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
Boeing walks from Embraer joint venture
By Scott Hamilton
April 25, 2020, © Leeham News: Boeing today pulled the plug on its proposed joint venture with Embraer. It claimed the Brazilian company failed to meet all the terms and conditions required of the JV agreement.
“Boeing has worked diligently over more than two years to finalize its transaction with Embraer. Over the past several months, we had productive but ultimately unsuccessful negotiations about unsatisfied MTA conditions. We all aimed to resolve those by the initial termination date, but it didn’t happen,” said Marc Allen, president of Embraer Partnership & Group Operations. “It is deeply disappointing. But we have reached a point where continued negotiation within the framework of the MTA is not going to resolve the outstanding issues.”
Global regulatory approval of the JV was won by nine of 10 regulators. But it has been held up by the European Union, which 
repeatedly halted consideration while asking for more information. A June 23 target date for a decision was recently reset to August.
The JV agreement provides for a $100m break up fee to be paid by Boeing if anti-trust approval isn’t forthcoming. By terminating the agreement early, Boeing hopes to avoid paying the fee, LNA is told.
Embraer is sure to protest and take an opposite position. Last month, the company said it continued to “take all the necessary actions” to complete the deal.
As recently as March 24, Boeing CFO Greg Smith “stressed the strategic value” of the partnership.
Can a passenger airliner run as a freighter with today’s tariffs? Part 4.
By Bjorn Fehrm
Subscription Required
Introduction
April 23, 2020, © Leeham News: We spent the last weeks checking if passenger airliners used as belly freighters make economic sense.
With the present air freight prices, it does. The high freight prices are a result of half the World’s freight capacity disappearing with the grounding of passenger jets.
Our economic analysis assumed standard densities for the belly cargo. What happens if this is no longer the case? Can more voluminous cargo fly in the passenger cabin?
Figure 1. Air Canada Boeing 777 with humanitarian supplies (face masks) transported in the cabin. Source: Air Canada.
Summary:
- Widebody aircraft can temporarily fly as belly freighters without loading cargo in the cabin, but enabling cabin cargo will improve the business case with the present lower-density cargo.
- For single-aisle jets the belly cargo holds are too small, a cabin cargo loading system is necessary for efficient operation.
- Is it OK to take out the seats and load cargo in the cabin? For normal cargo no, it isn’t. We check what is required.
Supply chain focus: Hexcel’s first 2020 quarter
By Bjorn Fehrm
April 22, 2020, ©. Leeham News: With the COVID-19 meltdown of airline traffic and aircraft deliveries, we place a special focus on the airliner industry supply chain in the next months.
Hexcel Corporation reported its 1Q2020 yesterday. In addition to the absence of MAX deliveries for a year, the mounting COVID crisis meant revenue was down with 11% year on year and profits 40%. The merger with Woodward Inc. is off. “This is the time for crisis management, not a merger,” said management.
Hexcel is a key supplier to Airbus A350.
Read more
HOTR: Airlines, lessors cancel ~250 MAXes since January
By the Leeham News Staff
April 21, 2020, © Leeham News: Since the COVID-19 pandemic went viral beginning in January, there have been nearly 250
cancellations of the Boeing 737 MAX.
Some of these were related more directly to the grounding of the MAX. In fact, it could reasonably be argued that most were. COVID-19 exacerbated the problems, now that passenger demand fell by as much as 95%.
The MAX was grounded globally March 13, 2019. Purchase agreements generally allowed the customer to cancel the contract if delivery is delayed more than 12 months, provided there isn’t an “excusable delay.” Pandemics typically fall under an excusable delay. Grounding by regulators depends on the language in the specific contracts.
Japan seeks to develop aircraft industry ties through Asian trade partnerships
By Judson Rollins
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April 20, 2020, © Leeham News: Japan has long been known as an engineering powerhouse, and Japanese manufacturing titans like Mitsubishi Heavy Industries and Kawasaki Aerospace have been a key part of Boeing and Airbus supply chains for the last two decades.
Japan’s government wants to expand the country’s influence by signing agreements with members of the Association of Southeast Asian Nations (ASEAN) to secure improved cooperation with downstream suppliers. Aircraft and engine OEMs and key tier-one suppliers already have manufacturing operations in Thailand, Singapore, Malaysia, Indonesia, the Philippines, and India.
The first of these agreements is expected to be signed with Malaysia, which declared its ambition to become the biggest aerospace producers in Southeast Asia by 2030.
On the sidelines of February’s Singapore Air Show, LNA met with representatives of Japan’s Ministry of Trade, Economy, and Industry (METI) to discuss the proposed agreement with Malaysia. This article has been withheld until now due to the myriad aerospace issues caused by the COVID-19 crisis.
