Pontifications: Boeing to focus on “long-term liabilities” in 2016’s SPEEA contract negotiations

Hamilton KING5_2

By Scott Hamilton

Nov. 16, 2015, © Leeham Co. Boeing will target “long term liabilities” in its contract negotiations with SPEEA, the engineers union, its president quoted CEO Dennis Muilenburg as telling him in September.

Ryan Rule, president of the local SPEEA union, met for an hour with Muilenburg when he was here for a visit by China’s president Xi Jinping. Rule termed the meeting cordial. He told Leeham News last week that Muilenburg wasn’t specific about the “asks” Boeing will seek in contract negotiations next year, citing only “long term liabilities,” which Rule took to mean health care and pension benefits.

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Pontifications: A380neo? Try A380TXWB. Dubai Air Show and other Odds and Ends

A380 Trent XWB

Click on image to enlarge. Airbus photo.

Nov. 9, 2015, (c) Leeham Co. Airbus last week launched its A380 flying test bed with the A350-1000’s Rolls-Royce Trent XWB 97,000 lb engine placed in the number two position.

The first thing that came to mind when I saw the photo was that if Airbus put three more engines on it, you’d have the A380neo. Or maybe call it the A380TXWB. Done and dusted, as they say in England.

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Pontifications: 50% of something or 100% of nothing: something to consider at Bombardier

By Scott Hamiltn

By Scott Hamilton

Oct. 19, 2015, © Leeham Co. Bombardier is dominating the aerospace news lately, given the reports of talks with Airbus about selling a stake of the CSeries program to the European company; a report that it planned to approach Embraer for a business tie-up; and on Friday, a long analysis by Reuters about BBD’s financial challenges.

Last week I chronicled Bombardier’s history predicament of how it got to where it is today, a very deep hole that the new management—which only got on the scene last February and which has spent much of the year reorganizing the company and hiring a new team—has to dig out of. It’s not an easy task and it won’t come overnight.

Let’s take yet another look at things, given the continued headlines last week.

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CSeries dilemma: a saga of missed opportunities, bad decisions, stiff competition

By Scott Hamiltn

By Scott Hamilton

Oct. 12, 2015, © Leeham Co.: The news agencies, stock markets and aerospace analysts last week went wild when Reuters reported there were talks going on between Bombardier and Airbus whereby the latter would take a majority stake in the CSeries program.

Within hours, both companies said talks had ended. As could be expected, the stock went into another tailspin.

Then United Airlines said it wants pilots to approve a contract, and is dangling a 100-seat airplane order for mainline operations as an incentive. The CS100 fits into this category, as does the Embraer E195 E2.

It is worth recapturing reasons BBD finds itself in its current predicament.

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Airbus gearing toward 63 A320s per month; Boeing sure to follow

By Scott Hamiltn

By Scott Hamilton

Oct. 5, 2015, © Leeham Co. Airbus appears to be closing in on a decision to boost the production rate of the A320 family to 63/mo by the end of the decade, a new report from Bernstein Research Group says.

Boeing is sure to follow with rate boosts for the 737, Bernstein writes in an Oct. 1 note.

Leeham Co. has been predicting these moves all year, and in LNC’s interview with Airbus Group CEO Tom Enders last month at the opening of the A320 Final Assembly Line (FAL) in Mobile (AL), Enders indicated the decision to boost rates would be made by the end of the year.

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Pontifications: Dueling refueling tankers

By Scott Hamiltn

By Scott Hamilton

Sept. 21, 2015, © Leeham Co.: This Friday, Sept. 25, is the date that at long last, Boeing and the US Air Force expect the first flight of the KC-46A that is equipped with the fueling system.

A “bare” KC-46A made its first flight last December. Then it spent the next six months or so on the ground. First flight of the second KC-46A, the one with the fueling system, has been delayed several times. All the program margin is gone and it’s going to be a challenge for Boeing to stay on schedule to deliver 18 combat-ready KC-46As to the USAF by 2017–two short years away. To try and stay on schedule, Boeing started production of the the airplane concurrent with the flight test aircraft, a risky proposition that could result in major rework or other difficulties if Murphy’s Law comes into play.

The KC-46A is the successor to the KC-767 International tanker program, which was an industrial disaster. Only eight airplanes were produced, four for Italy and four

Boeing KC-46A makes its first flight Sept. 25, 2015. Photo via Google images.

for Japan. It ran years late and hundreds of millions of dollars over budget. There were flutter and design issues. These problems became part of the risk assessment by the USAF in the KC-X competition evaluation between Boeing and Northrop Grumman/EADS–and one of the reasons why the Air Force selected the Northrop KC-330 offering (later named the KC-30).

Boeing successfully challenged the contract award and won the next round with what became known as the KC-46A. Boeing claimed it benefited from lessons learned from the KC-767 International program.

