Leeham News and Analysis
There's more to real news than a news release.
Worries increase over Middle Eastern airlines
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Introduction
Aug. 28, 2017, © Leeham Co.: Market sources are increasingly pointing to weakness in the Middle East airline sphere as a threat to existing Airbus and Boeing
Emirates Airline holds the future of the Airbus A380 in its hand, so-to-speak. Source: Emirates.
orders.
Emirates Airline, Etihad Airways and Qatar Airways are the Top 3 of Boeing’s Top 10 wide-body customers.
These three also represent 73% of Boeing’s 777X order backlog.
Qatar and Etihad are the Nos. 2 and 3 wide-body customers at Airbus (after AirAsiaX); Emirates has slipped to No. 8.
The financial trouble at Etihad, exacerbated by its poor investments in the now-bankrupt Alitalia Airlines and AirBerlin, have been well documented.
Emirates’ profits have fallen dramatically and is facing over-capacity. Qatar Airways is now isolated by intra-geopolitical events.
Summary
- Emirates and Etihad already deferred Boeing orders.
- Lessors beginning to express concerns.
- Customer concentration for 777X worries some.
- A380 future rests largely with Emirates.
Two short hops or one long for LCC long-range?
By Bjorn Fehrm
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Introduction
August 24, 2017, © Leeham Co.: We presented WOW Air yesterday, a long-range LCC which is using its Reykjavik, Iceland, hub to fly passengers over the Atlantic in two shorter hops instead of one long one.
It allows WOW Air to operate with single aisle A320 family aircraft instead of the classical long-range widebodies. But is it a more economical way of flying? The distance over the hub is longer than if flying direct, Figure 1.
Figure 1. Distances when flying Berlin-Chicago direct or over Reykjavik. Source: Great Circle Mapper.
We use our performance model to understand if two shorter hops with an Airbus A321 is a lower cost alternative to flying passengers direct with an Airbus A330.
Summary:
- What is the most economical way to fly? Two shorter hops with an A321or one longer with the A330?
- Our airline performance model gives the answer. We calculate fuel burn and compares Cash Operating Costs (COC) using WOW Air as example.
Airbus looks to increase, US, Canada spending
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Introduction
Aug. 21, 2017, © Leeham Co.: Airbus continues its drive to purchase goods from suppliers outside Europe, encouraging development of an aerospace cluster around its new Mobile (AL) plant.
Washington State, the home to arch-rival Boeing, has moved up slightly as a major supplier to Airbus.
Canadian suppliers now sell $1.4bn in goods and services to Airbus.
LNC met with Joe Marcheschi, the director of strategic procurement for Airbus Americas, on the sidelines of the ADSE conference at the Abbotsford Air Show Aug. 12.
Summary
- Mobile aerospace cluster doesn’t have to include huge facilities.
- Striving for environmentally friendly approach.
- Growth at Mobile will come from production rate increases.
CSeries, the long-ranger for thin routes
By Bjorn Fehrm
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Introduction
August 16, 2017, © Leeham Co.: At the end of 2014, we predicted the Boeing 737 MAX 8 would be used by LCCs to open new long-range destinations. And sure enough, the fourth MAX 8 off the line went to Norwegian Air Shuttle, for trans-Atlantic operations.
The Bombardier CSeries launch of operations from London City Airport last week gave us the chance to discuss CSeries long-range characteristics with Rob Dewar, VP CSeries program at Bombardier.
With the improved performance data to be announced, the CS300 will pass the range of the MAX 8.
To understand with what margin and costs we feed our performance model with the latest information.
Summary:
- At an equivalent load (standard 2 class or HD cabins) the CS300 flies further than the 737 MAX 8.
- It will transport about 30 fewer passengers, in higher comfort and at lower trip costs.
- The seat mile costs will be only slightly higher than the 737 MAX 8.
Can Airbus improve the A321neo further? Part 2
By Bjorn Fehrm
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Introduction
August 10, 2017, © Leeham Co.: Last week we started the look into how the Airbus A321neo could be incrementally improved. To understand what can improve an aircraft, ones need to understand its limitations.
The A321neo is mainly limited by its wing, which is highly loaded. But there are ways around this limitation other than developing a new wing, an exercise which would require time, money and a new certification program.
