Leeham News and Analysis
There's more to real news than a news release.
Pontifications: Moonshot for engines for Next Boeing Airplane may have to wait
By Scott Hamilton
Sept. 12, 2023, © Leeham News: The Next Boeing Airplane (NBA) may be a moonshot for CEO David Calhoun, but airlines will probably be reluctant to take a moonshot on the next new engine.
Service issues with the CFM LEAP and Pratt & Whitney GTF engines are driving airlines batty. The failures of the Rolls-Royce Trent 1000 years after entry-into-service (EIS) cost RR hundreds and millions of dollars and a confidence crisis that hurt future sales. LEAP engines are coming off wing well before initial forecasts. Every aircraft model using the GTF faced groundings as engine failures piled up.
Boeing sorely needs a successor to the 737, now in its 55th year and fourth iteration. Ron Epstein, the aerospace analyst for Bank of America, was biting in a Sept. 7 research note.
Flying a Boeing 737 is like driving a ‘68 Chevy Impala with a semi-modern dash.
“We note that Boeing continues to ride on the coattails of its past glory. The original Boeing 737 prototype first flew in April 1967, entering service less than a year later in February 1968 with Lufthansa. Fifty-five years later, the 737 airframe remains in service through a multitude of derivative models, including the most recent 737 MAX,” he wrote.
“However, we note that the model was never intended to be such a blockbuster long-term solution. Instead, the 737 was expected to be a band-aid for the Boeing portfolio to compete with the market share-winning DC-9. The Boeing fleet lacked a smaller narrowbody model to complement the company’s larger jets, like the 707. In the spirit of the General Motors model, the 737 was intended to be the ‘cheap Chevy’ of the portfolio. Fledgling carriers would operate the cheaper model before upgrading to Boeing’s large, higher-end products like the 707 and, later, the 747, which one could see as the ‘Cadillacs’ of the portfolio.
“In our view, while the longevity of the 737 is impressive, the aircraft is now a bit of an anachronism. Operating the aircraft is like driving around in a 1968 Chevy Impala with a semi-modern dashboard. It is important to note that the 737 is the only currently manufactured commercial aircraft without fly-by-wire controls, which are a staple in modern aircraft control system design.”
Epstein worked for Boeing from 1995 to 1999 as an Applied Research Scientist. He’s a technical advisor to United Airlines for the alternative energy sector.
Analysis: Jefferies presentations show industry hasn’t stabilized post-Covid
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By Bryan Corliss
Sept. 11, 2023, © Leeham News: Negative cash flow in the quarters ahead. Ongoing issues with the supply chain. OEMs struggling to meet high airline demand as Tier 1s wrestle with quality issues. New technology wearing out faster than the old systems it replaced.
The No. 1 takeaway from last week’s Jefferies Financial Group Industrials Conference presentations is that the aerospace industry is still a few years away from being in a stable state capable of meeting the demands of customers and shareholders alike.
“We know our customers really do want to make more,” said Howmet CEO John Plant, whose company casts fasteners and engine components for Tier 1s and OEMs. “The question becomes when can we achieve these improved rates?”
Plant went on to say that he believes both Airbus and Boeing will hit their goals for increased widebody production; Airbus at 9/mo on the A350, Boeing at 10/mo for the 787.
The question, he said, is whether the OEMs will hit those rates in 2025 or 2026.
Executives from Boeing, Spirit AeroSystems and Howmet all presented at the conference, and all agreed that there’s reason to be optimistic, given the strong demand from airlines for more planes.
The issue, as Plant put it, is the industry’s ability to meet that demand. “We haven’t seen the real benefits of increased aerospace production.”
- Companies discuss latest 737 quality issue
- Spirit tries to get on track as refinance deadline looms
- Gentile: Supply chain needs new contract terms
- Boeing CFO projects losses for next quarter
- Howmet talks about engine challenges
- Takeaway: Fundamental demand is strong, but…
Calhoun’s moonshot for the Next Boeing Airplane
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Now open for all readers.
By Scott Hamilton
David Calhoun
Sept. 4, 2023, © Leeham News: As people try to figure out when Boeing is going to launch a new airplane, confusion continues over semantics and doubts continue over willingness.
The semantics revolves around the words “launch” and “introduce.”
