Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- RTX Q1 2025 Earnings: GTF Talk Takes A Back Seat To Tariffs April 22, 2025
- Tariffs Tumult Takes Over GE Aerospace Q1 2025 Earnings Call April 22, 2025
- Boeing reports mixed results of latest employee survey, but middle management and officers remain key obstacles April 22, 2025
- Hopes for 1Q financial progress turns into bumpy ride for Boeing April 21, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 18. April 18, 2025
Major shift on split tanker contract
Update, April 3: The New York Times has this long piece on the prospect of a split procurement.
Original post:
It is a subtle but major shift on the controversial proposal to split the KC-X aerial tanker contract between Northrop Grumman and Boeing.
KIRO TV (CBS) in Seattle interviewed US Rep. Norm Dicks (D-Boeing/WA), who throughout the previous competitions has been dogmatically in favor of a single contract to Boeing. Dicks is #2 on the House Appropriations Committee, where any funding bill will have to originate. The chairman of the committee is US Rep. John Murtha (D-PA), who came out solidly in favor of a split contract as the only way to break the logjam over an award.
As the World Churns
Only a few days ago, President Obama’s Office of the Management and Budget suggested delaying the tanker competition for five years. Now the Wall Street Journal reports that another House Member wants to split the tanker acquisition. You can see the report here, and in this case it’s free. Meantime, the conspriracy theorists actually have a pretty good one. A commenter on the DODBuzz blog thinks the delay is designed to give Boeing the opportunity to develop the 777 into a tanker. See the March 11, 9:28am posting. As conspiracy theories go, we like this one. No clue if there’s any validity to it, but the timing does work.
Update, March 12: George Talbot has this long item that the White House denies it wants to delay the tanker program.
The Hill has this piece that House Member John Murtha is preparing legislation for a split buy, with the winner getting a larger piece of the pie, and a production rate of 24 a year rather than the 12-18 originally proposed.
Update, March 13: George Talbot of The Mobile Press-Register has this piece about Boeing, Northrop and their respective supporters banding together to kill any Obama Administration proposal to delay the tanker procurement for five years, as suggested by OMB. The White House denies it has any plans to do so, but the stakeholders aren’t convinced.
Reuters reports more about John Murtha’s plan to kick-start the procurement in this item.
EADS financial results 2008
EADS, parent of Airbus, posted its financial results for 2008. The press release may be obtained here. EADS summaries of the results:
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Group EBIT* of € 2.8 billion – supported by excellent underlying performance, significant positive foreign currency effects but burdened by programme charges
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Net Income of € 1,572 million (FY 2007: € -446 million)
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Free Cash Flow exceeded expectations with € 2.6 billion
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Robust balance sheet with Net Cash at a record level of € 9.2 billion
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Revenues increased by 11 percent to € 43.3 billion
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Order book grew 18 percent to a record of € 400 billion
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Dividend proposal of € 0.20 per share
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A400M issues with customers and suppliers pending
The analyst call may be obtained by clicking the top right webcast item on this page. The 20 page PDF earnings slide show may be obtained here.
Tanker contest gearing up
The Department of Defense’s JROC (a joint requirement group) met to consider what to do about the next round of the KC-X tanker competition, and US Sen. John McCain threw cold water on the idea promoted by US Rep. John Murtha about a split buy between Northrop Grumman and Boeing.
Boeing delivered its third KC-767J to Japan last week while EADS, partner of Northrop, promoted a milestone for its KC-30A Australian MRTT tanker.
Boeing has yet to deliver its first KC-767I to the Italians.
EADS/Airbus says ‘No’ to Air Force One competition
EADS and its subsidiary Airbus won’t compete for the Air Force competition to replace the US President’s Air Force One.
The very idea of the President of the United States possibly flying around in a French airplane was blasphemous, even for us. With only three orders in the USAF Request for Information (RFI), there was no way EADS would assemble the A380 in the US, in contrast with the prospect of building the KC-30 air force tanker in Mobile (AL), meaning the airplane would have been assembled in France.
This leaves Boeing as the sole-source supplier for the new Air Force One and its two backup airplanes. Boeing will in all likelihood offer the 747-8 (as opposed to the 777 or, even more far-fetched, the 787). The 777 and 787 are considerably smaller than the 747-8, and the new composite technology for the 787 is something the Secret Service probably would like to see proved before entrusting POTUS to it.
Boeing has eight VIP orders for the 747-8I.
EADS’ statement is below:
Airbus YE08 Conferences Tuesday, Thursday
EADS and its subsidiary Airbus will have their year-end 08 press conferences January 13 and 15 to discuss 2008 orders, events and the outlook for 2009.
