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
3Q Earnings reports kick off this week
Subscription Required
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
Subscription required
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.
Boeing: Breaking Up is Hard to Do
Subscription Required
By Karl Sinclair
Oct. 14, 2024, © Leeham News: As newly minted CEO Kelly Ortberg struggles to deal with striking workers from the International Aerospace Machinists (IAM) union in the Seattle and Portland (OR) areas, calls continued for the Boeing Company (BA) to shed one or more of the divisions that make up the corporate entity.
Some point to the turnaround at General Electric, which has now become the standalone GE Aerospace (GE), after a series of divestitures and consolidations into three business units, with two being sold, as a model that Boeing should follow.
While the prospect seems to be rather straightforward, it is far more complex and intertwined than simply throwing up a for sale sign on the front door of an underperforming or unwanted business segment. It might be better to ride out the current storm as a whole and focus efforts on fixing what ails the patient, rather than cutting off a limb.
Boeing strike hits suppliers, Airbus steps in
- Strike creates gap for suppliers.
- Airbus places accelerated orders at some affected suppliers.
- Snapping up capacity may complicate Boeing’s post-strike recovery.
Subscription Required
By Scott Hamilton
Oct. 10, 2024, © Leeham News: There is no end in sight for the strike by the International Association of Machines and Aerospace Workers, District 751, ending its fourth week today.
The strike costs Boeing between $50m and $150m a day, depending on whose estimate you believe. (The world will have an understanding of the cost on Oct. 23, when Boeing reports its third-quarter financial results.)
A strike by the IAM 751 in 2008 lasted 57 days. Boeing lost an estimated $6bn in sales during this period and racked up more than $2bn in lost cash flow. It took Boeing about two years to fully recover from the strike. Then, Boeing didn’t have the overhang that it has today from five years of crises and an irate Federal Aviation Administration that oversees and restricts Boeing’s production.
But recovery, whenever it begins, has a new wrinkle that didn’t exist in 2008. Then, it was Airbus that was in disarray. Its A380 program was in shambles due to production issues. The fledging A350, Airbus’ answer to the Boeing 787, was being redesigned and tweaked for the fourth or fifth time due to poor market reception. The A400M program was an operational and financial disaster.
Today, Airbus is playing from a position of strength and dominance. Boeing is playing from a position of weakness and financial trauma.
Strike slows Boeing’s march toward improving safety culture
Subscription Required
By Scott Hamilton
Credit: Federal Aviation Administration.
Oct. 7, 2024, © Leeham News: With the strike at Boeing by the International Association of Machinists and Aerospace Workers District 751 nearing its fourth week, progress in improving the safety culture is one of the areas that has slowed.
Boeing initiated a company-wide furlough to stem cash outflow during the strike. Among those laid off were people in the Chief Aerospace Safety Office, The Seattle Times reported on Sept. 19.
“[O]ne particular set of nonunion employees were surprised to learn they will be among those subject to the rolling furloughs,” the newspaper reported.
“That’s those in Boeing’s Chief Aerospace Safety Office — responsible for the company’s implementation of Congressional legislation that raised safety standards and setting up a new companywide safety management system.”
The Safety Office was created in 2021 in the fallout from the 2018-19 737 MAX crisis and continuing revelations of shortcomings in safety protocols and quality assurances on assembly lines in Washington State and South Carolina. It’s headed by Mike Delaney, a career Boeing employee.
The Federal Aviation Administration (FAA) has come down hard on Boeing to improve its safety culture and quality control.
Related Stories
The IAM 751 and Boeing in 2019 proposed a safety reporting program called ASAP, which stands for Aviation Safety Action Program. It took three years of negotiations before it was adopted. Two years later, union president Jon Holden said implementation was still in its early stages.
Boeing’s engineer and technicians union, SPEEA, early this year proposed a similar ASAP program, But in April, the union claimed it and Boeing was at an impasse over how the program would work. Negotiations between SPEEA and the company were held by Boeing’s labor relations department, not the Safety Office.
Boeing’s labor negotiators now have the strike to contend with. With the Safety Office employees subject to rolling furloughs, progress on improving the company’s safety culture has slowed. SPEEA’s lead negotiator is now occupied with contract talks at Spirit AeroSystems, a major Boeing supplier. SPEEA also represents the engineers and technicians there.
Rival Airbus has its safety protocols from which Boeing might benefit as an example to follow.
Aerospace supply chain still ailing; Sustainable Aviation Fuel isn’t the answer to go green
- Aerospace supply chain is still in recovery.
- Suppliers in Russia had to be closed. What happens if the same happens in China?
- Sustainable Aviation Fuel isn’t the answer to green aviation. Innovation in engine and airframe design is.
- US government must step up funding to go green.
Subscription Required
By Scott Hamilton
Oct. 4, 2024, © Leeham News: RTX, maker of the Pratt & Whitney Geared Turbo Fan engine and a large supplier to Airbus, Boeing, Embraer, and others through various divisions, continues to struggle with its supply chain.
CEO Greg Hayes told the US Chamber of Commerce Aviation Summit last month that “as much as we had contingency plans for pandemics, and I go back to the early 2000s with SARS and how the airlines managed through that, we were completely unprepared for COVID. Absolutely completely. There was no playbook.
“How do you keep your employees safe? How do you keep the airlines flying, despite the fact that there were very few passengers? How do you maintain all of your systems?”
