Leeham News and Analysis
There's more to real news than a news release.
No plateau on 737NG: Boeing
“There is no plateau in interest on the 737NG,” says Boeing’s Beverly Wyse, VP and GM of the stalwart program.
“Even though there are a lot of challenges in the industry, the growth, particularly in the single aisle market in emerging markets and Low Cost Carriers, continues to give us a lot of confidence the demand is out there. Even with the struggles in Europe, there seems to be a little tension between replacement demand and growth demand. We don’t see any pullback in the demand on the 737 at our current production rates or a weakness in demand as we transition to the MAX.”
Wyse gave this assessment during a briefing to the media in advance of the Farnborough Air Show. The briefings were embargoed until July 5.
“Basically we are full all the way through to the middle of 2016. We do have some capacity left in 2016 and 2017 prior to the introduction of the MAX,” she said. “We do have some NGs out in 2018 but that capacity is filling up. We still have customers coming in for NG and MAX four or five or six years out.”
She predicted there will be a two-three year transition period of NG and MAX overlap, though she prefers two years. Wyse acknowledged that the 737-based BBJ and P-8A Poseidon could further extend production of the NG even if passenger models are discontinued.
Boeing’s 2012 Current Market Outlook
Randy Tinseth, VP Marketing for Boeing, outlined Boeing’s update for the Current Market Outlook for the 20 years from 2012-2031. Aircraft in the world fleet has nearly tripled from about 6,500 to more than 19,000 today.
(We will post more detail July 5.)
- Fuel prices have forced some regional jets out of the market because they are no longer viable, Tinseth says.
- There will be 13,000km in of high speed rail in China by the end of this year, more than the rest of the world combined.
- By 2020, China will open 97 new airports.
- 60%-80% of travel is tied to GDP and economic demand.
- Passenger travel has historically grown at 5% per year.
- Non-stop, point-to-point, more frequency growing and airplane size is shrinking.
- Expect to see world fleet grow to nearly 40,000 airplanes by 2031. 40% of demand will be for retirements, 60% for growth.
- Replacement market is very, very important for us. 500 retirements last year.
- There will be demand for 940 production freighters.
- China, Asia, Asia-Pacific will grow the fastest. 35% of demand will be here.
- Cargo traffic has been much more volatile because more closely tied to economies. Growth has been steady but has slowed.
- Over next 20 years see demand for 2800 freighters, 940 new, rest conversions. 940 airplanes valued at $250bn.
Q&A
- About Airbus Mobile: I was a salesman and to be successful you have to do three things: it’s about the product and pricing; it’s about people; it’s about your relationship. Your customers are focusing on those things, not the address on your business card. What drives US and North American airlines, it’s about the business case. I don’t see how this drive the business case. You have to ask Airbus about efficiency. They are building airplanes in four different places.
- About the $500bn increase in value over 20 years: We will see some modest up-gauging in single aisle market, from A319/737-700 size to address airport issues to A320/737-800 and will see it go to 737-9/A321. This is driving some of the change. The twin-aisle market sees the strength in the 777-300 size aircraft.
- On the twin-aisle market: it’s split about 50-50 between small twins and large twins, a little heavier toward large twins. Long-term expect shifting up from 787-8 to -9 and -10.
- On Very Large Aircraft: demand down about 1%. Big airplanes are operated by a handful of carriers in a handful of markets. We’ve probably been a little optimistic in this. A380 after 10 years has sold about where we expected (there are 258 sales–editor).
Odds and Ends: Coverage on Airbus’ Mobile move and other thoughts
Randy Tinseth, VPO of Marketing for Boeing, is always fast with the quip–via Flight Global’s Twitter: “Market is about product, people and customers, not the address on your business card.”
Mobile Press-Register: general overview.
Reuters: Unions aren’t happy–but guess what, it’s US unions.
Chicago Tribune: Boeing’s home-town paper has this about Boeing losing a tactical edge–according to Airbus.
The Economist: Slaps Boeing and Airbus for their continued bickering over trade. Hear, hear.
Airbus and Mobile: Implications and analysis
Before getting to the meat of things, a couple of key stories:
Mobile Press-Register, June 30. Details of the plan.
Wall Street Journal: Boeing complains.
