Leeham News and Analysis
There's more to real news than a news release.
1,000 A320neos, 737 replacement at Paris Air Show
Update, Jan. 28: Think again, Heidi, Airbus says. The company said no way. See this story.
Original Post:
Heidi Wood at Morgan Stanley predicts Airbus may have 1,000 orders by the Paris Air Show and that Boeing will have to respond earlier than its long-talked about 2019-2020 EIS of a new airplane to replace the 737. Here is what Wood says in her report, issued this morning the bold face is hers:
What’s new: Airbus could announce between 500-1,000 new NEO orders by Paris air show (June), which adds pressure for BA to come up with a new 737 replacement. We believe BA could announce a new narrowbody by Paris Air show; re-engining makes less sense, in our view. Crucially, management discussed a new plane by 2019+ however we believe these sizable Airbus’ new orders changes the game & could cause BA to accelerate plans. Our 2013-2014 model contemplates rising R&D vs. the Street, as we reason the new narrow has to occur by 2017/18 for BA to retain its most important customers.
If Wood is correct, watch Airbus crow (1) that this is the “fastest selling airplane ever” and (2) “I told you so” to every doubter.
Boeing projects 20-40 747-8, 787 deliveries this year
Boeing projects there will be 20-40 deliveries of the 747-8 and 787 this year.
The projection came in its 2010 earnings announcement today, which includes the 2011 outlook.
According to the Ascend data base, 18 747s are scheduled for delivery this year, a figure we believe is reliable because while the 747 has had its issues, the program appears to be in much better shape than the 787. In fact, BCA Jim Albaugh recently told employees that the first freighter without traveled work rolled off the assembly line, an indicator of the program status.
Is failure an option in KC-X competition?
With Sen. Carl Levin (D-MI) set to hold the tanker hearing on Thursday (Jan. 27), it is clear the USAF continues to drag on its decision in the KC-X competition, which was expected this month. It now looks like March.
We’re going to ask a question that may be considered by some to be ridiculous on its face (and we’re not entirely sure it isn’t) but which, given all the twists and turns, starts-and-stops, hissy fits and more that’s happened in the painful saga of USAF tankers, we might ask, Why not ask this question?
Is failure an option?
Odds and Ends: Big week for EADS, Boeing
It will be a big week for EADS and Boeing on a variety of topics:
- January 26 is Boeing’s year-end earnings call. More guidance on 787 deliveries and speculation of potential writes-offs mounts.
- On #1’s former, we think 787 deliveries will be stretched out, even after first delivery, due to the increasingly-talked about skip-in-sequence delivery stream. Boeing officials, readers may recall, are openly talking about skipping the first completed block of airplanes for retrofit (this would be 7-25 or so) and skipping to the next block (26/27 or whatever) for first delivery and delivery stream. The first block would likely start seeing deliveries in 2012, under this scenario discussed by some Wall Street analysts, notably at Credit Suisse.
- On the latter point in #1, there is increasing speculation that there could be write-offs for the 787 and 747-8 programs. We’re not sure Boeing is “there” quite yet. We certainly don’t expect at this time a forward loss on the 787, but test planes 4-6 might see a write off. It is widely believed the 787 accounting block will be around 1,000, but this won’t be set until first delivery. A forward loss, if any, would likely be computed at that time. As for 747-8, this program is stagnant. Although there were two cancellations, from Guggenheim Partners, in the fourth quarter, these airplanes will almost certainly be assumed by Korean Air Lines, for which they were intended anyhow. But there are no new orders. Boeing’s CEO, Jim McNerney, on previous earnings calls, said the program would be profitable if some 350 747s are sold (this after a previous write off of more than $1bn, it will be recalled). We think this is wishful thinking. Wall Street seems to as well, expecting another write-off. Read more
EADS had Boeing data for a month, Sen. Cantwell charges; EADS denies it
- Side note: While EADS and Boeing fight over the USAF tanker contract, and neither one is capable of delivering their respective tankers on time, IAI Bedek of Israel completed conversion of the Boeing 767-200ER (the same airplane Boeing is using) into a tanker in short time and it is now offering the the airplane for lease to other countries. See this Flight Global article.
In a press conference January 20 in Everett (WA) at the Boeing factory, Sen. Maria Cantwell (D-Boeing/WA) leveled a charge against EADS which, if true, would cast a huge question over the handling of proprietary data mistakenly provided by the USAF to EADS and Boeing.
EADS January 21 denied Cantwell’s allegation that EADS had the data for more than a month. The allegation, if it were true, has all sorts of implications, and all of them bad for EADS. Here is Cantwell’s allegation:
What steps were taken to ensure EADS did not gain an unfair competitive advantage by having Boeing data for more than a month before the investigation was completed by the Air Force?
