Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Boeing wants to remarket China’s airplanes. It’s costly and time consuming. April 28, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 19. April 25, 2025
- How good is the C929? Part 2. April 24, 2025
- Boeing First Quarter Results Update: China is 10% of the backlog, with 500 in “Unidentified” April 24, 2025
- Boeing First Quarter Results: Tariffs, Return flights, $10.55bn asset sale April 23, 2025
Impact of Russian Airspace Closure for mid-European freight airlines
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By Bjorn Fehrm
Introduction
May 12, 2022, © Leeham News: Last week, we looked at what the closure of Russian airspace would mean for a mid-European airline that flies to Asia destinations like Japan, Korea, or Mainland China.
Air France now flies the routes from East Asia south of Russian airspace instead of over Siberia. The route is longer which increases the operating costs, but with the examples Boeing 777-300ER, there are no restrictions on passenger load factors, and most times, the cargo space can be loaded to the volume limit.
For a freight airline flying similar routes, the added distance impacts payload, as freighters have about 2,000nm less range than their passenger siblings. We check the operating cost and payload impact for mid-European freighter airlines flying from Far-East freighter hubs to West Europe.
Summary
- A freighter airline takes a heavier hit from Russian airspace closure.
- As the extra distance eats into the possible payload, the operating cost per tonne for hubs like Shanghai, Seoul, and Taipei increases more than for the airline’s passenger service.
HOTR: Embraer gets launch customer for E-Freighter, Boeing adds Lufthansa for 777-8F
By the Leeham News Team
May 10, 2022, © Leeham News: Embraer yesterday received its launch order for the E-Jet E1 P2F conversions from lessor Nordic Aviation Capital (NAC).
NAC reach “an agreement in principle” to convert 10 E190/195-E1s into freighters. The first deliveries are in 2024. The aircraft are in NAC’s current fleet.
Embraer E190F for lessor Nordic Aviation Capital. Source: Embraer.
The E-Freighters have 50% more volume capacity and three times the range of turboprop freighters (read: ATR) and up to 30% lower operating costs than narrowbodies (read: Boeing 737s), Embraer says. The aircraft will be converted by Embraer at its Brazilian operations. The conversion “includes the main deck front cargo door; cargo handling system; floor reinforcement; Rigid Cargo Barrier (RCB) – 9G Barrier with access door; cargo smoke detection system, including class “E” extinguishers in upper cargo compartment; Air Management System changes (cooling, pressurization, etc.); interior removal and provisions for hazardous material transportation,” Embraer says. “The E190F can handle a payload of 23,600lb (10,700kg) while the E195F a payload of 27,100 lb (12,300 kg).”
Mind the gap between announced and actual production rates
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By Vincent Valery
Introduction
May 9, 2022, © Leeham News: As passenger traffic is recovering from the COVID-19 pandemic, especially in the Americas and Western Europe, many airlines are eager to take delivery of more fuel-efficient aircraft. Higher oil prices and ambitious plans to reduce carbon emissions are driving new-generation aircraft demand, notably for the Airbus A320neo and Boeing 737 MAX families.
A combination of supply chain disruptions and challenges associated with increased production means that Airbus and Boeing aren’t ramping-up A320neo and 737 MAX production as much as they would like. Boeing fell short last year on its 737 MAX production targets. The American company is also dealing with multiple delays in the resumption of Dreamliner deliveries.
In recent years there have been significant gaps between announced and actual production rates. The gaps have a material impact on projected OEM revenues, cashflows, and incomes.
LNA analyzes aircraft production rates on all the Airbus and Boeing programs since 2010 to assess whether the gaps were as significant in the past. LNA also evaluates the programs that were the closest and furthest away from announced production plans.
Summary
- A metric to measure production line consistency;
- Relatively consistent Single-Aisle rates;
- More volatile twin-aisle rates;
- A more consistent OEM.
Pontifications: Next new mainline jet likely will be conventionally powered
By Scott Hamilton
May 9, 2022, © Leeham News: Pratt & Whitney thinks a hybrid-electric propulsion system might be ready for installation on the next new airplane from Boeing or Airbus by 2031. But more likely is that the new airplane, whatever design it is, will more likely be powered by a conventional engine that is capable of running on 100% Sustainable Aviation Fuel (SAF).
