Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Does an A220-500 need a new wing and engines? Part 2. May 8, 2025
- 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
Better to bring capacity back with a 777X or 777-300ER
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By Vincent Valery
Introduction
April 30, 2020, © Leeham News: The travel restrictions implemented in the aftermath of the COVID-19 outbreak lead to an unprecedented collapse in global passenger traffic.
These travel restrictions should remain in place until a COVID-19 vaccine becomes available for the wider population. Combined with the economic effects of the various social distancing measures, travel demand will remain depressed for a substantial period. Leeham Co. predicts that it will take four to eight years before traffic returns to 2019 levels.
Boeing 777-9 on the way to what was hoped to be its first flight Jan. 24. Photo by Scott Hamilton.
Airlines grounded a large number of aircraft due to the collapse in passenger demand. As a result, there will be plenty of aircraft in long-term storage available for lease or purchase at discounted prices once demand recovers.
These aircraft will compete against those coming off the assembly line. The 777-9 is planned to enter service in 2021 at the earliest. Apart from Lufthansa, all the airlines that ordered the 777X are 777-300ER operators. Once traffic bounces back, they will have to ponder whether they are better off keeping (or sourcing) older 777-300ERs or take deliveries of 777-9s as scheduled.
In this article series, we will compare the economics of the 777-300ER with the 777-9 on the world’s busiest intercontinental route.
Summary
- Depressed demand brings airlines to the brink;
- Near-terminal wounds to heal once demand recovers;
- A perfect storm for new (large and expensive) aircraft;
- Peculiarities of operating on the busiest intercontinental route.
Boeing techs ratify contract extension
By Bryan Corliss
April 29, 2020 © Leeham News — Unionized technical workers who initially rejected a proposed contract extension with Boeing have changed their minds.
Their union – the Society of Professional Engineering Employees in Aerospace (SPEEA) – on Tuesday announced that the techs had approved a 
proposed contract extension with a 74% yes vote.
The deal extends the techs’ contract with Boeing until October 2026, putting them in sync with unionized engineers at the company, who had approved a companion contract offer in March.
SPEEA represents some 4,700 techs at Boeing – mostly in Puget Sound, but also in California, Oregon and Utah – along with nearly 13,000 engineers.
Boeing to cut rates on 787, 777 production; posts big 1Q loss
By Scott Hamilton
David Calhoun, CEO of Boeing.
April 29, 2020 © Leeham News: Boeing will cut production rate of the 787 in half and the 777 from 5/mo to 3/mo in response to the dramatic drop in demand from the COVID crisis.
Production of the 737 MAX resumes at a low initial rate with a current target of 31/mo next year.
Boeing announced these rates in its first quarter financial results. The company has an operating loss of $1.35bn and a net loss of $641m on revenues of $16bn.
Boeing announces voluntary layoffs in Puget Sound
By Bryan Corliss
April 28, 2020, © Leeham News: Boeing on Monday formally announced it would offer voluntary layoffs – essentially contract buyouts – to members of its Puget Sound workforce.
For most workers, the offer would give them one week’s pay for each year of service, up to a maximum of 26 weeks. Boeing would also continue paying health insurance benefits for most of the laid-off workers for three months. (The exception to this: Machinists Union members will get six months of extended health benefits under the terms of an agreement negotiated in 2016.)
HOTR: Product development another victim of virus crisis
By the Leeham News staff
April 28, 2020, © Leeham News: The Coronavirus not only decimates the airline industry.
It’s going to completely upend the product strategies of Airbus, Boeing and Embraer.
Boeing is most immediately affected.
Boeing sees air traffic recovering in 2-3 years; production will take longer
By Scott Hamilton
April 27, 2020, © Leeham News: Passenger traffic should recover to 2019 pre-COVID-19 levels in two to three years. But resuming production at pre-COVID rates will take longer.
Boeing also needs to borrow more money in the next six months to get through the crisis.
These were among the announcements at the Boeing annual shareholders meeting today at which all 12 management-support directors were elected or reelected to the Board of Directors.
The Squeeze on Embraer
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By Scott Hamilton
Introduction
April 27, 2020, © Leeham News: The collapse of the Boeing-Embraer joint venture Saturday resurfaces the squeeze Embraer was under when the deal was announced in 2018.
Then, Embraer faced the prospect of competing against Airbus in the 100-150 seat sector with the former Bombardier C Series.
Embraer’s E2 Jets are squeezed from above by the Airbus A220 and, if Mitsubishi performs, the M100 SpaceJet from the bottom.
John Slattery, the CEO of Embraer Commercial Aviation (ECA), said he could not compete against the marketing might of Airbus alone. In fact, he lost a key customer when jetBlue ordered the A220-300 instead of the E195-E2 to replace 60 E190-E1s. Airbus, which took over the C Series July 1, 2018, wrapped the A321neo into the A220 order. This deal was announced shortly after Airbus assumed majority ownership of the C Series program.
Summary
- E195-E2 will drive demand.
- The E190-E2 won’t be a “door opener.”
- The E175-E2 future depends on US Scope Clause relief.
- Coronavirus upends everything.
- M100 waiting in the wings.
Pontifications: Taking a knife to a gunfight
April 27, 2020, © Leeham News: There is a great line in the movie, The Untouchables. Sean Connery’s character tells an assassin that he’s bringing a knife to a gunfight.
By Scott Hamilton
That’s what came to mind when Embraer says it will seek remedies against Boeing following the latter’s terminating the joint venture agreement between the two companies.
In the movie, the assassin lured Connery into a trap. Connery was gunned down by a machine gun. But don’t expect Boeing to be lured into any trap by Embraer.
Boeing doesn’t pull a move like this without thinking through all the possibilities. It may muff the thought process, as will be noted below, but it does think through alternatives.
Embraer: Boeing wrongfully terminated JV, will seek remedies
April 25, 2020: (C) Leeham News: Embraer says Boeing wrongfully terminated the joint venture agreement due to its own problems and reputational damage.
“Embraer believes strongly that Boeing has wrongfully terminated the MTA, that it has manufactured false claims as a pretext to seek to avoid its commitments to close the transaction and pay Embraer the US$4.2 billion purchase price. We believe Boeing has engaged in a systematic pattern of delay and repeated violations of the MTA, because of its unwillingness to complete the transaction in light of its own financial condition and 737 MAX and other business and reputational problems.
Analysis: The collapse of the Boeing-Embraer joint venture
By the Leeham News Team
Analysis
April 25, 2020, © Leeham News: The Boeing-Embraer joint venture is off.
Boeing called off the JV, saying Embraer didn’t satisfy all the conditions required.
The Boeing-Embraer joint venture is dead.
The impact to Embraer is more profound than to Boeing.
When the JV was announced in 2019, the advantages for Boeing were:
- Access to EMB engineers at a time when Boeing’s are aging and ready to retire.
- Access to much lower cost base in Brazil.
- KC-390 program.
- Revenue from EMB Commercial services.
- E2 program, though this is tangential.
The advantages for Embraer were:
- Access to Boeing’s vast customer base, marketing power, balance sheet (again, pre-virus) and capital markets.
- Access to work on new airplane programs: NMA (at the time), Future Small Airplanes (single aisle, either to compete with A220 or larger).
- Work for its engineers.
- A future beyond the struggling E2 and beyond the fanciful turboprop concept.
- A future for Embraer Commercial Airplanes, which in LNA’s view was increasingly risky.