Leeham News and Analysis
There's more to real news than a news release.
Analysis: Washington may be best state for aerospace; it needs to get better
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By Bryan Corliss
March 2, 2023, © Leeham News – The AeroDynamic Advisory’s latest Aerospace Competitive Economics Study is out, and while its findings were overshadowed by the comments the firm’s two managing directors made about Boeing that week, there is good data in the report that should be acted upon.
The Washington State Capitol in Olympia.
Particularly if you’re a Washington state lawmaker concerned about the long-term future of your state’s economy.
Washington remains the most-competitive state in America for manufacturing aerostructures and final assembly of aircraft, AeroDynamic determined. It finished ahead of Texas, but while Texas was ”impressive,” it was still “well behind Washington in its overall competitiveness,” the report says.
However, when you take a deeper dive into the numbers, there are some clear gaps in the Washington state game. With the state’s Legislature currently in session in Olympia, it’s our hope (as parochial residents of the Evergreen State), that somebody puts this report in front of policy makers, and that it motivates them to take action this year.
- Taxes, incentives aren’t pressing issues
- Spend more on roads and rails
- Lower building costs by spreading the cluster
- Invest more in research, education
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Universal Hydrogen’s first flight nears
- Universal Hydrogen nears first flight of containerized fueling concept.
- Eviation’s Alice all-electric airplane offers another option for clean skies.
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By Scott Hamilton
Feb. 27, 2023, © Leeham News: Universal Hydrogen (UH2) is just days away from the first flight of its hydrogen tank concept in a converted De Havilland Canada Dash 8-300.
The flight will be from the Grant County International Airport at Moses Lake in Central Washington State. As such, weather—which is often unpredictable here—could upset plans. So far, the forecast is favorable if cold.
UH2’s conversion removes seats from the aft portion of the passenger cabin to make way for two large tanks to install through a main deck cargo-size door cut into the fuselage. A similar approach is underway in France with an ATR-72.
The liquid hydrogen (LH2) containers are trucked from the refueling source and loaded onto the planes. Then, when near empty, these are swapped for refueling with other tanks filled with hydrogen for the next flight.
Universal Hydrogen’s concept for an H2-powered airplane centers on two fuel tanks at the aft end of the passenger cabin. This example is the ATR-72. A De Havilland Dash 8-300 is also being converted. Credit: Universal Hydrogen.
This concept solves the hydrogen supply problem at any airport. The ATR-72 capacity goes from 72 passengers to 56, a reduction of 28%. This dramatic reduction in revenue seats calls for a reset of cost and revenue per available seat mile, but for a first entry into the hydrogen field, it’s an important step in the quest for clean aviation. LNA believes that UH2 has the most viable hydrogen concept of all at the moment because the company addresses the hydrogen supply problem without the billions of dollars needed for airport infrastructure and pipelines.
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Moses Lake is the same airport used by Eviation for the first flight last year of its Alice electric aircraft. Its CEO, Gregory Davis, outlined the Alice concept at this month’s annual conference of the Pacific Northwest Aerospace Alliance (PNAA).
The pros and cons of Boeing launching a new airplane program sooner than later
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By Scott Hamilton
Feb. 23, 2023, © Leeham News: Many, outside of Wall Street analysts and stockholders, are critical of the decision by Boeing CEO David Calhoun to suspend the development of a new airplane. It will be the middle of the next decade before the company “introduces” a new one.
The view from this month’s Pacific Northwest Aerospace Alliance (PNAA) Conference is split. Speakers like Kevin Michaels and Richard Aboulafia, both from the consultancy AeroDynamics Advisory, favor launching a new airplane program sooner than later. So does aerospace analyst Ron Epstein of Bank of America. He’s a rarity among Wall Street analysts.
While Calhoun pointed to the lack of step-change engine technology as the reason to suspend any development today, LNA previously pointed out that Boeing simply may not be ready internally. Production of the 737 MAX remains challenging and somewhat erratic. The 787 is ticking along at a mere one-half airplane a month. Certification of the 737-7, 737-10, and 777X have yet to be achieved. Boeing’s debt remains in the tens of billions of dollars; about $5bn in due this year alone.
And then there is the supply chain. It’s simply not ready, either. It’s struggling with materials and labor shortages. Some laborers are new and inexperienced. Even Airbus continues to struggle to make its delivery targets. It fell short last year by a wide margin and in January delivered only 20 airplanes.
