When Hazy talks, people listen….

Steven Udvar-Hazy, the CEO of International Lease Finance Corp., carries enormous weight in the airline industry. His ILFC is the biggest customer of Airbus and Boeing. His public criticism of the A350 (Version 4.0) at the ISTAT conference two years ago (in response to a question we asked, BTW) set the stage for Airbus to redesign the aircraft.

Hazy once said he doesn’t think the A380 will sell more than 300-400 and he doesn’t think the 747-8I will sell well, either. Both predictions remain to be seen, but people listened.

While the world waits for Boeing to tell us about the latest delay for the 787, Hazy told the JP Morgan Aviation & Transportation conference today that he expects an all-in delay of 15-16 months from the original May 2008 delivery schedule, according to someone who was there. That means August or September of 2009 before the first delivery.

Hazy is usually extremely well clued in on these sorts of things. He told us of the third delay for the A380 before this became public, and we broke the news at the time.

It’s like the old EF Hutton slogan: When EF Hutton talks, people listen. EF Hutton is defunct, but this analogy isn’t to suggest that ILFC is headed that direction. It’s simply a great line.

Leeham.net updated/Looks at Tanker

Our corporate website, Leeham.net, has been updated with an in-depth look at the Boeing protest of the KC-30 tanker award; the surprise doubling of the Northrop Grumman jobs for the KC-30; and a Wall Street Journal story looking at the reasons for the Boeing protest.

VLA and the Airbus-Boeing forecasts

Boeing has had a long run in the spotlight, given the tanker award and protest and the Goldman Sachs report predicting another six month delay for the 787.

For a change, let’s take a look at the Airbus and the A380.

Airbus predicts a market of nearly 1,700 passenger and cargo airplanes in the Very Large Aircraft (VLA) category in its new forecast issued this year. Boeing forecasts 960 VLAs in its market outlook issued last year. Each prediction is for a 20-year period, or 2027 for Boeing and 2028 for Airbus.

The math is pretty simple: to achieve 1,700 VLA sales under the Airbus forecast (and it doesn’t matter whether it’s Boeing or Airbus, both the A380 and 747-8 are VLAs), this is an average of about 85 sales a year beginning this year.

To achieve the 960 figure from Boeing beginning last year, that means an average of 48  VLA sales a year.

Airbus predicts 30 sales for the A380 this year. Boeing hasn’t made a public prediction for the 747.

It’s pretty clear Airbus is just a tad short.

For comparison, Boeing has sold 1,522 747s since the first order in 1966, 42 years ago. That’s an average of 36 a year, and this started when the 747 had a monopoly for a few years as the world’s first jumbo jet–and maintained a monopoly on trans-ocean routes until the DC-10-30/40 and L-1011-500 began making serious inroads.

We’ve always thought Boeing’s forecast of only 300-400 sales of the A380 was woefully inadequate. But we’ve also thought  the Airbus forecast of 1,700 VLAs in 20 years was wildly optimistic.

The math certainly suggests as much.

Why Boeing protested tanker award

Because we were traveling this week, we’re a little behind on these sorts of things. Boeing’s press releases concerning the tanker protest don’t do justice to their reasoning. James Wallace of The Seattle Post-Intelligencer posted an audio of the 64 minute conference call in which Boeing executives explain why they protested. You may listen to this audio here.

Podcasts on the tanker and Southwest Airlines

Here’s an 11 minute podcast on the Boeing protest of the tanker award to Northrop Grumman.

Here’s an 8 minute podcast on the latest travails of Southwest Airlines and what might this mean.

Northrop’s job figures

As we noted Tuesday, Northrop issued a press release saying that its KC-30 program will produce 48,000 new jobs. This compares with the 44,000 jobs Boeing claims for its KC-767AT.

We find something really odd here. Setting aside for the moment that Northrop for more than a year claimed its tanker would produce 25,000 and accused Boeing of grossly inflating its figure, and setting aside for the moment the methodology described in the press release, here’s the deal:

The KC-30 has only 60% US content by value vs. the 85% claimed by Boeing (Northrop’s analysis of the KC-767 US content is 69% but that’s neither here nor there for purposes of this discussion). Northrop now claims its airplane, with less US content than the KC-767 (using either the Boeing or Northrop claim of content for the KC-767, BTW) will produce more jobs than Boeing claims. (Boeing also has previously said its number was conservative.)

Considering that one key message of the political battle is the “exporting” of US jobs, Northrop’s new jobs claim comes at an interesting time and with an interesting number despite its tanker’s lower US content.

The Politico, a website that follows all things in the political arena,  reports that Northrop and EAD lobbyists are focusing on the jobs that they assert will be created by the KC-30 program.

The timing and new number certainly have the appearances of oddity and desperation.

