Pontifications: No, it’s not time to fly

Aug. 10, 2020, © Leeham News: Frontier Airlines’ CEO Barry Biffle says “it’s time to fly,” reports The Points Guy.

By Scott Hamilton

Well, good luck with that.

Air fares are ridiculously cheap. Some airlines in the US continue to block middle seats and now require passengers to wear masks throughout the flight. Extra efforts are made to clean the airplanes. (Southwest Airlines, in a truly bizarre move, ceased cleaning seat belts and arm rests between flights—two things passengers are guaranteed to touch.)

Travel count in in the US is now up to about 800,000 passengers a day. This compares with nearly 3m a day pre-COVID.

I wrote July 6 why I won’t be flying any time soon. I wasn’t concerned about the airplane experience (except for those passengers who refused to wear masks). I was concerned about the experience getting to, from and at the airports and at hotels.

Now, there’s another reason why it’s not time to fly.

Read more

US Regional Consolidation Began Before Covid

Second in a Series on the Future of Regionals

Subscription Required

Introduction

By Kathryn B. Creedy

Aug. 6, 2020, (c) Leeham News: Many might assume the recent loss of three regionals – Compass, Trans States and ExpressJet – is Covid related.

What is actually happening is the long-anticipated consolidation of the regional airline industry coupled with fleet restructuring and the most recent fallout of the pilot shortage crisis that began in 2013.

Reducing the number of regional partners also streamlines the inherent inefficiencies of the regional/major model.

Summary
  • Regional airline industry is volatile.
  • Mainline-regional model broken for many years.
  • Rising costs eliminate some advantages.

Read more

Embraer’s 2Q2020: Revenues more than halved, causing increasing losses

By Bjorn Fehrm

August 5, 2020, ©. Leeham News: Embraer presented its 2Q2020 results today. The revenue virtually halved for 1H2020 to $1.17bn (2.2bn 1H2019) and shrank 61% for the second quarter to $537m ($1,379m 2Q2019), after delivering only four E-Jets during the quarter (26).

Total losses were -$342m ($27m), whereof -$202 was non-operational charges. The COVID crisis hits commercial aircraft deliveries, but Embraer had no cancellation of E-Jet orders in the quarter.

The Executive jet segment is holding up comparatively well, as is Defense and Security.

Read more

HOTR: Boeing warns of forward losses on 787, 777X programs

By the Leeham News Staff

Aug. 5, 2020, © Leeham News: In another demonstration of the negative impact of the COVID-19 crisis, Boeing warned that two flagship airplane programs could face forward losses.

Neither the 787 nor the 777X are in forward loss positions yet. A forward loss means Boeing won’t make money on the program.

Despite the 787 incurring more than $30bn in deferred costs, Boeing hasn’t taken a write down. The deferred costs have been burning off since 2015. Other programs have been subjected to forward losses, including the 747-8, VC-25 (Air Force One) and the KC-46A tanker.

But with the production reduction of the 787, down to 6/mo in 2021, Boeing now says there is a risk to a forward loss.

Read more

Boeing’s big opportunity

Subscription Required

Now open to all Readers.

By Scott Hamilton

Analysis

Introduction

Aug. 3, 2020, © Leeham News: Boeing has one of the biggest opportunities in decades.

This is counter-intuitive, given the disaster it faces with the COVID-19 crisis.

But in chaos, there are opportunities.

There are some key assumptions that must be made. But these are not outlandish.

Summary

Assume:

  • Boeing survives the virus crisis.
  • Boeing consolidates 787 in Charleston.
  • 787 demand doesn’t return, reactivating Everett line.
  • Sharp gains in production efficiency.
  • These lead to the Big Opportunity.

Read more

COVID production rates “firm” up

By Scott Hamilton

July 30, 2020 © Leeham News: Airbus and Boeing refined their COVID production schedules this week slightly downward in some cases.

Airbus largely held to its previously announced production schedule. It dropped the A350 rate by one, to 5/mo from six. The A320 rate remained at 40/mo, as did the A330 rate at 2/mo. The A220 rate is returning to 4/mo in Montreal and 1-2/mo in Mobile.

Read more

Airbus 1H2020; “We have reached the right production level for the pandemic”

By Bjorn Fehrm

July 30, 2020, © Leeham News: Airbus presented its results for the first half of 2020 today. Airbus CEO, Guillaume Faury said on the analyst call “We made a large adjustment to lower production rates end April. We are there now and it seems the right level. Except for a small adjustment for A350, from six to five per month, we are happy, we have found the right level for the crisis”.

The group revenue settled at €18.9bn for the first half of 2020 compared with €30.9 a year ago, with deliveries at 196 commercial aircraft (389 1H2019). EBIT adjusted for the first half is €-0.9bn, the size of the COVID-19 extra costs charge.

Read more

Boeing’s second quarter of 2020; cutting production as revenue halves due to MAX grounding and COVID-19

July 29, 2020, © Leeham News: Boeing presented its results for the second quarter of 2020 today. The company revenue is halved compared with the last second quarter with full 737 MAX production, 2Q2018. The reported loss was $3bn but the real loss, masked by program accounting, is close to double this number.

Boeing will now cut production of the cash cow 787 to less than half the pre-COVID rate, producing six planes per month instead of 14, and the 777/777X rate goes from five presently to two per month next year and stays there for 2022.

The 737 MAX production will stay at a very low level until the present inventory of 450 produced MAX has cleared. Present planning is a slow ramp during 2021, with a rate of 31 per month only reached at the end of 2022.

Read more

Pontifications: The light bulb goes on

 

By Scott Hamilton

July 27, 2020, © Leeham News: Airlines across the world are pledging aircraft, slots, airport facilities and real estate to raise money.

Some US airlines recently pledged frequent flyer programs to raise billions of dollars in debt to help carry them through the COVID-19 crisis.

Airfinance Journal last week had a podcast with United Airlines and Goldman Sachs to discuss UAL’s doing this and the larger picture.

The rush to pledge virtually everything to raise money is déjà vu all over again.

I’ve been in this business since 1979. I’ve been through the 1991 Persian Gulf War, SARS, downturns, 9/11 and the Great Recession. The impact to the airline and aerospace industry from the virus crisis is by far the worst.

Read more

As federal aid comes to end, small suppliers see “blood bath”

Subscription Required

By Scott Hamilton

Introduction

July 20, 2020, © Leeham News: As the Payroll Protection Plan of the US government nears expiration, a blood bath among small suppliers is all but certain unless an extension is approved by Congress.

This is the dire forecast by William Alderman of Alderman & Co. Alderman specializes in representing small suppliers and aftermarket companies wanting to exit the business. Small, in this case, is defined as revenues up to $100m.

Alderman told LNA that some of his clients don’t see business recovery for 10 years. This is a different metric than the one most often cited: air traffic returning to pre-COVID levels in 2023-24, by most accounts.

Summary

  • Small companies need PPP extension.
  • Small companies need working capital, fast.
  • If neither is forthcoming, exiting the business in the other alternative.

Read more