Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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Pontifications: MAX RTS, Emirates 777X order, Suspending 737 production, more
By Scott Hamilton
Editor’s Note: News reports Sunday indicated Boeing is considering reducing or suspending production of the 737 MAX. LNA reported this possibility Dec. 11.
While Sunday’s reports suggest Boeing will halt production, LNA is told a rate cut to between 10-20 airplanes a month is also possible in order to minimize impact to the supply chain.
Dec. 16, 2019, © Leeham News: It’s time for catching up on a variety of topics.
Topics this week:
- 737 MAX Return to Service.
- Emirates Airline 777X order reduction.
- Suspending or reducing 737 production—it’s not the first time.
- E175-E2 first flight.
- Airbus wins Project Sunrise.
Pontifications: Stop hitting the snooze button, Boeing
By Scott Hamilton
Dec. 9, 2019, © Leeham News: I know Boeing is preoccupied right now. But it has to get off the pot and decide to proceed with a new airplane.
We believe the New Midmarket Airplane is still required. But Boeing salesmen have also floated the concept of a new, single-aisle airplane to key players in the market. Either way, Boeing has to do something.
At least, that’s how we see it at Leeham Co.
The order last week by United Airlines for 50 Airbus A321XLRs should be a wake up call.
It’s not the only one Boeing has had.
Pontification: A320 production challenges may extend to 2022/23
By Scott Hamilton
- Update of Boeing 737 NG Pickle Fork cracking issues.
Dec. 2, 2019, © Leeham News: Airbus sees struggles for A320 production continuing throughout next year, into 2021 and spilling into 2022/23 as the Air Space cabin is introduced on the A321XLR.
Executives also see lower margins than the target 15% for the A350 and losses on the A220 continuing into the middle of the next decade.
Even so, profit targets are expected to be met and officials still want to ramp up production rates on the A320.
This mixed picture was presented by Airbus CFO Dominik Asam during series of investors meetings last month in Asia, arranged by Citi Research’s London office.
In a research note issued Nov. 22, Citi summarized the three days of meetings with investors in Australia, New Zealand and Tokyo.
Pontifications: Good, and Bad, news from the Dubai Air Show
By Scott Hamilton
Nov. 25, 2019, © Leeham News: The Dubai Air Show proved to be a mixed bag for Airbus and Boeing.
Each company picked up important orders and commitments.
But each company saw some previously announced commitments reduced in the process, including, for Boeing, a reduction in the backlog for the slow-selling 777X.
Pontifications: Observing Veterans Day
By Scott Hamilton
Nov. 11, 2019, © Leeham News: Today is Veterans Day observance in the USA. I’m going to make a rare departure from discussing commercial aviation issues to talk about the military.
I never served—my lottery number during the Vietnam era was too high and, with this unpopular war, I didn’t have a desire to join the Army. My brother had been drafted and received orders for Vietnam. On the day of his departure to the Southeast Asian country, which also happened to be his birthday, his unit’s orders were changed. They went to Stuttgart, Germany, where he served the remainder of his two year duty.
Our servicemen of that era were frowned upon because of Vietnam. I can truthfully say I did not join this view, reserving my disdain for the leadership in Washington DC.
But I did notice that as I got older, my respect for the military grew and grew.
Pontifications: Congressional hearings on Boeing dominated by grandstanding–but damning documents revealed
By Scott Hamilton
- Senate hearing largely theater.
- House hearing has grandstanding, but substance, too.
- House reveals some damning documents.
- Muilenburg claims no knowledge of legal strategy, but top lawyer reports directly to him.
Nov. 4, 2019, © Leeham News: Last week’s Congressional hearings about the Boeing 737 MAX crisis was just as I expected: theatre, lots of grandstanding, little substance and testimony that elicited little in the way of new information.
The US Senate hearing was a perfect example of playing to the television by many Senators.
