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 4. Propulsive efficiency April 19, 2024
- Boeing unlikely to meet FAA’s 90-day deadline for new safety program April 18, 2024
- Focus on quality not slowing innovation, says GKN April 18, 2024
- Boeing defends 787, 777 against whistleblower charges April 17, 2024
- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
Boeing comments on 787 delamination, delivery expectations
Jim Albaugh, CEO of Boeing Commercial Airplanes, today commented on the delamination issues on the 787 and the effect on deliveries and production going forward. He spoke at a JP Morgan conference. there are several stories that can be found on Google News, but here’s a link to a Reuters piece that neatly sums things up. Here is a link to Aspire Aviation’s synopsis.
Among other things, Albaugh said Boeing should deliver 70-85 787s and 747-8s, roughly evenly split between the two, or about 35-42 of each airplane. Jon Ostrower also Tweeted that the plan is to deliver the last re-worked 787 in 2014. Some may recall that Boeing’s Scott Fancher, at the time the head of the 787 program (now heading up 777), once said it would take “years” to complete the rework on the plethora of 787s lined up at Everett’s Paine Field. Ostrower also Tweeted, quoting Albaugh, as saying the first “clean” 787 will be line #66 (it had been forecast to be #63).
The other key point is about the delamination. While this has gotten a lot of high-profile attention, particularly in the context of the overall 787 program difficulties, independent sources we checked with tell us that while this is another annoying and embarrassing event for Boeing, the fix in relatively simple and the problem not particularly consequential. Boeing, of course, has said as much but skeptics continue to question Boeing’s credibility due to the history of the program often turning out to be worse than Boeing’s statements. Case-in-point is Boeing’s continued insistence that it will meet the goal of producing 10 787s per month by the end of next year and the disbelief expressed by every aerospace analyst and consultant we’ve seen. (Granted, there may be some who accept the goal as doable, but we’ve not seen them.)
Separately, an interesting public dispute between Air India, a 787 customer, and Boeing emerged. Air India says Boeing agreed to pay $500m for delays of 27 787s. Albaugh says that’s news to him. We ask, what precisely did Air India say? The news reports are too ambiguous. Did Air India say cash compensation or that Boeing is paying $500m in compensation, which, of course, could take many forms such as discounts, services, parts, etc? This would make Albaugh’s statement that no check is being written correct. So it goes….
Predictably, Airbus and Boeing claim victory in WTO appeals case
The report is now public and to no surprise, Airbus and Boeing (and the surrogates, the EU and US Trade Representatives) each claim victory.
This excerpt from a Bloomberg report neatly paints the picture.
World Trade Organization appellate judges sided with the U.S. over illegal government subsidies to Boeing Co., the U.S. Trade Representative’s Office said. Airbus SAS called the ruling a “sweeping loss” for Boeing.
AirInsight published the press releases of Airbus and Boeing.
The news services on the Internet haven’t yet posted a full range of reports (as of 0910PDT Monday). We’re not going to bother posting the statements of the warring parties, reflecting our disdain of the entire process in the first place. Readers may search Google News, Yahoo News, et al. and comment–but a reminder to be mindful of our Comment Rules.
WTO appeals panel upholds Boeing subsidy findings
Word is leaking out in advance of Monday’s public release of the appeal of a WTO finding that Boeing benefited from illegal subsidies that the appeals panel upheld the findings.
Additional reports: Here and here.
Boeing has previously said on several occasions that if the WTO found it received illegal subsidies, it would write a check. We’ll see what spin occurs next week on this point.
The European Union claims Airbus has now conformed with the WTO findings against it, a claim rejected by the US Trade Representative and Boeing.
Spirit, Airbus and Boeing: take-aways from analyst day
Spirit Aerosystems held an aerospace analyst day March 7 and several reports have already been issued. Given Spirit’s close association with Boeing 7-Series programs, we thought the following is useful information. Spirit is also a major supplier to Airbus on the A35, building sections of the composite fuselage at its North Carolina facilities.
Filling the gap until re-engine
Reuters has this interesting story from Airbus and a focus on selling the A320ceo (Current Engine Option) to fill in production slots in 2015-17 (2013-14 slots are sold out) while waiting for the A320neo (New Engine Option) production to ramp up. The A320neo is slated to enter service in October 2015, followed in six month increments by the A319neo and A321neo.
Concern about selling the current generation A320 (and the Boeing 737NG) at prices that won’t depress residual values is rearing its head again, alluded to in the Reuters story. The impact of the re-engine programs on the current generation A320 and 737 was a major talking point in the months leading up to the RE decisions by Airbus and Boeing. These concerns were pooh-poohed by both companies. But if Airbus (and perhaps Boeing) have to deeply discount sales of current airplanes to fill production slots, then this will depress values of the installed base.
Furthermore, UBS Securities just visited Boeing with more dismal news to values. UBS writes that Boeing acknowledged lease rates and values of second hand aircraft will likely weaken as production rates ramp up. Airbus and Boeing both have announced rates of 42/mo (Airbus by the end of this year and Boeing by 2014) for their single-aisle airplanes. Airbus is studying going to 44 and even 60 and Boeing has openly signaled its intent to go to 60 for the 737. This will put more pressure on lease rates and values.
