Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- A321neo continues upward market share; good luck hitting rate 14/mo for the A220 January 20, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 5. January 17, 2025
- What’s the future of the Boeing 787-8? January 16, 2025
- FAA understaffing affects air operations oversight; NTSB falls short, too January 13, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 4. January 10, 2025
Production ramp-up goals ambitious; exceed historical trends
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By Karl Sinclair
Nov. 14, 2024, © Leeham News: Airbus (AB) and Boeing (BA), the two largest commercial aircraft makers in the world, have a combined backlog of over $1tr in orders to deliver.
Both OEMs announced plans to increase production rates in the upcoming years to satisfy demand.
Airbus issued guidance for an increase to the A320neo family delivery rate of 75/mo by 2027. It is also targeting a rate of 14/mo on the A220 program by 2026.
Boeing previously projected a return to 50/mo on the 737 MAX family by mid-2025. However, LNA is told that internally, Boeing sees 2028 as a more likely timeframe. The consulting company Accenture thinks it will be five years (ie, 4Q2025) before Boeing achieves rate 50/mo.
Boeing’s 737 production rate was 52/mo on March 9, 2019, the day before the second MAX crash. Regulators worldwide began grounding the MAX on March 10. The Federal Aviation Administration grounded the US-registered MAXes on March 13 for what turned out to be 21 months.
Just how realistic are projections by Airbus and Boeing?
Boeing’s Investment-Grade Rating; Not just for bondholders
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By Karl Sinclair
Nov. 11, 2024, © Leeham News: The Boeing Company (BA) has repeatedly reaffirmed its commitment to retaining an investment-grade rating in comments from management. Many have taken that stance as an attempt to avoid an increase in interest rates on the $57bn in debt Boeing carries on its balance sheet.
However, there is another reason that is broadly overlooked by the market, analysts, observers, and media. Maintaining Boeing’s investment grade rating is important to a good portion of its supply chain that requires Boeing’s financial help.
Buried in Boeing’s filing with the Securities and Exchange Commission is this relatively innocuous paragraph:
“At September 30, 2024, trade payables included $2.7bn payable to suppliers that elected to participate in supply chain financing programs compared with $2.9bn at December 31, 2023. In future quarters, our suppliers’ access to supply chain financing could be curtailed or more expensive if our credit ratings are further downgraded.”
Boeing uses the supply chain to finance operations. Accounts Payable as of September 30, 2024, totaled $12.267bn, while Accrued Liabilities – an expense incurred but not yet paid for, hit $22.628bn (up from $11.964bn and $22.331bn year-end 2023, respectively).
Boeing’s 12-Step process to recovery – Part 2
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By Karl Sinclair
Nov. 7, 2024, © Leeham News: As employees from the International Association of Machinists and Aerospace Workers District 751 (IAM 751) begin to report back to work after ending their 53-day strike and accepting the fourth offer from the company, Kelly Ortberg, CEO of the Boeing Company (BA) can now shift his attention to other pressing needs.
LNA identified 12 key points that need to be addressed. We continue analyzing what needs to be addressed in the upcoming months and years to get Boeing back on track.
Related Article
Boeing’s 12-Step process to recovery
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By Karl Sinclair
Nov. 5, 2024, © Leeham News: When Kelly Ortberg became CEO of The Boeing Co. on Aug. 8, the company was mired in a multitude of crises. The most immediate was the open labor contract with its largest union, the International Association of Machinists and Aerospace Workers District 751 (IAM 751). The contract would expire 34 days after Ortberg took over from David Calhoun.
A strike was considered likely, and those thinking so were right. Based on a near-unanimous vote, members rejected the contract on Sept. 12 and walked off the job hours later.
Now, 53 days after the strike began, the union has approved a fourth contract offer. The first employees will begin returning to work tomorrow, and the remaining 33,000 union members must return by Nov. 12.
Boeing can now get back to the task of building aircraft.
Ortberg will now be at peace with the IAM’s touch labor for the next four years and can move on to tackling what needs to be fixed.