Graham Webb, the chief sustainability officer at Pratt & Whitney, said PW is “obviously investing in our Geared TurboFan. That’s our bread and butter. We are working to infuse a large number of technologies, including ceramic matrix composites, and aerodynamic improvements to the turbines and the compressor. We’re working on improving the cooling optimization and sealing, and the traditional core efficiency suite of technologies to enable us to get to the higher overall temperatures we need for the next generation cycles.
“We’ve already completed a suite of work with the FAA and our clean aviation program that enabled us to expand the bypass ratio of our Geared TurboFan engine further from where we are till now. We’re going to use that technology to grow the engine. We’ll put a different fan-drive gear system technology as a result of that expansion. That’s kind of like the traditional engine efficiency piece,” Webb said at the Aviation Week’s MRO Americas event in Dallas. LNA spoke with Webb on the sidelines of the huge event, attended by more than 13,000 people.
Under the FAA CLEEN Phase I program, PW developed ultra-high bypass ratio technologies beyond the current 12:1 present in today’s GTF engines. These technologies are ready for deployment for a future new aircraft. The specific bypass ratio of this new engine will be optimized to each installation on the new airframe configurations being developed by the airframers, a spokesperson added.
HOTR: Boeing moving HQ to Washington, DC, was obvious to those looking
By the Leeham News Team
May 5, 2022, © Leeham News: Boeing is moving the corporate headquarters from Chicago to Arlington (VA) (a Washington (DC) suburb), the Wall Street Journal reported. The signs were there for all to see if you were looking.
Boeing closed its headquarters in Chicago as the COVID pandemic expanded. The Illinois/Chicago tax breaks expired. Key corporate communications people relocated already from Seattle to Washington, including Bernard Choi—whose duties expanded from oversight of Boeing Commercial Airplanes communications to the corporate level. There is an under-utilized Boeing building in Arlington.
Already under financial pressure because of the 737 MAX grounding in March 2019, the pandemic made things much, much worse. With no orders flowing into Boeing Commercial and few deliveries after the pandemic grew across the globe, Boeing’s cash flow took a huge hit. Then 787 deliveries were suspended in October 2020 and have yet to resume.
Spirit AeroSystems seeks bigger role in aftermarket
By Scott Hamilton
May 5, 2022, © Leeham News: Spirit AeroSystems has had a tough couple of years. It’s not only had COVID to contend with, but its customer that provides more revenue than any other—Boeing—had a major impact on Spirit’s revenues and profits.
Boeing’s 737 MAX crisis, suspension of deliveries for the 787 and extended delays in the 777X programs all hurt Spirit. The Tier 1 supplier makes the fuselages for the 737s. It makes the nose sections for the 787 and 777. Spirit’s 737 production rate is now 31/mo. Deliveries for the 787 are expected to resume in the second half. Boeing said it will gradually increase production from the current rate of about 0.5 per month to 5/mo (though the timeline remains murky). Production of the 777X is suspended through 2023 while that for the 777-200LRF probably will hover around 2/mo for the indefinite future.
In its 1Q22 earnings release on May 4, Spirit appears on its way toward solid recovery. The company beat street expectations on strong Airbus deliveries, for which it’s also a supplier. Spirit’s own operational improvements and below-the-line improvements contributed to the better than expected results. And free cash flow was stronger than expected. The earnings detail is here.
Impact of Russian Airspace Closure on mid-European airlines
Subscription Required
By Bjorn Fehrm
Introduction
May 5, 2022, © Leeham News: Last week, we looked at what the closure of Russian airspace would mean for North European airlines that fly to Asia destinations like Japan, Korea, or Mainland China.
Our example was Finnair’s route from Helsinki to Tokyo and what it would mean for it cost-wise to fly over the North pole and then down to Tokyo instead of over Russia.
We now continue the analysis with what the air space closure means for a West European airline like Air France. We check the cost increase to fly from Paris to Seoul in South Korea when you can’t use Russian and Ukrainian air space.
Air France 777-300ER. Source: Wikipedia.
Summary
- The costs for Air France from Russia’s airspace closure are more manageable than for Finnair.
- Longer-term, it will mean changes to the route structure for affected airlines.
