Odds and Ends: 787-9 progress but Qatar blast Boeing; EADS; Airbus

Boeing 787-9 progress: Aviation Week has this article detailing progress in the 787-9 program.

Qatar blasts Boeing: In what should come as absolutely no surprise, Qatar’s vocal CEO took his displeasure with Boeing public, blasting the company for late deliveries of the 787-8. Qatar’s first 787 was supposed to be handed over in August but has not for undisclosed reasons. Flight Global has this interview with Al-Baker, which dates from about a year ago.

Boosting the take-off: Airbus is looking at assist for take-offs to allow for shorter runways. This is not a new concept. This Google images page show lots of variations in Jet Assisted Take Off, many dating to piston days. We remember seeing a photo elsewhere of a Braniff Airways DC-4 or DC-6 using JATO for La Paz, Bolivia’s, high altitude airport but couldn’t fine one on Google.

EADS-BAE merger trouble: Government interference could tank the merger, Reuters reports.

Odds and Ends: EADS faces unhappiness over BAE merger; EU rejects US WTO compliance claims; SPEEA Update

EADS unhappiness: In the weeks after the merger with BAE Systems was announced, it’s clear that the proposed merger with EADS hasn’t ben well received by shareholders or the EADS governments. This Reuters story details the reluctance from the German government. Even the head of BAE has been quoted saying the union won’t proceed if BAE’s US defense business is jeopardized. Boeing, after initially saying it sees no impact, now wants a full US defense review and plans to undertake its own evaluation. Some suggest Boeing will try and bring the WTO subsidies issue into the case.

Our take is that Boeing’s initial reaction was based on the largely non-competitive defense lines of BAE and EADS but belatedly realized the strength the combined companies would have to be future competitors across from Boeing’s lines.

But the larger issue seems to be the future role of the French and German governments in the new company. Their shares will be diluted and governance influence will eliminated under the proposed merger. The government influence has historically meant Airbus, the dominate EADS subsidiary, has had to carefully split jobs between France and Germany rather than being free to make commercial decisions without political considerations.

As readers know, we have advocated for years that the governments need to get out of Airbus’ hair.

The Washington Post has this story, aptly characterizing the “blood fued” between Airbus and Boeing.

WTO Claims: It’s absolutely no surprise that the European Union rejected claims by the US it is now in compliance with the WTO ruling that Boeing received illegal subsidies. The tit-for-tat continues.

Airbus issued this statement today:

The WTO final verdict had called in March for: 

  • Withdrawal of “at least $5.3 billion” of federal subsidies already received by Boeing.
  • Elimination of an additional $2 billion in illegal state and local subsidies due in the future under existing illegal schemes.
  • Termination of all U.S. Department of Defense (DOD) and NASA research grants to Boeing, including funding, Boeing use of government facilities and the illegal transfer of IP rights to Boeing

The EU’s requested 12 Bn annual penalty is justified by the WTO panel confirmation that the effect of the subsidies is significantly larger than their face value in light of their “particularly pervasive” nature.  For example, according to the WTO, Boeing would not have been able to launch the 787 without illegal subsidies.  Today’s request belies Boeing’s argument that the WTO’s findings will have no relevant consequences for Boeing. 

SPEEA Update: Seattle Times has this update on the SPEEA-Boeing situation.

Odds and Ends: Boeing responds to SPEEA; Enders’ mystery injury revealed; AirAsia

Boeing v SPEEA, con’t: As ballots are mailed by SPEEA to its members to vote on the Boeing contract offer, Boeing issued this response to SPEEA executive claims about the offer.

Enders’ mystery injury: EADS CEO Tom Enders was supposed to accompany the German chancellor to China on a recent trip but had to cancel due to an undisclosed injury. This Bloomberg article reveals what happened in a profile of his efforts to get the French and German governments out of EADS.

AirAsia: Long-written about plans to buy 100 Airbus A320s are headed to the board for approval, according to this article.

