Pontifications: Long road ahead, but Boeing will recover

By Scott Hamilton

May 3, 2021, © Leeham News: Cowen Co. called the Boeing 1Q21 financial results “messy” with questions unanswered.

Credit Suisse characterized a “challenging 1Q, though recovery should begin to accelerate.”

My take falls in line with Credit Suisse. It was a challenging first quarter and lots of variables overhang Boeing going forward. But I was struck by the confidence displayed by CEO David Calhoun and CFO Greg Smith going forward. And I’m not one to drink the Kool-Aid by any stretch.

To be sure, many challenges lie ahead for Boeing. Returning the 737 MAX to service has been anything but smooth. New issues popped up that resulted in Boeing (not the regulators) grounding the airplane again. Deliveries were suspended once more.

After 10 years of production, Boeing suspended deliveries of the 787. The KC-46 tanker still isn’t performing as required after nearly two years of delivery delay and limited operations with the US Air Force.

This is not The Boeing Co. of decades past.

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Pontifications: Balance shareholder value with product development and strategy

April 26, 2021 © Leeham News: Balance shareholder value with the long-term strategy of The Boeing Co.

By Scott Hamilton

This is what Boeing needs to do. But there were conflicting signals from the 2020 annual shareholders meeting held April 20 via virtual webcast and dial-in participation.

“We want to get back to a dividend policy. I can’t give you a date and we need a return in our commercial aviation department to support that.” So said David Calhoun, CEO.

Yet Calhoun was circumspect about a new airplane program.

When asked about developing a new airplane, Calhoun said—as he has before—that Boeing’s current research and development focus is on refining engineering modeling and production methods. These will be the “real differentiators” for the next new airplane.

“Calhoun vowed to return Boeing to its engineering roots,” reported Bloomberg News.

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Pontifications: End appears in sight for 16-year old US-EU trade dispute

By Scott Hamilton

April 19, 2021, © Leeham News: There appears to be progress in resolving the 16 year long trade dispute between Airbus and Boeing. Finally.

The dispute officially is between the European Union and the United States. But neither political entity would have pursued a dispute but for complaints by Boeing and Airbus.

No recap of the trade dispute is required for LNA readers.

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Pontifications: More of the same expected at Boeing’s annual meeting

By Scott Hamilton

April 12, 2021, © Leeham News: Boeing’s annual shareholders’ meeting is April 20.

The entire Board of Directors is up for election. Boeing sets terms for one year. In theory, this prevents entrenchment. In Boeing’s case, Board members historically are reelected year after year after year.

There are several members who were appointed after the 737 MAX crisis. Still, there are major gaps in the Board’s makeup.

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Pontifications: Southwest didn’t invite Airbus to bid

By Scott Hamilton

April 5, 2021, © Leeham News: Southwest Airlines didn’t ask Airbus to submit a commercial bid for the A220-300, three knowledgeable sources tell Leeham News.

Southwest conducted an internal technical analysis of the A220-300 vs. the 737-7 MAX. The A220-300 offered better economics. But this competed against the costs of retaining a common 737 fleet.

“Southwest acknowledged the merits of the A220, but there was no competition” for a commercially-based bid, LNA is told.

The airline placed an order on March 29 for 100 737-7s. Southwest said the order was an outgrowth of talks with Boeing for compensation due to the 20-month grounding of the MAX.

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Pontifications: Recovery plans from the pandemic at ATR, De Havilland

By Scott Hamilton

March 29, 2021, © Leeham News: Aviation stakeholders’ attention understandably focuses on Airbus and Boeing as the industry works its way through the COVID-19 pandemic. Embraer gets less attention than the Big Two.

But two other OEMs must be considered as well: ATR and De Havilland Canada.

Outside of China and Russia, whose home-grown industries sell only to these markets, ATR and DHC are the only manufacturers of turboprops in the 50-90 seat sectors.

LNA revealed on Jan. 12 that DHC would suspend Dash 8-400 production after the small backlog rolled off the assembly line. The privately held company delivered 11 airplanes last year due to the pandemic.

About 900 aging regional turboprop aircraft need to be replaced in the coming years.

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Pontifications: Embraer’s China ambitions

March 22, 2021, © Leeham News: Embraer wants to become a big player in China.

By Scott Hamilton

“We see a huge market potential there,” said Arjan Meijer, CEO of Embraer Commercial Aviation, in an interview with Nikkei Asia. The news outlet continued, “The company expects worldwide demand for 5,500 jets with up to 150 seats over the next 10 years. A third of that will come from Asia, with a large part of it from China, Meijer added.”

However, China presents risks and few rewards to companies wishing to gain a significant foothold. This is especially true for commercial aviation companies. China has high ambitions for the commercial aviation industry. Partnering with China in this sector produced more heartbreak than success.

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Pontifications: AerCap and GECAS to combine — assessing the impact

By Scott Hamilton

March 15, 2021, © Leeham News: GE Corp.’s decision to sell its mega-leasing unit, GECAS, to AerCap represents a huge shift in commercial aviation.

For decades, GECAS was the largest lessor in the world. One of GE’s best profit centers, GECAS was a major source of financing to airlines. The lessor purchases and leases back airliners, as do most lessors, as well as initiating leases with orders received directly from the OEMs. GECAS’ scale was a magnitude or two larger than most competitors.

The closest competitor was International Lease Finance Corp., a unit of insurance giant AIG. ILFC’s leadership liked to boast the asset value of ILFC’s smaller fleet was greater than GECAS, which while larger had more older airplanes in its portfolio.

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Pontifications: First flight nears for Berlin Airlift Foundation’s replacement airplane

The left wing of the Berlin Airlift Historical Foundation Douglas C-54E was impaled by a hangar beam during a tornado. Source: BAHF.

By Scott Hamilton

March 8, 2021, © Leeham News: The Berlin Airlift Historical Foundation appears to be weeks away from the test flight for the replacement of the Douglas C-54E that was badly damaged last year in a tornado.

The 76-year old airplane participated in the historic 1948 airlift that brough food, coal and other goods to West Berlin after the Soviet Union initiated a ground blockade. The Soviets tried to starve the West Berliners into submission and force the former World War II Allies (Britain, France and the US) to hand over occupation of West Berlin to the Soviets, who occupied East Berlin deep inside East Germany.

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Pontifications: Legislature weighs overdue actions for aerospace

March 1, 2021, © Leeham News: Two bills before the Washington State Legislature intend to create long-term strategic plans to grow the state’s advanced manufacturing sector in general – and the space industry in particular.

By Bryan Corliss

To this we say yes, hell yes and amen.

North America’s largest aerospace cluster has lurched from crisis to crisis over the past 20 years, with elected officials scrambling to meet Boeing’s demands for tax, workforce and labor concessions.

And – much to our dismay – for most of the past two decades, leadership in the state Capitol of Olympia has been content to cobble together ad hoc responses with only the faintest lip service toward any kind of long-range strategic planning for future industry needs.

These bills – Substitute House Bill 1170 and Substitute House Bill 1190 – have the potential to change all of that.

  • Bills contain a lot of what we’ve long advocated
  • Manufacturing bill sets ambitious goals for state
  • Space bill seeks to boost – and capture – fast-growing sector
  • Taxes aren’t on the table — yet
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