Leeham News and Analysis
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Leeham News and Analysis
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Pontifications: Bumps ahead notwithstanding, Boeing sees steady recovery
By Scott Hamilton
Feb. 21, 2023, © Leeham News: Boeing will have some bumps in the road (or maybe I should say, some turbulence) now and then, but its chief financial officer is confident the company is solidly on its way to recovery.
Recovery is daunting. There’s $51bn in total debt (more than $34.5bn in net debt), with $5.2bn coming due this year. Production of the 737 and 787 remains erratic. Deliveries are slower than hoped. Certification of the 737-7 and 737-10 has yet to be achieved. Program progress on the 777X is slow. A host of defense programs are in money-losing positions.
But orders picked up nicely for the 737 and 787. Even the 777X won 10 orders, from Air India, after a long, long drought. Debt, huge though it is, is coming down. Revenues are up at Commercial Airplanes and Global Services, though down at Defense.
Brian West, the CFO, outlined Boeing’s outlook during an appearance at a Cowen Co. investors conference last week. There was little new since Boeing held its own investors’ day on Nov. 2 and the 2022 earnings call on Jan. 26. But there are always a few nuggets to come out of these appearances.
Pontifications: Ihssane Mounir’s big challenge at Boeing
By Scott Hamilton
Feb. 14, 2023, © Leeham News: Ihssane Mounir was named senior vice president of Global Supply Chain and Fabrication for Boeing Commercial Airplanes (BCA). Appointed in December, he previously was the top salesman for BCA.
Ihssane Mounir. Credit: Boeing.
Mounir has a huge challenge ahead of him that goes beyond managing the logistics of BCA’s huge supply chain. He faces an irate group of suppliers who are increasingly openly angry. Some border on open rebellion.
As LNA reported last week, suppliers at the Pacific Northwest Aerospace Alliance (PNAA), some suppliers on the sidelines of the conference openly complained about Boeing’s lack of transparency and reliability. Some vowed to reduce their exposure to Boeing or even abandon working with the company. As always, Boeing’s Partnering for Success program—a long-running cost-cutting effort that demanded suppliers cut costs or be terminated—was another complaint.
Some who also supply Airbus but have to trim costs for it as well nevertheless praised Airbus’ gentler, collaborative approach vs Boeing’s threatening tactics.
The latter is relevant for some of the panelists.
Pontifications: One “good” engine in future for RR, faulty business strategy and model: JP Morgan
By Scott Hamilton
Feb. 7, 2023, © Leeham News: Our report last week about Rolls-Royce’s new CEO characterizing the company in dire straits is just part of the story. Shortly before that, on January 18, JP Morgan issued a 38-page dissection of the company that perfectly encapsulates what LNA has pointed out in the past about its commercial engine business.
Pontifications: New Rolls-Royce CEO paints a dire picture; all scenarios on table at Airbus
By Scott Hamilton
Jan. 31, 2023, © Leeham News: Rolls-Royce’s new CEO says the engine group is a “burning platform,” failing to give returns.
Tufan Erginbilgic, who joined RR as CEO on Jan. 1, said this is the “last chance” to get its house in order and turn a profit.
The dire outlook has potentially disastrous implications for Airbus. The airframer relies exclusively on Rolls for its engines for the A350 and A330neo. Airbus is monitoring the situation closely. Market sources tell LNA that Airbus is assuring customers and potential customers that Airbus will make sure engines and aftermarket support are available, without detailing how.
An Airbus insider tells LNA that all scenarios are under consideration. Some speculate that Airbus might either provide financial support to Rolls or even, in the extreme, buy the engine company. Others believe either course is unlikely because Airbus has its own production problems to sort out. Its fiduciary duty is to its stockholders. “It’s not their job to inherit a problem that was created decades ago,” one London-based analyst says.
What’s at the root of RR’s current problems? Many of the reasons have been discussed before, but let’s summarize them.
Pontifications: “What can be. What should be.”
By Scott Hamilton
Jan. 17, 2023, © Leeham News: “What can be. What should be.”
This was the title of an address last week at the University of Washington’s aerospace department. The speaker: the former CEO of The Boeing Co., Phil Condit.
Condit was named president of Boeing in 1992 and CEO in 1996. He retired in 2004 after a lifetime career at Boeing, with leadership roles in the 747, 757, 757, 767, and 777 programs.
With ecoAviation the soup de jour these days, beneficiaries of billions of dollars of investment (much of it stupid money) and the subject of much greenwashing, Condit had frank and candid observations about these concepts.
Although Condit retired from Boeing in the wake of the USAF tanker procurement scandal dating to 2001, his engineering skills and fundamental visions were highly regarded. He put these skills to good use a week ago.
Pontifications: Calhoun’s third year anniversary as Boeing’s CEO
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By Scott Hamilton
Jan. 10, 2023, © Leeham News: In three days, David Calhoun will “celebrate” his third anniversary as the chief executive officer of The Boeing Co.
I put “celebrate” in quotes because I’m not sure Calhoun really is in a celebrating mood. Boeing still has a big hole to climb out of and it’s going to be a few more years at least just to get back to 2019 production levels for the 737. Production levels for the 767/KC-46A are stable with a goal of increasing to 4/mo. Levels for the 777 remain at around two per month, pending certification of the 777X. Production of the 787 won’t get back to its peak of 14/mo, or even 12/mo. But Boeing hopes to achieve a production rate of 10/mo by mid-decade.
In the meantime, things are hardly running smoothly at Boeing Commercial Airplanes (BCA) or Boeing Defense, Space and Security (BDS).
David Calhoun
BCA remains plagued by quality control issues. Inexperienced workers hired to replace those who retired, accepted early buyouts, and normal attrition during the MAX grounding and COVID pandemic have learning curves. Clearing the grounded MAX inventory is slower than hoped. Clearing the 787 inventory will also be a slow slog.
Relations with the Federal Aviation Administration may be better than under Calhoun’s predecessor, Dennis Muilenburg. But Boeing doesn’t have its own “ticketing” (certification) authority restored and another safety investigation is about to begin.
BDS has its own long-standing issues. The Starliner and SLS space programs have been problematic. Losses and delays continue on the KC-46A, Air Force One, T-7, and MQ-25 programs. Legacy programs from the McDonnell Douglas era (the 1990s and before) recorded losses last year.
Boeing Global Services seems to be the only bright spot. Even Calhoun’s announcement on Nov. 2 that BCA won’t introduce a new airplane until the middle of the next decade drew a lot of raspberries from a wide swath of the industry—including, of all things, the Wall Street Journal.
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.
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.
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.
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.