2017: the year ahead

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Introduction

Jan. 3, 2017, © Leeham Co.: The New Year is here and it doesn’t look like a good one for commercial aerospace, if measured against previous outstanding years.

There are some troubling signs ahead, piling on to a slowdown in orders from last year that didn’t even reach a 1:1 book:bill.

This year looks to be worse than last. Airbus and Boeing will give their 2017 guidance on the earnings calls this month and next. Bombardier and Embraer earnings calls are a ways off, when each will provide its guidance.

But LNC believes the Big Two in particular will be hard pressed to hit a 1:1 book:bill this year and may even struggle to match 2016 sales.

Boeing’s year-end order tally comes Thursday. Airbus’ comes on Jan. 11.

Summary
  • Wide-body sales remain weak.
  • Narrow-body backlogs and low oil prices continue to inhibit sales.
  • China, Middle East concerns emerging.
  • United Aircraft MC-21 and COMAC C919 begin flight testing.
  • Airbus A330neo, Boeing 787-10, Embraer E195-E2 and Mitsubishi Aircraft MRJ-70 roll-out and begin flight testing.
  • Airbus A321neo and Boeing 737 MAX 8 EIS.

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Pontifications: A fresh perspective at Boeing Commercial is sorely needed

Hamilton ATR

By Scott Hamilton

Nov. 28, 2016, © Leeham Co.: Boeing last week named an outsider, Kevin McAllister, as the chief executive officer of Boeing Commercial Aircraft (BCA).

I think this has the potential to be an invigorating move.

McAllister comes to BCA from his position as CEO of GE Aviation Services.

I don’t know McAllister and have no opinion whether he will be good, bad or mediocre. But I do like the idea of bringing an outsider in to run BCA. (My insider favorites were Stan Deal and Beverly Wyse.)

Here’s why.

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Airbus, Boeing agree on NMA–for now

One concept of the middle of the market airplane.

One concept of the middle of the market airplane.

Oct. 12, 2016, © Leeham Co.: It’s rare when Airbus and Boeing agree on product strategy, but officials of the two companies seemed in almost perfect alignment in separate interviews by LNC last week.

Barry Eccleston, president of Airbus Americas, and Mike Sinnett, VP of Product Strategy for Boeing, each said there is no consensus yet among customers for the Middle of the Market airplane (MOMA), also known as the New Mid-range Airplane (NMA) at Boeing.

Eccleston was interviewed on the sidelines of the annual Seattle conference organized by the British American Business Council Pacific Northwest. Sinnett was interviewed on the sidelines of the annual Governor’s Conference organized by the Aerospace Futures Alliance, a lobbying group in Washington State.

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Boeing CEO reiterates production targets

Dennis Muilenburg

Denis Muilenburg, CEO of The Boeing Co.

Sept. 15, 2016, © Leeham Co.: The CEO of The Boeing Co. is sticking with current guidance for production rates through the end of the decade despite “hesitation” in wide-body orders.

Dennis Muilenburg, speaking at a Morgan Stanley conference, said Boeing Commercial Airplanes will move up from today’s delivery stream of around 740-750 aircraft to “well over 900.”

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Will United’s new president open door for Airbus?

Scott Kirby moves from president of American Airlines to president of United Airlines. Photo via Google images.

Scott Kirby moves from president of American Airlines to president of United Airlines. Photo via Google images.

Aug. 30, 2016, © Leeham Co.: Will Scott Kirby’s move from president of American Airlines to the same position at United Airlines lead to a major shift in fleet acquisition at the Chicago-based carrier?

This is an intriguing question that may take some time to answer.

Kirby spent 20 years with American CEO Doug Parker through their careers at America West Airlines, US Airways and American.

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State officials need to act now, ahead of lean times coming at Boeing Everett

August 4, 2016 (c) Leeham Co.: With the news that Boeing may terminate the 747-8 program, effective around 2019 when the current backlog expires, the obvious

Washington Gov. Jay Inslee (D) is running for reelection. He needs to think about the coming lean times at the Boeing Everett plant in less than three years. So does his challenger and all the incumbents and candidates for Legislature. USA today photo via Google images.

question arises: what happens to the assembly line space now occupied by the massive airplane?