Calhoun would have had better messaging on these points rather than simply saying technology isn’t advanced enough yet (which is only partly true). Critics may have been more easily persuaded.
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A deep dive into the twin-aisle market
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By Vincent Valery
Introduction
Feb. 20, 2023, © Leeham News: Last month, LNA analyzed the single-aisle market order opportunities for Airbus, Boeing, COMAC, Embraer, and UAC. We now focus on the twin-aisle duopoly of Airbus and Boeing.
Unlike in the single-aisle market, Boeing leads in market share: 64% nominally and 69% after Boeing’s at-risk ASC 606 adjustments and LNA’s assessment for Airbus, which doesn’t publish at-risk order numbers. If we exclude government and freighter orders, Boeing’s market share lead is 60% and 65% after at-risk adjustments.
However, the A330ceo family has the broadest operator base, and there are still almost 1,000 units in passenger service. LNA investigates the order twin-aisle aircraft order books and assesses replacement opportunities for both OEMs based on the in-service fleet.
Summary
- Boeing has the edge in the in-service fleet;
- Breaking down the order books between replacements and growth;
- Keep track of order choices for older-generation operators;
- Flip orders and airlines that did not order;
- The twin-aisle freighter market.
What is the ticket price influence of SAF? Part 2
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By Bjorn Fehrm
Feb. 16, 2023, © Leeham News: Last week, we looked at the ticket price influence if airline fuel costs would increase going forward, either through increased use of Sustainable Aviation Fuel, SAF, or higher environmental emission fees.
We realized that ticket prices have other parts than fuel and aircraft-related costs. For instance, an airline has sales and marketing, administration, and airport ground staff. We got an overview of such cost parts depending on whether the airline was a mainline carrier or a Low-Cost Carrier (LCC).
Now we use this knowledge and our airliner performance and cost model to check the influence of varying fuel and emission costs on ticket prices going forward.
Figure 1. Jet fuel price variation over time. Source: IATA Jet Fuel Price Monitor.
Summary:
- We check the influence of SAF blends and EU emission permits on end-of-decade energy costs.
- Then we discuss how increased flight energy costs can influence ticket pricing.
Aerospace supply chain needs capital, which isn’t always easy to find–and it may be expensive
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By Scott Hamilton
Feb. 13, 2023, © Leeham News: The aerospace supply chain is still struggling to recover from the grounding of the Boeing 737 MAX, the suspension of deliveries of the 787, the delays to the Boeing 777X, and the COVID pandemic.
Labor shortages and workforce quality/experience is also a challenge for the supply chain.
Profits remain elusive and capital is available at high interest rates, if at all. CFM, GE, Pratt & Whitney, and Rolls-Royce continue to face technical challenges with their engines. The CFM LEAP and PW Geared TurboFan engines have durability issues and must be taken off wing for maintenance and warranty work at a fraction of the time their predecessor engines were on wing.
It’s a rather bleak picture painted of the state of the aerospace industry during the annual conference of the Pacific Northwest Aerospace Alliance (PNAA) last week in a Seattle suburb.
Summary
- Suppliers need capital; Boeing should return to 30-day payment terms for immediate capital injection.
- Recovery not over, suppliers can make better investments in defense.
- Without a new airplane, there’s no reason for suppliers to invest in commercial.
What would be the ticket price influence of SAF?
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By Bjorn Fehrm
Feb. 9, 2023, © Leeham News: I have the last weeks described the difference between Jet fuel and SAF, or Sustainable Aviation Fuel, in my Friday Corners. We could see it has emission advantages compared with fossil Jet fuel that goes beyond the CO2 reductions it offers.
It’s a cleaner fuel where the production methods can avoid the troublesome aromatic carbon molecules that causes soot to form in jet engine exhaust. With reduced soot, the generation of contrails reduces, which is beneficial for reducing global warming.
But we could also see that SAF should be costlier to produce as the production cycle is complete. Our fossil fuel’s raw material had their CO2-absorbing plant growth millions of years ago.
So, if we mix SAF into Jet fuel at different ratios, what will be the effect on ticket prices? How much more expensive would flying be when we use SAF or other measures like CO2 emission taxes are introduced? We use our airliner performance and cost model to find out.
