Pontifications: Southwest meltdown (its second in 3 months) is a day of reckoning; what will it do to fix it?

Jan. 3, 2023, © Leeham News: I’ve been employed by, consulting, or writing about the airline industry for 43 years.

By Scott Hamilton

I’ve seen plenty of times when flights were disrupted. There was 9/11, in which the US skies were closed for four days. It was a first. The COVID pandemic essentially shut down global traffic for months, another first. I’ve seen 40% of the US capacity operating in bankruptcy following the 1991 Persian Gulf War. There was SARS. The hijacking epidemic in the 1970s. The Palestine Liberation Organization hijacked four airliners at once and blew them up in the desert, fortunately having let passengers and crew deplane first.

See airport chaos:


But never have I seen the chaotic meltdown of an airline like that seen during the Christmas period of Southwest Airlines. On Boxing Day, the Luv airline canceled two-thirds of its flights. Its hubs in places like Baltimore and Chicago Midway were a sea of humanity and baggage. Southwest’s meltdown was simply unbelievable.

Yet, somehow, I wasn’t terribly surprised.

I’ve been watching Southwest for nearly five decades. I gave up flying it probably close to 20 years ago, even though I love Midway Airport (I still have family in the Chicago suburbs). Southwest has been on a long, long, long road to implosion for years.

Here’s why.

Read more

Pontifications: LNA’s Top 10 stories of 2022

Dec. 26, 2022, © Leeham News: This year has been a year of recovery.

By Scott Hamilton

Recovery from the COVID-19 pandemic. Recovery from shortages in the supply chain, layoffs during the pandemic and from financial losses. Boeing continues to struggle in its recovery from the 2019 grounding of the 737 MAX and 2020 suspension of deliveries of the 787.

This year saw a resumption of the big international European air shows since the pandemic—Farnborough. There was great anticipation that Boeing was working on new airplane programs in earnest for the first time in three years.

And disappointments.

Here’s a review of the Top 10 stories LNA published, by readership.

Leeham News in addition to Twitter, Facebook and Linkedin, may now be found on Post.news here and on Mastodon here.

Read more

Pontifications: Nope, not convinced about Boom’s new entrant engine plans

Dec. 19, 2022, © Leeham News: Nope. Not convinced.

By Scott Hamilton

Boom’s CEO Blake Scholl last week announced that he’s put together a group of three companies to work with his firm to design an engine for his Overture supersonic transport.

None of the companies—including Boom—has designed a big jet engine, let alone one for a commercial airliner or an SST.

Yet Scholl said Overture’s first flight will slip only a year, from 2026 to 2027, and entry into service is still set for 2029.

No way will this happen.

Related Article

The three companies are Florida Turbine Technologies, which will design the engines; GE Additive, which will consult on ways to fabricate engine parts through additive manufacturing technology; and StandardAero, which will be Boom’s MRO partner and will consult on making the engines easy to maintain.

Florida Turbine is a subsidiary of Kratos Defense & Security Solutions. It has designed small jet engines for drones and cruise missiles. But not for big jets or SSTs.

Leeham News in addition to Twitter, Facebook and Linkedin, may now be found on Post.news here and on Mastodon here.

Read more

Pontifications: The Queen is Dead. Long live the Queen.

By Scott Hamilton

Dec. 12, 2022, © Leeham News: The 1,574th Boeing 747 rolled off the production line last Tuesday. The last one, after 53 years of continuous production. The iconic aircraft was known as the Queen of the Skies.

The larger A380 didn’t replace the 747. McDonnell Douglas’s DC-10 and MD-11 didn’t replace it. The Lockheed L-1011 didn’t replace it. Neither did Boeing’s own 777-300ER. And neither will the 777X. The 777-X does not replace the 747—it succeeds the 747. I don’t think that anyone will characterize the 777X as “the Queen of the Skies.” The X looks like any other airplane. The 747 look is unique (a well-worn, overused word that in this case applies) and iconic. It has a nose door. The 777XF does not.

The Queen is Dead. Long live the Queen.

The last Boeing 747 to be built rolled off the Everett factory line Dec. 6, 2022. Line No. 1574 is for Atlas Air. After painting, a decal of legendary engineer Joe Sutter, the father of the 747, will be applied to the starboard side. Photo credit: Leeham News.

As it turns out, there was a debate within Boeing as far back as 2004 about whether to cancel the 747 program then. The 777-300ER was just entering service. There was a recognition within Boeing that the -300ER was the beginning of the end for the 747.

I tell this story in my book, Air Wars, The Global Combat Between Airbus and Boeing. Also in the book is the story about how Boeing tried to launch the 747-500 and 747-600, without success. Airbus won this competition, launching the A380 with Singapore Airlines and in the process killing the 747 derivatives. But Phil Condit, then the CEO of Boeing, wasn’t upset. Something else was in the hopper.

