Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: Do I get COVID in airline cabins? Part 4. May 29, 2020
- What’s the gain of flying a smaller single-aisle during COVID-19 recovery? May 28, 2020
- HOTR: LATAM files bankruptcy, latest COVID airline casualty; 1,100 aircraft involved May 26, 2020
- Mitsubishi SpaceJet retreat is the best news for Embraer in months May 25, 2020
- Pontifications: Aircraft values, lease rates plummet May 25, 2020
HOTR: LATAM files bankruptcy, latest COVID airline casualty; 1,100 aircraft involved
By the Leeham News Staff
May 26, 2020, © Leeham News: LATAM, the largest airline company in South America, filed for Chapter 11 bankruptcy today in New York.
LATAM operates more than 300 aircraft. This filing means more than 1,100 worldwide were operated by airlines seeking bankruptcy or
administrative protections. The UK’s Flybe was already failing before COVID effectively shut down UK air travel.
Many others teeter on the edge, saved for the moment by government bailouts.
Below is LNA’s latest tally of aircraft.
Bjorn’s Corner: Do I get COVID in airline cabins? Part 3.
May 22, 2020, ©. Leeham News: In our Corner series about flying during the COVID-19 pandemic, we look closer at the available research around passengers that fly with virus infections and if these spread to other passengers during a flight.
How much do we know and what are guesses?
Figure 1.
Better to bring capacity back with a 777-9 or 787-10 if we fly 777-300ER today?
By Bjorn Fehrm
Subscription Required
Introduction
May 21, 2020, © Leeham News: We looked at the economics of extending the lease of a Boeing 777-300ER or taking an ordered 777-9 here.
If traffic post-COVID-19 on the routes we fly stays down for long, should we change the order to a 787-10? What are the trades between staying with the 777-300ER, taking the 777-9, or stepping down to a 787-10?
We use our airliner economic model to find out.
Summary:
- The 787-10 is the safe choice if the fill level for our routes will stay below its passenger capacity for a longer period.
- This choice is valid for a JFK to Heathrow route. The 787-10 has a shorter range than the 777-300ER and 777-9, so a 787-10 alternative is only possible for routes within its capacity.
Lessor exposure to Airbus, Boeing wide-bodies
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By Scott Hamilton
May 18, 2020, © Leeham News: As airlines park or retire thousands of aircraft, lessors with wide-body airplanes are most at risk.
Single-aisle airplanes are easier to re-lease and more in demand when traffic recovers. Reconfiguration and maintenance costs, if required, are 
reasonable by aviation standards. Cabin reconfiguration may run up to $1m. Airframe and engine MRO costs for Airbus A320s and Boeing 737s typically are in the low millions, depending on condition.
MRO and reconfigurations costs for wide-body airplanes, on the other hand, can cost more than a new A320 or 737. GE Aviation GE90s on Boeing 777-200LRs, -300s and -300ERs are notoriously expensive. MRO for Rolls-Royce wide-body engines is costly under RR’s contract packages.
Reconfiguration costs for A330s, 777s and A380s can run up to $30m, depending on the initial operator and who the second (or third) one will be. Therefore, HiFly did not reconfigure the ex-Singapore Airlines Airbus A380 it acquired after SQ retired the airplane.
LNA analyzed the number of wide-bodies owned by lessors. There are more than 670 Airbuses and more than 600 Boeings.
Pontifications: There is no good news
May 18, 2020, © Leeham News: There simply is no good news in commercial aviation right now.
By Scott Hamilton
Yes, airport traffic is upticking in the USA (and elsewhere) slightly. But in the USA, it’s still less than 10% of last year’s totals.
There remains a tremendous amount of uncertainty.
- Airbus plans to lay off some 10,000 employees, according to press reports. Another production rate cut seems inevitable.
- Boeing’s CEO revised the forecast for air traffic recovery from 2-3 years to 3-5 years. Production recovery will take another 2-3 years after that, he said.
- Embraer’s biggest customer for the E195-E2, Azul Airlines, deferred deliveries from 2020-2023 to 2024. There haven’t been announcements about deferrals by US carriers for E175-E1s, but there is no reason to believe these won’t be deferred.
- Delta Air Lines says 7,000 of its 14,000 pilots will be surplus to its needs this fall.
- Spirit Aerosystems laid off about 1,700 employees due to Boeing’s production planning.
- Qatar Airways will retire 50 airplanes, defer new orders from Airbus and Boeing and cut the workforce by 20%.
The list goes on and on and on.
Analysis: Mitsubishi suspends development of M100, continues M90 due to COVID
By Scott Hamilton
Analysis
May 12, 2020, © Leeham News: Mitsubishi Heavy Industries (MHI) yesterday said it cut development money for the M100 SpaceJet. M100 R&D is suspended indefinitely while it continues for the M90 on half rations.
MHI will continue certification of the M90.
MHI also said it will reevaluate demand for the M100 because of COVID-19 impacts.
This immediately raised questions whether MHI may kill the M100 program.
To do so will squander MHI’s once-in-a-lifetime chance to become a real global power in commercial aviation. If this happens, “Japan Inc.” also loses a chance to be part of this.
Pontifications: Ugly, fundamental changes coming for airline industry
By Scott Hamilton
May 4, 2020, © Leeham News: The global airline industry is on the cusp of a fundamental restructuring that will be painful, and painfully long.
A few airlines already ceased operations.
Several others are on the brink of filing for bankruptcy—among them Lufthansa and Virgin Atlantic, brand names that aren’t normally at the top of an endangered list.
A shake-out in Europe was already underway before the COVID-19 crisis erupted. The inevitable shake-out in Asia hadn’t yet begun.
Fleet rationalization among legacy carriers will occur at rapid-fire speed. And some carriers now have the opportunity to shed unprofitable routes that were maintained for market share.
It’s going to be an ugly process, though.
Boeing announces voluntary layoffs in Puget Sound
By Bryan Corliss
April 28, 2020, © Leeham News: Boeing on Monday formally announced it would offer voluntary layoffs – essentially contract buyouts – to members of its Puget Sound workforce.
For most workers, the offer would give them one week’s pay for each year of service, up to a maximum of 26 weeks. Boeing would also continue paying health insurance benefits for most of the laid-off workers for three months. (The exception to this: Machinists Union members will get six months of extended health benefits under the terms of an agreement negotiated in 2016.)
HOTR: Product development another victim of virus crisis
By the Leeham News staff
April 28, 2020, © Leeham News: The Coronavirus not only decimates the airline industry.
It’s going to completely upend the product strategies of Airbus, Boeing and Embraer.
Boeing is most immediately affected.
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.