Leeham News and Analysis
There's more to real news than a news release.
Pontifications: Boeing’s production system of the future
By Scott Hamilton
Nov. 1, 2021, © Leeham News: Boeing executives have been hinting for years about the production transformation the company sees as critical to the Next Boeing Airplane (NBA), no matter what form it takes.
Boeing’s effort, begun under former CEO Jim McNerney, was code-named Black Diamond. LNA has referred to it many times. The New Midmarket Aircraft was as much about production as it was about the aircraft.
In last week’s 3Q2021 earnings call, current CEO David Calhoun once again mentioned the transformation to a new design and production system.
“In addition, for the 737 MAX 7, the MAX 10, and the 777X, we are investing in our future, laying the foundation for our next commercial airplane development program,” he said. “This quarter, we stood up an integrated product team to bring together a digital environment where the next commercial new airplane and production system can be designed together. While we have not launched a new airplane, this is an important step in our digitization journey and our development journey to evaluate how we holistically design, build, test, certify and support the airplane and production system. It will build on the invaluable experience of our recent Defense programs.”
Boeing and Airbus freighter battle
By Scott Hamilton
Oct. 28, 2021, © Leeham News: Boeing yesterday gave its clearest indication yet that it’s moving closer to launching the 777X Freighter.
In a message to employees in conjunction with its third quarter earnings release Oct. 27, CEO David Calhoun said, “We’re progressing in development across several key franchise defense programs, and on the 737-7, 737-10 and 777X development and certification efforts. We’re also evaluating the timing of a freighter version of the 777X and are beginning to lay the foundation for our next commercial airplane development program.” News reports earlier suggest Boeing may launch the XF at the Dubai Air Show.
On the earnings call, Calhoun was slightly more expansive. “Given the continued robust freighter demand and the compelling economics of the 777X, we are currently evaluating the timing of launching a freighter version of our 777X airplane.”
A Lufhansa Boeing 777F freighter.
Single-aisle or Widebody over the Atlantic on thin routes?
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By Bjorn Fehrm
Introduction
October 28, 2021, © Leeham News: The headline seems like a no-brainer. On long thin routes over the Atlantic, we have learned a Boeing 757, or its replacement, the Airbus A321LR, is the right aircraft (as long as it’s within its range).
This was the situation in a pre-pandemic market where freight yields were half of today. The single-aisle has lower operating costs than the widebodies, and if the passenger stream and range fits, it was the transport to have on the route.
With the high cargo prices, does this change? We check for several Atlantic routes.
Summary
- The increased yields for air cargo challenge the mantra; a single aisle is preferred for trans-Atlantic service as long as the passenger number and range fits.
- Going forward it will be all about the cargo prices and the number of passengers to transport.
Update 1: Boeing posts small operating profits, net losses in 3Q and nine months (with CNBC comments)
Oct. 27, 2021, © Leeham News: Boeing reported small operating profits and small net losses for the third quarter and nine months.
The third quarter operating profit was $329m and $1.27bn for the nine months. Boeing lost $401m and $4.7bn for the periods in 2020.
Operating cash flow used in the third quarter declined to $262m and $4.1bn compared with $4.8bn and $14.4bn used in 2020. Additional cash was used for spending on property, plants and equipment. Boeing had $20bn in cash at Sept. 30, down slightly from June 30’s $21.3bn. Consolidated debt declined from $63.6bn at June 30 to $62.4bn at Sept. 30.
HOTR: Lessors warn Airbus
By the Leeham News team
Oct. 26, 2021, © Leeham News: Two mega-lessors warned Airbus against dramatically upping production rates of the A320 family, London’s Financial Times reported Oc
t. 23.
“[B]old plans to speed up production are unjustified given still subdued demand from airlines after the coronavirus pandemic,” The Times wrote. Airbus notified suppliers earlier this year to study going to a production rate of 70 aircraft per month by 2025. Rates might go even higher, to 75/mo, Airbus said.
“The chief executives of Avolon and AerCap, wrote to Guillaume Faury, Airbus chief executive, in recent weeks to express their concerns that the aircraft market would not support the most aggressive increases in output rates, according to four people familiar with the situation. A surge in supply of new aircraft, potentially flooding the market, could push down the value of the lessors’ existing fleets. They make their money by renting to airlines,” the paper wrote.
Airbus sees encouraging signs of wide-body demand recovery
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By Scott Hamilton
Oct. 25, 2021, © Leeham News: Airbus sees some “encouraging” signs wide-body demand is recovering from the global COVID-19 pandemic.
Christian Scherer. Source: Airbus.
Passenger demand is nearing-pre-pandemic levels in key areas of the world where single-aisle aircraft are used. Long-haul international demand remains suppressed, however. Some don’t forecast a return to normal for up to two more years. Others forecast a recovery on key routes next year.
