Leeham News and Analysis
There's more to real news than a news release.
Odds and Ends: 737 cost (not price); Bob Crandall
737 Cost, Not Pricing: Wells Fargo has this item about what American Airlines actually paid for the Boeing 737-800, as opposed to the list price: more than a 50% discount from $84.4m. Note that AerCap (AER) appears to have paid $40m per aircraft in a purchase-leaseback. One assumes American didn’t resell the aircraft for the price paid from Boeing but marked them up at least a little bit. We’ve heard AA’s cost was in the range of $35m but this is unconfirmed.
~$40MM Per 737, It Appears. Based on the change in YTD flight equipment additions, AER added $80MM in planes in Q4; since the only Q4 additions were two new 737-800s leased back to American Airlines, the 20-F implies a $40MM unit price. Also, based on changes in purchase commitments from 9/30/11, we believe the average 737-800 purchase price (over the remaining 33 planes as of year end) is ~$41MM. A new 737-800 typically appraises for ~$45MM.
Bob Crandall: The former CEO of American Airlines provides his usual candid views of the airline industry, of today’s American Airlines, and his greatest failure as CEO in this 30 minute video on the Charlie Rose program.
Odds and Ends: 787 ramp up, ISTAT, Airbus, the price of oil in 1968
787 Ramp-Up: UBS Securities issued a research note Monday in which it reports that the 787 rate ramp-up to 10 per month–a goal Boeing’s to be by the end of 2013–has slipped to the first quarter of 2014.
- More from UBS: Supply chain ahead of Boeing: We believe the supply chain is still ahead of Boeing given significant rework and a high level of component deliveries in 2009-10, although a pick up is expected soon. We understand Boeing now plans to ramp from current 3.5/mo to 5/mo in Q4 (had been Q1), 7/mo in Q2 2013 (had been Q4 2012) and 10/mo in Q1 2014 (had been Q2 2013).
ISTAT: We’re at the annual ISTAT AGM in Phoenix and we’ll be reporting throughout the event odds and ends (adding to this post initially, separate posts later on). So come back often.
From ISTAT:
- 40% of Airbus 2011 deliveries were via lessors: 115 through direct sale to lessors, 95 via lessor purchase-leaseback
- Lessor sees overlapping production of 737 NG with MAX, A320neo with CEO due to limited availability of production slots because of massive early neo/MAX commitments.
- Congressional targeting Ex-Im Bank financing is short-sighted; cutting funding will harm Boeing, GE, Pratt & Whitney.
- Airbus has delivered 10 A330-200Fs, four operators now.
- Undercurrent buzz about 737MAX. Watch for developments in the next weeks and months.
- Airbus about to start final assembly line for A350.
- Flight tests of Trent XWB going well.
- Airbus now advertising A350-1000 at 369 passengers, up from 350.
From Twitter, via Phil LeBeau of CNBC: @Boeing says it has NOT changed its goal of building 10 Dreamliners per month by end of 2013.
Back to ISTAT:
- A321neo gains 600nm, A320neo gains 500nm.
- Average oil price 1968 non-inflation adjusted was $3.18bbl (that’s per barrel, not per gallon!).
- Airbus sold 448 A320ceo since launch of neo.
- Airbus competes 99% of the time against Boeing, not new entrants, for sales. Barriers to entry for a new aircraft type very high rather than changing fleet type.
Side trip to Ex-Im:
Take a read of this column on the Ex-Im Bank financing controversy.
Back to ISTAT:
Boeing….
- Mike Bair: We are in a march to put Airbus out of business in the twin-aisle space: 777 vs A340, 787 vs A330, 747-8 vs A380.
- 787-10 will have 50% lower operating costs than A340-600, Boeing’s Bair claims.
- 747-8I has turned out to be the darling of billionaires who have too much money–Bair.
- New revenue opportunities for long, thin routes validate the 787 like San Diego to Japan. Opening new markets and opportunities for customers.
- Boeing uses 162 seats in 737-800/8 vs A320ceo/neo 150 seat comparisons; Airbus uses 157 seats for the Boeing.
- Every engine/airframe combination has a sweet spot, a bucket’s flat area with 3-4 inches of fan diameter. In MAX’s case, this means the 68.4 inch fan is the sweet spot.
- Our intent is to build the MAX until the market decides it doesn’t want it any more.
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.