Figure 1. The typical short to medium-haul airliner, 737 MAX 8, we use in our calculations. Source; Leeham Co.
Summary:
- In addition to the aircraft operating costs, we must add other airline costs to understand ticket prices.
- Then we must look at the effects of revenue management and the type of flight, domestic or long-range.
Spirit gearing up to produce 42-a-month on 737 program by the end of 2023
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By Bryan Corliss
Feb. 8, 2023, © Leeham News – Spirit AeroSystems plans to deliver 42 new-built 737 MAX fuselages a month to the Boeing Co. by the end of this year, executives said Tuesday.
Whether that’s how many 737s Boeing is delivering to customers is not for Spirit to say, CFO Mike Suchinksi told analysts during the company’s year-end earnings call.
“What Boeing delivers to their customers is, we have no purview. That’s on the Boeing side,” he said. “We’re just trying to communicate to you what the contract schedules have been and what we expect to produce internally and what we expect to ship to Boeing and to get paid for.”
But Spirit and its suppliers still have major challenges to overcome before they can get to those higher rates, Suchinski and CEO Tom Gentile warned. The company, which struggled through a tough year in 2022, is making major cash outlays in early 2023 to acquire the people and materiel it will need to reach those higher rates, and that will weigh on profitability for the next few quarters.
- Losses doubled in fourth quarter
- Outlook: 420 737s and 650 A320s
- Some suppliers in ‘deep distress’
- Spirit hiring, but new workers need time
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Orders at risk: Year-End 2022 snapshot
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By Vincent Valery
Introduction
Feb. 6, 2023, © Leeham News: With the publication of the Airbus and Boeing announcing 2022 orders and deliveries last month, and Boeing’s published its 2022 Annual Report (10-K), we undertake our annual analysis of at-risk deals on their books.
Airbus and Boeing have outstanding orders with airlines where there is a material probability some orders won’t translate into deliveries. Most were the result of airlines encountering financial difficulties, but some were related to contractual disputes. Boeing flags such orders as subject to an ASC 606 accounting rule adjustment.
Unlike Boeing, Airbus isn’t subject to an accounting rule like the ASC 606 adjustments at a program level. Therefore, the European OEM does not break down the orders at risk of cancellation by the program. Airbus only discloses the nominal value of its total adjusted order book in its annual report.
LNA analyzed July 2020, November 2020, August 2021, February 2022, and August 2022 Airbus’ and Boeing’s order books to identify orders at risk and come up with an apples-to-apples comparison. We update this analysis with the latest order books from both OEMs. The above links explain our methodology and its differences with Boeing’s ASC 606 adjustments.
Summary
- Lingering order book cleanup for older programs;
- Improving single aisle order book quality;
- Country-level single-aisle market share
- One order materially affects OEM twin-aisle market share.
Good news for 4th 737 production line, but lots of unanswered questions remain
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By Scott Hamilton
Feb. 2, 2023, © Leeham News: Boeing’s announcement that it will establish a fourth 737 MAX final assembly line (FAL) at its Everett (WA) widebody plant by the second half of 2024 answers some but hardly all questions.
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The fourth Boeing 737 MAX production line in Everett (WA) will build the MAX 10. Credit: Leeham News.
The news is welcome at the plant, which assembled the 747, 767/KC-46A, 777, and 787. The last 747 rolled off the line last month after 54 years in production. The 787 FAL closed in 2020, and consolidated with the line in Charleston (SC). The 767/KC-46A line is ticking over at 3/mo and the 777 line is at a 2/mo rate—both well below their peaks.
Rework on 110 787s is to be completed by the end of 2024. This rework is moving from the 787 bay to the 747 bay and a building south of the massive assembly building. The 737 line will go into the 787 bay.
The new FAL gives some certainty to workers and the neighboring supply chain, and to Everett and Snohomish County in which the city lies. But there are lots of questions that are unanswered.
Summary
- What will the production capacity of the new FAL be? How long will it take to reach the capacity?
- Where is the tooling coming from?
- How will the 737 fuselages get from Wichita (KS), where they are made?
- How long before all three lines in Renton are to full capacity of 63/mo?
- When does production of the P-8 end? (Put another way, how long is the backlog?)
- Is there any thought to expanding the MAX production someday into the sawtooth building?