Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Teamsters, Boeing have a new contract April 29, 2025
- 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
Pontifications: A330-300 could be great deal ahead
May 10, 2021, © Leeham News: The COVID-19 pandemic prompted airlines to ground more than 8,000 aircraft at the peak.
By Scott Hamilton
Among widebodies, no aircraft was hit harder than the Airbus A330ceo.
Traffic within China, the US and Asia recovers with narrowbody airplanes. European short- and medium-haul traffic is not recovering as quickly due to continued boarder closings. International traffic, for the same reason, remains awful.
But in chaos some see opportunities.
Jep Thornton, managing partner of the boutique lessor Aerolease, last week said the A330-300 could be a great trading opportunity.
At April 1, there were 267 -300s and 286 A330-200s (of all types) in storage, according to data reviewed by LNA.
HOTR: Annual Reports give hint to MAX return in China
By the Leeham News Team
May 4, 2021, © Leeham News: Annual reports from some Chinese airlines give an indication when Boeing can expect to resume deliveries of the 737 MAX there.
China Southern’s report issued this week indicates 48 MAXes will be delivered next year. Another 44 are shown to be delivered the following year. This compares with five A320 series this year and none next year. Only 15 A320s were delivered in 2020.
Five 787s and one 777s are scheduled for delivery to China Southern this year. Four A350s are scheduled for delivery this year and next.
Calhoun says next new airplane isn’t about engines, it’s about production
David Calhoun, Boeing CEO. Boeing photo.
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By Scott Hamilton
Introduction
May 3, 2021, © Leeham News: The Next Boeing Airplane (NBA) will not be driven by propulsion. Rather, a transformation in design and production to dramatically lower the cost will be the driving factor.
At least this is what Boeing CEO David Calhoun said last week in his final remarks on the 1Q21 earnings call.
While brief on this topic, his remarks are the most expansive yet in the public domain by a Boeing CEO or CFO.
LNA first was tipped to the importance of an entirely new approach to production years ago. That’s when a Boeing corp com official said the proposed Middle of the Market Airplane would be as much about production as it would be about the aircraft. LNA’s investigation subsequently revealed Boeing’s effort to revolutionize its engineering and production under the code name Black Diamond. LNA was the first media to write about this in detail. Even today, few recognize the code name.
Summary
- The NBA, whatever form it takes, won’t wait for revolutionary new engines.
- A transformation in design, engineering, and production will be key.
- Calhoun believes Boeing has the advantage, but Airbus isn’t standing still.
Pontifications: Long road ahead, but Boeing will recover
By Scott Hamilton
May 3, 2021, © Leeham News: Cowen Co. called the Boeing 1Q21 financial results “messy” with questions unanswered.
Credit Suisse characterized a “challenging 1Q, though recovery should begin to accelerate.”
My take falls in line with Credit Suisse. It was a challenging first quarter and lots of variables overhang Boeing going forward. But I was struck by the confidence displayed by CEO David Calhoun and CFO Greg Smith going forward. And I’m not one to drink the Kool-Aid by any stretch.
To be sure, many challenges lie ahead for Boeing. Returning the 737 MAX to service has been anything but smooth. New issues popped up that resulted in Boeing (not the regulators) grounding the airplane again. Deliveries were suspended once more.
After 10 years of production, Boeing suspended deliveries of the 787. The KC-46 tanker still isn’t performing as required after nearly two years of delivery delay and limited operations with the US Air Force.
This is not The Boeing Co. of decades past.
Why the MAX isn’t back – yet
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By Judson Rollins
Introduction
April 29, 2021, © Leeham News: Much virtual ink has been spilled in recent weeks over an apparent surge in demand for Boeing’s 737 MAX, as a slow drip-drip-drip of cancellations finally reversed into net new orders.
The Boeing team must be grateful to see a shift toward positive headlines for its single-aisle family. Longtime 737 customers provided badly needed votes of confidence with top-ups to their previous orders.
However, such momentum has been slowed by a continuing wave of cancellations. Boeing logged just 12 net orders in February and 40 in March. More cancellations are due to be announced; Turkish Airlines recently said it would cancel or convert to options 50 of its previous MAX orders, and ch-aviation says a single unidentified customer cancelled another 45 in March. Aeromexico swapped MAX orders for other MAX orders, saving $2bn in the process – a revenue hit for Boeing down the line.
The total backlog, net of orders in doubt under ASC 606, is down from a high of 4,708 to just 3,240 as of this week. This is enough to support average production of just 30 airplanes per month through 2029. Boeing CEO David Calhoun said on yesterday’s earnings call that he remains confident the MAX demand will recover from this point forward.
Summary
- New orders are mostly from large existing MAX customers, and likely include mitigation discounts for delivery delays.
- Boeing has 400 undelivered aircraft in storage, some of which were due for delivery to now-defunct airlines.
- Pricing trends are quite negative, depriving Boeing of badly-needed free cash flow.