Having understood the limitations, we now look into what can be done about them.
Summary:
- The changes to the wings can be limited to those that are easy to do, resulting in longer range.
- Combined with fuel capacity improvements and stronger engines it produces a very interesting aircraft.
Key lessors see strong wide-body market despite worries
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Introduction
Aug. 7, 2017, © Leeham Co.: Amid talk that Middle Eastern airlines, which are the largest group of users for wide-body aircraft, may defer Airbus and Boeing airplanes, there are conflicting signs that the bleak view of the sector isn’t as weak as perceived.
Just last week, two big lessors—Air Lease Corp and AerCap–of widebody airplanes said they are confident in the sector.
Few orders have been received for the Boeing 777-8 ultra-long range airplane. Sales for its larger sibling, the 777-9, have stalled. Along with the Airbus A380 and Boeing 747-8, demand is seen as limited.
AerCap ordered 30 Boeing 787s at the Paris Air Show. ALC has a significant order of Airbus A330neos.
And, the chairman of Emirates Airline said in an interview with the region’s The National newspaper that despite the current challenges at the carrier, it expects to announce an order before the end of the year for either the 787 or the Airbus A350—and possibly the Airbus A380.
Quantities on the former weren’t discussed. Airbus is pitching 20 A380s, according to accounts.
Still, there are a large number of Boeing 777s and Airbus A330s coming off lease in the next few years that could slow orders if these aircraft are offered on the secondary market with low enough lease rates.
Summary
- Air Lease Corp.’s wide-body aircraft are placed. A330neo orders late due to engine delays.
- AerCap sees strong wide-body market, reaffirmed with 787-9 order.
- More than 100 A330ceos and 777 Classics potentially entering secondary market soon.
Can Airbus improve the A321neo?
By Bjorn Fehrm
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Introduction
August 03, 2017, © Leeham Co.: The Airbus A321 has been in its own single aisle league for capacity and with the A321LR for capacity and range.
With Boeing’s launch of the 737 MAX 10, the unique position has taken a hit. With A321 occupying 40% of Airbus single aisle sales, Airbus is examining how to re-open the gap.There is much talk about an A322: an aircraft with new wing, engines and so forth. This is a major undertaking and will need new engines for its realization. Couldn’t Airbus improve the A321 as it is?
We look into what short term improvements can be done to the A321, and what these would give.
Summary
- To understand what improvements can be made for the A321neo, one needs to understand its limitations.
- We describe the present limits.
- We find them in wing-loading, span-loading, engine thrust and tankage
How Boeing pays back the 787 debts
By Bjorn Fehrm
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Introduction
July 27, 2017, © Leeham Co.: Boeing held its 1H2017 call yesterday, giving further information on how the 787 deferred costs decline. The payback in 2Q2017 was $16m per aircraft.
Boeing needed to achieve a $36m per-plane reduction, based on our analysis, to not increase the payback amount per aircraft for the remaining aircraft in the current accounting block.
The $16m is still a low rate, although better than the $11m 1Q2017, given that the remaining $26.5bn deferred production costs must be amortized over the Program accounting’s remaining 735 units of a 1,300 units block.
The key to amortizing the costs is the different margins of the 787 variants. We compare costs and revenue of the 787-, -9 and -10 to understand the payback margins better.
Summary:
- Program accounting means deferred production costs shall be nil at the end of the accounting block.
- Right now, there is $26.5bn to amortize and not many aircraft left that can pay the sum.
- The key to a plausible payback scenario is the payback margins of the different 787s.
- We analyze the margins through modeling of net revenue and unit costs for the 787 variants.
Mid-year production/delivery update for Boeing
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Introduction
July 24, 2017, © Leeham Co.: Boeing’s 2Q earnings call is Wednesday and analysts will be watching for information about the 787 deferred production costs, potential production rate changes for the 787 and for the 777 Classic.
We looked at the 787 costs last week.
It’s also mid-year and LNC is taking an updated look and production and delivery rate streams for Boeing, Airbus, Bombardier and Embraer. The Airfinance Journal Fleet Tracker is our resource for this report.
We begin with Boeing in advance of its earnings call.
Summary
- A case can be made for taking 737 production rates to 60/mo.
- 777 Classic rates still may need to come down.
- 787 rate increase remains questionable.