Boeing has a pretty cool photo exploration of the 737 at its New Airplane website here. We found it slow on Firefox but smooth on Chrome.
With the rhubarb that emerged from the Boeing 2Q earnings call over where the 737RE production will be, and the contradictory messages to come from Boeing Commercial Airplanes (BCA) in Seattle and Boeing Corporate in Chicago, we thought it might be useful (and certainly interesting) to return to the Boeing pre-Paris Air Show press briefing by Beverly Wyse, the Vice President and General Manager, 737 Program.
During the briefing, the question of potential 737 production rates came up. Boeing has announced a rate of 42/mo from 2014 and even then there was discussion of taking rates to 50/mo. Since the Air Show, BCA CEO Jim Albaugh said the company is studying a rate of 60/mo. It was within this context that the question over production was asked.
Wyse’s comments at the press briefing are noteworthy on a couple of points.
Update, July 28, 6:45am PDT: Gates has expanded his original story with more about the developments through yesterday, plus IAM comments.
Update, 6:00pm PDT: Dominic Gates just sent this message concerning the Boeing statement below:
I just spoke with John Dern. (Dern is a corporate spokesman for Boeing in Chicago.)
Dern said: “I am not saying your report was inaccurate. This is not about your reporting. The statements were inaccurate.”
In other words, Boeing Chicago is disavowing the statements of its own senior PR executives here in Puget Sound.
Update, 510pm PDT: This story gets odder as the day goes on. This just came from Boeing:
The comments delivered this morning by Boeing Chairman, President and CEO Jim McNerney regarding the potential location of final assembly for the re-engined 737 stand as delivered. While Renton, Wash., logically would be our first location considered, no decision has been made, nor would one be made at this point in the program. The decision on where to build the airplane will be made in due course as we move through the process of launching the airplane and evaluating production requirements. The statements in the Seattle Times attributed to company spokespeople made after the company’s earnings call were neither accurate nor representative of the company’s or BCA’s position.
You have to read this carefully to fully understand what has been said here: “the statements” were inaccurate and not representative of the company’s or BCA’s position.
It’s very odd there is a public dispute between Boeing Chicago and BCA.
Update, 11:25am: Boeing Commercial Airplanes back-peddled from McNerney’s comments. Here is Dominic Gates’ story in the Seattle Times, just posted. BCA really steps back from McNerney.
Original Post:
Boeing CEO Jim McNerney threw Seattle a curve on the earnings call: he said the 737 Re-engine could be built somewhere other than at Renton, where the 737 has been built since inception.
His paraphrased comments:
We haven’t made the final decision about where we’re going to produce the RE airplane. After 42/mo, we do run into some challenges at Renton. We have other options and we will study them all as we think this through. We would study Charleston, Renton and compare with another site.
and
Renton is one of the great aerospace factories in the world. Until we have sorted out the milestones associated with the ramp-up, the degree to which we have to modify the airplane, major investments required, but until we sort that out we have to keep this open. Until we study it all, obviously we have to keep it open. There is significant investment required and until we figure it out we have to sort it out.
This will be a locally developing story today.
Here is Boeing’s earnings press release.
Boeing announced its second quarter earnings today.
From the conference call:
Jim McNerney:
James Bell:
McNerney:
Q&A
Here is the quick-take from some of the analysts, preceding the earnings call:
We were traveling last week and are only now getting around to going through the analyst reports we receive, commenting on the American Airlines order. We put together a long synopsis after the jump.
Meanwhile, there are a couple of charts we want to highlight before getting into the recaps.
UBS put together the following charts of 2010 and 2011 orders at Airbus and Boeing. What we find notable is the break-out of A320 family Legacy orders vs NEO, with the clear preference for the NEO. Note that Boeing’s 737 orders are low this year. Compare the A320 Legacy orders last year, as the market waited for Airbus to decide what it was going to do about reengining. We previously wrote that we felt 737 orders were likely on the low side (though in fact YOY they were roughly the same through June) pending a Boeing decision on the 737’s future. The UBS tables support this view. Click on the tables for a more crisp and readable view.
Source: UBS
Source: UB
Credit Suisse put together a good chart on the potential USA orders Airbus and Boeing will compete for:
Update, 11:30am PDT July 25: The Ft. Worth Star-Telegram summarizes the delivery schedule of the huge AA order. Of particular note: AA doesn’t receive its first 737RE until 2018. This raises the question: is the EIS of the 737RE not until 2018? Or is AA truly not the “launch operator” of the 737RE (we wonder what a certain UK person would have to say about this)?
Original Post:
Wells Fargo issued a note today in which one small segment said:
“One curiosity about Airbus’s and Boeing’s aggressive marketing campaigns to replace AA’s narrow-bodies is the extent to which the manufacturers appear to have cut deals for one of the least profitable airlines in the world.
“We understand the “strategic” importance of AA, but according to consensus estimates AA is not expected to generate any profit until after 2013. Meanwhile, healthier airlines (see Delta, Ryanair, and Southwest above) are also looking at major re-fleeting plans and no doubt will pursue comparably attractive pricing and financing terms.”
The conventional wisdom is that Airbus wanted to penetrate American and brake the Boeing exclusivity, and this is certainly true. We have a broader take.
Update, July 26: Wells Fargo issued this update today:
American Airlines Pricing Update. On July 26 we heard from American Airlines regarding our calculation that the average price it is paying for reengined A320s and 737s is around $30M (ex-escalation: $27M). We now understand that the airline’s $10.3B projected Q3-ending purchase commitment balance excludes the 100 re-engined 737s but includes pre-delivery deposits (PDPs) for 230 aircraft (100 737NGs + 130 A320s) to be leased. Based on this new information, we can estimate an A320neo unit purchase price based on an assumed PDP level. Assuming a 20% PDP rate, the estimated implied unit price per new A320neo would be $40M (ex-escalation: $35M). Assuming a 30% PDP rate, the estimated implied price would be $35M (ex-escalation: $31M).
Original Post:
We were traveling last week and didn’t pick up on this-but here’s what Commercial Aviation Online reported about the purchase price of the Airbus and Boeing orders by American Airlines.
This is entirely consistent with the pricing we heard in advance of the deal.