We talked with Cantwell’s press secretary, Janeen Heath, January 22 to ask the basis on the allegation that EADS had the information for more than a month. Heath said, “We received that information from a reliable source, and that’s a question to be answered at the [January 27] hearing.” We asked if the information came from the Air Force or from Boeing, and Heath said she did not have this information.
Here is EADS’ denial, with respect to the charge EADS had the Boeing data for more than a month:
Responsible members of the defense industry understand that when someone becomes aware that they’re in possession of competition sensitive information they must immediately secure it, protect it, and return it to the customer. This was done by us, and according to the USAF, apparently by Boeing as well.
The assertion that EADS held competition sensitive information for over a month is simply untrue and flatly contradicted by the Air Force’s forensic investigation and analysis.
This latest event reinforces our previously stated view that a hearing by Sen. Carl Levin (referred to in the press release below) is appropriate. The Air Force, EADS and Boeing say they each handled the situation according to federal law and Air Force rules, but in the absence of a clear, detailed and full disclosure of the timeline of events and procedures followed, the cloud that hangs over this procurement is dark and threatens the entire process. We believe that all three parties must testify before Levin’s committee to get all the facts and information out in the open. Once this is done, let the chips fall where they may–if there is any reason for any to fall at all.
Below is Cantwell’s full press release. The bold facing is hers. The Levin hearing is January 27 at 9:30 AM EST.
KC-30A for RAAF involved in in-flight incident, refueling boom lost
Australian Aviation has this story about an in-flight incident during a refueling test between the Airbus KC-30A and an F-16. Readers will recall a Boeing KC-767J for Japan Air Defense Services had an incident in which the boom wouldn’t retract for landing and was damaged on the runway, the point being both programs have now suffered incidents.
But the KC-30A incident will likely further delay delivery of the plane to the RAAF; it is already two years late. The timing couldn’t be worse for EADS, with the contract award for the USAF only weeks away.
- Bloomberg News followed with this story.
- FlightGlobal has this story.
- Meanwhile, there is this story that Boeing is taking a pass on bidding for the Indian government tanker contract. A second story says uncertainty over the USAF contract outcome is why. A third story has more detail.
Defence Statement, 20 January 2011 from the RAAF:
Read more
Odds and ends: More Airbus NEO orders soon, engine selections shortly; tanker slips again
Odds and ends:
- More Airbus NEO orders are likely within the next few weeks, including from the US and Asia;
- Indigo is expected to make its engine selection for its A320neo within the next month or so, and it’s a real competition between GE/CFM and PW for the LEAP-X and Geared Turbo Fan;
- A major German bank may shun financing the A320neo, according to Bloomberg;
- Boeing is now saying there is only a 2%-3% direct operating cost difference between the 737NG enhanced model and the A320neo, a gap Boeing figures it can close by the time NEO enters service in 2016;
- Boeing thinks the A350-1000 will require enough changes compared with the -800/900 models that the -1000 will slip to 2019 EIS; Read more
Boeing sets 3Q for 787 delivery
Boeing just issued this press release:
EVERETT, Wash., Jan. 18, 2011 /PRNewswire/ — Boeing (NYSE:BA – News) announced today that it expects delivery of the first 787 Dreamliner in the third quarter of this year. The new delivery date reflects the impact of an in-flight incident during testing last November and includes the time required to produce, install and test updated software and new electrical power distribution panels in the flight test and production airplanes.
Countdown on KC-X tanker award
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EADS CEO Louis Gallois went public today in Europe with his prediction that the USAF will award a tanker contract next month. The best and final bid will be submitted this month.
We previously noted that the final bids were due this month and a contract award expected next month.
Meanwhile, here is an interesting story on the tanker from KING5 TV in Seattle, with this piece.
As readers know, the competition is a price shoot-out. As the KING story notes, Boeing continues to be worried about the benefit EADS has from subsidies found to be illegal by the WTO on the ability to under-price Boeing, but as we noted in this post last year, WTO may not have the effect Boeing fears; the withdrawal of Northrop Grumman as a partner to EADS has a much larger benefit to EADS’ ability to price the airplane.
Boeing expects solid 777 order stream
Here’s a story we did for Commercial Aviation Online. Comments are still closed. Comments are re-opened but moderated. Read our new Comment policies.
Boeing 777 orders on the cards
| Date: | 11/01/2011 09:42 |
| Source: | Commercial Aviation Online |
| Location: | Seattle |
| By: | Scott Hamilton |
Boeing is likely to have a very good next few months for its 777 line.
CAO has learned that that company is probably going to announce several major orders for the airplane, predominately if not entirely for the 777-300ER. One order is said to be for 20 777-300ERs and could be announced within the next few weeks. As many as four major orders are anticipated in the next few months, CAO is told.