On the 3Q2024 earning call, Ortberg alluded to the work ahead. “First, we need a fundamental culture change in the company; second, we must stabilize the business; third, we need to improve our execution discipline on new platform commitments across the company; and fourth, while doing the first three, we must build a new future for Boeing.”
Airbus looks to larger A220, insists not a threat to A320
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By Leeham News Team
Nov 4, 2024, © Leeham News: Airbus sees potential for an up-gauged A220 aircraft, but that would not pose a threat to the future viability of the A320 family, the company’s SVP for commercial aircraft marketing, Joost Van der Heijden, has said.
A220 sales have been somewhat sluggish, with the larger A220-300 variant leading in orders. In the first nine months of 2024 (to the end of September), Airbus secured an order from Air Baltic for 10 -300s, and cancellations from Nordic Aviation Capital for two of the smallest -100 variant and 10 -300s. In 2023, the A220 secured 142 orders across both variants.
Airbus A220-500. Credit: Leeham News.
Seeking to drive demand in the A220 program, Airbus is understood to be considering a stretched A220-500 model once production reaches 14 units per month, and Van der Heijden acknowledged there was “potential for family growth” beyond the current -100 and -300.
The A220-100 is a 110-seat airplane in a typical two-class configuration. The A220-300 seats 135 passengers, and the A220-500 would seat around 157, putting it in direct competition with the A320neo.
Five years to produce 737s at 50/mo, consultancy predicts
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By Scott Hamilton
Oct. 31, 2024, © Leeham News: When Boeing held its first investors day since 2018 in November 2022, then-CEO David Calhoun projected that the production rate for the 737 would be 50/mo sometime next year, three years hence.
John Schmidt, Accenture. Credit: Accenture.
This rate was slightly below the 52/mo production on March 9, 2019. The next day, an Ethiopian Airlines 737 MAX 8 crashed on take-off from Addis Ababa. It was the second MAX crash in five months. The two disasters killed 346 people. China grounded more than 80 MAXes operated by its airlines the same day. Europe’s EASA regulator and Transport Canada followed shortly. The Federal Aviation Administration didn’t follow suit until March 13.
Twenty-one months later, the FAA recertified the MAX. Global regulators followed, with China’s CAAC being the last to do so.
In March 2019, Boeing planned on boosting production to 57 a month by the end of the year. Planning was underway to increase production to 63/mo and even into the 70s.
Calhoun’s guidance blew out the window when a door plug blew out of a 737-9 MAX at 16,000 ft on Jan. 5 this year. But for the grace of God, there were no fatalities and only minor injuries. Pilots made a safe emergency landing. The ensuing investigation revealed production and safety lapses. The FAA clamped down on Boeing, officially capping production at 38/mo for now. In reality, new production hovered around 20/mo before the assemblers, the IAM 751 union, went on strike on Sept. 13. There is no end in sight.
Boeing’s new production 737 line has been well below the target of 38/mo all year. Source: Bernstein Research, Oct. 29, 2024.
So, when will Boeing get to a rate of 50/mo? A consulting firm—which occasionally consults with Boeing—predicts it will be another five years. Around November 2029. It’s a stunning prediction.
Job one in Boeing’s employee reset: changing the culture
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By Scott Hamilton
Oct. 28, 2024, © Leeham News: With last week’s decisive rejection by Boeing’s largest union, the IAM 751, of the third contract offer from the company, the question remains: What now?
Obviously, Boeing and the union must return to the bargaining table. A fourth contract offer must be forthcoming. One reason the union members voted 64%-36% to reject the third offer: no pension plan was included, a do-or-die demand for many members.
Boeing must sweeten its contract offer to the IAM 751–a lot–to settle the strike. Credit: Leeham News.
Boeing won’t give in on this, officials say. So, what now?
John Schmidt. Credit: Accenture.
It’s clear Boeing must sweeten the terms contained in the third contract offer. The 35% pay hike still fell short of labor’s demand for a 40% hike. Boeing also sweetened the bonus and 401(k) retirement plan contributions, and other terms. It’s also pretty clear that Boeing needs to really, really sweeten the offer to persuade the do-or-diers to let go of the pension plan demand.
