Leeham News and Analysis
There's more to real news than a news release.
Odds and Ends: Comparing Airbus, Boeing 20-year forecasts; A320neo first flight; 787 battery probe fizzles; Mythbusting
Airbus v Boeing forecasts: The Blog by Javier takes its annual look at and comparison of the Airbus and Boeing 20-year forecasts. Airbus issued its new forecast this week; Boeing’s annual update was issued last summer.
Separately, the A320neo with Pratt & Whitney engines made its first flight today. The CFM LEAP neo is supposed to follow by six months. Showing class, Boeing Tweeted a congratulations for a milestone for the industry.
787 battery probe: The US National Transportation Safety Board hasn’t been able to find the root cause of the lithium ion battery failure in the Japan Air Lines and ANA Boeing 787 incidents. Now, the Japanese investigation has also failed to find the root cause of the ANA battery meltdown.
It’s rare but not unknown for investigators to not find root causes of problems, sometimes for years. A Northwest Airlines Boeing 747-400 split rudder hard over during a flight from Anchorage to Tokyo is one example; it took four years to determine the cause. The root cause of Boeing 737 rudder hard-overs, two of which caused fatal accidents, went unsolved for years.
Boarding airplanes: The reality show Mythbusters, an often entertaining look at myths, conventional wisdom, fact and fiction, takes a deep dive into airplane boarding. The article, with an insert to the episode, is here.
The Southwest Airlines style of boarding, with no seat assignments and derisively called cattle-call boarding, is the fastest and the most annoying, according to Mythbusters. Back-to-front is the longest. The Window-Middle-Aisle works best (but for those of us who like the aisle seat, the overhead bins are usually stuffed by then).
ISTAT Europe Conference in Istanbul: Boeing and Airbus slugging it out with some new twists
Airbus and Boeing squared off once again Monday, this time at the ISTAT Europe conference in Istanbul, once again pretty much over the entire product lines.
Boeing’s VP Marketing Randy Tinseth began with two focal points, the 737 with its latest developments and Boeing’s “superior” Twin Aisle line-up. Tinseth claimed Boeing has caught up to the A320neo with the 737 MAX.
After an A320neo head start of a year, Tinseth says Boeing has kept the same sales rate per year for the 737 MAX. The backlog of 737 MAX now stands at 2,300 aircraft and he described why Boeing thinks it is well positioned in this market segment.
Odds and Ends: Safran benefits from engine after-market; ExIm could back Airbus; Paine Field future
Engine After-market: Safran, which owns 50% of CFM International with GE Aviation owning the other half, is positioned in the “sweet spot” of the engine after-market, according to a recent report by Bernstein Research.
The report further supports our own analysis posted August 25 and the growing importance of MRO support in winning engine orders.
According to Bernstein, Safran “has the best positioning in the aircraft engine after-market” in the investment bank’s coverage. This position is “driven by two engine families with strong growth ahead and low exposure to older engines that are at risk of early retirement.”
Bernstein notes that more than 95% of Safran’s after-market sales are derived from the CFM56, which powers 75% of the narrow-bodied aircraft, and the GE90, which powers the Boeing 777-200LR/LRF and 777-300ER.
Future programs include the CFM LEAP, GEnx and GP7200. Past programs, in decline, are the first generation CFM56 and the CF6 on earlier wide-bodies.
ExIm and Airbus: In a statement surely to inflame those opposed to renew ExIm Bank authority, the president of the bank said it’s possible it could back funding of the Airbus A320 family built in Mobile (AL).
Paine Field future: It’s a little parochial but The Everett Herald has an article looking at the future of Paine Field, where Boeing’s wide-body airplanes are assembled. The article necessarily looks at the future of the Boeing 747, 767 and 777 Classic production.
Congress is now talking about a nine month extension of ExIm.
Odds and Ends: Boeing leads net orders YTD; A320neo; ExIm Bank; Frontier Air
Airbus vs Boeing orders: Airbus reported its order tally through August and while it surpassed 1,000 gross orders, it’s net orders trail Boeing significantly. This article sums things up nicely, though it doesn’t include Boeing’s last four days of August. Boeing reports weekly and the latest report is due out today. Through August 26, Boeing trails Airbus slightly in gross orders but leads in net orders.