Below is a synopsis of these stories, excerpted from Air Wars.

Read more

Pontifications: A lost decade for new airplanes

By Scott Hamilton

Subscription Required

Dec. 5, 2022, © Leeham News: In September 2020, LNA wrote that commercial aviation was facing a “lost decade.”

The impetus for this prediction was the COVID-19 pandemic crisis.

“Commercial aviation is facing a lost decade due to COVID,” we wrote. “Yes, most forecasts target 2024-2025 as returning to 2019 passenger traffic and aircraft production levels. However, LNA in July published its own analysis indicating full recovery may not occur until 2028.”

Nobody predicted that effective vaccines would emerge as quickly as they did. Drug makers in the US and Europe moved heaven and earth to produce vaccines to fight COVID-19. These have been, by and large, extremely effective. (I’ve had two shots and three boosters and have not caught COVID, despite being at one major conference with 13,000 people.)

China created its own vaccine, which failed to stem the tide there. President Xi quickly adopted total lockdowns at the first sign of outbreaks. Despite this, China is now setting records for new infections. Commercial aviation recovery there remains underperforming. China’s performance illustrates the underlying reasoning we had in concluding commercial aviation was facing a lost decade.

This sector still faces a lost decade, though for some fundamentally different reasons.

Read more

Pontifications: Airports and aviation or mass transit, conventional or high-speed rail

Nov. 26, 2022, © Leeham News: Some European countries declared war on the airline industry. Authorities in The Netherlands want to put permanent caps on operations at the Amsterdam airport. The French government wants to ban most airline flights of two hours or less within the country.

By Scott Hamilton

These two countries prefer requiring travelers to use trains vs planes. In the US, there are some on the East Coast who similarly advocate mass transit, more conventional rail and the creation of high-speed rail over short-haul flights operated by small regional jets.

Here in the greater Seattle area, forecasts conclude that there will be airport passenger demand for 97 million people by 2050. The region’s main airport, SeaTac International, has growth plans to accommodate 50 million passengers by then. Physical constraints prevent the airport from expanding. Just adding a third runway took 20 years and required a massive landfill to match the plateau topography on which the airport sits.

A task force recommends three sites south and southeast of SeaTac. Each is a greenfield site that is mostly farmland. Aside from the opposition from landowners over their properties being targeted, anti-aviation people are already suggesting creating more conventional and brand new high-speed rail alternatives.

But, like so many advocating battery-powered airplanes and eVTOLs, or hybrids, or hydrogen-powered aircraft, those advocating substituting rail for airports ignore all the costs—both financial and otherwise—that go into a rail system.

Let’s take a look.

Read more

Pontifications: Some Boeing product development engineers reassigned to 737, 787 lines to fix problems

Subscription Required

By Scott Hamilton

Nov. 21, 2022, © Leeham News: When Boeing CEO David Calhoun told his audience at the Nov. 2 investors day (and all those watching on the web) that there will be no new airplane introduced until the middle of the next decade, it was a shocker to some.

Wall Street analysts and investors loved the news. There would be no spike in research and development spending. Free Cash Flow—which is seemingly all that matters to analysts—was forecast to be $10bn by 2025-2026. Returning money to shareholders seemed to be restored as Boeing’s No. 1 priority. The stock price went up 18% in the week after the news.

Calhoun said there would not be a new engine before the middle of the next decade that would support the development of a new airplane. Calhoun ignored advances in airplane/wing design as a contributor to reducing fuel burn, however.

But, as the late radio commentator Paul Harvey used to say, “now, for the rest of the story.”

Since the Nov. 2 investors day, the first since 2018, LNA quickly learned that there was more than expressed at the investors day event.

  • While officials pointed to continuing production challenges, mostly fingering the supply chain, this is only part of the story.
  • Quality control slipped not only at the Charleston 787 factory, as has been widely reported. It remains an issue even today.
  • Quality control is also a problem at the 737 Renton and 767 Everett factories.
  • Quality declined in part because there are so many new hires to replace retirements, early buyouts, and layoffs. These new hires have a learning curve required that slows production and makes quality control challenging.
  • Product Development engineers diverted to 737 and 787 production to resolve issues.

In the meantime, Calhoun purchased 25,000 shares of stock on Nov. 8 for approximately $3.87m. Insider purchases like this typically send a message to Wall Street and stockholders that the CEO (or whomever) has confidence in the company’s future.

Read more

Pontifications: Takeaways from the Boeing Investors Day

Nov. 14, 2022, © Leeham News:  Here are some takeaways from last week’s Boeing Investors Day.

New “Airplanes”

By Scott Hamilton

When CEO David Calhoun said there won’t be any new airplane this decade, much of the industry went into shock. Consultant Richard Aboulafia, writing in Forbes, said the decision threatens Boeing’s future in commercial aviation. He’s previously predicted delaying a new airplane program launch will see Boeing descend to about a 30% market share.

