Supply chain focus: Safran’ s first 2020 quarter

By Bjorn Fehrm

May 5, 2020, ©. Leeham News: Next out in our COVID19 supply chain focus is Safran Group.

Safran, together with GE Aviation, is the largest supplier of turbofan engines to the World’s airliners. Their success in the CFM joint venture is unprecedented. The first joint engine, the CFM56 has passed 30,000 deliveries, and the follow-up, the CFM LEAP, has 16,000 orders.

At the back of this successful business, Safran has expanded to a major aeronautical supplier for propulsion, systems, and cabins.

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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.

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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.)

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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.

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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.

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Can a passenger airliner run as a freighter with today’s tariffs? Part 3.

By Bjorn Fehrm

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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.

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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.

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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.

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Can a passenger airliner run as a freighter with today’s tariffs? Part 2.

By Bjorn Fehrm

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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.

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Airbus cut production rates by a third

By Scott Hamilton

Production of the A320 and A220 in Mobile is paused. Airbus hasn’t decided what to do about A220 rates, yet.

April 8, 2020, © Leeham News: Airbus today said it will cut production of the A320, A330, and A350 lines due to COVID-19.

The new rates are:

  • A320 to rate 40 per month (from 60-63);
  • A330 to rate 2 per month (from 3.5)
  • A350 to rate 6 per month (from 10)

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