Here’s why Boeing won’t do a “757 MAX”

Feb. 12, 2015, c. 2015 Leeham News and Comment: Boeing appeared to put to bed once and for all any prospect of reviving the 757 to fill a product gap between the 737-9 and the 787-8.

Randy Tinseth, vice president of marketing, refuted a published report that said Boeing was studying resurrecting the plane, last delivered in 2005, with new engines and winglets. Tinseth made the remarks Feb. 11 at the Pacific Northwest Aerospace Alliance conference in Lynnwood (WA).

While Boeing studied the prospect at one or more points, we didn’t view this as particularly significant; Boeing looks at virtually all options when studying product development.

Our economic analysis, performed after the published report, is one reason why we didn’t believe Boeing would proceed with a “757 MAX.” The economics simply fall short of the competing Airbus A321LR by double digits.

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Exclusive: Emirates Airlines gets pitch for 100 Boeing 747-8s

  • Update, 3:30pm PST: For those who may not be adept at reading literally what was written, we did not say Boeing made the pitch.

Feb. 4, 2015: In a pitch designed to save the Boeing 747-8 and simultaneously kill the prospect of an Airbus A380neo, Emirates Airlines has received a pitch for 100 of the slow-selling Boeing, two sources familiar with the situation tell Leeham News and Comment (LNC). This is isn’t yet a formal proposal, as far as we know.

Tim Clark, president of Emirates, said he would buy 100 A380s if Airbus re-engined and launched the neo. The neo would use the new Rolls-Royce Advance engine, according to two different sources. Neither Pratt & Whitney nor GE Aviation, which dominate the current A380 engine market share with its joint venture Engine Alliance GP7200, are interested in developing a new engine for the prospective A380neo, according to public statements by both companies. PW doesn’t offer an engine alone that could be adapted to the size required for the A380neo. GE’s GEnx engine, used on the Boeing 787, is in the thrust and size bracket but would only improve the efficiency with 4-5%, thus not worth the change effort. The smaller version of the GEnx is on the 747-8. Read more

Muilenburg’s challenges as Boeing CEO

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Introduction
Jan. 27, 2015: Dennis Muilenburg has been the No. 2 at The Boeing Co. for a little more than a year. He was named vice chairman, president and COO in December 2013.

Jim McNerney

His boss, Chairman and CEO Jim McNerney, turned 65 last August. Sixty-five is the mandatory retirement age, but this has been waived before and McNerney is widely understood to want to stick around through Boeing’s 100th Anniversary in 2016.

The industry is buzzing with reports that McNerney might move up soon to

Dennis Muilenburg

non-executive chairman, with Muilenburg assuming the CEO title.

If and when Muilenburg becomes CEO, he faces a laundry list of challenges.

Summary

  • Strong competition from Airbus that is getting stronger;
  • Continued cost cutting;
  • Learning the Commercial Airplanes business;
  • Declining defense business and revenues, putting pressure on profits and cash flow;
  • Flight testing and development of the KC-46A;
  • Development of the 737 MAX and 777X and proving that delivering new airplane programs on time and on budget can be achieved again;
  • Selling enough 777 Classics to maintain production rates to the 2020 EIS of the 777X;
  • Dealing with labor unrest with its Seattle area unions and a new attempt to organize the Charleston 787 plant; and
  • Deciding whether to take that “moonshot” and launch new airplanes earlier than the 2030 EIS McNerney set as policy.

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Fundamentals of airliner performance, Part 6; The engine

By Bjorn Fehrm

19 Jan 2015: There is a lot written about the fundamentals of how aircraft fly. It is something that fascinates people and it generates a high level of understanding of these fundamentals. The same is not true for the airline turbofan engines in use today; their detailed function remains a bit of black art.

leehamlogo copyright 2015 small 210_87 pixelsTo some extent this might be because what is exiting in the engines (the thrust) is generated behind closed doors. The only visible part of the process is a rotating fan face and sometimes a slight miss-colored exhaust out the other way. There is also at takeoff a funny buzzing sound interspersed with the general engine noise. Apart from that, the most that one sees is a round nacelle and that is it.

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Airbus reveals record orders at annual press conference

By Bjorn Fehrm

Toulouse 13 Jan 2015: Airbus today held their annual press conference where they among other things revealed their final numbers for orders and deliveries. The press conference was hosted by Airbus CEO Fabrice Bregier accompanied by COO Customers John Leahy, new COO Tom Williams and new Head of Programs Didier Evrard.

Airbus in 2014

Bregier started with pointing out that 2014 was a very eventful year for Airbus. Airbus did their customary end of year sprint and passed Boeing for net orders with 24 aircraft netting 1456 commands, Figure 1.

Screenshot 2015-01-13 15.07.08

Figure 1. Airbus orders for 2014. Source: Airbus.

On the delivery side Boeing is ahead with 723 deliveries versus Airbus 629, Figure 2.

Screenshot 2015-01-13 15.07.22

Figure 2. Airbus deliveries for 2014. Source: Airbus.

Further Airbus certified the A350 and delivered the first aircraft to its launch customer, Qatar Airways. It also launched the A330neo and got 120 orders during the year. Finally they flew the A320neo first prototype.

