Boeing 2Q earnings: down as expected, 777X delay confirmed

July 24, 2019, © Leeham News: Boeing’s first quarter and first half revenue is down $9bn vs last year as the impact of the 737 MAX grounding takes a full hit.

The MAX was grounded March 13, near the end of the first quarter, with limited understanding of the financial impact. The plane will be grounded through the entire third quarter and well into the fourth quarter, Boeing has acknowledged. Some believe a return to service won’t occur until into the 1Q2020.

Boeing’s 2Q2019 earnings press release has details.

Boeing also acknowledged the 777X will be delayed, with first flight now coming next year due to engine issues previously disclosed. Entry into Service is still targeted for 2020. LNA sees EIS slipping to 2021.

Boeing so far says the FAA certification process scrutiny for the 737 MAX hasn’t affected the 777X, but LNA and industry participants believe that the FAA must be reviewing what it’s done in the past and looking at what processes are to come. The consensus, and LNA’s conclusion, is that the FAA’s revisiting the process (if this thesis is correct) will result in a delay as well.

Lufthansa Airlines, the first launch order for the 777X, has been notified by Boeing that first delivery is now scheduled for December 2020. Emirates Airline has been notified first delivery is January 2021. LNA believes Lufthansa’s delivery will slip into 2021.

Below are first reactions from analysts to Boeing’s 2Q results.

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Trans-Atlantic market fragmentation hurts big widebodies

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By Vincent Valery

July 22, 2019, © Leeham News: Development of single-aisle aircraft that now have ranges of plus-or-minus 4,000 nautical miles are fragmenting hub markets needed to fill large twin-aisle aircraft.

Just as twin-engine widebodies began fragmenting routes needed to fill the Boeing 747 and later the Airbus A380, the Boeing 737-8 and Airbus A321LR/XLR appear to be contributing to weak demand for the Boeing 777X and Airbus A350-1000.

With launch of the Airbus A321XLR last month and expected New Midsize Airplane once the MAX crisis is over, some markets might have structures dramatically altered in the second half of next decade. The prime candidate is the US East Coast–Europe market. We will investigate through historical examples how things might turn out.

Rendering of Boeing NMA-7. Source: Leeham Co.

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Pontifications: Embraer counts on Boeing heft for E2 sales boost

By Scott Hamilton

July 22, 2019, © Leeham News: Embraer still appears to be in a bit of a holding pattern following the Paris Air Show in which it announced orders and commitments for only 76 EJets. Two additional orders announced at the show were previously under the Unidentified category.

This seems to be following a pattern set with the Bombardier C Series, in which sales were slow while the market waited for the deal to close in which Airbus acquired 50.01% of the C Series program.

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Analysts react to Boeing’s 2Q charge, cost and RTS announcement

July 19, 2019, © Leeham News: Boeing yesterday announced a $4.9bn charge connected to customer compensation for the 737 MAX grounding. It also announced a $1.7bn additional cost associated with the accounting block and forecast a 4q2019 return to service.

Wall Street analysts overall were positive with the new. Aftermarket stock trading was up; pre-market trading today is slightly down from the aftermarket high.

Below are excerpts of research notes issued last night and this morning.

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Bjorn’s Corner: Airbus’ A321neo has a pitch-up issue (now with a second update)

By Bjorn Fehrm

July 19, 2019, ©. Leeham News: The European Aviation Safety Agency EASA has issued an Air Worthiness Directive (AD) to instruct operators of the Airbus A321neo of a Pitch instability issue.

EASA writes “excessive pitch attitude can occur in certain conditions and during specific manoeuvres. This condition, if not corrected, could result in reduced control of the aeroplane.”

We analyze how this is similar or different to the Boeing 737 MAX pitch instability issues.

NOTE 2: We have got a further update from Airbus, see below.

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Boeing to record >$4bn charge in 2Q

July 18, 2019: Boeing just issued this press release:

Boeing [NYSE: BA] announced today it will recognize an impact to earnings when it releases second-quarter 2019 results on July 24. 

Boeing will record an after-tax charge of $4.9 billion ($8.74 per share) in connection with an estimate of potential concessions and other considerations to customers for disruptions related to the 737 MAX grounding and associated delivery delays. This charge will result in a $5.6 billion reduction of revenue and pre-tax earnings in the quarter.  

While the entire estimated amount will be recognized as a charge in the second quarter, the company expects any potential concessions or other considerations to be provided over a number of years and take various forms of economic value.

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How much of an NMA market will the Airbus A321XLR capture?

By Bjorn Fehrm

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Introduction

July 18, 2019, © Leeham News: Airbus’ new A321XLR is labeled as an Boeing NMA killer. It shall, with its capability to fly the same routes as the NMA, nibble away on its market space.

This discussion takes the Airbus passenger and range data for the A321XLR and compares it with the announced capabilities of the NMA. As we will see, it’s not that simple.

Summary:

  • To understand how the A321XLR will compete with the NMA, we first need to compare them with the same yardstick.
  • Putting them on the same cabin and operational rule set reveals interesting differences. The A321XLR and the NMA are complementary rather than competitors.

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14 new airplanes and derivatives see EIS through 2027

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July 15, 2019, © Leeham News: There are 14 new and derivative aircraft scheduled for entry into service (EIS) through 2027. This rises to 16 if Boeing launches the New Midmarket Aircraft (NMA).

But there are plenty of uncertainties around precise EIS hanging over some of these.

LNA sees entry into service for the Boeing 777X slipping to the first quarter of 2021.

LNA sees the Boeing 777X EIS slipping into early 2021. China’s C919 is now slated for a 2021 EIS, but development has been tricky and delays have been common. Russia’s MC-21 flight testing has been slow and international sanctions hang over this aircraft.

Mitsubishi’s MRJ90, now called the M90, is slated to enter service next year. It, too, has been plagued by delays. The redesigned MRJ70, the M100, moves from a 2021 EIS to a planned 2023 EIS—but given the MRJ90’s history of delays, the company has to persuade the industry no more slippages are likely.

Here is a rundown by year and aircraft of the EIS dates.

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Pontifications: Boeing can’t catch a break

By Scott Hamilton

July 15, 2019, © Leeham News: Boeing can’t catch a break.

Some may argue it doesn’t deserve one, given what’s come out about the 737 MAX development. And the sloppy production of the 787 at the Charleston (SC) plant. And the FOD issues with the KC-46A at the Everett (WA) plant.

To be sure, Boeing has gotten a lot of bad press it’s deserved. But last week, two pieces of news had connections to the MAX that were (1) overwrought and (2) unwarranted.

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Bjorn’s Corner: Kjos departure signals changes at Norwegian

By Bjorn Fehrm

July 12, 2019, ©. Leeham News: Norwegian Air Shuttles’ (Norwegian) founder and CEO for 17 years, Bjorn Kjos stepped down yesterday.  Over the last year the CFO, Board chairman and now the CEO have changed.

This signals a change in strategy for Norwegian. The new management is focused on halting growth and cutting costs. Norwegian must now consolidate itself to profitability.

Figure 1. Norwegians Intercontinental network spring 2019. Source: Norwegian.

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