Leeham News and Analysis
There's more to real news than a news release.
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.
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.
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.
Pontifications: Airbus’ new edginess
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’.
Pontifications: There are numbers, and there are numbers
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.
Bjorn’s Corner: Engine architectures
4 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.
PNAA Day 3: Boeing bought $40bn of stuff from suppliers in 2015
Feb. 11, 2016, © Leeham Co. “We bought more than $40bn worth of stuff from suppliers last year. We delivered 762 airplanes last year and we could not have done that without the suppliers.
- Feb. 11, 2016: Today is the last of three days of conference meetings organized by
the Pacific Northwest Aerospace Alliance (PNAA), in Lynnwood (WA). We’ve provided live reporting throughout the three days.
“We’re going through a shift…and through a global dogfight,” Kent Fisher, VP-GM of Supplier Management or Boeing, told the Pacific Northwest Aerospace Alliance (PNAA) conference today.
PNAA Day 2: Cautionary note raised
- Feb. 10, 2016: Today is the second of three days of conference meetings organized by the Pacific Northwest Aerospace Alliance (PNAA), in Lynnwood (WA). We’re providing live reporting throughout the three days.
Feb. 10, 2016: Large commercial aircraft deliveries hit just under $104bn in 2015, a 4.9% gain over 2014. Regional aircraft values, however, were just $7.1bn, a decline of 10.5% year-over-year, said Richard Aboulafia, a consultant with the Teal Group.
Deliveries of all aircraft types, including military, rotocraft, etc., saw only a 0.6% increase YOY. Jetliners account for 60% of the total values.
PNAA Day 1: Boeing’s view of the global market
- Feb. 9, 2016: Today is the first of three days of conference meetings organized by the Pacific Northwest Aerospace Alliance (PNAA), in Lynnwood (WA). We’re providing live reporting throughout the three days.
Randy Tinseth, VP-Marketing for Boeing, said forecasts predict oil as low as $7/bbl and as high as $80/bbl–as always, “giving themselves a lot of leeway.”
Asia remains the top growth market, adding 100m passengers every year (the size of Atlanta’s international airport, the world’s busiest, which served 100m passengers lasgt year.
The cargo market has been challenged over the last six years, and it comes and goes, but it will come back when trade comes back, Tinseth said.
- Tinseth compared the 787-10 with the A330-900 to show a claimed 165nm range advantage–but the A350-900 (new generation-to-new generation) was omitted. The A350-900 has a much longer range than the 787-10. (Updated to correct the A330-800 to the A330-900.)
The single-aisle market represents 70% of the market and half the value, including Airbus and all other competitors.
“We as an industry and we as a company have to focus on doing the right things…and build at the right cost” to be successful, Tinseth said.
He said that given the total forecast of 35,000 airplanes from regional jet to Very Large Aircraft, there is a need for 60% of the sales still to be made.
Tinseth said the company will deliver fewer 737s this year because the supply chain can’t keep up as the transition between the NG and MAX takes place.
Update: This email was received later from Boeing’s Corporate Communications department:
I wanted to touch base on this bullet in your coverage of Randy’s PNAA presentation.
After talking to Randy, I believe his response was lost in translation.
He was making the point that the transition to MAX is the reason we’ll deliver fewer 737s—because we’re producing several MAX airplanes this year that won’t deliver until 2017.
On a follow up question about separate production lines, he was simply making the point that the NG and MAX share a common supply chain.
So the supply chain is delivering precisely to our 42 per month rate. We’re producing 42 per month, but won’t be able to deliver to that rate this year due to MAX certification.
His point was the opposite of “can’t keep up.” Our suppliers are doing exactly what we need them to do. We can’t expect them to deliver at a rate higher than 42 right now just so we can build more NGs to make up for the MAXs that won’t deliver this year. And of course, that would go against our own rate hike schedule.
China’s market has slowed, but the government is restructuring the economy but “we see robust, double-digit growth” for the future, he said.
Despite the fluctuation of oil prices, “we haven’t seen a change in the replacement pattern,” Tinseth said. Aircraft reach maintenance requirements, interior upgrades and certain ages that simply need replacement.
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 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
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Posted on July 7, 2016 by Scott Hamilton
air force tanker, Boeing, Leeham News and Comment, Pacific Northwest Aerospace Alliance, United Technologies
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