Leeham News and Analysis
There's more to real news than a news release.
Sunset of the Quads, Part 7, The A380
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By Vincent Valery
Introduction
All Nippon Airways’ Flying Honu A380 livery
Sep. 17th, 2020, © Leeham News: Last week, we compared the economics of the A340-600 and the 777-300ER on the Los Angeles to Shanghai route. We now turn our attention to the last major bet on a quad-engine aircraft, Airbus’ Superjumbo A380.
Summary
- An extended market study to go after the Queen of the Skies;
- Supersized launch and development;
- A program on life support for several years;
- What went wrong;
- Analyzing two-stage Boeing response on a trunk route.
HOTR: Adjusting Airbus and Boeing orderbooks
By the Leeham News Staff
Sept. 15, 2020, © Leeham News: Boeing has removed hundreds of 737 MAX orders from its order book. While some were direct cancellations from customers, most came through ASC 606 adjustments.
Airbus does not publish such order adjustments by aircraft program in its monthly order and deliveries report. The European OEM publishes a total outstanding amount of contracts for commercial aircraft in its annual reports. However, the figure does not have a breakdown by program.
As a result, Airbus and Boeing order books aren’t an apple to apple comparison. The COVID-induced traffic slump has had a significant impact on airlines’ financial situation. Therefore, adjusting order books is necessary to assess an aircraft program’s backlog situation.
Pontifications: Boeing SC makes its case for 787 production consolidation—and it favors Everett
By Scott Hamilton
Sept. 14, 2020, © Leeham News: Boeing’s South Carolina 787 final assembly plant has made its case whether to consolidate production in one location, or not.
The conclusion favors retaining dual assembly lines, retaining one in Everett.
This click-bait lead doesn’t mean Boeing SC management favors retaining dual assembly lines. Far from it.
Sunset of the Quads, Part 6. The A340-600 versus the 777-300ER.
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By Bjorn Fehrm
Introduction
September 10, 2020, © Leeham News: The Airbus A340-600 was designed to challenge Boeing’s hold of the large, long-haul jets. With a capacity 60 seats above the previous largest Airbus jet, the A340-300, and a 7,500nm range, it should put Airbus firmly on the long-haul map.
The A340-600 would be flying its 350 passengers as long and for a lower cost than the 20 seats larger Boeing 747-400, the then-largest long-haul Boeing jet. It would have worked hadn’t Boeing upgraded the 777-300 to the 777-300ER and surpassed the spec. How much better did that make the 777-300ER when it arrived in 2004?
Summary
- The A340-600 could take almost as many passengers as the Boeing 747-400 and fly these to the same distance.
- In addition, it loaded more LD3 cargo containers and burned only three-quarters of the fuel of a 747-400.
- But the advantage of the A340-600 was shortlived. Only two years later Boeing responded with the 777-300ER which bettered the Airbus on almost all accounts.
HOTR: Boeing bear case: $73bn revenue drop 2020-2025
By the Leeham News Staff
Sept. 9, 2020, © Leeham News: Morgan Stanley has a new aerospace analyst, Kristine Liwag, who initiated coverage on a half dozen companies over two days last week.
Among them, of course, was Boeing.
One of the conclusions in one of her notes:
“Assuming that some orders for growth and those ordered by lessors are cancelled in the 2020-2025 timeframe, we estimate that there is $73bn downside risk to Boeing’s revenue from 2020-2025. We note that our Bull case scenario assumes that the entire current order book converts to revenue.”
Liwag and her team also write, “there is an underappreciated risk that Boeing is particularly vulnerable to cancellations as the 737 MAX grounding (March 2019) opened up cancellation rights (without penalty) for aircraft deliveries that were delayed a year.”
But Morgan Stanley doesn’t let Airbus off the hook
“Boeing and Airbus manufacture aircraft to an order book. White tails, which are aircraft without owners, are uncommon and undesired. When demand is strong and the production skyline is sold out, as we have seen in the past few years, a new aircraft is a scarce commodity that airlines and lessors want. In times of uncertainty, a new aircraft, with a capital cost of $50mn-$200mn per unit, becomes a white elephant.”
