Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: New engine development. Part 4. Propulsive efficiency April 19, 2024
- Boeing unlikely to meet FAA’s 90-day deadline for new safety program April 18, 2024
- Focus on quality not slowing innovation, says GKN April 18, 2024
- Boeing defends 787, 777 against whistleblower charges April 17, 2024
- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
HOTR: Rolls 787 engine orders tank last 5 year
By the Leeham News team
Sept. 29, 2020, © Leeham News: Engine orders for Rolls-Royce on the Boeing 787 tanked in the last five years—pre-COVID.
An analysis reveals that over this period, Boeing booked 952 orders for 787. Of these, 755 selected the GEnx. A mere 80 orders were placed with RR. There were 117 orders for which engines were not selected. This gives GE a 90% share of the selected campaigns.
It gets worse.
Of the 80 aircraft that went to Trent 1000, Boeing removed 44 under ASC 606 accounting rules as too shaky to consider firm orders anymore. These include Avianca, Latam, Norwegian Air Shuttle, etc., which either went into bankruptcy or are restructuring as a result of COVID.
Under this scenario, GE’s share is closer to 95% in last five years.
RR’s Trent 1000 on the 787 is a thorn in the company’s side because of serious technical issues that grounded up to 50 aircraft. Groundings began several years ago. RR continues to deal with the financial fall-out. Some customers switched from RR engines to GEnx in follow-on orders for the 787.
HOTR: Somewhat stabilizing twin-aisle lease rates
By the Leeham News Staff
Sept. 22, 2020, © Leeham News: Ishka, the UK-based appraisal and consultancy firm, Thursday published its update of values and rents for 5-year old, twin-aisle aircraft. After a significant reduction since the beginning of the year, lease rates seem to be stabilizing.
HOTR: Adjusting Airbus and Boeing orderbooks
By the Leeham News Staff
Sept. 15, 2020, © Leeham News: Boeing has removed hundreds of 737 MAX orders from its order book. While some were direct cancellations from customers, most came through ASC 606 adjustments.
Airbus does not publish such order adjustments by aircraft program in its monthly order and deliveries report. The European OEM publishes a total outstanding amount of contracts for commercial aircraft in its annual reports. However, the figure does not have a breakdown by program.
As a result, Airbus and Boeing order books aren’t an apple to apple comparison. The COVID-induced traffic slump has had a significant impact on airlines’ financial situation. Therefore, adjusting order books is necessary to assess an aircraft program’s backlog situation.
HOTR: Boeing bear case: $73bn revenue drop 2020-2025
By the Leeham News Staff
Sept. 9, 2020, © Leeham News: Morgan Stanley has a new aerospace analyst, Kristine Liwag, who initiated coverage on a half dozen companies over two days last week.
Among them, of course, was Boeing.
One of the conclusions in one of her notes:
“Assuming that some orders for growth and those ordered by lessors are cancelled in the 2020-2025 timeframe, we estimate that there is $73bn downside risk to Boeing’s revenue from 2020-2025. We note that our Bull case scenario assumes that the entire current order book converts to revenue.”
Liwag and her team also write, “there is an underappreciated risk that Boeing is particularly vulnerable to cancellations as the 737 MAX grounding (March 2019) opened up cancellation rights (without penalty) for aircraft deliveries that were delayed a year.”
But Morgan Stanley doesn’t let Airbus off the hook
“Boeing and Airbus manufacture aircraft to an order book. White tails, which are aircraft without owners, are uncommon and undesired. When demand is strong and the production skyline is sold out, as we have seen in the past few years, a new aircraft is a scarce commodity that airlines and lessors want. In times of uncertainty, a new aircraft, with a capital cost of $50mn-$200mn per unit, becomes a white elephant.”
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.
