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 21. May 9, 2025
- Does an A220-500 need a new wing and engines? Part 2. May 8, 2025
- Embraer downplays tariff impact on 2025 results May 6, 2025
- JetZero readies effort for private equity fund raising May 5, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 20. May 2, 2025
Boeing and Airbus: A financial comparison
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By Karl Sinclair
March 3, 2025, © Leeham News: “It was the best of times, it was the worst of times,” famously wrote Charles Dickens in the opening of A Tale of Two Cities.
Boeing 737 MAX. Credit: Boeing.
Indeed, the financial results may indicate that neither Airbus (AB) nor Boeing (BA) are going through the best of times. However, one corporation clearly weathered 2024 better than the other.
While Airbus (with Helicopters, and Defense and Space) and Boeing (with Defense and Space, and Global Services) have other business segments, make no mistake: these are the undercards that make up the heavyweight title fight.
Airbus and Boeing will both go as their respective commercial aircraft divisions do.
Airbus A320neo. Credit: Airbus.
Both OEMs have released 20-year commercial aircraft market projections, forecasting that more than 40,000 new aircraft are needed, worth trillions of euros and dollars. This is the huge prize Airbus and Boeing are grappling with.
Summary
- About 10 years for Boeing’s financial recovery.
- Boeing could deliver its entire backlog, and its debt will still be greater than pre-crisis levels.
- A400M continues to be a drag on Airbus financials.
- Spirit AeroSystems will add to Boeing’s debt.
Ortberg, SPEEA meet; union surveys members for contract negotiations, strike
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By Scott Hamilton
Boeing CEO Kelly Ortberg (left) and SPEEA president John Dimas. Credit: SPEEA.
Feb. 27, 2025, © Leeham News: Boeing CEO Kelly Ortberg met with the company’s engineers and technicians union, SPEEA, on Feb. 7. The meeting was the first since Ortberg was named CEO and took office on Aug. 8.
Neither SPEEA nor Boeing commented on the substance of the meeting. “We discussed matters of mutual concern and agreed to continue the dialogue going forward,” SPEEA President John Dimas said in a benign statement published on SPEEA’s website. Boeing declined comment.
SPEEA’s labor contract with Boeing expires next year. Negotiations won’t begin until next spring. A contract with Spirit AeroSystems’ technical workers represented by SPEEA expires on January 31. Boeing should complete its acquisition of Spirit by summer, so negotiations for that contract will be between SPEEA and Boeing.
Some SPEEA officials, noting Ortberg’s early statements about doing a “reset” with labor relations, complained that he hadn’t met with SPEEA.
But upon his arrival in August, Ortberg had his hands full. Contract negotiations were already underway with Boeing’s largest labor union, the IAM 751, whose contract expired 34 days after his arrival. The union walked out on September 13 for 53 days. Ortberg also had to deal with the long-running safety and quality control issues, the Federal Aviation Administration, and the fact that Boeing was running out of cash.
While it’s early yet, and the meeting between SPEEA and Ortberg only occurred on Feb. 7, on Feb 19, SPEEA published a survey for its members to identify issues and wants for next year’s contract negotiations. The responses must be returned by March 21. SPEEA will keep the results confined to the union’s leadership.
Among the questions is how long members would be prepared to stay out on strike. SPEEA is not prone to walkouts, as is the much more militant IAM.
GE sees 2,500 LEAP engine deliveries by 2028, enough for more than 1,000 A320neos and 737 MAXes
Larry Culp, CEO of GE Aerospace. Credit: GE Aerospace.
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By Scott Hamilton
Feb. 24, 2025, © Leeham News: CFM International plans to deliver 2,500 LEAP engines by 2028, enough to power more than 1,000 Airbus A320neos and Boeing 737 MAXes plus spare engines in a single year.
CFM is the 50-50 joint venture between GE Aerospace and Safran. The 737 exclusively uses the LEAP. The A320neo family splits its powerplant business between CFM and Pratt & Whitney’s Geared Turbo Fan engines. Between the MAX and a portion of the A320neo engines, CFM has a solid majority of the market share for the mainline single-aisle aircraft sector.
CFM is the brand for the CFM56 and LEAP, but GE and Safran benefit from the aftermarket business. Between the two engines, the maintenance, repair, and overhaul business is big and profitable.
Larry Culp, CEO of GE Aerospace, spoke at the Barclays investors conference on Feb. 20.
“There’s no question that from an aftermarket perspective, LEAP on top of CFM56 is going to keep us very busy,” Culp said. “We haven’t been particularly good at calling the outlook here because we’ve undershot the reality with the CFM56 the last couple of years.”
Culp said that GE continues to believe that it’s got several years of growth ahead. “We probably don’t see an apex until probably the 2027, 28-ish time period, and then we’ll see a gradual fade with the CFM56.