Update: Boeing just posted its weekly order tally: 1,004 gross orders (to Airbus’ 1,001) and 941 net orders, still well ahead of Airbus’ net orders.
A320neo first flight: Airbus will launch the first flight of the A320neo this month for the airborne test program. This is powered by the Pratt & Whitney GTF; the CFM LEAP A320neo is supposed to follow by about six months. Entry-into-service for the GTF neo is planned for October 2015.
ExIm Bank: Members of Congress are looking at a short-term extension of the ExIm Bank‘s authority (read: until after the November election).
Frontier Airlines: This carrier is rapidly converting to an Ultra Low Cost Carrier business model, a process begun several years ago and accelerated last year. Aviation Week has an article that takes a look.
Go Seahawks: The NFL season opens tonight with the 2014 Superbowl champs Seattle Seahawks hosting the Green Bay Packers. Go Hawks!
Odds and Ends: Boeing discounting; A380 analysis; A320neo LEAP
Boeing discounting: Although Boeing alternately acknowledges it’s under price pressure from Airbus or it’s maintaining pricing on its aircraft, UBS aerospace analyst David Strauss concludes that discounting is increasing on the 737 and 777 but is somewhat better on the 787.
Strauss writes in an August 6 note that discounting on the 737 is around 59%. The 777 is now discounted at about 54% and the 787 trails at 46%. (He doesn’t bother with the 747-8.) These are for in-production models.
Strauss concludes that 737 discounting increased since the introduction of the MAX in 2011.
Current list pricing for the 737 is $78.3m for the -700, 93.3m for the -800 and $99m for the -900. The MAX list prices are $87.7m, $106.9m and $113.3m.
The list prices for the 777 are $269.5m for the -200ER, $305m for the -200LR, $330m for the -300ER and $309.7m for the -200LRF. The -8X comes in at $360.5m and the -9X at $388.7m.
The 787-8 lists for $218.3m, the -9 for $257.1m and the -10 for $297.5m.
We are hearing, however, of special cases in which the 787-9 runs for $135m or significantly less and the 787-8 for as low as $115m. We also hear of the 777-300ER being offered for as little as $128m in special circumstances. The calculated discounts UBS mentions for 737 fall within the pricing range that we hear in the market. Strauss writes that some discounts to list reached 65%, also within the range of what we have heard.
The discounting becomes increasingly important because Airbus says it can price the A330ceo and neo sharply below the 787, up to 25% less. Boeing has far less flexibility to discount the 787 than with the 737NG and 777 Classic. The former still isn’t making money while the latter have amortized production lines–just as the A330ceo line is fully paid for. Airbus has offered the A330ceo at steeper discounts to list than Boeing offers the 787, and the forthcoming neo will also see steeper discounts than the 787–unless Boeing becomes more aggressive in that pricing, which will only increase the time to profitability.
A380 analysis: Here is a good, detailed analysis about the Airbus A380 and its position in the marketplace.
A320neo LEAP: CFM’s LEAP-1A, for the Airbus A320neo, has entered production. Aviation Week has this article with the details.
GE analysis post Farnborough
Our wrap up of Farnborough would be incomplete without looking closer at the world’s leading engine supplier, GE Aviation, which together with partners (like SAFRAN in CFM joint venture) garnered more than $36 Billion in orders and commitments during the show. This figure was only significantly bettered by Airbus ($75 Billion) and it came close to Boeing’s $40 Billion. With such level of business the claim by GE Aviation CEO, David Joyce, that the Airbus A330neo engine business was not the right thing for GE as they have more business than then they know what to do with, was certainly no case of “sour grapes”. Read more
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Posted on July 28, 2014 by Bjorn Fehrm
Airbus, Airlines, Boeing, Bombardier, CFM, Comac, CSeries, Embraer, Farnborough Air Show, GE Aviation, Leeham News and Comment, Pratt & Whitney, Rolls-Royce, Uncategorized
737 MAX, 777, 777-300ER, 777X, 787, A320NEO, A330neo, Airbus, Boeing, Bombardier, CFM, Embraer, Pratt & Whitney, Rolls-Royce