Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Embraer downplays tariff impact on 2025 results May 6, 2025
- JetZero readies effort for private equity fund raising May 5, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 20. May 2, 2025
- Supplier Howmet exceeds expectations despite tariffs May 1, 2025
- Airbus 1Q2025 results: So far, so good, but US tariffs make future results unpredictable May 1, 2025
Bringing back long-haul capacity with narrowbody aircraft
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By Vincent Valery
Introduction
May 11, 2020, © Leeham News: The timeline for a passenger traffic recovery is highly uncertain. Major OEMs and some airlines expect a return to 2019 passenger traffic levels in two years at the earliest.
Southwest Airlines doesn’t see traffic returning to 2019 for five years. IAG, parent of British Airways and several other airlines, predicts a three year recovery.
Leeham Co. predicts that it will take four to eight years before traffic returns to pre-COVID-19 levels.
Airbus A321XLR. Source: Airbus.
However, the recovery sequence for the various markets is becoming clearer. Governments will progressively lift travel restrictions on domestic markets, followed by regional international. Long-haul international will probably be the last to return to normal.
Airlines in China started ramping up domestic capacity, though the government mandates some of this. The governments of Australia and New Zealand disclosed discussions to lift trans-Tasman travel restrictions. French President Emmanuel Macron made it clear that travel would be first allowed within the European Union before outside the old continent.
People who need to travel for business reasons will be allowed first, including for long-haul travel. That means airlines that wish to restore long-haul capacity will have to do so with a much-reduced demand. With this in mind, it might make sense to restore long-haul flights with latest generation narrowbody aircraft such as the Airbus A321(X)LR and Boeing 737 MAX.
LNA analyzes pre-COVID-19 long-haul route patterns to determine what fraction narrowbody aircraft can cover as passenger traffic recovers.
Summary
- Long-haul markets split in two;
- Missed New Mid-Range Aircraft launch opportunity;
- A large addressable market for the A321XLR;
- A321LR and 737MAX long-haul route coverage.
Pontifications: Boeing focuses on design, production vs airplane development–for now
By Scott Hamilton
By Scott Hamilton
May 11, 2020, © Leeham News: Boeing killed development of its alphabet soup of airplane concepts for now.
“For now” is a relative term. When Boeing will be ready to show concepts to customers as a prelude to a program launch depends on how quickly the industry recovers from the COVID crisis.
But research and development of a streamlined production system, once key to new airplane projects, continues.
CEO David Calhoun said on the 1Q2020 earnings call that the New Midmarket Airplane (NMA) is essentially dead. He said in the following media call that the “differentiators” for the next new airplane from Boeing or Airbus will be manufacturing and engineering.
Bjorn’s Corner: Can I get COVID-19 in airline cabins? Part 1.
May 8, 2020, ©. Leeham News: In our Corner series, we now dig into this important subject: Is my probability of getting infected with the COVID-19 virus higher in an airliner cabin than in other places?
We look at simulations of how the virus travels when we breathe/cough and how the virus load propagates in an airliner cabin. Then we talk about infection probabilities compared with other environments.
Figure 1.
Better to bring capacity back with a 777X or 777-300ER? Part 2
By Bjorn Fehrm
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Introduction
May 7, 2020, © Leeham News: With the Covid-19 pandemic depressing passenger traffic for years to come, we started an analysis last week on the options the airlines have who wait for their Boeing 777-9. Hold on to their 777-300ER or upgrade to the newer and more efficient 777-9?
We deepen the analysis this week by comparing the economics of a 10 years old 777-300ER versus a new 777-9.
Figure 1. The 777X has 30% larger windows than standard in the class. Source: Boeing.
Summary:
- The 777X is best seen as a cross between a Boeing 787 and a 777-300ER. It inherits the passenger comfort features the 787 brought to the market like lower cabin altitude, higher cabin humidity, larger windows, and a smoother ride.
- If a 777-9, with it’s higher capital costs, can compete on operating cost with a used 777-300ER depends on the fuel price.
Updated with earnings call: Spirit Aerosystems reports 1Q loss, expect worse 2Q
By Scott Hamilton
May 6, 2020, © Leeham News: Spirit Aerosystems, a major supplier to Boeing and Airbus, reported a net loss of $163m for the first quarter.
