Leeham News and Analysis
There's more to real news than a news release.
1 of 2 trade secret lawsuits settled; plaintiff attorneys seek withdrawal in Boeing case
By Scott Hamilton
Feb. 07, 2020, © Leeham News: A trade secret theft lawsuit against the giant insurance company Xavian Holdings involving an insurance funding program for Boeing airplanes was settled last month under undisclosed terms.
Marsh and Boeing were sued in 2018 by Xavian, which claimed it created the plan and undertook all the research for a concept that it presented to Boeing under a trade secret/non-disclosure agreement.
The Boeing lawsuit is pending.
Replacing ExIm funding
The concept was intended to replace funding previously provided by the US ExIm Bank. Congress refused to renew the bank’s authority to fund deals of the size required for Boeing airplanes.
Boeing initially declined Xavian’s overtures when it looked like ExIm would be reauthorized. When Congress failed to do so, Boeing contacted Xavian to renew 
conversations, the lawsuits claimed.
Robert Morin of the US ExIm Bank, who was aware of Xavian’s efforts, later went to work for Marsh, taking with him information obtained under the Xavian plan, Xavian claimed—hence the lawsuit against Marsh.
In court documents in New York, the federal court in the Southern District ordered mediation. Documents reveal a settlement was reached, but terms were not disclosed. Court approval of the settlement is pending.
Boeing will proceed with NMA. Or FSA. Take a poll
By Scott Hamilton
Feb. 6, 2020, © Leeham News: Boeing will decide to proceed with the launch of the New Midmarket Aircraft (NMA).
Or it won’t and instead launch a single-aisle replacement for the 737 MAX that essentially 
reinvents the long-gone 757.
These are the two popular options discussed yesterday at the annual conference of the Pacific Northwest Aerospace Alliance in Lynnwood (WA).
Aerospace analyst Ken Herbert of Canaccord Genuity believes Boeing will launch the NMA.
Analyst Rob Epstein of Bank of America Merrill Lynch believes Boeing will go with the Future Small Airplane (FSA), a fresh design that is similar in size to the 757-200 and 757-300.
Consultants Kevin Michaels of Aerodynamic Advisory and Michel Merluzeau of AIR voted for the NMA. Consultant Richard Aboulafia of The Teal Group voted for the FSA.
Consultant to Boeing: cut dividends, invest in new airplane
By Scott Hamilton
Feb. 5, 2020, © Leeham News: Boeing is headed for a 30% market share unless it invests in a new airplane, and soon.
This is what aviation consultant Richard Aboulafia of The Teal Group predicted today at the annual conference of the Pacific Northwest Aerospace Alliance in Lynnwood (WA).
Aboulafia, who has been following Boeing for 30 years, implored the new CEO, David Calhoun, to redirect billions of dollars in shareholder dividends toward research and development instead.
Calhoun recently suspended 2 ½ year focus on the New Midmarket Aircraft to conduct a clean-sheet review of the next new airplane.
This has been widely interpreted as a move to kill the NMA. In reality, LNA understands, this is more about reassessing the market and what the airplane should ultimately be.
“Who’s going to fail?”
By Scott Hamilton
Feb. 5, 2020, © Leeham News: “Who’s going to fail?”
This is a key question on the sidelines of the annual Pacific Northwest Aerospace Alliance conference in Lynnwood (WA).
The question, of course, related to the small- and medium-sized suppliers caught up in the grounding of the Boeing 737 MAX.
Boeing 737 production rate boost to 57/mo delayed by four years
- Plan called for 737 rate to go to 57/mo YE 2019.
- This rate won’t be achieved until 2023.
- Rate reduction considered for 777.
By Scott Hamilton
Feb. 5, 2020, © Leeham News, Lynnwood (WA): Suppliers attending the annual conference of the Pacific Northwest Aerospace Alliance say they gained some clarity from Boeing last week about future production plans for the 737 MAX.
But they still face a multi-year challenge that puts strain on everyone.
Boeing’s plans to return to the pre-grounding production rate of 52/mo will take until 2022. Plans to boost the rate won’t be fulfilled until 2023—four years later than planned.
