July 20, 2020, © Leeham News: The timing is coincidental. If you think the airline industry is in a wind shear now, don’t be fooled.
The industry has been in perpetual turbulence for 50 years.
At least that’s the theme of an airline executive’s new book, Turbulence.
David Banmiller began his career as a ticket agent, when hand-writing the coupons at the airport as common practice.
He retired three years ago after a career that saw him in executive positions at AirCal, American Airlines and other carriers.
He became a bankruptcy reorganization specialist as well.
Banmiller weaved through American, TWA, AirCal, the second Pan Am, Aloha and Air Jamaica. He was CEO of AirCal when it was sold to American, where he became an executive under legendary CEO Bob Crandall. Banmiller went on to become CEO of Aloha, Pan Am and Air Jamaica. He took the first two through bankruptcy reorganization and restructured Air Jamaica outside of the courts. He also served as CEO of Sun Country Airlines.
Throughout his careers, Banmiller experienced many of the downturns of the airline industry: oil price wars, 9/11, the SARS pandemic and now, from his retirement, COVID-19.
July 13, 2020, © Leeham News: Earnings season calls for the second quarter begin this month.
For our readers, Airbus and Boeing are the big ones.
Boeing’s earnings call is July 29. Airbus follows the next day.
A few early analyst previews were issued last week for Boeing.
July 6, 2020, © Leeham News: I really, really want to return to traveling by air soon. But I don’t expect to fly until next year.
I’m not worried about being on the airplane. As LNA’s Bjorn Fehrm detailed over a series of Friday posts, the cabin purification technology scrubs the air every few minutes.
The problem is not the airplane.
It’s the people who fly.
June 29, 2020, © Leeham News: Boeing may be set to begin recertification flights of the 737 MAX as early as today, The Seattle Times reported last week.
Testing will take three days, if all goes well. But Boeing still has a lot of work to do to fully satisfy regulators.
According to The Times, Transport Canada and Europe’s EASA require additional modifications to enhance safety on the MAX. The additional changes may not be required for certification but must be done within a year, the paper reports. The MAX 10 must have the changes before it is certified.
June 22, 2020, © Leeham News: Although more passengers are flowing through airports and airlines are adding back service, airplane order deferrals continue.
Airline bankruptcies do, too.
LEVEL’s short haul operation went into bankruptcy last week. LATAM Argentina ceased operations. Lufthansa said it may seek administration if shareholders don’t agree to the government bailout negotiated by the airline.
New orders dried up. And, so far, there is no telling when there might be some placed.
Boeing announced just a handful of new orders last month. Airbus didn’t announce any orders in May.
June 15, 2020, © Leeham News: The jet engine division of Rolls-Royce faces an uncertain future because of its own problems, exacerbated by the impact of COVID-19 on commercial airlines.
Beset by problems with its Trent 1000, Boeing 787 engine, hampered by a huge error in judgment to withdraw from a joint venture with Pratt & Whitney, beset by the premature termination of the Airbus A380 program and now facing a long-term impact of the coronavirus crisis, Rolls is an engine maker with few opportunities.
June 8, 2020, © Leeham News: Pratt & Whitney struggled since its new Geared Turbo Fan engine entered service in 2016 to fix technical, reliability and operational issues.
Plagued by premature engine removals as parts, other than the gear box, failed, Airbus A320neos stacked up in Toulouse and Hamburg while new engines were diverted to operators with aircraft out of service.
India’s regulator issued a grounding order of GTF-powered neos. Shop visits for repairs and modifications overwhelmed PW. The mess cost PW parent United Technologies (now Raytheon Technologies, following a merger) billions of dollars.
Working its way out of this mess was forecast to take into 2021.
Now, with COVID-19 impacts grounding airliners by the thousands, PW is using this as an opportunity to speed replacement and reworked engine deliveries.
Performance Improvement Packages (PIPs) will be ready this summer.
“If there is any silver lining in the environment we’re in today, it is likely around the GTF and the retrofit,” Raytheon CFO Toby O’Brien said during a UBS webcast last week. “We are utilizing available shop capacity to fix the issues in the fleet. Our goal is to have GTF engines with enhancements by the end of the year as the recovery plays out.”
June 1, 2020, © Leeham News: The new chief executive officer for GE Aviation (GEA) will face huge challenges when he or she succeeds David Joyce when he retires this year, say industry sources. Joyce was named CEO in 2008.
Like other sectors of commercial aviation, the COVID-19 crisis hit GEA hard.
Initially, the workforce was cut by 10% in March. This was deepened to 25% in May. Non-essential spending was cut. A hiring freeze was implemented and other cost-cutting measures were put in place.
May 25, 2020, © Leeham News: Aircraft lease rates continue to plummet as the virus crisis infects the airline industry.
In an update of its periodic look at rates, the UK advisory firm ISHKA last week looked at 5-year old aircraft. Monthly Rates plunged as much at 26%. Aircraft values dropped as much as 15% (22% for an ATR-72).
Since Jan. 1, the Boeing 777-200F lost only 2% of its value but lease rates dropped 11%, despite high demand for cargo airplanes now. The Airbus A350-900 lost 5% of its value but lease rates were off 17%.
A five year old Boeing 787-8, on which pricing was under pressure before COVID decimated the airline industry beginning in March, now can be leased for $575,000/mo, ISHKA says.
The Airbus A320/321ceo and Boeing 737-800 also show sharp value and lease rate declines.
May 18, 2020, © Leeham News: There simply is no good news in commercial aviation right now.
Yes, airport traffic is upticking in the USA (and elsewhere) slightly. But in the USA, it’s still less than 10% of last year’s totals.
There remains a tremendous amount of uncertainty.
The list goes on and on and on.