Leeham News and Analysis
There's more to real news than a news release.
Boeing was “hungry” for deal, says Allegiant CEO
By Scott Hamilton
Jan. 6, 2022, © Leeham News: Allegiant Airlines CEO Maury Gallagher said Boeing was “hungry” and the carrier “got a good deal all the way around” with its first order from the manufacturer.
In an interview with LNA yesterday, Gallagher confirmed that early delivery positions from Boeing were also important in placing an order for 30 737-7 and 20 737-8-200 MAXes. Deliveries begin in 2023 and continue through 2025.
Allegiant currently is exclusively operating Airbus A319ceos and A320ceos. Airbus didn’t have enough delivery slots for the A220-300 to cover the smaller end of Allegiant’s needs. Additionally, the A220-300 hasn’t yet been certified for its maximum potential capacity of 160 passengers. Nor was Airbus willing to provide any assurances that a larger A220-500 would be launched. The A220-300 also has a shorter time to maintenance checks than the 737, reflecting the new aircraft type vs the 737-7’s derivative status.
There were no slots for the larger A320neo family until 2026-2038, Gallagher said.
Fleet transition support from Boeing also was a key element of the order, which includes options for 50 more airplanes.
HOTR: Boeing works on HGW 787-10—and the 787-9
Jan. 5, 2022, © Leeham News: In his first interview since becoming CEO of Boeing Commercial Airplanes, Stan Deal told The Seattle Times that development of a High Gross Weight (HGW) version of the 787-10 is underway.
“[Deal] also revealed that Boeing is currently designing a new ‘high gross weight’ version of the largest Dreamliner, the 787-10, bumping up its payload and range to make it more competitive against the Airbus A350-900.”
But LNA learned exclusively that Boeing also is developing an HGW version of the 787-9.
Airbus critics reach low blow in forthcoming KC-Y competition
By Scott Hamilton
Analysis
Jan. 4, 2022, © Leeham News: The US Air Force KC-Y tanker competition hasn’t even started but Boeing partisans already have the knives out.
For at least the fourth time, an OpEd appeared attacking Airbus for illegal subsidies. For good measure, the writer also pointed to Airbus’ misdeeds in its bribery scandal and other misadventures. All this in what increasingly appears to be the opening shots in a campaign to politicize the coming KC-Y Bridge Tanker procurement.
Once more, Boeing will be pitted against Airbus and the KC-46A against the A330 MRTT. This time, Airbus partnered with Lockheed Martin to take on Boeing. The latest column hit the Internet on Christmas Eve. This time, a Congressional staffer called on Airbus to be “Grounded” in the KC-Y competition.
This column was one of the most irresponsible commentaries seen so far. And this is saying something.
Pontifications: Assessing the advantages Boeing, Lockheed Martin-Airbus have in KC-Y tanker competition
Fourth in a Series
By Scott Hamilton
Jan. 3, 2022, © Leeham News: As the US Air Forces gears up to solicit bids for its KC-Y aerial refueling “bridge tanker” competition, Boeing is now the incumbent tanker supplier.
Having won the KC-X competition against Airbus, Boeing is supplying a total of 179 tankers based on the 767-200ER. The KC-46A, however, has been plagued with problems, delays, and cost overruns.
As the incumbent, Boeing would seem to have an advantage in the KC-Y competition. But on the other hand, the problems that Boeing has had in technical compliance categories, failures, and delivery delays, and foreign object debris issues, could work against it.
Sean O’Keefe was the president of EADS North America, Airbus’ parent when Boeing won the KC-X contract. He also worked for the government as the NASA administrator and on The Hill. He was friends with Bob Gates, the Secretary of Defense during parts of the Bush 43 and Obama administrations. This gives him a special insight from government and industry perspectives to weigh the advantages and disadvantages Boeing faces in the anticipated KC-Y contest that will likely pit the incumbent against the Lockheed Martin-Airbus team that will once again offer the A330-200-based tanker called the LMXT.
Forecast 2022: Airbus
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By Bjorn Fehrm
Introduction
January 3, 2022, © Leeham News: When the COVID-19 Pandemic started, it was tough to predict its impact on world air travel and how long the downturn would last.
The aircraft OEMs are at the top of a supplier pyramid of hundreds of companies and millions of parts. The prediction of airliner output at the end of this chain is critical for all, but most for suppliers. The suppliers have strained their liquidity to expand the production at the demand of the OEM.
A downturn in deliveries means less money, which forces sensitive suppliers into a liquidity crisis. Brake moderately, and the suppliers can handle it. Brake hard, and they can’t, or brake a bit and then harder, and it’s as bad.