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A380neo decision likely this year, triggering the next widebody engine project

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By Bjorn Fehrm

Introduction

Jan. 12, 2015: One of the subjects which is sure to come up on Airbus annual press conference on Tuesday the 13th in Toulouse will be when and how Airbus will re-engine the A380.

Airbus Commercial CEO Fabrice Bregier vowed during the Airbus Group Global Investors Day last month that an A380neo is coming.

There is much speculation around this subject as the business case of re-engineering an aircraft that is selling at such low numbers is difficult to get to close. The business case is difficult to make work for Airbus Leeham logo with Copyright message compact(such a project will cost in the order of $2 billion) but it will be equally hard for the engine manufacturers to offer engines that have enough efficiency gain to make the overall project feasible from an efficiency improvement perspective.

Summary

  • A380 Classic equals Boeing 777-300ER seat fuel costs.
  • Boeing 777-9 beats A380 on CASM, an A380neo regains the advantage.
  • Engine makers face hard choices to retain dominance or to broaden market penetration.

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Boeing 777-300ER and its replacements; A350-1000 and 777-9X.

By Bjorn Fehrm

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Introduction

Dec. 21, 2014: Last week we did a deep analysis of A380 and its competition. It has been windy weeks for the aircraft since the Airbus Global Investor Forum and it was time to bring some needed facts on the table. These facts showed there is a clear difference between the hype being perpetuated in the media and the reality. As we cleared the situation around the A380, we also touched on the large twins that could fulfill at least parts of its missions.

Leeham logo with Copyright message compactThere has been a lot of discussion around these aircraft as well as they form the battle of titans one level down from A380, the large, long-haul market today dominated by Boeing’s 777-300ER (the A380 does not have a real competitor–the 748i is clearly smaller, in fact so much smaller that it will be engulfed by the 777-9X).

Summary

  • The 777-300ER had an exclusive run in its size until launch of the A350-1000;
  • The A350-1000 doesn’t enter service until 2017;
  • 777-9 EIS set for 2020, with hopes to advance by six months;
  • We undertake a full economic analysis which gives good cues as to the future dominance of Boeing or Airbus in this highest margin segment of the market.

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A380, a deep analysis of its competitiveness

By Bjorn Fehrm

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Introduction

Dec. 18, 2014: In our Monday article we go behind the scenes of the doubts that were spread over the A380 by Airbus last week. To complete the picture we now update our competitive analysis that we did in February this year. We then compared the A380 to Boeing’s 747-8i, the 777-300ER and the forthcoming 777-9X. We also included Airbus closest aircraft, the A350-1000.

Leeham logo with Copyright message compactA lot has happened since then. Airbus has done a lot of work on the passenger area of the A380 to offer increased passenger densities and the pictures of the emerging Boeing 777-9X and Airbus A350-1000 is now clearer.

Sales efforts of the A380 has also progressed, with meager results despite adding a leasing proposition what should make the hurdles of operating a small sub-fleet of A380s lower. To understand why, we interviewed Mark Lapidus, the CEO of Amedeo, the leasing company which specializes in financing and leasing of A380s. We wanted specifically to talk to Lapidus about the reactions of the airlines to the A380 and what problems he saw in selling an aircraft of this type.

In preparing the article we also gathered additional info from Airbus and Boeing, from the former around their work on the cabin configurations and densities, from the latter the maintenance costs for the up and coming 777-9X.

Summary

  • In our February article we established that an A380 is roughly equal on fuel per passenger transported to the benchmark in the present non-VLA long haul market, the Boeing 777-300ER. We also found that this is highly dependent on how many passengers one assumes for both aircraft in the comparison.
  • We could also see that come 2020, when the replacement of the 777-300ER would be available, the 777-9X, A380 would trail with up to 20% in fuel efficiency, once again dependent on how many seats were used in the comparison.
  • At the time we only looked at a fuel consumption comparison; we did not include crew cost, maintenance costs, landing and en route fees to generate Cash Operating Costs (COC) or capital costs to come to Direct Operating Cost (DOC). In today’s updated analysis we add these costs items.
  • Finally we have talked with Amedeos CEO Mark Lapidus, asking about his discussions with the Airline CEOs and their teams, to understand what the reactions are from the airlines and why has he not placed any A380 with customers yet.

As we did this deeper study, a more nuanced and different picture emerged from the one seen in February. The results busts a number of deeply engraved myths, one being that four engines are more expensive to fly and maintain than two.

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Boom times leads to looming cash flow shortfall across OEMs

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Introduction

Dec. 16, 2014: There have been record aircraft orders year after year, swelling the backlogs of Airbus and Boeing to seven years on some product lines, Bombardier’s CSeries is sold out through 2016, Embraer has a good backlog and the engine makers are swamped with new development programs.

So it is with some irony that several Original Equipment Manufacturers (OEMs) are warning of cash flow squeezes in the coming years.

Summary

  • With so many development programs in the works, the prospect of new airplane and engine programs are being trimmed.
  • Most airframe and engine OEMs under pressure.
  • The full impact of the pending cash flow squeeze hasn’t been appreciated by the markets yet.

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