Boeing cites US-China relations as business watch item in 1Q earnings
April 28, 2021, © Leeham News: Boeing’s first quarter financial results were slightly worse than estimates by Wall Street analysis.
“Boeing reported first-quarter revenue of $15.2bn, primarily driven by lower 787 deliveries and commercial services volume, partially offset by higher 737 deliveries and higher KC-46A Tanker revenue,” the company states in its announcement. “GAAP loss per share of ($0.92) and core loss per share (non-GAAP) of ($1.53) reflect year-over-year KC-46A Tanker improvement, higher 737 deliveries, and lower commercial airplanes period costs, partially offset by lower tax benefits and higher interest expense. Boeing recorded operating cash flow of ($3.4)bn.”
Boeing recorded a charge of $318m for the VC-25B (Air Force One) program. Impacts from COVID-19 and a vendor that Boeing sued (and which counter-sued) are cited as reasons.
Productions rates remain unchanged.
The press release is here.
But buried in the slide presentation for the earnings call at 10:30 EDT is a one line reference that US-China relations are a business environment watch item. Credit Suisse notes this is the first time Boeing has so referenced China in earnings calls.
First reactions to the financial reports and China are below.
Pontifications: Balance shareholder value with product development and strategy
April 26, 2021 © Leeham News: Balance shareholder value with the long-term strategy of The Boeing Co.
By Scott Hamilton
This is what Boeing needs to do. But there were conflicting signals from the 2020 annual shareholders meeting held April 20 via virtual webcast and dial-in participation.
“We want to get back to a dividend policy. I can’t give you a date and we need a return in our commercial aviation department to support that.” So said David Calhoun, CEO.
Yet Calhoun was circumspect about a new airplane program.
When asked about developing a new airplane, Calhoun said—as he has before—that Boeing’s current research and development focus is on refining engineering modeling and production methods. These will be the “real differentiators” for the next new airplane.
“Calhoun vowed to return Boeing to its engineering roots,” reported Bloomberg News.
“There’s light at the end of the tunnel, but the journey is just beginning.”
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By Scott Hamilton
Introduction
April 26, 2021, © Leeham News: Aerospace suppliers generally had worse delivery and quality control performance in 2020 than in 2019. By next year, executives think timeliness and quality will return to 95% of pre-pandemic levels.
Eighty-three percent of executives surveyed see delivery rates for narrowbody aircraft improving this year and next.
Forty-nine percent of executives surveyed see airline industry revenues returning to 2019 levels in 24-36 months.
And eco-aviation and sustainability drives will be an increasingly important topic over the next three years.
These are just some of the findings in the annual survey of aerospace and airline executives conducted by the international consulting firm Accenture.
Summary
- “There’s light at the end of the tunnel, but the journey is just beginning.”
- 6-18 month outlook. 2019 survey skipped as the pandemic spread.
- The shift in sustainability-driven is by today’s younger generation.
Unsustainable – and growing – airline debt load weighs on OEMs, suppliers
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By Judson Rollins
Introduction
April 22, 2021, © Leeham News: COVID-19 has forced every layer of the commercial aviation supply chain, apart from cargo airlines, to streamline their businesses and raise cash to survive. Nowhere has this been more true than for passenger airlines, the end-customers for most aviation products.
Before the pandemic, passenger carriers were taking advantage of cheap capital to invest in both new and used aircraft. However, most have stretched their balance sheets beyond imagination by pledging every unencumbered asset – even frequent flyer programs – to raise additional debt.
International Air Transport Association (IATA) economist Brian Pearce said in a February webinar that governments provided $101bn of repayable loans and tax deferrals in 2020 alone. Another $125bn was raised from banks, capital markets, and lessors. More will be required this year.
Governments and markets backstopping the world’s airlines, aided by central bank money printing, are why fewer than 50 have ceased operations since the start of the pandemic. This is not materially worse than a typical year, but it doesn’t begin to reflect the scale of the ongoing financial shock to airlines.
Summary
- Airline demand recovery is prolonged in most regions; new tax and cost pressures loom.
- Debt loads will continue to grow this year; interest expense is mounting.
- High leverage may depress airline capital expenditures through 2030.
- Governments may finally ground loss-making state carriers, adding to used aircraft inventory.
- Aircraft production cuts are already impacting the supply chain.
10 Minutes About: Boeing, Calhoun’s extension and Smith’s retirement
April 21, 2021, (c) Leeham News: Boeing announceed April 20 that the Board extended CEO David Calhoun’s mandatory retirement age from 65 to 70. Calhoun was 64 on April 18 and had one year to accomplish everything that needs to be done. 
Now, with six years, he can finish structuring Boeing and presumably launch a new airplane program.
Also announced on April 20 is that Greg Smith, the chief financial officer and EVP of strategy and other things, will retire July 9. Smith was named CFO in 2011. Some thought he might be in line to become CEO once Calhoun stepped down at age 65.
Richard Aboulafia of The Teal Group is LNA’s guest on this episode of 10 Minutes About to discuss these developments.