Pontifications: Good, and Bad, news from the Dubai Air Show

By Scott Hamilton

Nov. 25, 2019, © Leeham News: The Dubai Air Show proved to be a mixed bag for Airbus and Boeing.

Each company picked up important orders and commitments.

But each company saw some previously announced commitments reduced in the process, including, for Boeing, a reduction in the backlog for the slow-selling 777X.

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Big Three Gulf Carriers’ financials

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By Vincent Valery

Introduction

Nov. 4, 2019, © Leeham News: The rise of the Big Three Middle Eastern carriers since the mid-2000s has been nothing short of astounding.

They took full advantage of an advantageous geographical location: 85% of the world population is within a 10-hour flight from either Qatar or the UAE. Emirates and Qatar Airways connect all continents, except Antarctica.

This transformation into super connectors did not come without controversies. The most vocal are the Big Three US legacy carriers, through the Partnership for Open and Fair Skies. They accuse the Gulf Carriers of benefiting from massive subsidies that allow them to underprice their competitors.

As part of a deal between Qatar, the UAE, and the USA, the Big Three Gulf Carrier started publishing audited financial statements. Emirates’ and Qatar Airways’ financial statements are publicly available on their websites since 1994 and 2015, respectively. Etihad Airways has been releasing some income statement information since 2010.

Ahead of the upcoming Dubai Air Show Nov. 18-19, LNA had a look at those financial statements. We outline our takeaways in this article.

 

Summary
  • Very high growth at all three airlines;
  • Funded by different means;
  • Global slowdown and Geopolitical tensions force strategy rethink;
  • Varying levels of earnings quality;
  • An unsuspected (significant) source of revenues.

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Boeing’s 777X problem: Shifting market, lagging economics, softening order book

By Judson Rollins

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Introduction

Oct. 28, 2019, © Leeham News: The Boeing 777X’s lackluster sales to date put it in a similar light as the soon-to-end A380 program. Is the era of the 400+ seat aircraft turning onto final approach?

There are only 344 777Xs on firm order at present. As many as 59 of these orders are soft. The aircraft has been available for sale since May 2013, during a period of near-record global airline profitability. This calls into question the market viability of the 777X – and whether Boeing will ever break even on the program.

Summary
  • VLA demand is limited; Airbus’s forecast seems overly optimistic.
  • 777X order book is concentrated on just a handful of customers.
  • Middle East carriers account for two-thirds of 777X orders.
  • Inferior economics limit the 777-8 to a narrow niche like the 777-200LR.
  • 777-9 economics outweighed by trip cost risk, lower yield of marginal seats.

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A380 service life struggles

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By Vincent Valery

Introduction

Sep. 30, 2019, © Leeham News: It hasn’t been an easy year for the Airbus A380 program since the end of production was announced in February.

Lufthansa announced in March that Airbus would buy back six A380s in 2022/2023 as part of a follow up order for 20 A350-900s. Air France intends to retire its Superjumbo fleet by 2022. Emirates retired two aircraft that were less than seven years old.

A number of factors are leading airlines to prematurely retire their A380s.

Summary
  • Small MRO market increases maintenance costs;
  • (Prohibitively) expensive cabin refurbishments;
  • Operators struggling to operate profitably year-round;
  • A lack of secondary market;
  • No business case for engine PIPs.

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Airbus faces challenges for A330neo

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Aug. 26, 2019, © Leeham News: Airbus faces near-term challenges with its production skyline for the A330, even at a reduce rate of 4/mo, an analysis shows.

Looking forward from next year, when there are slightly more deliveries scheduled than production rates—a function of some leftover 2019 builds—Airbus faces an easily-filled gap in 2021 but huge production gaps beginning in 2022.

Even if Letters of Intent and options were fully converted to firm orders, big production gaps will exist.

A production rate cut seems inevitable in the near future.

Summary
  • Key Emirates order not yet firmed up.
  • Big, 200 unit A330-200R LOI no longer appears in data.
  • Why keep the A330neo in the product line?