“I think we’re still talking about 2,000 shop visits at the end of the decade. We’ll see if we’re right or wrong on that, but that’s our current view. I think our partners at Safran have in effect echoed that recently at their own earnings call.”
Tier 1 suppliers are a “failed market”
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By Scott Hamilton
Feb. 20, 2025, © Leeham News: The Tier 1 supply chain is all but dead.
Kevin Michaels.
This rather startling conclusion belongs to Kevin Michaels, the managing director of the consulting firm Aerodynamic Advisory. When he explains his thinking, it supports a major shift in the aerospace industry.
He made his remarks at the Pacific Northwest Aerospace Alliance conference this month in the Seattle area.
Tier 1 supplies are the last step in the supply chain, delivering products directly to the Original Equipment Manufacturers (OEMs), such as Airbus, Boeing, Embraer, and the engine makers.
Michaels said the supply chain is “fragile” and “red hot.” “Overall, the supply chain is in better shape than it was last year at this time. It’s in better shape now than it was two years ago. But it’s still incredibly fragile.” OEMs purchase about 75% of the value of the aircraft from the supply chain. Aerostructures are the first tier. And this is where Michaels’ rubber hits the road.
Howmet tariffs to be paid by customers: CEO
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By Karl Sinclair
Feb. 17, 2025, © Leeham News: Howmet Aerospace (HWM), a supplier to Airbus, Boeing, and other aerospace companies, last week reported sharply improved earnings for 2024.
Howmet is a Pittsburgh (PA)-based aerospace manufacturer, generally classified as a Tier 2 supplier. It produces components for engines, aluminum and titanium structures, fasteners, and other aircraft components.
On the Feb 13, annual earnings call, Howmet Executive Chairman and CEO John Plant remarked that he expects that Howmet will be well positioned to deal with the effects of the tariffs instituted by President Donald Trump, due to the strong contracts it has. Any costs incurred in those respects will be passed onto its customers.
Howmet is segmented into four divisions: Engine Products, Fastening Systems, Engineered Structures, and Forged Wheels.
JetZero sees big sales potential, but consultants say it won’t be them to bring BWB to market
By Scott Hamilton
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JetZero Z4 commercial BWB and USAF tanker concepts. Credit: JetZero.
Feb. 10, 2025, © Leeham News: There will be a surge in aircraft replacement requirements as today’s Airbus A320neos and Boeing 737 MAXes age. Simultaneously, the seating capacity of aircraft is increasing, says Michel Merluzeau, the Head of Sales Engineering and Market Development for the start-up company JetZero.
JetZero is developing the first commercial blended wing body (BWB) aircraft, a 250-plus seat design with a goal of reducing fuel consumption by 50% over the remaining Boeing 767s and Airbus A330ceos still in operation.
Merluzeau joined JetZero last year after decades as a consultant in commercial and defense aerospace sectors. He spoke last week to the annual conference of the Pacific Northwest Aerospace Alliance in a Seattle suburb.
The replacement forecast and the up-gauging will open a replacement market for at least 7,000 aircraft, Merluzeau said, for which JetZero’s Z4 concept is designed.
Hopes, skepticism, for Boeing from suppliers
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By Scott Hamilton
Feb. 6, 2025, © Leeham News: Hope and skepticism for Boeing permeated the sidelines of a suppliers’ conference this week in the Seattle area as the big manufacturer struggles to regain footing following six years of back-to-back-to-back crises.
Boeing’s CEO Kelly Ortberg said on Jan. 28 that the company is on a path with the Federal Aviation Administration to achieve a production rate of 38/mo for the 737 MAX later this year. Afterward, rates would increase in increments of 5/mo every six months. At this rate, production won’t return to the pre-MAX grounding production of 52/mo until the fall of 2027.
But suppliers at the annual Pacific Northwest Aerospace Alliance (PNAA) conference this week interviewed on the sidelines think Boeing won’t hit rate 38 until late next year. If Boeing then could ramp up in increments of 5/mo thereafter, the pre-grounding production rate would be achieved in the fall of 2028, nine years after the MAX was grounded.
Suppliers think the ramp up rate is also optimistic.
Ihssane Mounir. Boeing photo.
But at the PNAA conference, Ihssane Mounir detailed Boeing’s new approach to the supply chain, safety and quality Boeing has adopted since the grounding and after the Jan. 5, 2024, accident involving a door plug separation from an Alaska Airlines 737-9 MAX. Mounir is the Boeing Commercial Airplanes (BCA) senior vice president of Global Supply Chain & Fabrication.
The same suppliers who are skeptical of the ramp plans express hope and optimism of BCA’s plans to return to normalcy.
A few also expressed residual anger toward Boeing over the six years of lurching from one crisis to another that disrupted business.
One supplier noted that it received no tooling orders for years because of the disrupted production and the absence of a new airplane program.
