HOTR: Norwegian claims $1bn+ in damages from Boeing

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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.

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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.

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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.

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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.

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HOTR: Boeing still sees MAX 3Q recertification

By the Leeham News staff

June 10, 2020, © Leeham News: Despite COVID slowdowns, Boeing still expects recertification of the 737 MAX in the third quarter, say people familiar with the situation.

Whether this timetable proves out remains to be seen. But this is the schedule Boeing continues to work toward.

The two key regulators are the Federal Aviation Administration and Europe’s EASA. Other regulators are expected to follow their leads.

Concurrent recertification as conventionally thought of—recertification and everyone authorizes a return to service at the same time—isn’t realistic. After EASA recertifies the airplane, the member states’ own regulators must step up and formally do so. This may take a couple of weeks.

China’s CAAC was the first regulator to ground the airplane. It has its own process. There isn’t a reciprocity agreement with the FAA in place. (There are bilaterals, which aren’t the same thing.)

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HOTR: Moving up the 777-8F?

 By the Leeham News Staff

June 4, 2020, © Leeham News: A lawsuit filed by cargo specialist Volga Dnepr against Boeing claims Boeing is running out the clock on the 747-8F.

The report by The Seattle Times makes for interesting reading. Key of HOTR is the reference that Boeing plans to end 747 production within three years. This is longer than LNA believes. Regardless, the three-year timeline fits with information LNA about the 777-8F.

LNA is told Boeing sales floated the possibility of launching the 777-8F around 2023-24. This would bring forward the launch by about two years from plans when the X program was launched in 2013.

Then, the entry into service for the 777-9 was targeted for 2019-2020. This was to be followed by the 777-8 passenger model in two years and then the 8F two years after that.

During the fallout of the MAX grounding, the 777-8 was deferred indefinitely. Now, with COVID upending demand, customers are deferring and talking about canceling 777X orders. Boeing is reducing 777 production from five to three per month. The 777-9 production will go to one per month.

The 777 Classic line is sustained by the 777-200LRF. The 777-8F concept is a couple of frames longer than the -8P but shorter than the 777-9.

Having spent more than $1bn for the advanced Composite Wing Center to build 777X wings and having produced about a dozen 777-9s so far, Boeing needs to boost the X sales prospects.

Bringing forward the -8F is the way to do so.

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HOTR: Mitsubishi, Bombardier set June 1 to close CRJ deal

By the Leeham News staff

May 6, 2020, © Leeham News: Mitsubishi Heavy Industries announced May 7 (Tokyo time) that it will close the acquisition of the Bombardier CRJ program June 1.

Production of the CRJ was to end this summer. The COVID crisis effectively terminates the program now. But the CRJ itself wasn’t the reason MHI bought the program, for US$500m. The attraction was the built-in global product support system for the CRJ that will transition to the M100 SpaceJet. It also provides a new revenue/profit stream as MHI enters the global RJ market.

Along with it, as icing on the cake, is acquisition of Bombardier’s sales team, infrastructure and other assets.

It would take years for MHI and Mitsubishi Aircraft Corp. (MITAC) to establish its own product support system.

This is a major step in development of the SpaceJet as a new global competitor.

With the collapse of the Boeing-Embraer joint venture, MITAC can reinvigorate and strengthen its relationship with Boeing.

Embraer, which said it needed the Boeing JV to compete in the future with Airbus against the A220, increasingly faces higher risks as MITAC and MHI evolve the CRJ product support system and potentially strengthens the Boeing relationship.

MHI also announced that it will immediately write down the $500m acquisition by ¥50bn- ¥ 70bn ($470m-$656m).

 

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HOTR: Airlines, lessors cancel ~250 MAXes since January

By the Leeham News Staff

April 21, 2020, © Leeham News: Since the COVID-19 pandemic went viral beginning in January, there have been nearly 250 cancellations of the Boeing 737 MAX.

Some of these were related more directly to the grounding of the MAX. In fact, it could reasonably be argued that most were. COVID-19 exacerbated the problems, now that passenger demand fell by as much as 95%.

The MAX was grounded globally March 13, 2019. Purchase agreements generally allowed the customer to cancel the contract if delivery is delayed more than 12 months, provided there isn’t an “excusable delay.” Pandemics typically fall under an excusable delay. Grounding by regulators depends on the language in the specific contracts.

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HOTR: American sees virtually no travel for up to 7 months

By the Leeham News staff

April 7, 2020, © Leeham News: “Nobody’s traveling in the next 30 or 60 days,” said Vasu Raja, American Airlines Group Inc.’s senior vice president for network strategy. “But nobody is really making any plans to go travel in the next 90 to 150 days, either.

So reported the Wall Street Journal Sunday.

That basically takes you through the end of the year.

Singapore will suspend its Changi Airport Terminal 2 for 18 months from May 1. (Associated Press.)

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HOTR: Boeing has options to federal bailout, CEO says

By the Leeham News Staff

March 25, 2020: First, Boeing CEO David Calhoun said he wasn’t an insider (after 10 years on the Board of Directors, and as lead director for many of them). No, he merely had a front row seat in the movie theatre.

Then he trashed his predecessor, Dennis Muilenburg, for stock buyback and dividend policies (that the Board approved).

Next, Boeing said it needs a portion of the $60bn in federal aid it requested for the aerospace industry.

Now, Calhoun appears to have put his foot in his mouth again. Or did he?

When asked about the possibility of the government taking an equity position in Boeing as a condition to a bailout, Calhoun said Boeing has options to federal money.

The Wall Street Journal wrote yesterday, “I don’t have a need for an equity stake,” Boeing CEO Calhoun said Tuesday on Fox Business Network. “If they forced it, we’d just look at all the other options, and we have got plenty.”

There’s a very practical reason for Boeing to object to government taking an equity stake. It would effectively shut down bidding on some key defense contracts.

But wait a minute: if you’ve got all these other options, why ask for a federal bailout for Boeing?

Or was this a message to the street that Boeing is OK?

Still, on CNBC’s Squawk Box, Calhoun said if the credit markets stayed closed for eight months, it would be tough for Boeing to remain healthy.

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