Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- The BWB has a long way to go before flying passengers, freight May 12, 2025
- 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
CAE: Leading quietly from Canada, with changes
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By Karl Sinclair
Nov. 18, 2024, © Leeham News: Marc Parent, the CEO of the simulator company CAE of Canada, will step down next year after 15 years at the helm, the company announced on Nov. 12.
Parent, 63, will retire at the Annual General Meeting in August 2025, after 20 years at the company. He joined CAE after working at Bombardier as an aerospace engineer, working his way up to vice-president and general manager of the Challenger 300, Challenger 604, 850/870, and CRJ-200 aircraft programs.
CAE is the dominant simulator company, providing equipment to the military, corporate and commercial aviation industries.
CAE grew under his leadership to become industry leader in the industry, growing revenues to C$4.3bn and a C$12bn backlog in 2024.
Boeing strike post mortem: Ortberg has work to do
- Teamsters contract expires in April 2025.
- IAM’s contract with Boeing’s defense unit follows in July.
- SPEEA engineering contract negotiations come up, too.
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By the Leeham News Team
Analysis
Nov. 15, 2024, © Leeham News: Boeing CEO Kelly Ortberg’s performance during the IAM strike is getting low marks from the men and women who will do the work that turns Boeing around-–the mechanics, techs, and engineers in the factories, according to those LNA has spoken with.
Kelly Ortberg, Boeing CEO. Credit: Boeing.
Ortberg came in talking about a “reset” in the company’s relationship with its unionized workforce. He took a good symbolic step by announcing he’d relocate to Seattle and work from there.
But while Wall Street hailed the move, it didn’t land as well as it could have.
Ortberg spent one day in the Renton factory before the strike. Boeing got a good photo of him touring the factory floor, but it’s unclear if he met with many workers.
Likewise, it’s unclear how much Ortberg was involved in one of the biggest crises his new company faced when he took over: the Machinists Union negotiations.
- Ortberg went with Calhoun’s plan
- Boeing bureaucrats believed their own spin
- Behind-the-scenes hardball
- Boeing’s billion-dollar blunder
- Absent Ortberg
- Furloughs and layoffs
- Looking ahead
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.