Leeham News and Analysis
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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
Airbus profits climb despite one-off charge
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By Gordon Smith
Nov 9, 2023, (c) Leeham News: Airbus struck a defiant tone on Wednesday as the company posted strong numbers for the first nine months of 2023. Despite supply chain headwinds, the European firm’s Q323 adjusted Earnings Before Interest and Taxes (EBIT) rose by 21% year-on-year to €1.013bn. The figure was influenced by increased commercial aircraft deliveries and the positive impact of currency hedging.
The robust performance of its civil portfolio was dampened by a net loss at Airbus’ Defence & Space division. The group took a hit of €400m relating to “updated estimates at the completion of certain satellite development programs” which were mainly recorded in the third quarter.
The headline figures for the first nine months of 2023 are as follows:
- Revenues: €42.6bn
- Adjusted EBIT: €3.6bn
- Free cash flow (before Mergers and Acquisitions (M&A) and customer financing): €1.0bn
- 488 commercial aircraft delivered
For context, let’s compare these figures with those published at the same time last year. In its nine-month results for 2022, the OEM delivered 437 commercial aircraft, with revenues of €38.1bn generating an adjusted EBIT of €3.5bn. Free cash flow comprised €2.9bn.
Speaking during a follow-up investor call, Airbus CEO Guillaume Faury was bullish in his assessment. He said that the company is confirming its earnings target for 2023 and would be ramping up aircraft production in the years ahead: “We think we are well-placed to deliver around 161 planes to fulfill the guidance for the year. For those deliveries, we obviously have a high degree of visibility on parts, including engines.”
Faury’s positive outlook appeared slightly at odds with comments from other industry heavyweights in recent days. On Tuesday, Steven Udvar-Hazy from Air Lease Corporation suggested OEMs could miss their year-end goals as chronic engine supply issues persist.
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Maintenance cost, availability are growing concerns for OEMs, airlines
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By Judson Rollins
November 7, 2023, © Leeham News: Maintenance costs and lead times have been a growing topic in aviation circles and financial markets since last month’s Aviation Week MRO Europe conference in Amsterdam.
Wage and commodity inflation have been widely identified as key cost drivers in many regions. However, this has been compounded by ongoing part shortages, deferred maintenance from aircraft flown less than normal in 2020-2022, and the retention of older aircraft to maintain capacity in the face of new-generation engine reliability issues and resulting groundings.
Even the Financial Times recently covered the impact of MRO constraints. Consultant Kevin Michaels of AeroDynamic Advisory told the FT that airline maintenance spending had ballooned from a historic 8%-10% of airline costs to an estimated 14% this year.
Source: Aviation Week.
Summary
- Aircraft availability limits options for carriers, spares providers.
- Spares availability further limited by commodity shortfalls.
- Labor constraints evolve from headcount to experience and productivity.
- Sustainability panel long on possibilities, short on deliverables.
Spirit Focused on Delivering On Time and At Quality
By Dan Catchpole
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Nov. 6, 2023, © Leeham News: Spirit Aerosystems’ new CEO Pat Shanahan’s focus right now is “to restore confidence in the company” with its biggest customers—Airbus and Boeing.
During a Nov. 1st conference call discussing the company’s third quarter earnings, Shanahan said, “I recognize we have disappointed our stakeholders.”
Shanahan just came on as chief executive in October to help turn around Spirit, which has been flailing, along with much of the aerospace supply chain. Boeing and Airbus will be watching Shanahan’s progress. He gained a reputation as Mr. Fix-It during his time at Boeing.
Summary
- Market responds favorably to latest earnings report and management’s promises.
- Shanahan says Spirit is on track to deliver more than 50 737 MAX airframes in 2025.
- Goal is zero-quality issues.
NASA, Boeing Say SAF Creates Fewer Greenhouse Contrails
By Dan Catchpole
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Nov. 2, 2023 © Leeham News: High over Montana, Andy “Jeeves” Barry slipped the McDonnell Douglas DC-8 to the right and out of the Boeing 737-10’s wake to “get some fresh air.”