The loss was a negative margin of 15.5% on revenues of $1.08bn, but it was better than analyst expectations.
With a majority of revenues coming from Boeing, the grounding of the 737 MAX continued to hit Spirit hard. The COVID-19 crisis further impacts the company.
Spirit will deliver 125 737 fuselages to Boeing this year, down from 216 previously agreed, reflecting the COVID crisis. This includes 18 delivered in January before production was suspended. Spirit did not reveal how many of 116 produced and stored in parking lots will be among the 125.
On the earnings call, Spirit said the the storage will grow somewhat, peaking in July-August. It will get back down to the 120s by year end. The inventory will decline in 2021 and “burn down” in the next two years.
Supply chain focus: Safran’ s first 2020 quarter
By Bjorn Fehrm
May 5, 2020, ©. Leeham News: Next out in our COVID19 supply chain focus is Safran Group.
Safran, together with GE Aviation, is the largest supplier of turbofan engines to the World’s airliners. Their success in the CFM joint venture is unprecedented. The first joint engine, the CFM56 has passed 30,000 deliveries, and the follow-up, the CFM LEAP, has 16,000 orders.
At the back of this successful business, Safran has expanded to a major aeronautical supplier for propulsion, systems, and cabins.
Seattle Times, reporting team win Pulitzer Prize for Boeing 737 MAX coverage
May 5, 2020, © Leeham News: The Seattle Times and its reporting team won a Pulitzer Prize, it was announced yesterday, for its coverage of the Boeing 737 MAX crisis.
The team is Dominic Gates, Steve Miletich, Mike Baker and Lewis Kamb.
Engine OEMs forecast big hit to aftermarket revenue
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Now open to all readers.
By Scott Hamilton
May 5, 2020, © Leeham News: The COVID crisis will damage the aerospace aftermarket in ways that are only beginning to be understood.
As key companies report 1Q earnings, it’s clear that engine aftermarket revenue is going to take a major hit for years to come.
Engine companies like CFM, GE Aviation, Pratt & Whitney and Rolls-Royce, rely on aftermarket sales as the key component of their business plans.
The research and development money that goes into an engine consumes such huge amounts of cash that the OEMs don’t recoup their costs for 10-20 years. The aftermarket for parts, maintenance, repair and overhaul is where they make their profits in the meantime.
But this is seriously threatened by the virus crisis.
“The aftermarket for key programs took 4+ years to return to 2008 levels out of the Great Financial Crisis, and that was with traffic decline at a fraction of the declines today,” Bernstein Research wrote in a May 4 note to clients.
Collapse of Boeing-Embraer JV gives Mitsubishi Aircraft new opportunities
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By Scott Hamilton
Introduction
May 4, 2020, © Leeham News: The collapse of the Boeing-Embraer joint venture removes a major cloud over another Boeing agreement with a different airframe company.
Long ago, Boeing and Mitsubishi Aircraft Corp. (MITAC) entered into a support agreement for what was then the MRJ program.
MITAC was to receive marketing and services support from Boeing for the MRJ.
From the moment the news emerged that Embraer and Boeing were talking about a merger, acquisition or joint venture (the goal moved over time), questions arose over the future of the MITAC agreement.
Summary
- Boeing said the MITAC agreement would be honored, but skepticism remained.
- The MRJ and later the SpaceJet would compete with the former Embraer product line.
- Recovery consensus 3-5 years.
- With collapse of Boeing-Embraer JV, Mitsubishi-Boeing can reaffirm, strengthen their cooperative agreement.
Pontifications: Ugly, fundamental changes coming for airline industry
By Scott Hamilton
May 4, 2020, © Leeham News: The global airline industry is on the cusp of a fundamental restructuring that will be painful, and painfully long.
A few airlines already ceased operations.
Several others are on the brink of filing for bankruptcy—among them Lufthansa and Virgin Atlantic, brand names that aren’t normally at the top of an endangered list.
A shake-out in Europe was already underway before the COVID-19 crisis erupted. The inevitable shake-out in Asia hadn’t yet begun.
Fleet rationalization among legacy carriers will occur at rapid-fire speed. And some carriers now have the opportunity to shed unprofitable routes that were maintained for market share.
It’s going to be an ugly process, though.