Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Boeing, Airbus still struggle with supply chains and personnel shortages December 13, 2024
- Airbus procurement head “convinced” supply chain issues are on right path December 12, 2024
- CFM gets FAA and EASA certification for a more robust LEAP-1A turbine. December 10, 2024
- Global instability poses questions for aerospace industry December 9, 2024
- How Trump tariffs affected, and could affect, Airbus, Boeing and Embraer December 6, 2024
Delta looks to double Seattle gates as wide-body decision nears
Delta Air Lines wants to double the number of its gates at Seattle, potentially allowing more than 300 flights a day, Bloomberg News reports. The story appeared just weeks before Delta will make its decision whether to order 50 wide-body jets from Airbus or Boeing, with about half of them planned for trans-Pacific service from Seattle and Delta’s Detroit hub; and the other half for trans-Atlantic service from New York and Atlanta.
Best-and-final-offers from Airbus and Boeing were due last week or this week and an internal decision is due after Thanksgiving, we are told. Delta is expected to announce its decision at its annual investors day, which is December 11 this year.
Airbus has its annual investors days December 10-11 in London. We don’t ascribe any significance to the concurrent dates, since these are dates of long-standing in years past.
Boeing fails to assure on 777 production gap
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Introduction
Boeing’s ability—or inability—to bridge the production gap for the 777 Classic to the 777X entry-into-service in 2020 was a top concern of a series of Wall Street types during a recent series of meetings we had across the USA.
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There is a great deal of skepticism over whether Boeing can successfully maintain the current production rate of 100/yr (8.3/mo). People we talked with look at the number of orders Boeing needs to bridge the gap, the Boeing claims that it can obtain 40-50 or 40-60 a year, and, in a more recent development, the falling oil prices depressing the need for a new, more efficient 777-300ER compared with the 2004 model and the even older 777-200ER series.
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We have been telling our clients since March that Boeing will have to reduce the production rate of the 777 because of the large production gap. Aerospace analysts began waking up to this possibility by May and the broad consensus today is that Boeing will have to reduce the rate—the only questions remaining is by how much and how soon.
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As recently as the 3Q2014 earnings call, Boeing continues to assert it will be able to maintain rates with new sales. Boeing has booked 43 firm orders through October for the 777 Classic—39 for the 300ER and four for the freighter. This is as the low-end of the range Boeing says it needs.
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However, our Market Intelligences gathered over the summer and into the fall indicates sales efforts are struggling.
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Summary
- Boeing clearly hasn’t been persuasive in its claims it will bridge the production gap at current rates;
- Boeing has open delivery slots in the second half of 2016;
- The big drop off in backlog begins in 2017 and gets worse going forward;
- Key airlines that have been pitched have said “no;”
- Emirates sends the industry’s first operational 777-300ER to scrap;
- Bow wave of 777s coming to 12 years and off lease begins soon, creating cheap alternatives to new sales; and
- Lessors will be compelled to offer -300ERs for low prices, depressing opportunities for Boeing.
Delta’s wide-body fleet plan: could it include used 777-200ERs?
Delta Air Lines is supposed to make a decision on its Request for Proposals for 50 wide-body aircraft before the end of this year, perhaps as early as next month. The competition is hot between the Airbus A330-900, the A350-900 and the Boeing 787-9.
Delta is understood to use the aircraft to beef up its growing Seattle hub across the Pacific; for its Detroit hub, also to Asia; and its New York JFK trans-Atlantic hub.
In addition, Delta is phasing out the last 14 of its Boeing 747-400s inherited from its merger with Northwest Airlines by the end of next year.
The A330-900 is viewed as a trans-Atlantic airplane, while the others are viewed as largely, but not necessarily solely, trans-Pacific aircraft, according to our information.
But there could be another wrinkle. On Delta’s third quarter earnings call, CEO Richard Anderson made some intriguing comments that could raise another possibility: acquisition of used Boeing 777-200ERs.
To put this in context, recall that Anderson and Delta actively seek out inexpensive used aircraft which, while hardly competitive at high fuel prices when comparing operating costs vs new aircraft, provide low capital acquisition costs and low ownership costs.
Here’s the exchange on the earnings call, as recorded by Seeking Alpha’s transcript:
Part 2: Boeing 757: Airbus A321neoLR as a replacement on long and thin routes
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By Bjorn Fehrm
Part 2 of 3
Introduction
In Part 2 of our three-part 757 Replacement analysis, we take a close look at Airbus’ new 97 tonnes take off weight A321neo, revealed by Leeham News and Comment October 21. We call the 97t airplane the A321neoLR (Long Range); Airbus has yet to name the aircraft, which it began showing to airlines last week.
We analyze the A321neoLR’s capabilities and limitations when compared to the aircraft it intends to replace, the Boeing 757-200W. We have chosen to do so using a real airline configuration as opposed to an OEM’s typical seating layout. By comparing the 757-200W and the A321neoLR over the route structure that United Airlines is using the 757 today, we can better see the characteristics of the A321neoLR and what operational consequences the differences between the types would mean for the airlines. Before we start, a short recap of Part 1 about the 757 and its replacement candidates. Here is what we found:
- the seating capacity of the A321 is within 10 seats of the 757-200 in a standard configuration; the 737 MAX9 is trailing with about 20 fewer seats.
- the myth about the strong engines of the 757 is just that, a myth.
- the good field performance of the 757 is coming from its wing more than any advantage on the engine side
- the A321neo and 737 MAX9 were hindered in their capability to replace the 757 for long and thin international routes by characteristics that can be changed. For the A321neo, this may be accomplished with rather modest changes to Max Take Off Weight (MTOW) and tankage. For the 737 MAX9, more elaborate changes to the wing and engines are required, both hard to do.
