By Scott Hamilton
Aug. 28, 2023, © Leeham News: The order in February by Air India for 190 737 MAXes involves a backstory involving China that until now hasn’t been told. A subsequent sale by a Chinese lessor of all 737 MAX orders to a Middle Eastern lessor further reduces Boeing’s exposure to China.
The Air India was finalized at the June Paris Air Show. When Boeing announced its second quarter financial results the following month, the MAX inventory accumulated during the 21 month grounding of the type was reduced by 55 aircraft. These 55 MAXes were part of the inventory of 140 737s that were built for Chinese airlines and lessors.
Subsequently, the Chinese lessor CALC announced a deal to sell its entire MAX backlog of 54 to the Emirates lessor, DAE. Purchase rights to some 50 more MAXes were also transferred to DAE. This transaction left CALC with no 737s on its order books.
In its 2022 annual report, the most recent CALC financial statements available, the lessor wrote, “As at 31 December 2022, CALC had 226 aircraft on its orderbook, including 131 Airbus, 66 Boeing and 29 COMAC aircraft.”
By Bryan Corliss
July 26, 2023, (c) Leeham News — The Boeing Co. on Wednesday reported a quarterly loss of $99 million, due in part to spending tied to production rate increases in its Commercial Airplanes division.
Boeing said that rates on its 737 line in Renton are increasing to 38 a month. The 787 program has increased rates to four a month, with a plan to increase that to five a month by the end of this year.
Boeing is working with suppliers to get rates up to 50 a month on the 737 line sometime in 2025-26. CEO Dave Calhoun said during Wednesday earning call that demand is there for even higher rates.
“I’d love to get to 60 and the market is there for it,” he said. “The industry is short of airplanes by a relatively large margin.”
However, Boeing and its suppliers need to stabilize production at currently projected rates before considering going beyond what’s already been announced, the CEO said. “We’re going to work hard on stability.”
For this year, Boeing said it expects to deliver between 400 and 450 737s, along with 70 to 80 787s.
By Scott Hamilton
June 20, 2023, © Leeham News: Relations between the US and China remained strained, beginning with the Trump Administration’s trade war initiated in 2017—which continues under the Biden Administration.
The strain has been exacerbated by China’s tilt toward Russia during the Russian-Ukraine war. Except for a brief meeting at this year’s G7 meeting between President Xi and President Biden, there has been little in the way of top-level diplomatic contact until this week. Secretary of State Antony Blinken met with Xi this week, leading to optimism by Boeing and GE Aerospace that relations between the US and China may be thawing.
During executive media briefings surrounding this week’s Paris Air Show, Boeing Commercial Airplanes CEO Stan Deal and GE Aerospace CEO Larry Culp gave their outlooks about the near-term future.
By Bryan Corliss
May 5, 2023 © Leeham News – Embraer on Thursday reported a loss in what typically is a slow quarter for the Brazilian jet-maker.
“We are on track and we are going to get there,” CEO Francisco Gomes Neto said.
By Bryan Corliss
April 12, 2023, © Leeham News: – MRO operators foresee double-digit growth in the rest of 2023 – as long as they can get the spare parts they need.
“The outlook remains robust,” RBC analyst Ken Herbert wrote, in a report sent to clients this week. Based on the survey results, RBC projected overall MRO sales and parts purchases increased 18% in the first quarter, with the strongest growth in Asia and Europe.
Much of that was driven by the engine market, where demand is up 20%, he wrote.
However, “spare part availability and material lead times, followed by ongoing labor shortages, remain the key risks to the 2023 outlook,” Herbert wrote.
The survey gathered responses from about 40 global MRO companies, parts distributors and OEMs in early April.
April 11, 2023, © Leeham News: Airbus last week firmed up an order for 150 A320neos and 10 A350-900s with China. The deal was announced last year.
Additionally, Airbus and the Chinese government agreed to add to the A320 family assembly site in Tianjin, increasing the capacity of the plant. This will be another step in Airbus’ goal to achieve a production rate of 75 per month by 2026 for the A320 family.
And that’s not all. Airbus and the China National Aviation Fuel Group (CNAF) signed a Memorandum of Understanding to increase the development of Sustainable Aviation Fuel.
Meanwhile, Boeing remains essentially frozen out of China. Deliveries of the 737 MAX remain stalled. Although China Southern Airlines outlined expected deliveries this year and through the next few years, we’ve seen this sort of thing before. Until an official announcement comes from Beijing authorizing deliveries, or some of the stored airplanes are delivered, words are just words.
That said, there are some solid indications we’re seeing that Boeing deliveries to China may well resume in the not-too-distant future, but on a glacial pace. The financial viability of some airlines within China, while opaque to outsiders, is monitored by the CAAC, China’s regulator. Some airlines are deemed too financially risky now to accept delivery of any new aircraft, whether the OEM is Boeing or Airbus.