Pontifications: Boeing in Washington: Here We Go Again
By Bryan Corliss
Sept. 7, 2020, © Leeham News: Stop me if you’ve heard this one: the pundits are saying Boeing is going to leave Puget Sound, leaving behind the hollow husk of a company doomed to wither and die on the vine.
Bryan Corliss
Just like they did in 2003, in 2009, in 2013 and 2016.
Seattle-area political economist and author T.M. Sell, in fact, traces the company’s first threat to leave clear back to the 1920s, when company executives got into a fight with the Seattle City Council over building new roads to connect downtown with the airport we now call Boeing Field.
Boeing said it would pack up and move to southern California, if Seattle didn’t cooperate.
“Like rain in winter, this is a regular feature of the Puget Sound emotional landscape,” Sell opined back in 2009.
Sunset of the Quads, Part 5
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By Vincent Valery
Introduction
Sep. 3rd, 2020, © Leeham News: Last week, we compared the economics of the A340-300 and the 777-200ER on the Paris to San Francisco route. We now turn our attention to Airbus’ larger long-range aircraft, the A340-600.
Credit: Virgin Atlantic Airways
The 30% larger A340-600 was developed in the last year of the 1990s to compete with Boeing’s 777-300ER, then in development.
Summary
- Offering airlines a full product suite;
- A340-600 launch and development;
- Quad vs. twin-engine long-range operations;
- Disappointing commercial performance;
- A long-haul trunk route.
Boeing seeks to cut production costs of 787-8 to boost sales
By Scott Hamilton
Sept. 2, 2020, © Leeham News: Boeing is considering production changes to the slow-selling 787-8 to lower costs and boost sales.
The effort comes at a time when global passenger traffic is at record lows and recovery of international traffic is forecast to take four or five years.
Boeing photo.
As airline traffic recovers, carriers appear to be favoring smaller aircraft in restarting suspended routes.
In recent years, Boeing discouraged sales of the 787-8 because it is a low margin airplane with high production costs. This is a legacy of the program and development difficulties from 2004-2011, when it finally entered service.
The 787-9 and 787-10 are high margin aircraft Boeing counted on to reduce the billions of dollars in deferred production and tooling costs. At one time, this exceeded $32bn.
The early program difficulties resulted in the production and parts of the -8 to be substantially different than the -9/10, which have 95% commonality. The -8 was only 30% common.
European Regionals Face Hostile Operating Environment
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By Kathryn B. Creedy
Third in a Series. Previous articles:
- The future of regional jets is limited by choices, Scope Clause
- US Regional Consolidation Began Before Covid
Introduction
Aug. 31, 2020, (c) Leeham News: European regionals face far greater challenges than Covid and, sadly, much of what is happening to the industry is beyond its control. The result is similar to failures seen in the U.S. Flybe’s recent loss resulted from pre-Covid problems which also led to the pre-Covid failures of such airlines as Flybmi and Cobalt.
The failures illustrate, however, the three reasons why European regionals are so fragile – low-cost competition, geography, and challenging government policy.
Flybe is just the latest of many regionals to cease operations owing to harsh conditions in Europe.
Summary
- Government Policies Hardest on Regionals
- LCC Competition Challenging
- Consumer Protections Crushing
- Turboprops Have Large Role
Pontifications: WA State frets about Boeing brain drain, but it’s already happening
By Scott Hamilton
Aug. 31, 2020, © Leeham News: Elected officials and others in Washington State worry about the “brain drain” as Boeing considers whether to consolidate 787 production from Everett to Charleston.
These people are asleep at the switch and have been for some time. The brain drain is already just around the corner.
Nearly half of the membership of SPEEA, the engineers and technicians union at Boeing, are 50 years or older right now.
Almost two thirds of these are within 55-64 years old. In other words, ready for retirement right now or soon to be.