Figure 1. Boeing 757-200 of British Airways which launched the 757 together with Eastern Airlines 1983. Source: Wikimedia.
Summary, Part 2
- We will now look in detail on the changes Airbus is doing on the A321neoLR, what each change brings and any restrictions that remain.
- We will also detail why we think it will be harder for Boeing to match the A321neoLR with a 737 MAX9 development.
- We detail prime, present 757W long-thin routes.
- We present 757W international, A321neoLR and 737 MAX9 “long range” configurations.
- We provide economic comparisons such as Payload-Range charts and Fuel consumption per trip and per seat diagrams.
In the final Part 3, will look at Boeing’s alternative to an A321neoLR, a clean sheet New Single Aisle (NSA) and a prospective Small Twin Aisle (STA) design and how much such an approach would surpass the A321neoLR on medium and long haul networks and when it could be available.
Odds and Ends: Airbus to lower A330 rate; Mitsubishi MRJ rollout Saturday; Delta retiring 747s; Enders slams German government; MC-21
MC-21 will claim 10% of world market: So Irkut claims. Here’s a 10 minute video.
Update, 7am PDT Oct. 17: Airbus announced it will lower production rates on the A330ceo from 10 to nine a month in 4Q2015. We believe this is a first-step. The backlog drops sharply in 2016. The first A330neo isn’t planned for delivery until December 2017 and we believe rates will come down once more in advance. At the Farnborough Air Show, John Leahy, COO Customers, said he believes rates for the neo will settle in around 7-8 a month/ we think ceo rates will come down to reflect this.
Mitsubishi rolls out MRJ Saturday: You can watch it live, at 2pm Japan time.
The MRJ 90 is Japan’s first home-grown commercial airliner since the YS-11 turbo-prop, which entered service in 1961. As we noted Wednesday, the MRJ has collected a good number of orders, but the customer base in small.
The MRJ is 3 1/2 years late.
Aviation Week has this feature.
Here is a link to a brochure.
Delta retiring 747s: Delta Air Lines said during its earnings call Thursday that it will retire its Boeing 747-400s in 2017. These airplanes were acquired in the merger of Northwest Airlines, which was the launch customer of the 747-400. Delta is replacing the 747s with twin-aisle, medium-sized airplanes.
Enders slams German government: Tom Enders, CEO of Airbus Group, slammed the German government over its position on defense exports.
Enders, a German, has long been critical of German government policies, and has been moving operations into France as a result.
We find Enders’ candor to be refreshingly frank. Most CEOs tend to hedge their opinions.
Part 1–Boeing 757: An analysis of facts and myths
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By Bjorn Fehrm
Part 1 of 3
Introduction
The Boeing 757 was developed in the late 1970s as a replacement for Boeing’s popular 727 mid-range single aisle aircraft. Starting from the smaller 727, it ultimately grew to 180 to 230 seat capacity and US transcontinental range. With initial orders from Eastern Airlines and British Airways, the aircraft nonetheless had poor sales through most of the 1980s, picking up with a surge of orders in 1988-1990 when major deals were announced from American, Delta and United airlines.
Figure 1. Boeing 757-200 of launch customer Eastern Airlines.
Following the 1991 Persian Gulf War and recession, orders plunged until the mid-decade with a respectable resurgence. After 9/11, sales dried up and Boeing terminated the program.
Summary
- The 757 program had slow sales in its first decade, robust sales for a few years then declining sales through most of the 1990s.
- Sales were respectable in the late 1990s but dried up after 9/11.
- Boeing efforts to boost sales with the 757-300 were a failure–only 55 were sold. 757F sales were a moderate success.
- The 757-200 had strong engines for its time (especially the Rolls Royce equipped models), we dissect if this is still true.
- With the 757 being the only narrow-body with trans-Atlantic range, what is missing from today’s Airbus A321 and Boeing 737 MAX9 to make the cut? What can be done with small changes will be answered in part 2.
- How will a future clean sheet NSA perform compared to these three? How much of a game-changer will a clean sheet design be if it enters service 2025? We look at the answers in part 3.
Odds and Ends: GAO report on ‘Boeing’s bank;’ C919; Airbus widebody strategy
GAO report on ‘Boeing’s bank:’ The US Government Accounting Office, a non-partisan investigating agency, completed a study of the funding and guarantees provided by the US ExIm Bank, which is under criticism from Congressional Republicans, and concluded non-US airlines do benefit from what amounts to subsidies.
These put US competitors at a disadvantage, GAO concludes. The full 29 page PDF may be found here.
The study period covered the global financial crisis, during which a good deal of private capital funding dried up. Airbus and Boeing each relied more heavily on export credit agencies for customer financing–ExIm in Boeing’s case and collectively European Credit Agencies, or ECAs, for Airbus.
The GAO found that ExIm funded or guaranteed financing for 789 Boeing wide body aircraft while the ECAs supported 821 Airbus wide-bodies.
Parenthetically, this statistic alone should demonstrate to Congress the need for ExIm to continue to be available for Boeing airplanes.
Alaska-Delta Battle in Seattle comes at the expense of United, Southwest
National media and trade magazines are paying attention to the increasing battle between Alaska Air Group (Alaska Airlines and Horizon Airlines) and Delta Air Lines (including its regional airline partners) in the Battle in Seattle as the latter dramatically increases its presence here, but the focus appears to be on the wrong parties.
While the headlines and stories point to the “Delta challenge” to Alaska, a review of the traffic statistics and market share data provided to us by Sea-Tac Airport yesterday show that Alaska and its regional sibling, Horizon Air, and Delta with its regional partners are growing at the expense of United Airlines and Southwest Airlines.