While Boeing’s 140 MAXes originally ordered by China remained in a Twilight Zone of sorts, delivery of some Airbus A320neos also has been blocked. Generally, though, Airbus continues to tender airplanes and win orders while Boeing sits on the sidelines.
By Bryan Corliss
March 23, 2023, © Leeham News – Chinese leader Xi Jinping flew into Moscow this week for a three-day summit with accused Russian war criminal Vladimir Putin.
They wined and dined. They talked publicly about economic accords and oil pipelines and pledged mutual support. In private, Putin almost certainly made a plea for stepped-up Chinese support for his faltering invasion of Ukraine. They made bold statements about banding together to oppose the hegemony of the West, which has united against Russia with sanctions including bans on providing Russia with the basic technology it needs to build weapons.
And at the end of it all, on Wednesday, Xi walked up the jet stairs to his Air China 747, built by Boeing in Everett, America. He turned and waved, and then flew back to Beijing.
That moment, with Xi standing in front of the massive American-made jet, may just illustrate China’s conundrum right now: Xi, by all accounts, wants nothing more than to shove aside the post-Cold War order that has confined his nation from global Great Power status. An alliance with Putin’s Russia could be a key step toward that.
And Xi, as he looks around the interior of his jumbo jet, has to be acutely aware that China remains dependent upon the Western democracies for software, computer chips, and – critically – aircraft.
By Bryan Corliss
March 13, 2023, © Leeham News — Embraer executives said last week that the company is on a flight path to growth after weathering two major storms in 2020.
“As we have said, since 2020, the 2021 and 2022 years would be dedicated to the business recovery after two simultaneous crises – the pandemic and the end of the Boeing deal – and the focus will be on growth from 2023,” Embraer CEO Francisco Gomes Neto said Friday.
“We can now state we have fulfilled what was promised,” he continued. “The business turnaround was completed in 2022, and we are ready to start a new growth phase.”
Embraer still faces “supply chain challenges this year,” he acknowledged, “but we are optimistic about the company’s future in terms of revenue growth and profitability.”
Neto made the declaration as his company reported delivering 80 regional and executive jets in the fourth quarter of 2022, which was roughly half of the total deliveries for the year.
The company reported earnings before interest and taxes of US $166.2 million for the quarter, which was 196% better than its earnings in the same quarter of 2021.
By Scott Hamilton and Laura Mueller
Update, March 9, 2023: Some readers have interpreted this story as reporting that new deliveries directly from Boeing are being delayed. The wording is somewhat ambiguous. To clarify, airplanes purchased by lessors–who have taken delivery from Boeing–are experiencing delays in delivery to their lessees due to the issues with the Boeing software reconfiguration described.
March 6, 2023, © Leeham News and Airfinance Journal: A new issue with a software program is delaying deliveries of some Boeing 737 MAXes by up to a year, joint reporting by Leeham News and Airfinance Journal learned. The Federal Aviation Administration views its use as a safety matter that must be resolved before delivery on aircraft undergoing reconfiguration. It is not a safety issue when aircraft are delivered to the originally intended operator.
The Boeing software, called Option Selection Software (OSS), is used by Boeing to identify software installed on 737 MAXes that must be reconfigured when the airplanes are going from one airline going to another. For example, if a 737 was built for Airline A and instead it will go to Airline B, reconfiguring the cockpit display and related systems may be necessary. We are told that MAXes and 787s are impacted, given their large inventories of airplanes that have been stored long enough that some original customers no longer wanted the aircraft. When sold or reconfigured for a different operator, Boeing uses the OSS to reconfigure the software and identify related parts for any changes.
This issue has not been reported previously.
By the Leeham News Team
China’s goal for C919
Beijing wants to shift to supplying its single-aisle jet needs to the COMAC C919 by the end of this decade, according to a person familiar with the situation. But ramping production up to meet future demand is difficult under the best of circumstances.
With Western-built suppliers a key to the development of the C919, including the CFM LEAP 1C engines, there is little chance the domestic industry can shift exclusively to domestic suppliers on the scale required in the time desired.
Regardless of the feasibilities, these goals are bad news for Boeing—and most likely for Airbus, too.
Boeing’s dilemma with China is well known. Aside from the geopolitical challenges between China and the US and the well-known slow return to service of the in-country 737 MAXes, Boeing can’t deliver 138 new-build MAXes to China.
Deliveries are blocked for the aforementioned geopolitical considerations. Beijing’s three-year-long zero-COVID policies cratered domestic demand. With the policies recently lifted, passenger traffic is building but it is still well below pre-pandemic levels.
But that’s not all.