Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: Air Transport’s route to 2050. Part 25. June 6, 2025
- New RISE powerplant benefits from decades of GE research and development June 5, 2025
- Engine makers emphasizing durability, reliability June 4, 2025
- Boeing CEO: Lessons learned are key to certification of 737-7/10 and 777X June 2, 2025
- Digital twin is a key to JetZero’s hopes for Blended Wing Body entry June 2, 2025
Embraer sees broadening market in North America
Subscription Required
Introduction
Nov. 17, 2015, © Leeham Co. The chief commercial officer of Embraer sees US mainline carriers adding
John Slattery, Chief Commercial Officer, Embraer. Photo via Google images.
aircraft in the 100-plus seat sector that will open new opportunities for the largest E-Jets hitherto a limited interest in this region.
First among high profile possibilities: United Airlines, which was identified as a major prospect for Bombardier and its CS100. According to multiple news reports, UA is holding out an order for the CS100 as an inducement for some pilot contract revisions. According to Market Intelligence, the potential order is for an equal number of orders and options, well below 50 orders but one which would be a crucial win for struggling Bombardier.
But Embraer isn’t going to let this order go without a stiff fight. Through United Express partners, EMB has a large installed base of E-175s operating for United. This is viewed as a major advantage by EMB’s CCO, John Slattery.
Summary
- United, JetBlue, Air Canada targets for CSeries sales.
- Embraer has large, installed fleet of E-Jets at these airlines.
- Broadened market potential seen with North American carriers for 100-plus seat airplanes.
Delta CEO is right about 777-200ER values, says market
Subscription Required
Introduction
Richard Anderson, CEO, Delta Air Lines. Photo via Google images.
Delta Air Lines CEO Richard Anderson is right.
Actual market values for 10-year old Boeing 777-200ERs are around $10m, not the $50m-ish suggested by Boeing and professional appraisal firms.
This is the conclusion of our Market Intelligence of real-world demand for these airplanes, not some theoretical book appraisal.
Furthermore, used 777-300ERs are in little demand.
The costs involved in reconfiguration and maintenance, repair and overhaul (MRO) simply upend traditional expectations.
Summary
- Used 777-200ERs can’t be “given away,” reducing values to scrap regardless of book values carried by owners or appraisers.
- Rolls-Royce-powered -200ERs, caught up in RR maintenance programs, make traditional engine valuations irrelevant.
- A sudden glut of late-model 77-300ERs upend these values.
- Ten year old -300ER lease renewal rates demanded by airlines drop to $325,000 in negotiations.
Emirates’ 615 seat A380, is it more economical?
By Bjorn Fehrm
Subscription required.
Introduction
Nov. 11, 2015, ©. Leeham Co: Emirates Airline showed off its newly delivered two class A380 at this week’s Dubai Air Show. With a record 615 seats, this is the densest A380 that has been delivered by Airbus.
Emirates have reached this record seat number by replacing the first class cabin (and showers) with economy seats. Part of the business area has gone as well. What remains on the Premium side are 58 of the well known lie-flat seats and the ubiquitous Emirates bar.
The aircraft is aimed at high density destinations which are reached within a 12 hours limit, therefore the aircraft has no crew rest facilities.
The question is, what improvements in seat-mile costs does this configuration bring and how does it stack up against a similarly configured Boeing 777-300ER or 777-9?
Will there be a change in the economical pecking order compared to the more classical long range configurations that we looked at December last year?
We used our proprietary performance model to find out.
Summary:
- To be fair to all aircraft, we equipped them with similar high density two class cabins.
- We also kept the ratio of business-to-economy seats the same for all cabins.
- The result is high capacity workhorses that are used for flying passengers and cargo at sector lengths of up to 12 hours. Consequently, none of the aircraft have crew rest facilities.
- We then looked at fuel efficiency, Cash Operating Costs and Direct Operating Costs for these long-haulers now given a mostly mid-haul work scope.
Embraer’s fundamental advantages
Subscription Required
Introduction
With the first Embraer E-Jet E2 under assembly, we take a look at the E1 and E2 programs in the run-up to 
roll-out of the E-190 E2 next year and projected Entry Into Service (EIS) in 2018.
Summary
- Broad customer base gives Embraer a major advantage against new competitors.
- More than 2,300 ERJs, E-Jets in service.
- More than 1,100 E-Jets in service.
- Broad product support a key advantage.
Do the Boeing 787 sums add up, Part 2
By Bjorn Fehrm
Subscription required.
Introduction
Oct. 22, 2015, ©. Leeham Co: This is an update on our article about Boeing 787 program costs now that Boeing has presented its 3Q 2015 results.
It was a good quarter for Boeing with solid performance in revenue and in cash generation. The results for deferred costs for the 787 program were also above Boeing’s guidance (guidance: same losses as for 2Q), with a $577m increase in deferred costs instead of $790m for 2Q.
Boeing’s CFO, Greg Smith, commented that this result and also gave new values for when the 787 goes cash positive and what the learning effects are for the 787-8 and 787-9. We update our analysis based on these further data points.
Summary:
- Boeing reports less deferred costs than expected but Greg Smith put this in perspective in his comments. We decode what this means for the deferral curve for the 787.
- Smith also gave new information regarding learning effects for 787-8 and 787-9 and when the 787 goes cash positive. We check if this changes any of our assumptions in our original article.
Do the Boeing 787 sums add up?
By Bjorn Fehrm
Subscription required.
Introduction
Oct. 19, 2015, ©. Leeham Co: Boeing presents its Q3 2015 results on Wednesday. This is a hotly awaited presentation, as analysts then will get another data point in their quest to understand if the 787 program will ever turn a profit.
We believe it is pretty clear that the program will not record an overall profit with the cost of development as well as production costs included. With a development cost of close to $20bn, this is to ask for too much. The question is if the production over the first 1,300 units can turn a profit. This is also under scrutiny.
Boeing employs program accounting for the production phase of an aircraft program and now, 25% into the accounting period for the 787, the accumulated deferred costs are such that it is questionable if future deliveries can compensate.
We take a look at the present state and what Boeing has said about the future. Based on this information, we can deduce if it is probable that Boeing can turn $32bn of deferred cost for the 787 into a profit by 2022.
Summary:
- We analyze Boeing’s information around its deferred production cost for the 787 and show how many analysts have misunderstood what has been said.
- Based on the Boeing information, we can deduce the present production cost level, learning curves and when production costs go below the assumed average in the accounting block.
- We also show what the delivery mix from 787-8 and 787-9 to 787-9 and 787-10 will mean for margins in the program.
- Finally, we judge whether Boeing will turn the corner on production cost and get the accounting block to a black zero (or better).
Delta Air sees 777 surplus developing
Subscription required.
Oct. 14, 2015, © Leeham Co.: Delta Air Lines sees a major surplus of young Boeing 777s developing in the near term as key operators plan to let the aircraft go from
leases or retirements. The looming surplus makes it more likely that increased pressure on Boeing’s efforts to sell new 777s, and to sell them at reasonable margins, will become increasingly difficult.
Goldman Sachs, the investment bank, sees Delta’s comments as further evidence supporting the likelihood there will be a sharp production rate reduction as early as 2017, perhaps down to six/mo.
Separately, Bernstein Research’s aerospace analyst Doug Harned, also see 777 rates coming down to the equivalent of 6.5/mo in 2017, six in 2018 and five in 2019. The first 777X isn’t scheduled for delivery until 2020, when Harned predicts only five deliveries of the X.