Loren Thompson’s report of Boeing protest

Lexington Institute’s Loren Thompson provides a report of why Boeing protested the tanker award to Northrop.

Until we get through with our travels, this will have to suffice for our readers. We plan a full report Tuesday on our Corporate Website with our bi-weekly update.

Boeing OK about new aircraft entrants

Boeing doesn’t appear too worried so far about the possibility of the established and emerging regional jet manufacturers encroaching on the low-end 737 market.

Randy Tinseth, vice president of marketing for the Seattle-based manufacturer, made the remarks today at the 25th Annual Meeting of ISTAT, the International Society of Transport Aircraft Traders.

In a follow-up interview with us, Tinseth said that Bombardier’s proposed CSeries airplane, the largest of which is designed to carry about 139 passengers, is so far a “paper” airliner that he thinks doesn’t quite make the quantum leap airlines are looking for in fuel and maintenance efficiencies. Despite choosing the Pratt & Whitney Geared Turbo Fan and increasing the use of composites, the CSeries remains below the 15% to 20% improvements requested by airlines, Tinseth says.

China has rolled out its 70-seat ARJ-21 and announced plans to develop a 150-seat airliner. This hits right at the core of the Boeing and Airbus single-aisle airplanes, and China historically has been one of the most reliable customers for both manufacturers, through good times and bad. Tinseth told ISTAT that China’s market in 20 years will equal that of the USA today, and he tells us that Boeing must remain responsive to customer needs and relationships if it is to compete with the government’s propensity to favor indigenous products.

With Japan, China and Russia each developing regional jets—and each in industrial or engineering relationships with Boeing (and Airbus), Boeing’s unions expressed concerns about technology transfers creating new competitors. Tinseth, an engineer by training, said Boeing strives to protect its intellectual properties. “As part of what we do, we hold that close,” he says.

Tinseth acknowledged to ISTAT the program challenges of the 787. While Goldman Sachs last Friday issued a report suggesting a new, six month additional delay in the program is likely—Boeing said it will have an update at the end of this month—Tinseth stuck to the current company position that power-on is targeted for the first airplane soon. Originally this was scheduled for the end of March; Tinseth told ISTAT that it is targeted for early April (Goldman predicts June), and first flight is still scheduled for June. However, Tinseth told ISTAT that the program schedule is being assessed, which seemed to us sitting in the audience to be a little bit of wiggle room.

We asked Tinseth about this in our follow-up interview, and he demurred on the “wiggle room” but reiterated that the schedule remains under review for update by the end of the month.

Tinseth also clarified for us an element discussed during his presentation in which he said the Very Large Aircraft segment is a “100% replacement” market. Boeing predicts 560 passenger VLAs to the Airbus forecast of some 1,280. Airbus validates its forecast with the thesis that air traffic doubles every 15 years (Tinseth agrees) and that congestion at hub airports requires larger airplanes. Tinseth says 80%-90% of the congestion is from single-aisle airplanes and these are up-gauging to accommodate more passengers: for example, from 737-700s to 737-800s and 50-seat RJs to 70-90 seat RJs.

 

First thoughts on Boeing protest

There’s not much to say at this juncture; Boeing says the tanker process was flawed; the Air Force and Northrop say it wasn’t. Boeing’s statements over the last couple of days generally outline its grievances, so we won’t repeat them here.

One thing we can say: the Democratic response, and that of some labor leaders, blaming Sen. John McCain for this is, we think, out of place (and we’re no supporter of McCain in his presidential bid–on the GOP side we actually liked Ron Paul). McCain stopped the 2001 tanker award because he found evidence the Air Force and Boeing acted illegally. Two Boeing executives went to jail over this deal, and Phil Condit resigned as CEO. Political posturing against McCain over this is unfair.

 Second thoughts:

We’ve previously gone on record as thinking the best solution for the Air Force all along was a split buy between Boeing and Northrop. In many ways, the two airplanes can accomplish different missions. We still think so. The Congress should double any allocation to double the production rate (which makes more sense in any case). Building just 12-18 tankers a year over 10-15 years to replace airplanes that are 45 years old is too skimpy. Boeing didn’t like the idea of a split buy before. But we still think this is the best solution for the war fighter.

Buzz about Boeing protest

Washington and a major aviation conference is a-buzz with expectations that Boeing will file a protest over the USAF tanker award to Northrop Grumman, perhaps as early as today.

Boeing was debriefed Friday and over the weekend and today issued statements that appear to lay the groundwork for a protest. Boeing said the competition was much closer than had been represented in the press and that it had questions about the Air Force process. Northrop Grumman was debriefed today and issued a statement as well, supporting the  press reports that its KC-30 was superior to the KC-767.

Stay tuned.