Odds and Ends: FT on BAE-EADS; Boeing-SPEEA dispute getting ugly; Arik Air

BAE-EADS: The Financial Times of London has this analysis, from the British perspective, of the proposed merger between BAE Systems and EADS. Bloomberg News has this analytical piece. And when the merger was announced, Boeing CEO Jim McNerney didn’t have objections. Now he says the merger needs scrutiny. Seems to us he woke up to the long-term potential impact of a strengthened EADS in future competitions for US DOD contracts, including the next round of tankers–the KC-Y. Here is a report of McNerney’s original reaction.

Boeing-SPEEA: The contract dispute between Boeing and SPEEA is getting uglier by the day. SPEEA has outright accused Boeing of lying over terms and/or negotiating tactics. If you follow SPEEA on Twitter, you can see the vitriol increasing almost by the hour.

Boeing, for its part, spent the summer confining discussions to only one topic at a time, rejecting SPEEA contract offers, then dropped a full offer on SPEEA only a couple of weeks before a contract vote was to commence–then expressed bewilderment at SPEEA negotiators sending the contract for a vote with a “no” recommendation. We see some parallels in Boeing’s approach to those it followed with the disastrous 2008 IAM 751 negotiations. We think the contract will be rejected by a comfortable margin.

Nigeria’s Arik Air: The airline ceased domestic operations. The airline has eight Boeing 737s, two 747-8Is and seven 787s on order.

Odds and Ends: Status of KC-46A; US Airways without AA; CSeries timeline

KC-46A: Aviation Week has this article on the current status of the Boeing KC-46A tanker and the management challenges. AvWeek also reports what we did earlier: the tanker gets nailed in sequestration. We have the specifications sheet here: KC46 Tanker Specifications.

US Airways without American: In case this merger doesn’t happen, US Airways is looking ahead, according to this Aviation Week article.

CSeries timeline: Aviation Week has this piece about the Bombardier CSeries timeline for first flight and EIS, comparing it with the Q400 and CRJ700 programs, which were both late.

BAE-EADS: EADS CEO Tom Enders calls this a perfect fit. The Financial Times has this story. Free registration may be required.

Odds and Ends: More on EADS-BAE; surviving crashes

EADS-BAE: NOW that a few days have passed since the announcement BAE and EADS want to combine, here’s some more worldwide press:

Reuters: Government demands could make or break deal.

Interactive Investor: Merger will advance EADS military goals.

Mobile Press Register: Merger will advance Gulf Coast aerospace cluster.

London Daily Post: Defence worried about UK security.

International Business Times: US access key to merger.

Surviving crashes: A crash test of a Boeing 727 in Mexico drew snickers from some quarters, but the test concluded it’s safer to sit in the rear of the airplane than in the front. No kidding, and this is not new; this has been known in aviation for decades. But we actually like the response of Ted Baker, the founder and long-time CEO of National Airlines in the US (he sold out around 1961). When asked by a reporter where the safest place to sit in a plane in the event of a crash, the blunt Baker replied, “flat on your ass.” And you didn’t need a crash test to figure this one out.

Shrinking UAV market: Once thought to be one of the bright spots in a shrinking defense budget, Boeing now says the drone market will decline despite moves to increase civilian use.

BAE Systems is growth opportunity for EADS

Update, Sept. 13: Here are some stories from today:

Bloomberg: EADS move seen by Boeing as growth; Revives decade-old plan; and this update about the rankings:

BAE is the ninth biggest vendor to the U.S. government, with $7.3 billion in direct, or prime, contracts in the year that ended Sept. 30, according to a Bloomberg Government study ranking the top 200 contractors. EADS ranks No. 100, with $684 million in awards.

Reuters: US approval seen likely.

AOL: Big deal in Europe, not so much US.

Mobile (AL) Press-Register: EADS-BAE in merger talks, with a spin on local impact.

Original Post:

The prospective combination of BAE Systems and EADS is a growth opportunity for EADS, particularly in the US, where it has been striving for years to expand its defense footprint.

BAE Systems in 2009 was the Defense Department’s #5 of the Top 10 defense contractors. At that time 50% of BAE’s business was in the US. We have checked more recent figures. EADS North America, during the KC-X tanker competition, did about $1bn worth of business with the US government, in defense, Homeland Security and other contracts. We don’t believe this has appreciably changed in the 18 months since the tanker contract was awarded to Boeing.