Airbus managed the reductions well, and with an intact supplier chain, 2022 will be about how hard to step on the throttle as the Pandemic isn’t done yet.
Summary
- With a competitive product range and an intact supplier base, 2021 is about the correct level of increase in deliveries, with the Pandemic a bigger worry than the main competition.
- With Airbus’ in perhaps its relative strongest position ever, how much this shifts the market is more a supply issue than anything else.
Air Wars is now available via Barnes and Noble
Dec. 29, 2021: Air Wars, The Global Combat Between Airbus and Boeing, is now available in paperback via Barnes and Noble. It is also available via Amazon in paperback and eBook.
Air Wars is by LNA’s Scott Hamilton. It covers 35 years of the global sales and product strategy between Airbus and Boeing. John Leahy, who retired in January 2018, led Airbus’ sales teams in the US and globally for most of his 33 years at Airbus. The book covers his successes and failures, campaigns against Boeing and gets both sides of these campaigns and product strategies from key people like Leahy, Tom Enders, Kiran Rao, Tom Williams and Leahy’s successor, Christian Scherer at Airbus; and Ray Conner, Jim Albaugh, Scott Carson, Toby Bright and John Feren from Boeing. Industry players like Steven Udvar-Hazy and John Plueger are also interviewed.
Forecast 2022: Boeing hopes for the best on pandemic, 787, MAX
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By Scott Hamilton
Introduction
Dec. 20, 2021, © Leeham News: To say that last two years have been challenging for Boeing is an understatement.
But for the first time in a long time, officials appear optimistic that the worst is behind them. This is not to say that 2022 will be a cakewalk.
- Boeing is slowly clearing the inventory of 450 737 MAXes produced during the grounding. New airplane production rates are slowing ramping up.
- China’s recertification of the MAX appears around the corner.
- Deliveries of the 787 to restart in a few months.
- Widebody recovery still a challenge.
Pontifications: EADS went ahead with tanker bid despite long odds against winning
Third in a Series
By Scott Hamilton
Dec. 20, 2021, © Leeham News: When EADS, then the name of the parent of Airbus, decided to go it alone and bid for the US Air Force contract for the KC-X aerial refueling tanker, officials knew it was an uphill battle.
Despite winning the contract in Round Two, with Northrop Grumman as the lead, the parameters of the competition changed. No longer would the A330-200-based tanker get credit for its greater capabilities that won it the contract in Round Two. Now, the ancient Boeing KC-135 was the baseline to meet. Any bidders—Boeing and EADS—would receive only a pass-fail rating for meeting the baseline.
If the bid price was within 1% of each other, then EADS would receive credit for the extra capacity afforded the A330 tanker over Boeing’s KC-767 offer.
The pass-fail approach caused Northrop to take one look at decide to withdraw from the competition. EADS officials made the decision to proceed anyway, knowing now that winning was unlikely.
HOTR: Dropping Embraer comes back to bite Boeing
By the Leeham News Staff
Updated with details of Air France – KLM order
Dec. 16, 2021, © Leeham News: When Boeing decided to drop its joint venture plan with Embraer, there were good business reasons to do so.
The grounding of the 737 MAX was dragging on much longer than anyone ever expected, and there was no end in sight. The coronavirus infections exploded into a global pandemic the month before. Air transportation plunged as much as 95%. Airlines were grounding fleets and some, at that 
point, looked certain to go bankrupt or go out of business. Boeing was bleeding cash and debt exploded by more than $20bn. The company was in survival mode.
Embraer faced the same industrial and customer challenges Boeing did. And while none of its airplanes were grounded, the E175-E2 turned out to be an airplane with no customers because the US market for which it was designed disappeared. Restrictions in pilot contracts limiting the weight of airlines in regional operations killed the airplane.
Finally, Embraer’s market value at the time the joint venture was agreed was set at $4.5bn. By April 2020, it had fallen to $1.25bn. Given the business environment and the drop in value, why pay the higher price?
With Qantas Airways abandoning Boeing, we now know why going through with the deal may have been smart.
One A380 departure of two 777-200ER alternatively 787-9? Part 3.
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By Bjorn Fehrm
Introduction
December 16, 2021, © Leeham News: Last week, we discussed the economics for an airline that dispatches one A380 instead of two smaller widebodies on a trunk route with heavy traffic.
Our example modeled British Airways, which uses the A380 on its highest volume Heathrow departures. Now we finish the series by going deeper into the analysis, examining all cost and revenue aspects, including looking at slot values on congested airports.
Summary
- The ultimate decision to fly one departure or two per departure wave on slot-constrained airports is the value of using one slot or two to transport x passengers on an airport like London Heathrow.
- We develop the revenue and costs factors and discuss the airline’s intangible values around this dilemma.