Airbus, Boeing likely to push for 70/mo single aisle airplane production rates: analysis

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Introduction

Feb. 19, 2018, © Leeham Co.: Production rates for the Airbus A320 and Boeing 737 families are already at record levels, and heading higher.

Airbus plans to hit a production rate of 60/mo next year. Boeing is taking the 737 to rate 57. Boeing is studying rates of 63/mo and even 70/mo. Airbus is sure to match.

How will the airframers achieve these rates?

Information gleaned from the sidelines of the Pacific Northwest Aerospace Alliance conference last week give a reasonably good picture of how Boeing will get there.

Visibility was less on Airbus, which is unsurprising given the conference was in Boeing’s back yard in Lynnwood (WA).

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Airbus, plagued by “decapitation,” faces tough choices on NMA: consultant

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Introduction

Feb. 15, 2018, © Leeham Co.: Airbus’ plans to respond to Boeing’s prospective New Midrange Aircraft, aka 797, is a mystery to one of the industry’s leading aviation consultants.

Richard Aboulafia of the Teal Group notes that Airbus’ research and development investment overtly disappears after 2018, with the introduction into service of the A350-1000 and the A319neo.

Aboulafia spoke at Day 2 of the Pacific Northwest Aerospace Alliance (PNAA) conference in Lynnwood (WA).

He’s long compared R&D spending between Airbus and Boeing, often praising the former for its level of investment and criticizing the latter for lagging.

Now, Airbus’ level of spending is a question mark while Boeing’s is a comfortable level compared with revenue, Aboulafia says.

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NMA demand skeptics aren’t thinking outside the box, Boeing exec says

Feb. 13, 2018, © Leeham Co.: Skeptics who question Boeing’s market demand forecast of 4,000 airplanes for the New Midrange Aircraft aren’t thinking “outside the box,” says Randy Tinseth, VP Marketing.

Tinseth heads up the team that prepares Boeing’s annual Current Market Outlook for the next 20 years.

Boeing’s CMO forecasts a need for about 5,900 small twin-aisle aircraft (fewer than 300 seats but larger than single-aisle airplanes of more than 200 seats). About 4,000 of these are for the NMA.

Others, including Airbus, Pratt & Whitney, Rolls-Royce and some key suppliers see the market as between 2,000 and 2,500. Leeham Co.’s own estimate is 2,300.

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Global Services won’t hurt airline tech ops, says Boeing official

Feb. 13, 2018, © Leeham Co.: A Boeing official today dismissed concerns that expanding Boeing Global Services, with additional controls on aftermarket support for commercial airplanes it builds, might negatively impact potential sales.

Several airlines, including Delta, Singapore, Lufthansa, Air France-KLM and some Chinese carriers, operate their own MRO facilities that not only maintain their own fleets, but offer services to other airlines.

Kevin Michaels, president of the consulting firm AeroDynamics, expressed concern that Boeing’s tighter control of aftermarket parts is already leading to customer satisfaction issues at some airlines. He also said Boeing might lose airplane sales to Airbus if it is unwilling to grant MRO rights to the maintenance facilities of those carriers that operate them.

Michaels made his remarks at the annual conference of the Pacific Northwest Aerospace Alliance.

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Boeing risks losing orders in aftermarket business push, says consultant

Feb. 13, 2018, © Leeham Co.: Boeing’s drive to dramatically increase its aftermarket business, competing with suppliers or even controlling the parts needed by airlines for maintenance, repair and overhaul operations have a risk, says an industry consultant.

Kevin Michaels, president of AeroDynamics, said Boeing potentially could lose airplane sales if it takes too hard an approach to controlling aftermarket parts.

Michaels appeared at the 2018 annual conference of the Pacific Northwest Aerospace Alliance (PNAA) today in a Seattle suburb.

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Boeing launches PFS 2.0

Update, 0815 PDT July 7: Boeing Corporate Headquarters responded to our questions. The transcript has been added to the article below.

Boeing LogoJuly 7, 2016, © Leeham Co.: Boeing’s controversial Partnering for Success (PFS) drew ire from its suppliers and scorn from observers for its heavy-handed, threatening cost-cutting demands: shave your costs to Boeing 15%-25% or be put on our own no-fly list of companies that we won’t do business with.

Boeing wasn’t shy about who it targeted, or punished. Even supply-chain giant United Technologies was placed on Boeing’s no-fly list when it balked at the onerous demand.

Now Boeing is moving forward with PFS 2.0, a second round of demands.

Summary
  • PFS 1.0 focused on price.
  • PFS 2.0 focuses on terms and conditions.
  • Boeing wants to stretch accounts payables; some suppliers balking.
  • Suppliers get credit for investing in technology.
  • Threats cease in PFS 2.0.

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Why Boeing won’t take a charge on 787s

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Introduction

Boeing 787-9. Source: Boeing.

April 11, 2016, © Leeham Co.: Boeing has $29bn in deferred production costs and another $3bn in deferred tooling costs for its 787. The accounting block, for its program accounting, is a record 1,300 aircraft. Many Wall Street analysts are skeptical whether Boeing will ever recover the huge deferred numbers.

Boeing insists it will.

Still, taking a charge of some number—as it has done twice for the 747-8 and twice for the 767-based KC-46A—is something Boeing repeatedly insists it doesn’t need to do.

Why not?

There are a few key reasons, say Wall Street analysts who follow Boeing: revenue, cash flow and the stock price.

Summary

  • Bank of America Merrill Lynch estimates Boeing needs to post a profit of $30m on each of the remaining 900 787s to be delivered to recover the deferred costs. LNC figures this number is higher.
  • Pricing pressure from Airbus makes it difficult to obtain this profit.
  • The deferred costs limit Boeing’s ability to price down to meet Airbus’ offers to customers.
  • Credit Suisse figures Boeing can recover only some $22bn of $29bn in deferred production costs.
  • Boeing warns in SEC filings a forward loss might be required.
  • But no forward loss is likely unless revenue falls short.

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Pontifications: Airbus’ new edginess

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By Scott Hamilton

March 14, 2016, © Leeham Co.: Airbus is presenting a new edginess in the long-running war of words with Boeing, adopting a tactic Boeing has used for years to make its case.

The European manufacturer has never been shy about getting in its digs at Boeing, but generally Boeing’s messaging—years in the making and steadfastly adhered to—has had more sticking power than Airbus’.

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Pontifications: There are numbers, and there are numbers

Hamilton KING5_2

By Scott Hamilton

March 7, 2016, © Leeham Co.: The public relations battle between Airbus and Boeing was on full display at the annual conference last week of the International Society of Transport Aircraft Trading (ISTAT) in Phoenix (AZ).

As usual, the respective officials of the two companies used numbers to make the case that their airplanes sold more than the other guy.

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Bjorn’s Corner: Engine architectures

By Bjorn Fehrm4 March 2016, ©. Leeham Co: There is a saying, “There’s more than one way to skin a cat.” The same goes for making successful Turbofans to commercial aircraft.

At the recent Pacific Northwest Aerospace Alliance 2016 sub-supplier conference in Seattle, GE, Rolls-Royce and Pratt & Whitney all talked about their latest engine projects and the technology development that was critical to their success.

The engines they talked about, the GE9x, Rolls-Royce Advance and Pratt & Whitney’s Geared Turbofan, can all be characterised as the best of breed for their intended use but they could not be more different in how their level of excellence is achieved.

It made for interesting listening. Here’s the gist of what was told.

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