Although the immediate reaction among observers and media is that the combination will make a strong competitor to Boeing, in fact BAE Systems services defense segments that are more closely aligned with Lockheed Martin and Northrop Grumman than with Boeing. There is also little if any overlap between BAE and EADS, whether here or in Europe and the UK, where BAE is headquartered.

BAE has about 40,000 employees in the US.

The combination, which has to be approved by the boards of both companies as well as a host of governments on both sides of the Atlantic, will certainly strengthen EADS and its argument that it is a substantial contributor to the US economy and US employment. Airbus, a wholly owned subsidiary that accounts for around 80% of EADS revenues, purchases $12bn in goods and services in the US and says it employs or supports 100,000 jobs directly or indirectly.

BAE, which owned 20% of Airbus until EADS bought these shares in 2006, isn’t a current supplier to Airbus. Although defense cuts in Europe and the US are limiting growth at this time, these come in cycles and BAE would strategically position EADS to grow its defense business and reduce reliance on Airbus revenues and financial performance.

The new company will be 40% owned by BAE shareholders and 60% owned by EADS shareholders. The current shareholdings in EADS of the German and French governments, presently 15% each, would almost certainly be diluted. (The German EADS shareholdings are currently indirect but may become direct. The French shareholdings are direct.)

The new company would be listed on several European exchanges, including BAE’s listing on the UK stock market.

Hypocrisy and Aerospace Industries Assoc.

On Twitter:


Alabama move won’t open door to Airbus in US lobby group: We dont want foreign govts to use AIA to lobby ours, CEO Blakey tells #ReutersA&D

This is hypocrisy. The UK’s BAE System is a member of AIA. Rolls-Royce (North America) is a member. Brazil’s Embraer Aircraft Holdings is a member. France’s Dassault Systems is an associate member. Safran USA (obviously part of France’s Safran) is an associate member. And these are just the ones we immediately recognize from the AIA member list.

There key issues that Airbus and Boeing have in common: flight safety, air traffic management, environment, bio-fuel. There is no reason why Airbus Americas shouldn’t be a part of this group to participate in lobbying Congress for these kinds of issues. EADS North America, which already has major Defense contracts, could help on something like sequestration.

Airbus buys $12bn worth of supplies from the US and plans to double this. Even Washington State, Boeing’s home, is a top supplier to Airbus.

Who or what is black-balling Airbus?

Shame on AIA on this one. The reason given is transparently bull[stuff].

It’s official–new A350 delay

EADS, parent of Airbus, reported that there will be a three month delay for the A350 EIS due to wing drilling issues. We reported on July 6 we expected a delay of 5-6 months and earlier this week linked to an article suggesting one month. Here is an article synopsizing the information. The Wall Street Journal has this article.

This represents a 15 month delay for the A350 XWB-900 EIS. It’s unclear what, if any, cascading effect this will have on the A350-800 and the A350-1000.

Airbus said the program remains “challenging” and the linked news articles indicate this.

We’re skeptical of all new airplane programs given the recent history at Airbus, Boeing, Bombardier (CRJ1000) and, if you want to add it in, COMAC’s ARJ21 (though this one might be a bit unfair to include with the legacy OEMs). We would not be surprised if the A350 has additional delays between now and EIS.

But one thing we are seeing is that Airbus is coming forward sooner with delay acknowledgements than it did on the A380 and Boeing did on the 787. We have to give Airbus credit for being more forthcoming than in the past.


Odds and Ends: China trojans; China is the biggest threat; EADS ponders own bank

China trojans: we’re not talking about condoms, either. This item from Defense Tech is pretty alarming. And while this piece is also pretty alarming, though it isn’t about China. Or maybe it is. The chips are made by the same company, sourcing them in China.

China is the biggest threat: So says Jim Albaugh, CEO of Boeing Commercial Airplanes. Aviation Week has this article about an Albaugh appearance in the UK.

EADS ponders its own bank: This would give it access to low-cost funds and protect against the Euro, officials say. Here’s an article. Our first thought: since the WTO ruled Airbus launch aid was illegally structured because of below market rates (but did not rule the aid itself illegal), this returns EADS/Airbus to the low-cost funding access. Clever. Wonder what Boeing thinks about this?