Assessing airlines’ widebody replacement needs
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By Vincent Valery
Introduction
Feb. 3, 2020, © Leeham News: As part of the 777X maiden flight, Boeing briefed the media on its demand forecast for the large widebody market. The OEM sees a demand to replace between 60 and 100 aircraft annually in that market segment until 2030.
Last week we estimated the number of narrowbody aircraft where airlines still need to place a replacement order. We now perform a similar analysis for the widebody market.
OEMs are struggling to cope with the insatiable demand for latest-generation narrowbody aircraft. However, the situation is different in the widebody market. After significant orders and deliveries during most of the last decade, demand is sharply slowing now.
After announcing a 787 Dreamliner production rate cut last year from 14 to 12 per month, Boeing acknowledged it is expecting a further cut to 10 per month from early 2021. The company expects to return to rate 12 in 2023.
Photo by Scott Hamilton
Airbus hasn’t announced any reduction in its A330neo or A350 production rates yet but acknowledged demand softness.
Both OEMs point to the significant widebody replacement needs that will arise later in the decade. We will analyze whether their hope for better days is justified.
We will also partially address why Boeing decided to go back to the drawing board on new aircraft design.
Summary
- At face value, numerous widebody aircraft to replace;
- Materially different customer mix from narrowbody aircraft;
- Varying demand, depending on aircraft size;
- Boeing forecast for the large widebody market;
- And a change of mind on the NMA;
- Replacement needs timelines.
Pontifications: 777X certification, MAX market deficiencies, NMA and what’s an insider
- Certification of 777X will be impacted by MAX crisis.
- Market sees “deficiencies” in Boeing’s narrow-body product line.
- Reopening new airplane study doesn’t mean NMA is necessarily dead.
- The SEC considers Calhoun to be an insider, even if he doesn’t.
By Scott Hamilton
Feb. 3, 2020, © Leeham News: Boeing has said very little about how the MAX certification review will affect the 777X.
The Federal Aviation Administration has said nothing at all.
But David Calhoun, the new CEO of The Boeing Co., gave a hint in a recent call shortly after assuming office Jan. 13.
Boeing looks to produce about 220 MAXes in 2020
By Scott Hamilton
Jan. 30, 2020, © Leeham News: Boeing appears preparing to produce around 220 737 MAXes this year.
Spirit AeroSystems announced this morning that it reached agreement with Boeing to supply 220 fuselages in 2020.
The actual number of MAXes Boeing produces this year may vary from 220. It could well be that some of the 2020 fuselage deliveries spill over into 2021 deliveries.
With Boeing’s 737 MAX delivered to storage instead of customers, unique cost and revenue insights can be gained, Part 2.
By Bjorn Fehrm
Subscription Required
Introduction
January 30, 2020, © Leeham News: The last three-quarters of non-delivered Boeing 737 MAX production has exposed the internals of an airliner OEM as never before.
By comparing the second, third and fourth quarterly reports from Boeing for 2018 and 2019 we can get an understanding of the net revenue shortfall for the non-delivery of 737 MAX aircraft during 2019. By digging deeper into the reports we can also get an understanding of the present production cost of the 737 MAX.
Summary:
- The difference in revenue for a well-chosen time period of 2019 compared to the same period in 2018 tell the story of 737 MAX net revenue per aircraft.
- In principle, the same is valid for production costs which get booked into inventory instead of being delivered. Here more intricate adjustments must be made, however.
Boeing MAX production will restart, build slowly
By Scott Hamilton
Jan. 29, 2020, © Leeham News: Restarting production of the Boeing 737 MAX assembly lines will be slow, methodical and paced to avoid adding to inventory of about 400 airplanes in storage.
Boeing 737 factory, Renton (WA). Source: Boeing.
This was one of the take-aways from Boeing’s earnings call today. Boeing announced its first loss since 1997. This is when production of the 737 and 747 lines were shut down when rates outpaced the ability of the supply system to keep up.
Greg Smith, EVP, CFO and head of Boeing’s strategy, revealed the production restart in broad terms.