Brian West, the CFO of The Boeing Co., appears at an investors conference Sept. 7 hosted by Jefferies, an investment bank. The event will be webcast; a link is available on the Boeing website. Perhaps West can clarify the timeline, but here is what’s happened recently.
David Calhoun, the CEO of The Boeing Co., said during Boeing’s investors’ day event on Nov. 2 last year that Boeing will “introduce” a new airplane by the middle of the next decade. LNA at that time asked corporate communications if by “introduce” Calhoun meant entry-into-service or a program launch. Corp Com replied that Calhoun meant EIS.
Last month, at another investors conference, a lower level Boeing official said Boeing would “launch” its next airplane by the middle of the next decade. If this is what the official meant, “launching” the next airplane by mid-next decade would represent a major shift. LNA figured the official was mixing words and asked Corp Com for clarity. A spokesman replied, go with Calhoun’s November statement. So, for the moment, let’s take this at face value.
Then there are the skeptics.
Pontifications: One step forward, two steps back: Déjà vu all over again.
Aug. 29, 2023, © Leeham News: It’s déjà vu all over again.
By Scott Hamilton
Last March, I wrote a piece entitled One Step Forward, Two Steps Back discussing Boeing’s efforts to climb out of the very deep hole dug by the 737 MAX grounding, suspension of 787 deliveries and the pandemic.
I noted that for every step forward, something seems to happen to set it back two steps. (A Boeing official suggested the piece should have been two steps forward, one step back, but the underlying point is made.)
The backward steps seem out of Boeing’s control. But it’s Boeing’s name on the side of the airplane and its Boeing that delivers airplanes to the customers. It’s Boeing with whom customers are frustrated.
The latest step backwards that delays deliveries again of the 737 MAX comes from Spirit AeroSystems. Misdrilled holes for the aft pressure bulkhead are blamed this time. The full extent of the flaw, with impacts, number of planes affected, etc., is still being assessed at this writing. Spirit says a supplier is responsible for this issue.
This follows a previous setback when Spirit found that one of its suppliers provided parts that failed to meet specifications which attached the vertical tail to the fuselage of the 737.
These flaws, revealed within months of each other, negatively impact the delivery of new production 737s and delivery of some of the more than 200 MAXes that remain in inventory due to the 2019 21-month grounding of the MAX.
Before that, Spirit’s quality control on the 787 nose section it builds for Boeing was found to have flaws. Deliveries were suspended for nearly 20 months. Eventually, Boeing had 110 newly built 787s in inventory that require rework. The inventory won’t be cleared until the end of next year.
The back story to a Chinese lessor sale of 737 MAX orders
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By Scott Hamilton
Aug. 28, 2023, © Leeham News: The order in February by Air India for 190 737 MAXes involves a backstory involving China that until now hasn’t been told. A subsequent sale by a Chinese lessor of all 737 MAX orders to a Middle Eastern lessor further reduces Boeing’s exposure to China.
The Air India was finalized at the June Paris Air Show. When Boeing announced its second quarter financial results the following month, the MAX inventory accumulated during the 21 month grounding of the type was reduced by 55 aircraft. These 55 MAXes were part of the inventory of 140 737s that were built for Chinese airlines and lessors.
Subsequently, the Chinese lessor CALC announced a deal to sell its entire MAX backlog of 54 to the Emirates lessor, DAE. Purchase rights to some 50 more MAXes were also transferred to DAE. This transaction left CALC with no 737s on its order books.
In its 2022 annual report, the most recent CALC financial statements available, the lessor wrote, “As at 31 December 2022, CALC had 226 aircraft on its orderbook, including 131 Airbus, 66 Boeing and 29 COMAC aircraft.”
Pontifications: A little math for 777X, 737 MAX
By Scott Hamilton
Aug. 22, 2023, © Leeham News: We have a follow up to our Aug. 9 post about Boeing revealing the sub-type orders for the first time for the 737 MAX and 777X.
Boeing every month updates its website data for gross orders, cancellations and orders classified under an accounting rule called ASC 606. ASC 606 means orders are “iffy” for contractual or financial reasons with the customer.