Boeing FY 2024: Capital raise, debt, order cash advances helped Boeing avoid running out of cash in 4Q
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By Karl Sinclair
Note: Boeing has not released its Securities and Exchange Commission filing (10-K) for the full year. Much of the analysis contained herein is based on press releases and previously filed statements, exact figures being unavailable and noted as such. A section of the analysis will also be based upon comments by CEO Kelly Ortberg and CFO Brian West, taken from the Jan. 28 earnings call. LNA reached out to Boeing and was told that the annual report was to be filed later today.
Feb. 3, 2025, © Leeham News: Financial documents reveal that The Boeing Company (BA) needed to make some very astute financial moves during 2024 to avoid running out of operating capital in the fourth quarter.
It did so by tapping into three sources: lenders, investors, airlines, and lessors (purchasers).
At the end of 2023, Boeing indicated on its Consolidated Statement of Cash Flows an ending balance of $12.691bn in cash and equivalents as of December 31, 2023.
Free cash flow (FCF) for 2024 was ($14.31bn), with ($4.098bn) used in 4Q2024 alone.
If Boeing does not make these moves, then cash burn ($14.31bn) will outstrip cash and equivalents of $12.691bn in the fourth quarter, and Boeing must dip into its revolving line of credit.
Boeing needed capital, and it needed it fast.
Boeing sees achieving pre-MAX grounding production rates 8 years later
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By Scott Hamilton
Jan. 30, 2025, © Leeham News: When Airbus began to record more orders than Boeing in the early 2000 decade, Boeing’s CEO dismissed the shift.
Orders didn’t matter, sniffed Phil Condit. Only deliveries mattered. The statement ignored the obvious: if you didn’t have orders, you wouldn’t have deliveries.
For much of the past two decades, Airbus has been delivering more airplanes than Boeing. According to both companies’ forecasts, this trend will continue in the heart of the market in the coming years by a wide margin.
Deliveries of the 737 MAX are key to Boeing’s financial recovery. The cash flow and profits from the MAX line will drive Boeing’s ability to develop a new airplane. (This does not ignore the necessity of Boeing’s defense unit to get its financial house in order.)
Kelly Ortberg, Boeing’s CEO, appeared on the financial news network CNBC this week and said Boeing hopes to return to a production rate of 38/mo in the second half of this year.
“I’m not going put a date on when we need to get to rate 38 and get approval for the FAA to go beyond,” he said. “It’s more important that we do this right; we have a stable production system, we get through that, and I expect by the second half of the year, we’ll have that approval, and we’ll be moving to a higher production rate.”
Rate breaks in 5 every six months
Ortberg added, “Well, we’re planning to be at about 38 a month for the balance of this year, ramping up, and we’ll go in five-step increments every six months after that. On 787, we’re at five a month rate, moving to seven a month rate…hopefully, that’s in the next quarter or so.”
The 737 data can be extrapolated to suggest Boeing will return to the pre-MAX grounding rate (52/mo) in the first half of 2027. (Others are skeptical, and the ramp-up appears aggressive.) This would be eight years after the MAX was grounded on March 10-13, 2019, for what turned out to be 21 months.
Boeing was on its way to a rate of 57/mo by the end of 2019. Under the Boeing plan, this rate won’t be achieved until the end of 2027. If Boeing still believes demand supports this rate, a higher rate of 63/mo that was planned pre-grounding would follow in 2028.
Airbus will also increase its production rate. Production and delivery forecasts appear to place Boeing at a permanent distant second to Airbus as long as the competitors are the A320neo and 737 MAX.
777 P2F market grinds to a halt: lack of feedstock, Boeing, war, money to blame
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By Scott Hamilton
Jan. 27, 2025, (c) Leeham News: Boeing’s inability to deliver 787s on time and continued delays in certification of the 777-9 mean airlines planning to replace aging aircraft or expand must retain older aircraft longer than expected.
Airbus’ inability to deliver the A350 on planned schedules also affects fleet renewal and expansion plans, but to a much lesser extent than caused by Boeing.
IAI’s Big Twin Boeing 777-300ERF. Credit: IAI.
Boeing’s circumstances also mean that feedstock intended for conversions of 777-300ERs from passenger aircraft to freighters upset the business models of the three P2F conversion companies: IAI Bedek, KMC, and Mammoth Freighters.
Finally, certification of IAI’s conversation program is running two years behind schedule, and Boeing’s reluctance to license critical flight control software has also stalled P2F programs.
In addition to the problems outlined above, the inability to convert the big twin 777-300ER to freighters or receive new 777-8Fs and A350Fs in the coming years means that 747-400 freighters, which are gas-guzzlers by today’s standards and expensive to maintain, must remain in service longer than planned.
It’s a bleak picture emerging for the near- to-mid-term freighter market.