Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: New engine development. Part 5. Turbofan design problems April 26, 2024
- Airbus 1Q2024 results: Airbus CEO: “A350 in-service experience drives positive reputation and orders” April 25, 2024
- A350-1000 or 777-9? Part 3 April 25, 2024
- Boeing CEO promises company is turning around…again April 24, 2024
- Solid start for stand-alone GE Aerospace despite cuts to LEAP output April 23, 2024
Boeing faces exodus of senior engineers in tight market for talent
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By Bryan Corliss
Nov. 28, 2022, © Leeham News: Boeing’s engineering corps could become further depleted within the next few days, as union-represented engineers and technical workers at the company’s Puget Sound plants face a Wednesday deadline on filing their retirement paperwork.
If they don’t leave now, individuals could face retirement benefit losses in the hundreds of thousands of dollars.
The potential loss of several hundred of Boeing’s most experienced engineers comes at a time when the company is scraping together engineering teams to tackle production problems in Charleston, and in the midst of an industry-wide shortage of engineering talent.
Summary
- Aggressive hiring sparks Brazilian lawsuit
- Engineers face Wednesday deadline
- All aerospace companies need engineers
- Tech industry layoffs won’t help
Read more
UPDATE: Spirit close to breakeven in a ‘dynamic’ environment, CEO says
By Bryan Corliss
Nov. 3, 2022, (c) Leeham News: Spirit AeroSystems said today its third quarter revenues grew by 30% year-over-year, driven by an increase in deliveries for Boeing’s 737 MAX program.
The company posted positive operating income of $4.5 million for the quarter – its first positive income since 2019 – but reported an overall net loss it said was due mainly to charges connected with the cost of terminating an employee pension plan.
Spirit said it delivered 69 Boeing 737 shipsets during the third quarter — 23 a month — compared to 47 shipsets in third quarter 2021.
Boeing deliveries are expected to be stable at 31 a month for the foreseeable future, Spirit President and CEO Tom Gentile said.
“Given that our production rate is set at 31 aircraft a month on the 737 program now, and we will likely remain at that rate for much of 2023, we are initiating a focused effort to reduce structural costs to enhance our profitability and cash flow in 2023,” Gentile said in the company’s earnings release.
The company faces challenges, however. “We continue to see disruptions in our factories due to part shortages, increased levels of employee attrition and volatile schedules,” Gentile said.
Spirit, which had reduced its quarterly dividend to 1 cent a share in 2020, said it will suspend dividend payments entirely starting in the fourth quarter, “due to the current challenging macroeconomic environment.”
SUMMARY
- Labor and supply chain issues ‘dynamic’
- Spirit to slowly work through 737 backlog
- Defense diversification helps bottom line
- More demand for spares and maintenance
Pontifications: Suppliers don’t lack for demand, but haven’t recovered from Pandemic crisis
By Scott Hamilton
Oct. 3, 2022, © Leeham News: Aerospace suppliers don’t lack demand. But they still have a long way to go to recover from the crisis brought about by the COVID-19 pandemic. The pandemic began in earnest in March 2020. While largely under control today, there are still COVID variants sending people to hospitals and deaths.
Jeff Knittel, the president of Airbus Americas, homed in on the fundamental question during the US Chamber of Commerce Aerospace Summit last month in Washington (DC). Knittel moderated a panel with suppliers Tom Gentile, CEO of Spirit Aerosystems, and Paolo Dal Cin, Senior Vice President, Operations, Supply Chain, Quality, Environmental, Health, and Safety for Raytheon Technologies.
“Is this the beginning or the end or the end of the beginning in terms of [supply chain] disruptions?” Knittel asked. “This has been painful for everyone, and outside our industry also. Where do you see us today in terms of the recovery and next steps for you and the industry?”
“I would say that the recovery has started for the supply chain, but we still have a long way to go,” said Gentile. At the July Farnborough Air Show, there were few orders announced. The whole story was the supply chain.
Spirit AeroSystems seeks bigger role in aftermarket
By Scott Hamilton
May 5, 2022, © Leeham News: Spirit AeroSystems has had a tough couple of years. It’s not only had COVID to contend with, but its customer that provides more revenue than any other—Boeing—had a major impact on Spirit’s revenues and profits.
Boeing’s 737 MAX crisis, suspension of deliveries for the 787 and extended delays in the 777X programs all hurt Spirit. The Tier 1 supplier makes the fuselages for the 737s. It makes the nose sections for the 787 and 777. Spirit’s 737 production rate is now 31/mo. Deliveries for the 787 are expected to resume in the second half. Boeing said it will gradually increase production from the current rate of about 0.5 per month to 5/mo (though the timeline remains murky). Production of the 777X is suspended through 2023 while that for the 777-200LRF probably will hover around 2/mo for the indefinite future.
In its 1Q22 earnings release on May 4, Spirit appears on its way toward solid recovery. The company beat street expectations on strong Airbus deliveries, for which it’s also a supplier. Spirit’s own operational improvements and below-the-line improvements contributed to the better than expected results. And free cash flow was stronger than expected. The earnings detail is here.