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Pontifications: Trump-China trade war hits Boeing

By Scott HamiltonAug. 19, 2019 © Leeham News: There have been no widebody orders placed by China with Boeing since President Trump launched a trade war in March 2018, hurting American’s biggest exporter and affecting the US balance of trade.

In fact, there have been no announced orders by China with Boeing since October 2017. Only 22 China orders were announced in 2017.

Boeing has a large number of Unidentified 737s listed on its website. It is widely believed that China accounts for perhaps as many as 25% of these, but Boeing won’t comment.

China historically accounted for between 25% and 33% of Boeing’s annual deliveries.

Since 2011, China took delivery of more than 170 widebody passenger and freighter jets, or 9.3% of all widebodies delivered by Boeing.

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Stored A330s, 777 Classics offer alternative to new orders

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Aug. 12, 2019, © Leeham News: Slow sales of the Airbus A330neo, A350 and 777X this year are the result of a dip in the order cycle, A330ceos and 777-300ERs coming off lease and route fragmentation from more capable single-aisle aircraft that are much cheaper to operate and which allow long, thin routes to be served.

Airbus and Boeing have yet another aspect to contend with: stored A330s and 777s that have come off lease or, in the case of Etihad Airways, grounded its late model A330-300s in a fleet restructuring related to its poor financial condition.

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Boeing faces weak sales, production gap for 777X

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Now open to all readers.

Aug. 5, 2019, © Leeham News: Design issues with the giant General Electric Aviation GE9X are causing untimely headaches for the Boeing 777X program, at a time when the 737 MAX is consuming the company.

The MAX grounding and longer-than-expected fixes and Return to Service (RTS) is overshadowing challenges with the 787 skyline, where a production rate of 14/mo is burning through the backlog faster than new orders are coming in.

The 777X is facing skyline challenges as well. Sales have been slow. One major customer in the Middle East is undergoing a financial and fleet restructuring and another publicly said it will reduce 777X orders if it places a new order for 787-10s.

The 777X delivery schedule has slid to the right due to the engine issues and the 777-8 is a niche airplane that may have a greater future as a freighter than it does as a passenger model.

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Boeing MAX crisis overshadows other challenges

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Now open to all Readers.

July 29, 2019, © Leeham News: The 737 MAX crisis overshadows everything else right now at Boeing.

This includes forward orders, weak customers and production gaps on the 787 line, which right now is the cash flow cow at Boeing Commercial Airplanes.

Boeing’s production line for the 787 is filled through 2021, but after that, there are big gaps. Source: Leeham Co. Click on image for a crisp view.

Executives only briefly, and obliquely, touched on the 787 during the 2Q2019 earnings call last Wednesday.

This prompted LNA to examine the details of the backlog and production rates. The 787 is current being produced at a rate of 14/mo.

There are clear signs of challenges, both near- and medium-term for the 787.

Summary
  • Weak customers threaten to create deferred deliveries near-term.
  • There will be about 20 A330s and 777s coming off lease each year from 2021-2026 on top of retirements. Airbus and Boeing see these are replacement opportunities.
  • The production back delivery stream falls off the cliff in 2022.

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14 new airplanes and derivatives see EIS through 2027

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July 15, 2019, © Leeham News: There are 14 new and derivative aircraft scheduled for entry into service (EIS) through 2027. This rises to 16 if Boeing launches the New Midmarket Aircraft (NMA).

But there are plenty of uncertainties around precise EIS hanging over some of these.

LNA sees entry into service for the Boeing 777X slipping to the first quarter of 2021.

LNA sees the Boeing 777X EIS slipping into early 2021. China’s C919 is now slated for a 2021 EIS, but development has been tricky and delays have been common. Russia’s MC-21 flight testing has been slow and international sanctions hang over this aircraft.

Mitsubishi’s MRJ90, now called the M90, is slated to enter service next year. It, too, has been plagued by delays. The redesigned MRJ70, the M100, moves from a 2021 EIS to a planned 2023 EIS—but given the MRJ90’s history of delays, the company has to persuade the industry no more slippages are likely.

Here is a rundown by year and aircraft of the EIS dates.

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