The difference between gross orders and net orders represents cancellations, for whatever reason. The airline or lessor may have decided to cancel outright. Some orders might have been swapped within the family (for example, from a 737-8 to a 737-10). Some orders may have been swapped (cancelled) between models—for example, from the MAX to the 787. Boeing’s cumulative statistics haven’t revealed the difference between gross and net orders—until now.
ASC 606-classified order adjustments are excluded from the gross/net tally, Boeing tells me. In other words, for purposes of the tallies, the ASC 606 orders remain included in the gross numbers. They’re still orders at this stage, even if iffy. Airbus, operating under European accounting rules, doesn’t have to identify its iffy orders; LNA has made its best estimate for years of Airbus “iffy” orders, however, in an effort to level the publicly reported playing field. There are times when discussing orders and backlogs that we ignore Boeing’s ASC 606 classification when comparing with the Airbus orders.
With this as background, let’s get to the follow up to the Aug. 9 post.
United selects GEnx for order for 100 787s
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By Scott Hamilton
Aug. 14, 2023, © Leeham News: United Airlines quietly selected GE engines for its order in December last year for 100 Boeing 787-9s, according to Boeing’s website. The order isn’t finalized and neither GE nor United would comment.
There had been speculation that UAL might order Rolls-Royce engines as a mitigation for cancelling 45 Airbus A350-900s, which is powered exclusively by RR. United repeatedly deferred delivery of the A350s, which were ordered by previous managements. United inherited a large order for 787s when it merged with Continental Airlines and placed repeat orders for the 787 after the merger. The A350s essentially are duplicative to the 787s.
United placed large orders for the Airbus A321neo at a time when Boeing at first dithered whether to launch the New Midmarket Aircraft. UAL added to the neo order during the time when Boeing was unable to pursue any new airplane program due to the extended grounding of the MAX and during the COVID pandemic.
Bjorn’s Corner: New aircraft technologies. Part 25. Efficient development
August 11, 2023, ©. Leeham News: We have described a number of technological advances that can be used to make the next-generation airliners more efficient and, thus, more environmentally friendly.
Part of developing more efficient next-generation aircraft is to change the development process to be more efficient. The last Boeing aircraft, the 787, took 7.5 years from launch to entry into service, and Airbus A350 took 8.5 years.
The target is to reduce this by up to 50%, but how?
Figure 1. The Airbus A350 development schedule. Source: Airbus.
Boeing reveals sub-type orders for MAX, 777X for the first time
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By Scott Hamilton
Aug. 9, 2023, © Leeham News: Boeing yesterday revealed the orders for sub-types for the 737 MAX and 777X, the first time it has done so publicly.
The Seattle Times first reported the MAX detail.
The MAX data is largely similar to LNA’s estimates over the years, in which we analyzed the backlog, including Unidentified customers, to percentages. When the MAX 10 was program was launched, customers who ordered the MAX 8 or MAX 9 switched some of these to the MAX 10. Others have done so since then.
MAX orders remain concentrated around the MAX 8 and the high-capacity MAX 8 200, also known as the MAX 8200. Seventy-one percent of the MAX orders in backlog are for these two aircraft types. In contrast, 62% of the Airbus A320neo family backlog is for the largest model, the A321neo. Boeing’s direct competitor to the A321neo, the MAX 10, represents 19% of the MAX backlog.
The MAX 7 and MAX 10 have yet to be certified. Only the A321XLR remains to be certified of all the A320neo family variants.
Pontifications: Freighter outlook for the next 20 years
By Scott Hamilton
Aug. 8, 2023, © Leeham News: The cargo conversion market faces the prospect of oversupply of certain types, the consulting firm IBA said last week in a webcast.
The aftermarket conversion of Boeing 737-800s is already at 60 this year, according to IBA’s estimate.
Figure 1.
The forecast doesn’t extend beyond this year—and therefore is incomplete. IBA notes that the Airbus A321 P2F supply is a fraction of the 737-800 conversions, which are undertaken mainly by Boeing and aeronautical Engineers Inc (AEI). There are more than 100 A320 family conversions orders (all but a handful for the A321) that will be coming on line in future years.
Figure 2.
Likewise, IBA’s forecast for widebody conversions doesn’t extend beyond this year. There are also more than 100 orders for Airbus A330ceo conversions (all but a handful for the A330-300). Figure 2, like Figure 1, paints an incomplete picture.