HOTR: Shakeout of P2F companies coming
By the Leeham News Team
May 3, 2022, © Leeham News: A shakeout in the number of passenger-to-freighter conversion companies is coming, say industry stakeholders.
The conversion industry has seen a number of new lines and new entrants emerge as demand for air freight exploded during the COVID pandemic. But the long-term demand won’t sustain these new entrants, said members of a panel in April at the Aviation Week MRO Americas conference.
There are now four companies offering Airbus A320 conversions: EFW, which is partly owned by Airbus; Precision Conversions; CCC (known as C Cubed); and Sino Draco. Some have yet to produce a converted A320 and EFW has multiple lines.
There are four companies offering Boeing 777 conversions: IAI Bedek, the first to market; Mammoth Freighters, the only one offering 777-200LR conversions; Kansas Modification Center; and Eastern Airlines. The latter is converting 777 passenger aircraft without cutting a big cargo door into the airplane, essentially maintaining the “Preighter” approach used by several airlines during the pandemic. The termination of the Boeing 747-8F production and aging 747-400Fs will boost 777 P2F sales, panelists said.
Boeing partnered with third parties to convert 737-800s. AEI is an independent 737 conversion company. It also converts Boeing MD-80s and Bombardier CRJs. The latter two programs were not commercial successes, admits Bob Convey, SVP of Sales and Marketing. AEI will only recover its costs for the CRJ-200 P2F. Only about 30 MD-80s were converted. Odd-sized containers make the CRJ and MD-80 less desirable than 737s and A320s, he said.
Many companies are “late to the party” and will fail, Convey said.
Pontifications: “Dreadful” or “clearing the decks”? Boeing’s first quarter results
By Scott Hamilton
May 2, 2022, © Leeham News: Boeing’s first quarter report was just awful. There’s just no getting around this, although a few Wall Street analysts bent over backward trying to make a silk purse out of a sow’s ear (an American colloquialism). One analyst called the quarter “dreadful.” The stock tanked $20 on the day the earnings were reported. As of Friday, it gained $4 from Wednesday’s close.
- Boeing confirmed the 777X certification and entry into service won’t be until 2025, confirming Tim Clark’s fears that emerged back in October at IATA. Clark is the president and COO of Emirates Airline, which has more 777Xs on order—115—than any other customer.
- Production of the X will be paused until the end of 2023, adding about $1.2bn in costs to the project. This comes on top of $6.5bn in write offs on the X program previously taken.
- About 50 777Xs moved from firm order status to iffy, under the accounting rule ASC 606. These are orders that were slated for delivery before 2025. Contracts for these must be renegotiated, yet again, casting a cloud over their status.
- Boeing took a charge of more than $600m on the Air Force One program. AF One is a two-airplane order for the conversion of two 747-8 whitetails from civilian-passenger configuration to the militarized-VIP AF One specifications. LNA is told by multiple sources more sizable charges will be forthcoming.
- The OEM also took a charge against the T-7 Red Hawk trainer. This was supposed to be one of the two programs (the MQ-25) is the other that lays the advanced design-and-production groundwork to be implemented in the Next Boeing Airplane (NBA), whatever it is, for the commercial market.
All Air Lease Corp’s single-aisle airplanes are delayed
By Laura Mueller
Airfinance Journal, April 14, 2022
Reprinted with permission
April 27, 2022, © Airfinance Journal: Air Lease Corp’s executive chairman, Steven Udvar-Hazy, told Airfinance Journal that “every one” of the lessor’s single-aisle Airbus aircraft is delayed.
Steven Udvar-Hazy. Source: Air Lease Corp.
“Our Boeing 737 Max deliveries also are delayed this year,” he said. “The supply chain, starting with the engine manufacturers, the people who make landing gear, the people who make avionics… are not equipped today to meet the production goals of the two manufacturers.”
Add in increased absenteeism and working from home, and it is clear further delays are ahead. “You can’t build airplanes on a Zoom call.”
The situation means Airbus and Boeing are “faced with very difficult strategies”.
ALC’s chief executive officer, John Plueger, echoed those thoughts. He told a JP Morgan conference on 16 March that 18% of the Airbus workforce was off due to Covid-related matters. Plueger confirmed to Airfinance Journal that Airbus told him that figure, but the information was “probably a month or two old” as of April.
“It would not surprise me to get further delays beyond that,” he added.