Heart Aerospace’s revised ES-30
Subscription required
By Bjorn Fehrm
September 26, 2024, © Leeham News: Heart Aerospace has revised its environmentally friendly aircraft for the third time. The variants started in September 2020, when Heart presented an all-electric, battery-based 19-seat airliner that should test fly by now and be available in 2026, Figure 1, top aircraft.
Two years later, in September 2022, it all changed. The aircraft was changed to a 30-seater with a serial hybrid propulsion system using turboextenders to increase the operational range, Figure 1, aircraft two.
After another 20 months, the configuration changed again to the third iteration in Figure 1, which will fly in prototype in 2026 and be available to airlines in 2029.
In an article series, we explain the reasons for these changes and analyze whether the changes in the aircraft have increased the likelihood of the ES-30 entering the market in 2029.
Figure 1. The Heart Aerospace regional airliner series. Top, the ES-19, then the ES-30, and finally, the revised ES-30. Source: Heart Aerospace.
Summary:
- Heart Aerospace has followed the typical trajectory for an electric aircraft startup.
- It begins with an all-electric, battery-based airliner that will change regional flying.
- Gradually, reality sets in, and all-battery architecture becomes a serial hybrid and, finally, a parallel hybrid.
- We analyze if the evolution trail increases the chances we will fly on Heart Aerospace airliners come 2030.
Boeing’s shareholders: which do you prefer? Dilution or bankruptcy?
By Scott Hamilton
Sept. 23, 2024, © Leeham News: A Wells Fargo analyst calculated The Boeing Co. might have to issue 190 million shares of stock to get itself out of the financial mess it’s in.
At the $155 range Boeing’s stock has been recently trading, which would be just shy of $30bn.
Last week, Barron’s (a financial publication) wrote that Boeing has too much debt and perhaps a $10bn equity offering would suffice.
The Wells Fargo analyst and Barron’s complained that issuing stock would hurt shareholders due to the dilution.
On Sept. 12, the day Boeing’s IAM 751 union rejected the Tentative Agreement for a new labor contract and voted to strike at midnight, LNA did a deep dive analysis of the Wells Fargo equity speculation and the increasing speculation that Boeing might be forced into bankruptcy if the strike lasts a long time.
Before that, LNA analyzed the net debt levels, how long it would take to pay it down, and the annual interest to be paid.
Boeing’s financial position is precarious. It needs $10bn in cash to run the company; on June 30, the end of the second quarter, it had $12bn in cash. It’s losing an estimated $100m a day during the strike.
Wall Street types wring their hands over the dilution of a possible stock offering. This begs the question: would they prefer dilution or bankruptcy, which typically wipes out shareholders?
Or would they prefer at least a decade of stagnation while Boeing tries to operationally repair its balance sheet?
LNA welcomes the idea of a $30bn equity offering.
Boeing won’t fully recover without drastic action. And a massive equity offering best fits this need.
Related Stories
- Boeing has too much debt. (Barron’s)
- IAM rejects contract, strikes at midnight
- Boeing’s liabilities problem: a decade to resolve
- Melius analyst report: The Strike is a Symptom of a Bigger Problem
The A330neo for medium haul or twice the frequency with A321XLR? Part 3
Subscription required
By Bjorn Fehrm
September 19, 2024, © Leeham News: We examine the high-volume short-to-medium-range market and check whether a route previously reserved for the Airbus A330 can be flown with a fleet of A321XLRs. At equal per-passenger operational costs, doubling the frequency is advantageous and can drive market growth, revenue, and margin.
After comparing passenger only operating costs, such as per seat mile Cash Operating Costs (COC), we add cargo to the mix. To compare efficiency, we then need to do a route margin comparison.
Summary:
- When we add cargo to the revenue mix, the A321XLR’s limited cargo capability makes it a less attractive alternative for routes with cargo traffic.
- The A321XLR is still an interesting alternative for routes with few cargo opportunities and where route frequency can motivate higher passenger yields.
Why the IAM 751 rejected the Boeing contract and what is needed for approval
Subscription Required
By the Leeham News Team
Analysis
Sept. 16, 2024, © Leeham News — The lopsided outcome of last week’s vote by the International Association of Machinists District 751 union members to resoundingly reject Boeing’s four-year contract offer caught a lot of observers by surprise, including us.
Not that we didn’t expect the offer would be rejected. That seemed a reasonable bet. But if anyone tells you their Magic 8 ball had predicted a 94.6% vote to reject the contract and a 96% vote to strike, they’re overstating.
Our industry sources tell us that Boeing management was utterly gobsmacked by the result. Even the union staffers and officers we talked to on the night of the vote were surprised.
The result is now that some 33,000 751 members spent the weekend on picket lines surrounding Boeing facilities in Washington state, Oregon, and Edwards Air Force Base in California.
And Boeing management, which had very little leverage going into these contract talks, has approximately zero leverage now.
The problem, for everyone in our industry hoping for a quick resolution of this strike, is that Boeing has been acting since intensive talks started in August like it doesn’t understand how little leverage it has over the union this year. Despite new CEO Kelly Ortberg’s factory floor visits and talk about a “reset” with the unions at Boeing, Boeing acted like it believes it’s still 2014 when it won a bitter fight for a contract amendment granting concessions in exchange for locating the 777X final assembly line in Everett (WA).
Maybe Thursday night’s results will be the moment Boeing’s labor relations strategy needs if it’s ever going to solve its interconnected safety, quality, reputational, and cash-flow problems.
Summary
- What’s the latest
- Why the offer failed
- At the table
- Where we are
- How does this end?