Given that the State of Washington elected and appointed officials generally view Boeing in a reactive rather than a proactive mode, an open letter to them seems appropriate.

It’s imperative that Washington officials begin planning now for some lean times ahead for the Everett plant. Waiting until 2019 is too little, too late.

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Pontifications: A321LR actions put pressure on Boeing to launch 737-10

Hamilton ATR

By Scott Hamilton

Aug. 1, 2016, © Leeham Co.: The order last week by JetBlue for 15 Airbus A321neos, with the option to convert these to A321LRs for potential trans-Atlantic service, comes within two weeks of Norwegian Air Shuttle converting orders for 30 A321neos to A321LRs. NAS is going to use the LRs for trans-Atlantic service.

We’re aware of at least two more campaigns for A321LRs with carriers that would use them for trans-Atlantic operations. There are undoubtedly more.

The  A321LR is an option, allowing airlines that have already ordered the 321neo to switch before construction of the planes begins. The LR EIS is 2019.

To date, Air Lease Corp, TAP and NAS have ordered the LR. Astana is taking the LR on lease from ALC. The JetBlue and NAS deals up the pressure on Boeing to make decisions on whether to launch the stretch of the 737-9 MAX, to what’s commonly called the 737-10; and whether to launch the New Mid-Range Airplane (NMA) for the Middle of the Market (MOM) sector.

The NAS announcement is significant. NAS has a large order for the 737 MAX and A320neo families. The original intent was to use the MAX on longer routes and the A320neo on shorter routes. NAS is also acting as a lessor and leasing out the A320neo family. Now, with the selection of the A321LR, this is another airline that chose the A321LR over the MAX 9.

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Weekly analyst synopsis: Farnborough recap

Analyst SynopsisJuly 20, 2016: Aerospace analysts had somewhat different takes on the commercial aviation portion of the Farnborough Air Show. This week’s analyst synopsis includes some of the analyst reports. Between now and the end of the month, earnings season begins reporting the second quarter results. Airbus reports July 27. So does Boeing. Bombardier and Embraer report after July.

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Farnborough redefines the MOM sector

AirbusNewJuly 19, 2016, © Leeham Co.: If anything came out of the otherwise dull Farnborough Air Show, it was that the Middle of the Market airplane debate is as muddled as ever.

Boeing didn’t launch, or even say much, about the prospective 737-10, a slightly larger version of the MAX 9 intended to close the gap between the 9 and the Airbus A321neo. Boeing illustrates the 737-8-based MAX 200 as a separate model in its product line up. The 737-10 will slot in above the MAX 200, if built.

Boeing increased the demand in its 20-year Current Market Outlook for the small, twin-aisle airplane by 5%–a move Airbus claims is aimed at the Boeing Board of Directors to entice it to approve launch of the New Mid-range Aircraft, or NMA as Boeing now calls the MOM aircraft.

Boeing LogoAirbus said the MOM sector ends at 240 seats (single class) and only a single-aisle airplane makes sense. This is a shift from long-standing messaging that the A321neo covers the lower end of the MOM sector and the A330-200/800 covers the upper end. This message was advanced as recently as the Airbus Innovation Days at the end of May.

With the rhetoric changing a bit, is it time to redefine the MOM sector?

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Airbus’ Leahy shifts a bit on MOM aircraft

Introduction

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John Leahy, Airbus COO-Customers. Airbus photo.

July 14, 2016, © Leeham Co., Farnborough Air Show: Basking on an order for 30 A321LRs on the final day of the Farnborough Air Show, Airbus’ top salesman said the Middle of the Market sector stops at 240 passengers and it’s best served by a single-aisle aircraft.

John Leahy, Chief Operating Officer-Customers, said twin-aisle aircraft down to 240 or even 220 passengers don’t work economically against a single aisle. The A321LR (Long Range) seats a maximum of 240 passengers and it is single-aisle. Even though Airbus has a 250-seat A330-200R (Regional) and an A330-800 (7,200nm-plus range), Leahy didn’t attempt make a case that these aircraft are suitable for the MOM sector.

Summary

  • A 767-200/A310 size replacement isn’t viable.
  • Boeing’s 20-year market forecast for the mid-sized twin-aisle is for consumption for the Board of Directors.
  • The A330-200R and A330-800 aren’t good MOM aircraft.

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