Pontifications: The reshaped commercial aviation sector
By Scott Hamilton
July 12, 2021, © Leeham News: With Washington State and the US open for business following nearly 18 months of COVID-pandemic shut-down, there is a lot of optimism in commercial aviation.
In the US, airline passenger traffic headcounts are matching or exceeding pre-pandemic TSA screening numbers. Airlines are placing orders with Airbus, Boeing and even Embraer in slowly increasing frequency.
The supply chain to these three OEMs looks forward to a return to previous production rates.
It’s great to see and even feel this optimism. But the recovery will nevertheless be a slow if steady incline.
HOTR: Airbus, Boeing R&D spending continues decline
By the Leeham News Team
Nov. 5, 2020, © Leeham News: Research and Development spending by the Airbus and Boeing commercial units declined year-over-year.
The movement is in keeping with cost-cutting by the Big Two OEMs. For Airbus, the reduction is due to the coronavirus pandemic. For Boeing, it’s due 
to the 737 MAX grounding and the pandemic.
Boeing’s spending typically lags Airbus. Richard Aboulafia, a consultant with Teal Group, for years criticized Boeing over its smaller spending, favoring instead shareholder value. Airbus overtook Boeing is innovative single-aisle airplane development years ago. Boeing’s choice of creating a 777 derivative instead of a new design to compete with the A350-1000 proved to be a weak move. There are only a handful of customers and the skyline is weak.
Looking ahead for 2020 and 2030 decades: Boeing
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Second in a series.
By Scott Hamilton and Vincent Valery
Introduction
June 24, 2020, © Leeham News: “Airbus’ widebody strategy is a mess.”
This is what Kostya Zolotusky, then a VP with Boeing Capital Corp., said a few years ago on the sidelines of a major aerospace conference.
Today, it may be going too far to say there is increasing opinion in the industry that Boeing’s product strategy is a mess. But it’s fair to say it’s seriously challenged.
Even setting aside the 737 MAX grounding, Airbus clearly outpaced the MAX with the A320neo family. The A321LR and XLR thrust Airbus into dominance in the single-aisle, 150-220 seat sector.
Airbus fell into a winner with the acquisition of the Bombardier C Series. Boeing’s 737-7 MAX has captured fewer than 100 orders since the program launch in 2011. Demand for the 777X is weak.
Boeing critics, and there are many, see little but doom and gloom ahead. Even before the COVID-19 crisis, Boeing faced years of recovery from the MAX grounding.
There’s no doubt Boeing has a deep hole to climb out of, exacerbated by the COVID crisis. The question is, what does Boeing do after the MAX is returned to service and the virus crisis is over?
Summary
- Airbus is clear leader in single-aisle sector.
- Boeing’s product strategy for New Midmarket Airplane, Embraer role is over.
- Former CEO Jim McNerney said, “no more moonshots.” But is this just what Boeing needs to regain its position?
Boeing tells Spirit to pause 737 MAX fuselage production
June 11, 2020, © Leeham News: Spirit Aerosystems, maker of the Boeing 737 fuselages, yesterday said it will lay off 900 workers on the MAX line 
for three weeks.
“Spirit received a letter from Boeing directing Spirit to pause additional work on four 737 MAX shipsets and avoid starting production on 16 737 MAX shipsets to be delivered in 2020, until otherwise directed by Boeing,” the supplier said in a press release.
“Based on the information in the letter, subsequent correspondence from Boeing dated June 9, 2020, and Spirit’s discussions with Boeing regarding 2020 737 MAX production, Spirit believes there will be a reduction to Spirit’s previously disclosed 2020 737 MAX production plan of 125 shipsets,” the company said.
Spirit also is furloughing workers at two locations in Oklahoma.
Pontifications: Boeing focuses on design, production vs airplane development–for now
By Scott Hamilton
By Scott Hamilton
May 11, 2020, © Leeham News: Boeing killed development of its alphabet soup of airplane concepts for now.
“For now” is a relative term. When Boeing will be ready to show concepts to customers as a prelude to a program launch depends on how quickly the industry recovers from the COVID crisis.
But research and development of a streamlined production system, once key to new airplane projects, continues.
CEO David Calhoun said on the 1Q2020 earnings call that the New Midmarket Airplane (NMA) is essentially dead. He said in the following media call that the “differentiators” for the next new airplane from Boeing or Airbus will be manufacturing and engineering.
Updated with earnings call: Spirit Aerosystems reports 1Q loss, expect worse 2Q
By Scott Hamilton
May 6, 2020, © Leeham News: Spirit Aerosystems, a major supplier to Boeing and Airbus, reported a net loss of $163m for the first quarter.
The loss was a negative margin of 15.5% on revenues of $1.08bn, but it was better than analyst expectations.
With a majority of revenues coming from Boeing, the grounding of the 737 MAX continued to hit Spirit hard. The COVID-19 crisis further impacts the company.
Spirit will deliver 125 737 fuselages to Boeing this year, down from 216 previously agreed, reflecting the COVID crisis. This includes 18 delivered in January before production was suspended. Spirit did not reveal how many of 116 produced and stored in parking lots will be among the 125.
On the earnings call, Spirit said the the storage will grow somewhat, peaking in July-August. It will get back down to the 120s by year end. The inventory will decline in 2021 and “burn down” in the next two years.