allan McArtor.
Allan McArtor believes there will always be a market for the Very Large Aircraft (VLA), but he’s not surprised Boeing cut the production rate of the 747-8.
McArtor, who as chairman of Airbus Americas, is hardly an unbiased observer. He says the 747-8 Intercontinental is uneconomic and the market for the 747-8F is weak. But he also acknowledged that the dearth of sales for the Airbus A380 has been a challenge.
Airbus has forecast 1,200-1,300 VLA-Passenger deliveries over a 20 year period every year since 2000, while Boeing has steadily reduced its forecast to just 540 VLAPs in its current forecast. Airbus believes it will capture 50% of the market, based on its forecast. In fact, it currently is capturing between 86%-90% of the sales.
Each forecasts several hundred more VLA-Freighter deliveries during the next 20 years. Boeing currently holds a monopoly in the VLAF sector, but sales haven’t been on a pace to meet either company’s forecast, nor have sales of the A380 remotely maintained a pace that suggests Airbus will meet its own forecast, without dramatically adjusting both the total market and its market share expectations.
In an interview with Leeham News, McArtor maintained there will “always” be a demand for the VLA. He acknowledged that one can quibble with the forecast or the timing, but airport constraints and growing markets between key cities, such as London-Tokyo, London-New York, Paris-Tokyo or New York and similar segments, will demand a VLAP.
Airbus so far this year has has a net order for the A380 of minus three, but it signed a Memorandum of Understanding for 20 from specialty lessor Doric during the Paris Air Show. This is expected to be firmed up before the end of the year, potentially at the Dubai Air Show.
Boeing is also expected to make a splash at Dubai with the highly anticipated public launch of the 777X, with a large order from Emirates Airlines. The airplane, with a new composite wing, new engines, systems upgrades and cabin modifications, will come in a 350-seat 777-8 and a 407-seat 777-9. The 777-8 directly competes with the Airbus A350-1000. The 777-9 doesn’t have an Airbus competitor and at nominally 407 seats falls just within the VLA sector, which begins at 400 seats.
Boeing cuts 747 rate on weak demand
Boeing 747-8 production rate: To the surprise of absolutely no one, Boeing today announced it will trim the production rate of the 747-8 from 1.75 per month to 1.5/mo through 2015. the only surprise is that it wasn’t reduced to 1/mo.
Boeing cited lower demand for Very Large Aircraft, both in passenger and freighter models. Boeing stood by the airplane, however, predicting a cargo market recovering next year.
“This production adjustment better aligns us with near-term demand while stabilizing our production flow, and better positions the program to offer the 747-8’s compelling economics and performance when the market recovers,” said Eric Lindblad, vice president and general manager, 747 Program, Boeing Commercial Airplanes, in a statement. “Although we are making a small adjustment to our production rate, it doesn’t change our confidence in the 747-8 or our commitment to the program.”
There is a backlog of only 51 aircraft.
The USAF wants to replace its two Air Force One 747-200s in 2021. We think Boeing will be hard-pressed to keep the line alive until then. The official launch of the Boeing 777X, and the widely expected order for the larger 9X version at the Dubai Air Show next month, will make it that much more difficult for Boeing to sell the airplane.
Odds and Ends: Repairs begin on Ethiopian 787; WTO appeals; CSeries update
Ethiopian 787: Remember that Boeing 787 fire at London Heathrow Airport some months back? It seems that Ethiopian Airlines, the owner, and Boeing, have finally reached agreement on how to fix the airplane–but nobody is saying how, according to Steve Wilhelm at the Puget Sound Business Journal.
WTO Airbus/Boeing: In case anyone was wondering what’s happened to the cross-appeals of the World Trade Organization findings that Airbus and Boeing received illegal subsidies, it seems the USA isn’t the only place where budget constraints have bollixed things up. The appeals are delayed by budget shortfalls at the WTO.
CSeries Update: In case you’ve been wondering about the Bombardier CSeries test program–the plane has flown only three times since first flight Sept. 16–BBD just posted this YouTube with an update.