How much sweetening is needed is anybody’s guess. But eventually some agreement will be reached and passed.
Then the story becomes about recovery.
In an interview with Accenture, a consultancy the works closely with aerospace companies (including Boeing), is optimistic that Boeing’s new CEO can turn things around. John Schmidt, the head of its Global Aerospace and Defense department, explained in an interview last week after the contract vote.
Heart Aerospace’s revised ES-30, Part 3. UPDATED
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By Bjorn Fehrm
October 24, 2024, © Leeham News: We analyze Heart Aerospace’s latest evolution of the hybrid ES-30. The latest version, presented in spring 2024, is a parallel hybrid, putting gas turbine turboprop engines outside the electric motor engines.
After examining what such a parallel hybrid system means for aircraft dimensions and masses, we now fly the aircraft on a typical US short-haul route through our Aircraft Performance and Cost Model (APCM) to assess its operational performance.
Does the ES-30 make operational sense for an airline that needs a short-haul feeder?
Summary:
- The parallel hybrid architecture gives the ES-30 certain operational flexibility to fly routes over 100nm, making it possible to replace present 30 seaters on such short routes.
- However, the operational costs are considerably higher than today’s 30-seaters. As always, the problem is the battery costs.
- UPDATE: Heart Aerospace contacted us after the article was published. The article has been complemented with their information.
3Q Earnings reports kick off this week
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By Scott Hamilton
Oct. 21, 2024, © Leeham News: Third quarter earnings reports kick off this week. The most anticipated call will be The Boeing Co.
Boeing previewed a big loss for the quarter on Oct. 11. On Oct. 15, it filed a registration statement with the US Securities and Exchange Commission (SEC) for $25bn in equities, debt, and other securities—money that’s badly needed as it bleeds cash. It also filed another SEC document for a “supplemental” $10bn line of credit. This is in addition to a previous $10bn credit agreement.
Coupled with the $10bn in cash, Boeing potentially has up to $55bn in liquidity.
With the quarter’s loss already pre-announced and the new $25bn liquidity plan filed with the SEC, much of the suspense for Boeing’s earnings call is over. Also on Wednesday, the company’s largest union, the IAM 751 workers, vote on a new contract offer to end a strike closing in on its sixth week. Further color about CEO Kelly Ortberg’s “reset” plan for the company will be closely watched.
Boeing’s earnings call is Wednesday at 10:30 am EDT. The press release will be issued before the stock market opens. The union vote will be announced Wednesday evening.
In addition to Boeing’s earnings call this week, RTX (parent of ailing Pratt & Whitney) and GE Aerospace announce their earnings on Tuesday at 8:30 am EDT and 7:30 am EDT, respectively.
RTX results continue to be dragged down by PW’s continuing technical challenges with the Gear Turbo Fan engines that power the Airbus A220, A320neo and Embraer E-Jet. GE faces a drag on late deliveries and time-on-wing issues with its LEAP engines that power the Boeing 737 MAX and A320neo. GE is also affected by all the production turmoil and IAM strike at Boeing.
Germany’s MTU Aerospace reports on Thursday as well. MTU is a supplier to PW and GE. Safran reports on Friday.
Heart Aerospace’s revised ES-30, Part 2
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By Bjorn Fehrm
October 17, 2024, © Leeham News: We analyze Heart Aerospace’s latest evolution of the hybrid ES-30 (bottom aircraft in the picture), which replaces the original battery-based 19-seater (top aircraft) and the original ES-30 (mid aircraft).
The latest version, presented in spring 2024, is a parallel hybrid, putting gas turbine turboprop engines outside the electric motors. What are the advantages of the parallel hybrid version, and will it make the Heart ES-30 project more likely to succeed?
We use our Aircraft Performance and Cost Model (APCM) to understand the design choices and the costs involved.
Summary:
- The latest revision of the Heart Aerospace hybrid electric aircraft, the ES-30, takes the hybrid architecture from a serial to a parallel system. It simplifies the architecture.
- Does the revised ES-30 make airline operational sense? We analyze this using our Aircraft Performance and Cost Model.