NASA’s uses a highly-modified McDonnell Douglas DC-8 as a test platform for its Armstrong Flight Research Center. (Photo by Dan Catchpole)
After a few minutes, the NASA research pilot edged the DC-8 behind the MAX, trailing about a mile and a half or so. It was another in a slew of test flights in October that he’d spent riding the 737’s bumper in NASA’s venerable DC-8 research aircraft.
The former U.S. Navy aviator eased the workhorse into a slot of calmer air in the 737’s wake, he said. “…[I]n that sweet spot of that secondary (wake) and just above the primary wake is where we lived the whole time and got the best science that they really loved the entire time we were out there.”
NASA and Boeing collaborated on the flights to test the effect of sustainable aviation fuels (SAF) on the formation of contrails, short for condensation trails, which climatologists contribute to global warming. The 737-10 alternated between burning jet fuel and 100% SAF, while the DC-8 sampled the air in its wake.
Summary
- Researchers say data collected will help predict when and how contrails form and SAF’s effects on contrails.
- How much contrails contribute to global warming is not completely clear.
- Boeing is working with supply chain to develop airplanes that can fly 100% SAF and traditional jet fuel by 2030.
Safran revenues take flight, but supply chain woes persist
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By Gordon Smith
Oct 31, 2023, (c) Leeham News: Robust demand in the civil aftermarket sector has helped propel Safran Group’s Q3 2023 revenues upwards. The French firm shared its latest sales results on October 27 and confirmed that it was on track to achieve its year-end targets – but the positive performance hasn’t been universal.
A choppy combination of headwinds and tailwinds is currently buffeting the business, whose vast range of interests includes engine development, aftermarket, aircraft interiors, and other MRO-related sectors.
Overall, revenues were up 20.1% year-on-year at €5.82bn, tracking estimates of €5.79bn. As a result, the company reiterated its FY23 adjusted revenue guidance of €23bn, which was raised at the end of July.
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MTU posts upbeat earnings report despite €1bn GTF hit
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By Gordon Smith
Oct. 30, 2023, (c) Leeham News: MTU Aero Engines has confirmed its guidance for 2023 and posted higher adjusted sales and earnings in the third quarter. The numbers are the first reported by the German company since it revealed last month that it would take a €1bn knock from the Geared Turbofan (GTF) inspection program.
The exceptional charges dragged the engine manufacturer into the red with an EBIT loss of €410m for the first nine months of 2023. The comparative earnings figure for last year was €331m, representing a sharp 224% fall.
In September, the firm said well-documented powder metal issues with the Pratt & Whitney PW1100G-JM GTF would knock revenue and earnings for the year by around €1bn. During an earnings call on September 27 attended by Leeham News, MTU CFO Peter Kameritsch said he expected this figure to be slightly above the €1bn mark. Without adjustments, revenue was €3.7bn for the first nine months of 2023. Adjusted operating profit was €597m, up a third from the €448m posted a year earlier.
Commenting on the latest numbers, CEO Lars Wagner said: “MTU posted organic growth in all business segments. However, exceptional charges for the Geared Turbofan inspection program affected our figures.”
Adjusted net profit reached €138m, up from €113m a year earlier. Adjusted EBIT – which is the company’s chosen profitability metric – grew to €192m from €158m, representing a margin of 12.7%. Kameritsch acknowledged that “favorable exchange rate effects” provided a welcome boost to the numbers, alongside the company’s “positive revenue mix and a good cost base”.
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Further developments of the A321, Part 4
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By Bjorn Fehrm
October 26, 2023, © Leeham News: We do an article series about what can be the next development for Airbus’ most popular aircraft, the A321neo. We looked at a minimal makeover in Part 3; now, we make a larger change.