Christian Scherer, the chief commercial officer for Airbus, is optimistic.
“I would say that on the wide-body market, you see encouraging signs,” he said during a press gaggle at the IATA AGM Oct. 3-5 in Boston. “Maybe that has to do with the fact that the ecosystem at large is realizing that the best thing they can do in the short- and medium-term, towards that whole global objective of sustainable air transportation is to equip themselves with the most fuel-efficient and therefore eco-friendly airplanes.
“I think that against that backdrop and the opening of more international corridors sees a regained interest on the wide-body side as well. Now it’s lagging the single arch really and there is no scoop here that rates in the long-range airplanes are going to change imminently, but the general sentiment is positive on the wide-bodies as well and that’s really good.”
Air freight demand explosion: a long-term trend?
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By Judson Rollins
Introduction
October 18, 2021, © Leeham News: Much ink has been spilled over the surge in demand that has washed over every corner of the cargo world: air, sea, road, and rail.
Amazon Air’s first parcels being unloaded at Amazon.com’s new Cincinnati (US) sort hub. Source: Amazon.com.
Before the COVID-19 crisis, air transport was reserved primarily for items with high value and/or time sensitivity, such as laptop computers or express documents. And growing competition in the cargo market meant that average yield (revenue per ton-mile) was declining by more than 2% per year, according to past editions of Boeing’s World Air Cargo Forecast.
But now the cost of sea transport has exploded, shifting a significant chunk of cargo from ocean freighters to their airborne equivalents. This is driving some retailers to use air transport. Home Depot, an American home-improvement retailer, is resorting to air freight to bring in smaller, higher-value items like power tools that it needs to keep on the shelves at all times.
Even before COVID-19, a growing share of air freight has come from e-commerce — thereby shifting the volume-to-weight considerations relative to “traditional” freight.
Will these trends continue even beyond the COVID crisis? And what impact will it have on the market for factory-built freighters and passenger-to-freighter (P2F) conversions?
Summary
- Soaring sea freight yields mean small shipments are now more economic by air than sea.
- Volumetric capacity matters more than max gross weight.
- New freighter options will compete with a glut of conversion feedstock.
- Air freight yields will eventually revert to historical trendlines in most regions.
Bjorn’s Corner: The challenges of airliner development. Part 25. Safety monitoring and reporting
By Bjorn Fehrm, Henry Tam, and Andrew Telesca
October 15, 2021, ©. Leeham News: Last week, we introduced the activities around Continued Airworthiness that we have to do during development and flight testing of our aircraft.
As described, the majority of accidents for aircraft are attributed to failings in Continued Airworthiness and Operations rather than design. We listed Continued Operational Safety, Operational Preparedness, and Service Readiness as the three important areas for Continued Airworthiness.
We dive into Continued Operational Safety first, specifically Safety Monitoring and Reporting.
Figure 1. A graph showing how an OEM and FAA surveys the operation of an aircraft and takes action. Source: Boeing.
With high cargo prices, will airlines fly larger aircraft in their widebody fleets?
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By Bjorn Fehrm
Introduction
October 14, 2021, © Leeham News: Over the last weeks, we’ve seen that the present cargo crunch and high yields will influence what aircraft variants airlines purchase. Models that are too large passenger-wise for years to come will be paid for by a longer belly that can take more cargo.
This trend will remain as long as cargo prices are high. Will the high cargo yields also affect what aircraft to keep stored and which to fly of an existing fleet? We apply the analysis to an airline with a fleet of Boeing 777s.
Summary
- The increased yields for air cargo changes the fleet planning for the widebody fleet. The most suitable passenger models stay in the desert, and the longer siblings fly despite lower load factors.
Pontifications: Upping the game in eco Aviation
By Scott Hamilton
Oct. 4, 2021, © Leeham News: The pressure to reduce greenhouse gas emissions by the commercial aviation industry continues to increase.
Two weeks ago, Airbus hosted a day-and-a-half media event promoting its vision of moving toward decarbonizing aviation.
Boeing and Alaska Airlines last week hosted media for a touchy-feely event following up on the announcement in June by Boeing and Alaska of its joint ecoD (as Boeing calls it) program.
Boeing in October outlined progress of its ecoDemonstrator program, at the time with Etihad Airways as the partner. A 787-10 was used at that stage.
Mike Sinnett, Boeing VP of Product Development, said last week that the Alaska 737-9 MAX that is the focus of the current ecoD effort includes several ideas that would not make it into test on a stand-alone basis. But as part of a larger effort, little things that cumulatively can reduce drag and therefore fuel burn can be tested.