[youtube=http://www.youtube.com/watch?v=JwkhQDDEgdw&w=420&h=315]
We understand that the long run of rainy weather in advance of the first flight (delayed by a week because of the weather) meant that some of the testing that had been expected in advance of the flight resumed after the flight.
Flight Global has this short story.
757, 737-900ER/9 MAX, A321 replacement should be the next new airplane
The Boeing 757 doesn’t have a true replacement. The Airbus 321neo and Boeing 737-9 fall short. The 9 MAX doesn’t measure up to the A321neo. Boeing has to move toward a program to replace the 757 and the 737-9.
With the launch of the Boeing 777X a given, what’s next in aircraft development?
John Leahy, COO-Customers of Airbus, gave a tantalizing hint at the ISTAT conference last week in Barcelona, Spain, when he said the OEM was studying a stretch of the 350-seat A350-1000 to fill the gap between it and the 525 A380 and to compete with the 400-seat 777-9. But then he tried to reel it back, saying there was “no story here,” according to Aviation Week.
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- KING5 (NBC Seattle) has this report about the 757 replacement.
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Then Boeing’s own Joe Ozimek, who heads sales for the 737 MAX, asked the lessor’s panel which aircraft do they want and CIT Aerospace president Jeff Knittel said a replacement for the Boeing 757, Tweeted AFM magazine.
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This is what we think will be the next big project.
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We reported in March 2012 that Boeing continued studies-dubbed the New Airplane Study, or NAS-of a replacement for the 757 even after launching the 737 MAX program and billing the 737-9 as the 757’s replacement.
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Except that it isn’t. Far from it.
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The 737-9 doesn’t have the range, the field performance or the payload of the 757. Neither does the Airbus A321neo, although it is much better than the 737-9.
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Entry-into-service for what we will dub the 757R is envisioned for 2025-2027, leaning toward the former.
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During the media briefings in advance of the Paris Air Show, Boeing acknowledged it saw a market for the 757 replacement. Although 1,049 757s were built in its production run ending in 2003, a solid sales effort for its era, we believe the market is far larger when you consider the general up-gauging that’s been happening and the sales of the A321ceo/neo and the 737-900/900ER/9. Through September, there have been 1,861 A321 family sales and 766 of the largest 737 family siblings sold. Combined with the 757 sales, this totals 3,676 programs sales for all three airplanes, excluding future sales.
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|
Aircraft |
757-200 |
757-300 |
A321ceo |
A321neo |
737-900 |
737-900ER |
737-9 |
|
Sales |
994 |
55 |
1377 |
484 |
52 |
530 |
184 |
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Although Boeing claims the 737-9 is a replacement for the 757, for some 80% of the missions, and while Boeing claims the 737-9 is better than the A321neo, sales figures tell the story. Furthermore, airlines we talk to universally tell us the A321neo is more capable than the 737-9.
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The combined sales figures demonstrate that Boeing is trailing badly in the 180-220 seat single-aisle sector, with a mere 29% share of the market and even worse with the 737-9 at just 27.5% of re-engined competition. To recapture this market, Boeing has to proceed with a new airplane.
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We believe a 2025 EIS means activity will begin to truly ramp up for decision-making as early as 2017. Eight years now is becoming the norm for new airplane development lead time.
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Development of the true 737 replacement will then flow out of development of the 757R. The first 737 MAX EIS, for the -8, is slated for July 2017. The -9 follows in 2018 and the -7 in 2019, assuming the only two customers (Southwest Airlines and WestJet) don’t swap these for larger models or proceed with another solution entirely.
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We believe the MAX, coming two years behind the Airbus neo family, will have a shorter production life than the neo, especially with the poor-selling and poorer-performing -9. A 10-11 year production run is probably a reasonable expectation.
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Airbus and Boeing each have said they expect a replacement for today’s single-aisle airplanes around 2030. We believe this may be advanced a few years to as early as 2027.
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The question is, which company goes first? We think Boeing has the greater need and greater motivation. We believe Boeing will be first off the mark.