We use our Airliner Performance and Cost Model (APCM) to examine what a new wing and revised engines can bring regarding larger passenger capacity, range, and lower seat-mile costs.
Summary:
- To increase the capacity significantly of the A321, a new wing is needed.
- We design a new wing combined with uprated engines and look at the result.
MRO demand, pricing power near record levels: great for providers, painful for operators
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By Judson Rollins
October 24, 2023, © Leeham News: In aviation’s topsy-turvy post-Covid recovery, one group of companies faces a near-perfect storm of positive developments: maintenance, repair, and overhaul (MRO) service providers and their suppliers.
Source: Maxim Commercial Photography via Aviation Week.
Last week, MRO providers and airline representatives met in Amsterdam for Aviation Week’s MRO Europe conference. There was an almost palpable sense of “it is what it is” resignation from airlines about costs and delays and from providers regarding labor availability and supply chain challenges.
However, the current balance of power clearly favors providers, who face almost unprecedented demand. The aforementioned constraints serve to limit MRO capacity further, giving providers almost unprecedented pricing power.
The biggest obstacle facing both providers and airlines is a growing gap between market demand and production rates of key components, especially for engines. This shortage is exacerbated by limited aftermarket supply, which in turn is driven by limited feedstock for part-outs.
Summary
- Long backlogs, high prices are a growing concern for airlines.
- Lessors are also facing strong tailwinds from MRO, engine market dynamics.
- Production and pricing strategies are being called into question.
Q3 Could Be Boeing’s Reddest Earnings Report This Year
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By Dan Catchpole
The U.S. Air Force accepted the first of five T-7A Red Hawk test aircraft from Boeing on Sep. 14th. (Image courtesy of USAF and Boeing Co.)
October 23, 2023, © Leeham News: Wall Street analysts expect Boeing to post its biggest quarterly loss of the year when it reports its third quarter earnings on Wednesday. The company’s commercial and defense divisions continue to struggle with rework, slow work, supply chain snafus, and other challenges for both its commercial and defense and space divisions. Those divisions’ losses likely will be offset somewhat by Boeing Global Services, which continues to be a bright spot on the company’s otherwise blood-red ledger book.
Analysts aren’t expecting any big surprises, just more of the same financial dark clouds that have been camped out over Boeing in recent years. They expect Boeing to announce a loss due to well-known challenges, especially with its 737 and 787 programs, as well as ongoing struggles within Boeing Defense, Space and Security. In recent research notes, investment analysts have forecast BDS posting a loss between $475m and $500m for the quarter.
Across Boeing’s divisions, Wall Street expects the company to book more than $1bn in losses. Projections vary by as much as $1bn. At the low end, TD Cowen expects a loss of just under $900m. At the other end, Bernstein projects about $1.85bn in losses. In either case, that would be the biggest loss since 2022’s third quarter, when Boeing posted a $3.3bn loss.
Summary:
- BCA continues to struggle with the 737 and 787 programs. It just announced a price revision deal on those programs with airframe supplier Spirit AeroSystems.
- BDS is expected to post more charges due to ongoing struggles with new and mature programs.
Order Risk for Boeing: Warning Flags
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By the Leeham News Team
Oct. 19, 2023, © Leeham News: Airbus and Boeing have airplane order backlogs exceeding 10,000 aircraft. Most of the respective production lines are sold 
out to 2026 and even beyond 2030. Airlines and lessors must place orders soon to get into the queue. If early delivery positions are sought, the customers must hope Airbus and Boeing can find a few slots—but there won’t be many.
Like airlines selling their seats, Airbus and Boeing overbook production slots. The OEMs bet on boosting production rates, customers willing to defer deliveries (for whatever reason), cancellations to open earlier slots, or to meet delivery commitments. These bets sometimes pay off—and sometimes they don’t.
Today, LNA looks at the Top Boeing Customers of each product line and assesses the risk factors of whether these carriers will likely take delivery of their orders. We looked at Airbus’ Risk Orders on Oct. 16.