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Pontifications: Boeing view of market conditions today

By Scott Hamiltn

By Scott Hamilton

Sept. 14, 2015, © Leeham Co.: Randy Tinseth, Boeing’s VP Marketing, spoke with Bernstein Research last week on a variety of topics. In a note issued after the conversation, analyst Douglas Harned reported:

  • “Boeing views the 140 orders to date as a good start, and that high demand for this model will come later when it is closer to being in service. Boeing is sold out for all models of the 787 through the decade, so there are few opportunities for near/medium term deliveries in any case. The company sees the 787-10 as a natural replacement for 767s, A330s and some 777s, and expects that these will drive strong replacement

    Randy Tinseth. Photo: Boeing.

    demand in the early 2020s.”

  • “Airlines have been upgauging narrowbodies away from the 737-700 and A319. Boeing expects that the 737-900ER will gain share, but that the 737-800 (or soon the 737MAX-8) will remain its most popular narrowbody. Airlines have been moving to larger narrowbodies and using slimline seats to add capacity to existing airplanes. Boeing believes that, while this trend does exist, the market will be centered on the 737-800/A320-size airplanes, but with a larger share than in the past going to 737-900s/A321s. Boeing believes that its product set offers greater flexibility since the 737-800 and 737-900ER are closer together in size that are the A320 and A321.”
  • “In terms of orders for the 777, the companyis sold out in 2016 and is over 60% sold out for 2017, with many campaigns in progress. Production of the 777X would start in 2018 and current 777 rates will be lowered to introduce the 777X in the final assembly line (consistent with our projections). There are some 737NG slots left in 2018 and 2019, but the first available slots for the 737MAX are now in 2021.”

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Pontifications: Airbus flies past Boeing in order race

By Scott Hamiltn

By Scott Hamilton

Sept. 7, 2015, © Leeham Co.: Airbus flew past Boeing in the annual orders race when the August numbers were reported last week by both companies.

With the order for 250 A320s finally firmed up by India’s Indigo Airlines (it was announced last year), and an order for 45 A330ceos announced by China, the outcome was clear.

Through August, Airbus now has a 66% market share of single-aisle orders. Boeing has a 60% share of wide-body orders, thanks to a boost from FedEx for 50 767-300ERFs. (Boeing reported 48 767 orders net of cancellations.)

But if you remove the FedEx orders and just look at passenger airplanes, Airbus edges out Boeing in the year-to-date wide-body market share.

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Pontifications: Storm warnings ahead

By Scott Hamiltn

By Scott Hamilton

Aug. 17, 2015 (c) Leeham Co: Sometimes I never know what’s going to exercise readers. Sometimes it’s obvious. Last week it wasn’t.

Our post last week about the formidable challenges still facing Bombardier for the CSeries brought some surprising reaction, particularly on Twitter. And I didn’t see it coming.

The story was behind the paywall, but Canada’s National Post saw the public portion and called to get more information. The Post published some comments from an interview and with permission recreated a chart that was behind the paywall.

We’ve been doing risk assessments of “skyline” quality for a couple of years now, including Bombardier, which is why the reaction to last week’s post came as a surprise.

Our risk assessment has taken a couple of forms. For Bombardier, it’s a Green-Yellow-Red assessment, the meaning of which really doesn’t mean any explanation for anyone who drives a car or, in the aerospace industry, has ever seen Boeing’s Green-Yellow-Red assessment of access to aircraft financing it does every year.

The other symbolic method we use is nautical: Storm Warning Flags, looking at the top 10 narrow- and wide-body customers of Airbus and Boeing and raising a Storm Warning Flag about how solid the order is. We do this annually and the most recent time for Airbus and Boeing customers is here, also behind our paywall.

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Pontifications: Talk about government interference in private industry; book review of United “Flight 232”

  • There are many topics on which to comment, n one of which requiring a full Pontification, so today’s column is going to be a bit of a free association.

By Scott Hamiltn

By Scott Hamilton

August 10, 2015, (c) Leeham Co. Government interference: While right wing Republicans and Tea Party members decry supposed ExIm Bank interference with private industry, there is now a bill in Congress to sell millions of barrels of oil from the USA’s Strategic Oil Reserve in order to raise $15bn.

Unlike the ExIm Bank’s participation in the global capital markets, Congress’s action–if it passes–won’t create  jobs. It will compete with jobs and companies trying to sell oil in the global market place. It will help drive prices down.

Once more, the hypocrisy of Congress is glaringly evident.

Bombardier: Pierre Beaudoin should have left Bombardier last February when he relinquished the title of president and CEO to Alain Bellemare instead of assuming the chairman’s title. This is the opinion of a few people with whom I’ve talked just in the last week.

Furthermore, the Beaudoin family needs to step out of the company entirely and give up its voting control (it has 54% of the voting stock) if BBD wants to attract new investors, says one Canadian aerospace analyst who hasn’t written any of this publicly.

“I can’t even see how they’re going to raise money for BT. I can’t imagine European investors would like subordinate shares either. Equity markets won’t be supportive unless the Family gives up control,” this analyst wrote me.

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