Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- China’s air travel “recovery:” volume improving, but revenue still elusive May 6, 2021
- HOTR: Annual Reports give hint to MAX return in China May 4, 2021
- Uneven financial challenges among OEMs May 3, 2021
- Calhoun says next new airplane isn’t about engines, it’s about production May 3, 2021
- Pontifications: Long road ahead, but Boeing will recover May 3, 2021
Boeing seeks to cut production costs of 787-8 to boost sales
By Scott Hamilton
Sept. 2, 2020, © Leeham News: Boeing is considering production changes to the slow-selling 787-8 to lower costs and boost sales.
The effort comes at a time when global passenger traffic is at record lows and recovery of international traffic is forecast to take four or five years.
Boeing photo.
As airline traffic recovers, carriers appear to be favoring smaller aircraft in restarting suspended routes.
In recent years, Boeing discouraged sales of the 787-8 because it is a low margin airplane with high production costs. This is a legacy of the program and development difficulties from 2004-2011, when it finally entered service.
The 787-9 and 787-10 are high margin aircraft Boeing counted on to reduce the billions of dollars in deferred production and tooling costs. At one time, this exceeded $32bn.
The early program difficulties resulted in the production and parts of the -8 to be substantially different than the -9/10, which have 95% commonality. The -8 was only 30% common.
HOTR: Five more airlines under court restructuring or ceasing operations
By the Leeham News Staff
Aug. 31, 2020, © Leeham News: The Smartwings Group is the latest airline to file for a court restructuring.
LNA’s monthly tracking of failed carriers adds Virgin Atlantic, EasyFly, Go2Sky, ExpressJet, and the Smartwings Group to the list of carriers in bankruptcy or court-supervised restructuring since COVID collapsed the global airline industry beginning in mid-March.
Among those five, Go2Sky and ExpressJet announced that they would cease operations. Virgin Atlantic won the support of its creditor for a court-supervised restructuring.
HOTR: Values, rents leveling off for 5-year old aircraft
By the Leeham News staff
Aug. 25, 2020, © Leeham News: Lease rates and aircraft values on narrowbody, mainline jets appear to be leveling off, except for the Boeing 737-700.
Ishka, the UK-based appraisal company, revised its tracking presentation in last week’s update. Moving from text to a graphic, it’s visually apparent that values for the A320, 737-700, Boeing 737-800 and -900ER began to level off in May. Values for the Airbus A321 began to level off in June.
Lease rates for all airplanes except the 737-700 began to level off in June. Rates for the -700 continue to decline.
These are for off-lease, half-life aircraft that are five years old.
Half-life means an airplane half-way through its maintenance cycle.
HOTR: Lease rates, aircraft values continue to plunge/Update
Update: Ishka advises that its starting comparison point in the chart below should have been January, not July. This changes the rate of value and rent decline appreciably.
Aug. 19, 2020, © Leeham News: Aircraft values and least rental rates for selected 5-year old aircraft fell in a six week period, some dramatically.
Ishka, a UK-based appraisal firm, estimates that current market values fell between 9% to 25% in the short period.
The Boeing 777-200LRF value fell the least. Values of the Boeing 777-300ER fell the most.
Airbus A330-300 lease rates dropped a staggering 45% in six weeks, Ishka reports—for a 5-year old aircraft.
HOTR: Boeing warns of forward losses on 787, 777X programs
By the Leeham News Staff
Aug. 5, 2020, © Leeham News: In another demonstration of the negative impact of the COVID-19 crisis, Boeing warned that two flagship airplane programs could face forward losses.
Neither the 787 nor the 777X are in forward loss positions yet. A forward loss means Boeing won’t make money on the program.
Despite the 787 incurring more than $30bn in deferred costs, Boeing hasn’t taken a write down. The deferred costs have been burning off since 2015. Other programs have been subjected to forward losses, including the 747-8, VC-25 (Air Force One) and the KC-46A tanker.
But with the production reduction of the 787, down to 6/mo in 2021, Boeing now says there is a risk to a forward loss.
HOTR: NOK Air, 3 more bite the dust in COVID fall-out
By the Leeham News Staff
July 31, 2020, © Leeham News: NOK Air of Thailand is the latest carrier to filed for bankruptcy.
LNA’s monthly tracking of failed carriers adds NOK, Jet Time, Level and Blue Air to the list of carriers in bankruptcy since COVID collapsed the global airline industry beginning in mid-March.
HOTR: Norwegian claims $1bn+ in damages from Boeing
HOTR072120
By the Leeham News staff
July 21, 2020, © Leeham News: Norwegian Air Shuttle said June 30 it canceled orders for 92 Boeing 737 MAXes and five 787s.
The orders still appear on Boeing’s Unfilled Orders website, which is updated monthly.
In a lawsuit filed June 20 in Cook County Circuit Court (Chicago), NAS claimed breach of contract for failure to deliver the MAXes due to grounding. It claims breach of contract for failure to delivery 787s due to the long-running issues with the Rolls-Royce engines.
HOTR: American’s threat to Boeing: no MAXes without financing
By the Leeham News staff
July 14, 2020, © Leeham News: Last week’s news that American Airlines told Boeing it won’t take delivery of 17 new 737 MAX-8s unless it can get financing isn’t a surprise for those in the know.
This could be a bit of negotiating in the press.
When MAX was grounded, AA had lined up Japanese financing for its next round of deliveries. The lease rate was said to be in the vicinity of 0.52%, a number that is unconfirmed. But it was a very inexpensive lease rate. Over the course of the balance of 2019, the financing expired.
HOTR: Second hand 787-8 market to be tested
By the Leeham News Staff
July 10, 2020, (c) 2020, Leeham News: A few months ago, Qantas announced that it intended to sell three Jetstar-operated Boeing 787-8s that would become surplus once the airline received its first A321-LRs. In the aftermath of the COVID-19 outbreak, Avianca rejected one 787-8 lease and Royal Air Maroc intends to sell four of them.
Four 787-8 operators (Aeromexico, Avianca, Latam Airlines, and Thai Airways) with a total of 38 aircraft in service filed for Chapter 11 or are in administration. This represents around 11% of the 374 787-8s delivered so far.
After years of high 787-8 production rates, Boeing is reluctant to sell the type. It has less production commonality than the 787-9 and 787-10 have between them and sales margins are lower. As a result, airlines do not place many new orders for the variant because they think other aircraft are more attractive investments.
HOTR: Aircraft lease rates, values continue to plunge in virus environment
By the Leeham News Staff
June 30, 2020, © Leeham News: Fifteen year old aircraft values and leases plunged compared with six month ago, according to the latest analysis by Ishka.
Ishka is an aircraft appraisal and consultancy.
The aircraft are assumed off lease and immediately available. Mid-life maintenance status is also assumed. Rates and values will continue to decline, Ishka believes. Aircraft on-lease have higher values and lease rates.