Summary
- Bilateral agreement postponed due to COVID-19.
- Areas of cooperation include manufacturing, training and more.
- Malaysia’s growing aerospace footprint.
Pontifications: What shape and how long will recovery take?
By Scott Hamilton
April 20, 2020, © Leeham News: There just is little good news for the aerospace industry right now.
Airbus announced it will reduce production by a third across the A-Series airliners. I don’t think this will be the last cut.
Boeing last week said it will resume production in the Seattle area of its wide-body airplanes. It’s also now preparing to restart production of the 737 MAX, clearly a piece of good news. Defense-related production for the P-8 Poseidon and the KC-46A tanker resumed last week.
But Boeing hasn’t laid out its production plans for the 7-Series airplanes. This undoubtedly will come next week. Monday is the shareholders’ annual meeting. This will be held virtually at 9am CDT. Access is via the Boeing website. The first quarterly earnings call will be held two days later, also accessible via the web. Either meeting may outline the production plans for the rest of the year.
Can a passenger airliner run as a freighter with today’s tariffs? Part 3.
By Bjorn Fehrm
Subscription Required
Introduction
April 16, 2020, © Leeham News: In last week’s article we saw the present high air freight prices can support a belly-cargo operation with a passenger airliner when flying the hot routes from Asia to North American and Europe.
But the aircraft shall fly the return route as well, with as much belly cargo as possible. And last week’s freight prices are volatile. We dig deeper this week and look at the total equation with return flights, different levels of load factors, and price variations.
At what level is an operational belly freighter better than a grounded passenger jet?
Figure 1. American Airlines is increasing its belly cargo operation step by step since the launch on March 20. Source: American Airlines.
Summary:
- Last week we saw the belly cargo operation with passenger aircraft make sense in today’s market if we fly the prime routes, Asia to North America or Europe.
- When one includes the return trips the case is less clear cut. But it’s still sensible as long as aircraft and crews are sitting idle and can’t be used for other purposes.
Pontifications: Airlines, OEMs step up in virus crisis
By Scott Hamilton
April 13, 2020, © Leeham News: There are plenty of stories and photos floating around the Internet about airlines flying empty or nearly so.
Schedules have been pared back up to 95% across the globe.
Spot-check Flightradar24 at any given moment and there are a lot air freighters flying.
But the passenger airlines are also flying some airliners dedicated to cargo. Some are flying cargo in the below-deck holds only. Others installed plastic protection over the passenger seats and loaded box after box after box of protective masks for shipment. Still others removed the passenger seats entirely and loaded the main deck with lighter-weight cargo.
This article summarizes many airlines that stepped up to fly supplies throughout the world.
Is COVID-19 a Force Majeure event?
Editor’s Note: Airbus, Boeing and Embraer and other OEMs face requests for deferrals and perhaps cancellations of orders as a result of COVID-19. In addition, Boeing now faces cancellation requests for the 737 MAX grounding, now in its 13th month. While Boeing’s contracts generally allow Boeing or the customer to cancel the order after the 12th month, the COVID crisis raises a new element: canceling by Force Majeure and something called the Doctrine of Frustration.
The following analysis appeared March 12, 2020, on the website of the law firm Shearman & Sterling law firm. The authors are listed at the end of this article. It is reprinted here with permission.
Following the rapid spread of the novel coronavirus (“COVID-19”) that was first reported in Wuhan, China at the end of 2019, the World Health Organization declared COVID-19 to be a pandemic on March 11, 2020.
In this note, we consider how force majeure provisions in commercial contracts and the related common law doctrine of frustration may be engaged in the context of the COVID-19 outbreak. While this analysis focuses primarily on the position under English law, we have included a PRC law perspective because of the significant impact COVID-19 has had on business in China. We also suggest steps that parties may take to safeguard their positions in view of the evolving situation.
Can a passenger airliner run as a freighter with today’s tariffs? Part 2.
By Bjorn Fehrm
Subscription Required
Introduction
April 9, 2020, © Leeham News: Monday, we started looking at using a passenger airliner as a freighter, now that passenger aircraft are grounded in many countries because of COVID-19 lockdowns.
We examined the main cargo routes and how much of the freight capacity that went missing when airliners didn’t bring along belly cargo when flying their schedules. We also looked at the volatile freight prices, on the up since the lower airliner hold capacity went missing.
Now we see if flying passenger aircraft as freighters makes sense outside emergency medical supply flights. Can you fly the plane as is, or do you need to take out seats or add seat freight bags to make it worthwhile?
Summary:
- The air freight prices have increased further since last week and fuel prices are at an all-time low.
- With the present fuel and freight prices, it makes sense to fly passenger airliners as belly freighters.