It’s now one of the worst-kept industrial secrets: Airbus will announce at 10am CDT July 2 that it will construct a $600m A320 Family Final Assembly Line (FAL) in Mobile (AL).
This is a major strategic and tactical move in the intense, often bitter competition between Airbus and Boeing.
Even before the plans became official, Boeing issued a pissy slam, harking back to the World Trade Organization dispute, rather than stating that it is in a position to compete against Airbus and its A320 with what Boeing otherwise routinely characterizes a better airplane with the best workers in the world.
Perhaps the pissy statement was chosen because in many respects, Airbus has mouse-trapped Boeing—and there is very little the company can do about it.
Before explaining, here are some facts to keep in mind. Click on the graphic to enlarge.
787 enables ANA to begin Seattle route–after an interim 777 solution
Japan’s All Nippon Airlines, the launch customer of the Boeing 787, said yesterday that the new, high-tech airplane is the enabler that prompted it to schedule its first service from Tokyo to Seattle.
Never mind that initial service begins in August with the Boeing 777-300ER and the 787 service won’t begin until October (ironically, with a 787 that will be delivered in August).
The seeming contradiction is explained by an initial summer-time surge in passenger demand that makes the 777 a viable start. Seattle is a highly seasonal market and the smaller-capacity and more fuel efficient 787 is what makes the 787 the preferred choice, ANA said during a celebratory event yesterday.
ANA will need all the advantages it can get from the 787’s lower fuel burn. The airline will be challenging giants Delta Air Lines and United Airlines on the routes. Delta operates the Airbus A330-300, a highly efficient airplane, and United uses the 777-200ER. Each has a good feeder system to Seattle and each has a good hub in Tokyo.
ANA, which like United, is a member of the Star Alliance, terminates its service in Seattle but it has a much better hub than UAL and DAL in Tokyo. It’s counting on the beyond-Tokyo strength to support its route. The daily traffic is 1,000 passengers but only 200 are between Seattle and Tokyo.
ANA’s 787s now is service are the heavy-spec ones with Rolls-Royce engines that initially have not been up to spec. Even so, the 787s are 21% more fuel efficient than ANA’s Boeing 767-300ERs, the airline said. ANA did not offer a comparison vs its 777s.
Boeing desperation: give it a rest, gents
This is really reaching. Is this really the best Boeing can do?
Odds and Ends: Airbus to Mobile; No “doubts” about A350
Airbus to Mobile: The New York Times reports that Airbus is gearing up to announce plans to build the A320 in Mobile (AL). We reported this prospect during our reporting from the Airbus Innovation Days last month. Bloomberg has this take.
A350: No doubts at Airbus. But the margins are probably gone to first flight and EIS. Airbus is sticking to its schedule of EIS by mid-2014; we think it will slip into early 2015.
Update, June 28, 10am PDT:
We can confirm that as of this moment, EADS/Airbus has not made the decision to establish a final assembly site in Mobile. We think we have a reasonably clear understanding of the situation that leads us to believe an affirmative decision is near. It is our belief that any FAL will follow along the lines that were discussed for the KC-30/45 FAL: build the parts within the current supply chain and ship to Mobile for final assembly. This follows the well-established FAL model for Hamburg, Toulouse and Tianjin.
We received some speculation that this FAL might be fore the A330 P2F conversation. We don’t see a business case for this. Our focus is entirely on the A320 family and the intense competition with the 737 family. Note we do not distinguish between ceo/NG and neo/MAX.
Albaugh retires, replaced by Ray Conner
Update: 8:00am PDT June 27: The Seattle Times has a detailed story, including indications why Albaugh chose to retire.
Original Post:
In shocking news, Boeing announced that Jim Albaugh is stepping down as CEO of Boeing Commercial Airplanes and retiring Oct. 1.
Albaugh is just 62. He had been a candidate for CEO of The Boeing Co. when Harry Stonecipher was fired, a job that went to Jim McNerney. McNerney later tapped Albaugh, who was CEO of what was then known as Boeing Integrated Defense Services, to head Boeing Commercial Airplanes when BCA CEO Scott Carson was largely forced out following yet another delay in the 787 program.
Conner was widely assumed to be one of two candidates–Pat Shanahan was the other–to succeed Albaugh, who was assumed to be the CEO of BCA until retirement at age 65–three years from now.