Republicans in Congress out to lunch on Ex-Im Bank funding
The politically-focused publication The Hill has an article that describes a Republican Party that is completely out of touch with reality on the Ex-Im Bank funding of exports.
Ex-Im supports a broad spectrum of industries, but is especially important to Boeing–so much so that Ex-Im is sometimes derisively called Boeing’s Bank due to the dominance of Boeing airplanes funded by Ex-Im.
Ex-Im reaches its $100bn cap this month, according to The Hill, much earlier than the previously anticipated May. Boeing and GE–which supplies engines for 92% of Boeing’s airplanes–are lobbying Congress to increase the cap to $140bn. This might sound like lunacy in the budget crisis, but according to Boeing, Ex-Im actually contributed more than $1bn through fees to the US Treasury in recent times. And fees are going up as a result of international changes last year to Ex-Im and Europe’s similar credit agencies.
According to The Hill, some Republicans characterized Ex-Im as providing subsidies to US corporations. As readers of this column know, we dislike corporate subsidies of any kind (see also below), but Ex-Im is not subsidies (and neither are the European Credit Agencies’ support for Airbus airplanes). This are funding mechanisms to support exports. In Boeing’s case, the company is the USA’s largest exporter that helps the balance of trade.
So let’s see: Ex-Im is a net contributor to the US Treasury. It helps exports. It helps the USA’s largest exporter, which helps the balance of trade. What’s not to like about this program?
About the only thing not to like with respect to Boeing is Ex-Im lends to airlines that compete with US international carriers. But this complaint largely revolves around cheaper financing, and last year’s agreement took care of this. The other complaint is that Ex-Im also supports financially troubled carriers like Air India. But the airline complaining the loudest on this is a product of two bankruptcies (Delta Air Lines and its merger partner Northwest Airlines), and there now isn’t a US legacy carrier that hasn’t been “supported” through the bankruptcy process. We could write a whole new post about how the legacies, including the “old” Delta, complained that bankruptcy unfairly supported weak carriers.
The Republicans opposing Ex-Im funding are out to lunch, and this time with the business community they profess to support. No wonder the Republican brand is in so much trouble.
Congressman from Boeing to retire
Norm Dicks, the prominent Congressman from Boeing who made winning the KC-X contract for Boeing the “highlight” of his career, announced today he is retiring.
Dicks has one of the safest Democratic seats in the State of Washington. His retirement will be a big loss for Boeing in Congress.
Odds and Ends: Airworthiness Directives and sloppy headline writing
Airworthiness Directives: The New York Times has a good piece about ADs that should put many general assignment reporters to shame. The rhubarb over the ADs applied to the Airbus A380 spurred Nicola Clark’s reporting. This is a must-read not only for the general public to actually understand what’s going on in the world of aviation, it’s a must-read for the hysterical headline-writers who seem more interested in page hits than in facts.
787 Surge Line starts in June: Boeing’s 787 Surge Line begins operation in June. This is the line in Everett that is being created as risk mitigation for the new line in Charleston as the workforce there comes up on the learning curve. The two lines are intended to have a capacity of three per month, while Line 1 in Everett has a capacity of seven per month.
The Surge Line is supposed to terminate in May 2014, according to internal Boeing documents obtained by the IAM 751 in the now-defunct NLRB case. But we hope, and believe, the Surge Line could become a long-term line as Boeing considers ways to go beyond the 10/mo production rate goal by the end of 2013. We believe Boeing has to significantly go beyond this rate to catch up from delays that are hitting four years for some customers, as well as to open up slots for demand.
Rolls-Royce and the Trent XWB: Flight Global has a long article about RR’s engine development for the Airbus A350.
Dark Clouds over Asia: Aspire Aviation has a long piece about Asian airlines that are struggling. Asia has been a bright spot for Boeing and Airbus orders. Perhaps the bubble is about to burst.
WTO Appeal of EU v Boeing issued, in secrecy
The dual appeal of the WTO Panel Findings in the European Union’s complaint against illegal subsidies provided Boeing for its commercial airplanes program has been issued, but it remains under wraps until March 12 to allow the parties to review it and request commercial sensitive information be deleted from the public version.
The WTO Panel found Boeing received more than $5bn in illegal subsidies. The key ones are grants from NASA and the Department of Defense, but tax breaks provided by the State of Washington–amounting to $3.2bn over 20 years–also were found to be illegal.
The EU and the US Trade Representative each appealed the Panel findings. The EU wanted to start the clock on the countdown to Boeing compliance as well as seeking reconsideration of complaints rejected by the Panel. The US appealed some of the findings of the Panel that found Boeing received illegal subsidies.
Leaks from both sides are expected in advance of the March 12 public release.
We expect the core of the Panel’s findings–that grants to Boeing are illegal–to be upheld. We also expect that the tax breaks granted by Washington State (as well as Kansas) will also continue to be held as illegal.
Stories by AFP and Reuters were first off the mark.
Boeing had contended throughout the process that Airbus had received more than $200bn in illegal aid, a figure Boeing claimed includes interest expenses. The WTO found only $18bn in aid was provided Airbus. The original WTO panel found $5bn in illegal aid to Boeing. The Appeals panel could lower or raise the Boeing figure. The Reuters article has some detail on the disputed amounts in the Boeing appeal.