The House hearing certainly had its share, but in more lucid moments, some House members produced new documents that were especially damning to Boeing.
Boeing CEO Dennis Muilenburg and John Hamilton, VP and chief engineer, did no harm to Boeing, which was probably the prime objective. (Hamilton is no relation to me.)
Muilenburg did harm to himself, however, and some Members of Congress landed some damning blows.
Pontifications: Southwest to evaluate splitting airplane supplier next year
Oct. 28, 2019, © Leeham News: Gary Kelly, the chairman of Southwest Airlines, told CNBC Thursday that next year, the company will review whether to source airplanes from another manufacturer besides Boeing.
This, of course, means Airbus.
The prolonged grounding of the Boeing 737 MAX is the reason. Southwest says the grounding already has cost nearly $500m in lost revenues.
Kelly said the analysis won’t be for “smaller” airplanes, but he didn’t specify to CNBC what this means.
Southwest has 500 Boeing 737-700s seating 143 passengers at 30-31 inch pitch.
The Airbus A220-300 seats 145 at 32 inches in the Air Baltic one-class configuration.
The Embraer E195-E2 seats 146 passengers, but in a 28-inch pitch. At Southwest’s preferred 31-32 inch pitch, the E-Jet seats 132 passengers.
Since the context was the 737-8 MAX, did Kelly mean, not smaller than the -8? This isn’t known.
Pontifications: To no surprise, MAX was major topic at 3 NYC events
- Media, Twitter go mad over text messages.
- Recertifying MAX now looks like December or January.
- Boeing’s initial compensation offers.
By Scott Hamilton
Oct. 21, 2019, © Leeham News: New York: The grounding of the Boeing 737 MAX was expected to be a hot topic of conversation on the sidelines of the Wings Club event here Friday as well as two aviation conferences in town at the same time.
And it was.
How long would the grounding last? What’s the long-term impact on MAX values? How many cancellations might there be?
And then the media frenzy began and the Twittersphere went wild.
Reuters reported that a pilot at Boeing experienced, in 2016—two years before the Lion Air crash—the symptoms of a runaway MCAS in a simulator.
Pontifications: Muilenburg loses chairman’s title; are his days numbered?
By Scott Hamilton
Oct. 14, 2019, © Leeham News: Look for Boeing CEO Dennis Muilenburg to leave in 2020.
At least this is my view.
But some aerospace analysts I spoke with over the weekend are split. Some believe Friday’s action by the Boeing Board of Directors “stripping” (as most media headlines and stories positioned it) the chairman’s title from Muilenburg, while his retaining the president and CEO titles, is the first step in easing him out the door next year. This is my view, too.
Muilenburg also remains on the Board.
Others think handing the non-executive chairman’s title to lead director David Calhoun is actually an effort to save Muilenburg’s job.
Here’s the divergent thinking. None of the analysts wanted to be identified because by investment bank policy, their remarks hadn’t been cleared for quotation and none had yet issued research notes in reaction.
Pontifications: Muilenburg’s departure wouldn’t go far enough
By Scott Hamilton
Oct. 7, 2019, © Leeham News: A recent call for Boeing CEO Dennis Muilenburg by my friend Ernie Arvai to resign or be removed has a litany of woes at the company that occurred under the CEO.
These mostly relate to the 737 MAX crisis, but also include the policy of returning free cash flow to shareholders rather than investing in new airplanes. Other issues are also cited.
Arvai makes many good points, but he doesn’t go far enough.
If Muilenburg deserves to go, so does Greg Smith, the Chief Financial Officer and Executive Vice President, Enterprise Performance & Strategy.
The emphasis on cost control, which have become part of the focus of the MAX development, emanates from Smith. The strategy for new products ultimately falls under Smith, who vehemently opposes investment in the New Midmarket Airplane.
If these two deserve to go, so do the Board of Directors.
It’s the Board of Directors who set the shareholders’ value policy that Muilenburg carries out.