This comes on the heals of a January 9 analyst report by Goldman Sachs (London) on EADS with a Sell recommendation entitled, “It’s worse than we thought.”
The gloomy report follows one in December, also a Sell rating, that Goldman today says wasn’t gloomy enough.
The Goldman analysts look at plunging worldwide airline traffic, the dismal state of affairs in China’s aviation sector and what is now at least a three year delay in the troubled A400M program, also worse than thought in the December report. (More after the jump.) Read more
2009: Recovery for Boeing, Challenges at Airbus
Update, January 10:
Bloomberg News reports EADS says it will be three years after the A400M’s first test flight–which remains unscheduled–before Airbus will ship the airplane to customers. This is hardly good news.
Original Post:
Commercial Aviation enters 2009 with a high level of uncertainty. Boeing’s headlining 787 program and the lower profile but increasingly costly 747-8 development face critical milestones this year. Airbus’ A350 does, too. The global financial market meltdown last year hopes for recovery this year but the global economy is questionable.
These are just a few of the issues facing Airbus and Boeing this year.
Boeing continues to dominate the headlines with its troubled 787 program, so we’ll look at the US aerospace company first.
Year for Recovery
This has the makings for being a year of recovery in new airplane programs. No new joint BCA-IDS program is without significant issues and two of BCA’s three new airplane projects have significant delays.
The 787 program needs little review here; its issues are well known. The question is when the first flight and flight testing will begin.
Boeing says the first flight will be in the second quarter; Air Transport World first reported that April 20 is now the schedule for first flight and Flightblogger followed with its own reporting on a timeline leading to this date. Our own checks suggest that a new development and testing timeline for the critical software systems is aimed for a sooner-than-later second quarter first flight (the old timeline suggested a June-August timeline for first flight). Our checks also report, however, that April 20 is thought to be aggressive and our sources are unsure this date can be met.
What is important to emphasize here is that this date is an internal timeline and Boeing is only saying first flight will be in the second quarter. This means it could take place on June 30 and still meet the publicly stated goal.
At long last, we expect that the first flight and the flight testing will get underway this year. These are obviously critical milestones in the recovery of the 787 program and Boeing’s operations.
Delta Air Lines may cancel the 787 ordered by Northwest Airlines now that NWA is a subsidiary of Delta. NWA ordered 18, but Delta’s CEO Richard Anderson is unhappy with the delays and performance issues (the 787 is overweight and has a shorter range than originally advertised, though the extent of the latter is in dispute). Anderson likes the 777LR and it’s possible there could be a deal for more 777LRs to replace the 787-8s ordered by NWA.
A cancellation will be nothing but a minor embarrassment for Boeing—with 900 orders, losing 18 won’t matter much and it’s possible others will come forward to grab these in any event. Read more
787 update due shortly
In this week’s column:
- 787 Update Due Shortly
- Other program issues at Boeing
- The decline and fall of the Chinese aviation sector
- The impact of the Global economies on Airbus and Boeing
787 Update Due Shortly
Boeing plans an update of the 787 program by mid-December, with expectations that a new timeline for first flight and first delivery will be forthcoming. Aerospace analysts diverge on these predictions right now.
JP Morgan forecasts first flight in the first quarter while Goldman Sachs predicts 2Q09 or 3Q09. Based on conversations we’ve had with Boeing insiders, the unions and others, we believe the first flight is likely in the June-August 2009 period.
When, then, will be the first delivery? Cowen & Co. predicts 2Q10; JP Morgan and Goldman predict delivery will be a year after the first flight. Boeing has consistently maintained that it can complete flight testing within 6-9 months after first flight, but given the track record of its predictions so far, we’re inclined to side with JP Morgan and Goldman and go with one year after first flight.
Bad news for Northrop?
With Pennsylvania Congressman John Murtha (D-Foot-in-Mouth) suddenly in danger of defeat in Tuesday’s election after calling his constituents racist and rednecks, Norm Dicks (D-Boeing/Washington) is in line to succeed Murtha as chairman of the House Appropriations Committee.
This would be bad news for Northrop Grumman and its effort to sell the Airbus-based KC-30 to the USAF instead of Boeing’s KC-767. Regular readers need no reminder of the dynamics here.
Update, 10:15 PM EST, November 4: Northrop can breath easier; NBC News just declared Murtha was reelected.
Obama considers dual tanker buy
The US Air Force AIM online newsletter reported October 24 that presidential candidate Barack Obama is considering a dual tanker purchase. The article is here.
The same publication has another story quoting a retired general as saying delaying the tanker purchase is unwise.