Kiran Rao, the former chief product strategist for Airbus and now an advisor to airlines and lessors, told LNA that Boeing is now headed to a market share between 20% and 30%.

In the wake of Calhoun’s announcement, some wondered when Boeing would “launch” a new airplane. Would this be in the last part of this decade, with entry into service in the mid-2030 decade? Or did Calhoun mean a program launch next decade?

A Boeing spokesman provided this transcription to clarify:

“And then there’ll be a moment in time where we’ll pull a rabbit out of the hat and introduce a new airplane sometime in the middle of next decade,” Calhoun said. (Emphasis added.)

A normal program launch-to-EIS is about seven years. One could conclude, then, that the program launch could come around 2027 or 2028 if EIS is 2035. (Boeing wants to shrink the timeline to five years from launch to EIS.) CFM is working on an Open Fan engine design for the single-aisle sector (ie, replacing the 737 MAX and A320neo). The EIS target for the engine is 2035. So, Calhoun’s statement seems to fit with his desire for a step-change engine.

Intriguing, to say the least.

Read more

Pontifications: Boeing is fighting the last war instead of the present one

By Scott Hamilton

Nov. 7, 2022, © Leeham News: With the firm declaration that Boeing won’t launch a new airplane program until the next decade, CEO David Calhoun is signaling he’s content to see the company shrivel into a distant number two position after Airbus.

Amazingly, one Boeing executive told one of the attendees of the investors day event that he (the executive) was okay with that for now.

It’s a recipe for Boeing to follow the path of McDonnell Douglas Corp. (MDC) in its long decline into commercial oblivion. MDC merged into Boeing in 1997. Boeing hasn’t been the same since. Its legacy as an engineering company shifted into one focused on shareholder value. McDonnell Douglas had become a company where Derivatives-R-Us prevailed. Boeing long ago shifted to this mode as well.

Calhoun is a creature of Jack Welch’s GE mantra. Cut costs. Emphasize profits and shareholder value. And while Welch’s philosophy that GE should always be No. 1 or No. 2 in any industrial sector it played in, Welch’s vision of No. 2 was a close No. 2. Boeing’s decline into a distant No. 2, with only a 40% market share against Airbus (and less when looking only at the total single-aisle sector) began long before Calhoun became CEO in January 2020.

David Calhoun. Source: Boeing.

Calhoun told his audience of investors and aerospace analysts that he’d like nothing more than to return cash to shareholders. Knowing who your audience is is part of any speaker’s requirement, so in isolation, I’m not going to chop Calhoun up for this statement. The trick is to balance shareholder return against the future of the company.

As I’ve written in the past, returning 100% of free cash flow to shareholders isn’t necessary. Before suspending the dividends and stock buybacks after the MAX grounding, Boeing returned more than $62bn to shareholders over a decade. Using part of this for new airplanes would have been a good approach.

Calhoun declared that even if all the advanced design and manufacturing is ready this decade, he won’t support a new airplane until the next decade when a new engine that can reduce fuel consumption by at least 20% is ready. Any new airplane must hit this target to benefit airlines and the environment, he said.

Well, there are other ways to hit this target. LNA discusses this behind today’s paywall.

In the meantime, Boeing is content to rest on the past.

Read more

Pontifications: Analysts overlook Boeing losses for cash flow gain; what’s behind the jump in charges?

By Scott Hamilton

Oct. 31, 2022, © Leeham News: Boeing last week surprised Wall Street aerospace analysts with a huge loss instead of the expected profit for the third quarter.

But positive cash flow was the metric the analysts focused on. The loss was attributed mostly to big write-offs of five defense programs: the KC-46A, VC-25B, MQ-25, T-7A, and Commercial Crew (the Starliner) programs. Boeing wrote off $2.8bn for these programs in the quarter. The company previously wrote off $8.8bn for these programs.

The specifics: Boeing took charges of $1.2bn for the KC-46 tanker, $766m on Air Force One, $351m for the MQ-25 aircraft carrier tanker drone, $285m for the T-7 jet fighter trainer, and $195m for the Commercial Crew.

All are fixed price contracts that have come back to bite Boeing big time.

Boeing also had a loss of $643m in the quarter at Commercial Airplanes. Global Services reported a profit of $733m and Boeing Capital Corp (BCC)—the leasing unit—eked out a $23m profit.

For the nine months, Commercial Airplanes recorded a loss of $1.74bn. Defense lost $3.66bn. Services reported a profit of $2.1bn and BCC barely recorded a profit of $14m.

But cash flow was positive at $2.9bn. And this is what analysts liked. Yet there was a little smoke-and-mirrors involved in this. Boeing said the cash flow was helped by “higher commercial deliveries, favorable receipt timing, and a tax refund,” as analyst Robert Stallard of Vertical Research put it. The tax refund was $1.5bn, a huge chunk of the cash flow touted by Boeing.

Read more