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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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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LNC’s Top 10 stories in 2018

Jan. 2, 2019, © Leeham News: Boeing dominated the Top 10 news stories last year, as measured by views.

Displacing Airbus at Hawaiian Airlines, which ordered the 787-9 and canceled the A330-800, led the readership.

Boeing’s flip of the Hawaiian Airlines order for the A330-800 to the 787-9 was the most read story of 2018. Photo: Hawaiian Airlines.

Airbus’ launch of the A350-900ULR came in second.

Here are the Top 10 stories on Leeham News for 2018: Read more

2019 Outlook: Boeing’s decision on NMA is the headline to watch

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Introduction

Dec. 21, 2018, © Leeham News: It is a stretch to say 2019 is a pivotal year for Boeing.

There would have to be events of tsunami proportions to be pivotal for a company with revenues of more than $90bn.

But there is no doubt 2019 will be a very important year for Boeing.

Summary
  • The headline to watch will be the widely anticipated launch of the New Midmarket Aircraft, also called the 797.
  • The 777X begins flight testing next year. Sales are stalled for the newest airplane of the Boeing family.
  • The proposed new joint venture between Boeing and Embraer is expected to be consummated by the end of the year.

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How useful is an NMA, Part 4

By Bjorn Fehrm

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Introduction

November 1, 2018, © Leeham News.: Last week we looked at how a Boeing NMA would function as a medium range airliner in the Asia-Pacific.

We now continue with flying the two aircraft variants from Middle East locations, exploring how large an area in Asia, Europe and Africa the aircraft would cover.

Artists impression of the Boeing NMA. Source: The Air Current.

Summary:

  • The profile of an NMA fits well in a Middle East Carrier’s fleet. Dependent on location it covers all of Europe and most of Africa and Asia.
  • As the NMA is a lesser aircraft than the present long-range aircraft used on the routes it would have impressive economics for this type of operation.

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Boeing’s growing 777X challenge

  • Boeing 3Q earnings call Oct. 24, 10:30am EDT.

Oct. 23, 2018, © Leeham News: Boeing has been confident it has bottomed out the production rate of the 777 line, successfully bridging between the Classic and the X models.

CEO Dennis Muilenburg nevertheless typically couches this confidence with “with still have some work to do.”

But during LNC’s trip last week to New York, sources said this bridge may be moving to the right.

Etihad Airways was a launch customer for the Boeing 777X. It’s deferred delivers once. It may do so again. LNC has been on this story since January 2017. Image via Google images.

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