Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: The challenges of airliner development. Part 26. Maintenance planning October 22, 2021
- Single or twin Aisle for cargo rich routes? October 21, 2021
- Pontifications: Embraer’s strategy for the TPNG October 18, 2021
- Air freight demand explosion: a long-term trend? October 18, 2021
- Bjorn’s Corner: The challenges of airliner development. Part 25. Safety monitoring and reporting October 15, 2021
Airbus delivers strong 1H2021 and launches A350 Freighter
By Bjorn Fehrm
July 29, 2020, © Leeham News: Airbus presented its results for the first half of 2021 today. The company reported a profit of €2.7bn on a turnover of €24.6bn, a very strong result from the -€0.9bn of last year. Yesterday, the Airbus board gave the go-ahead for the A350 freighter with planned entry into service 2025.
The strong result came from deliveries of 297 commercial aircraft, 100 more than the 196 of 1H2020. Net orders were 38 aircraft (1H2020 196). Guidance for 2021 was increased to 600 airliner deliveries with operating profit at €4bn and Free Cash Flow of €2bn.
Artist impression of the A350 Freighter. Credit: la-livery.net
Global airline recovery: LNA’s view shifts from traffic to revenue, but our timeline hasn’t changed
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By Judson Rollins
Introduction
July 19, 2021, © Leeham News: A year ago last week, LNA published what might have seemed an apocalyptic call: global airline passenger traffic would not recover until 2024 at the earliest – and potentially not until 2028.
Early trends and forecast revisions by other parties point to the earlier half of our window. However, one major downside surprise has been an increasingly bifurcated world for airlines as demand returns at widely uneven rates by region and passenger segment.
Air travel is undergoing a “K-shaped recovery” like the global economy, with fairly obvious delineation between winners and losers. The upper leg of the “K” represents countries with large domestic markets, leisure travel, short-haul routes, and low-cost carriers.
The lower leg applies to developing countries, international traffic, business travel, long-haul routes, full-service airlines – and most airline suppliers.
Source: International Air Transport Association.
In hindsight, our prediction probably answered the wrong question, because the key driver of renewed profitability and future investment in commercial aviation isn’t the recovery of airline traffic, but revenue. The many changes to business and long-haul travel make revenue more difficult to forecast, but it will clearly be even slower to return than traffic.
Most industry forecasts don’t call for airline traffic to fully recover until 2024 or 2025, even if large domestic markets recover sooner. That means airline revenue – and profitability – will still be hampered until late this decade.
Summary
- Advanced and developed economies are on widely divergent economic trajectories.
- Global travel recovery statistics are distorted by a couple of large domestic markets.
- Vaccine rollout and documentation issues are likely to keep borders closed for longer.
- Revenue recovery matters more than volume, both to airlines and the aviation supply chain.
Bjorn’s Corner: The challenges of airliner development. Part 12. The Prelaunch Phase.
By Bjorn Fehrm, Henry Tam, and Andrew Telesca.
July 16, 2021, ©. Leeham News: Last week, we showed the first cut of an overall Program Plan for our 19 seat airliner project.
Now we discuss the Prelaunch Phase activities in more detail, including what type of knowledge, tools and resources we need to get on board for the project.
Figure 1. The Viking Twin-Otter utility-oriented unpressurized 19 seater. Source: Wikipedia.
IATA update on COVID-19 and World Travel
By Bjorn Fehrm
July 8, 2021, © Leeham News: IATA’s half-year Global Media event finished today. The Director General Willy Walsh and SVP Operations Nick Careen briefed on travel trends, ramp-up bottlenecks, and IATA travel pass activities.
At present domestic travel is recovering fast, but international travel remains weak.
Airbus Commercial Programs update
By Bjorn Fehrm
June 15, 2021, ©. Leeham News: Airbus hosted an update on the Pandemic effects on its airliner business today.
It presented its view of the pandemic’s effects overall, how it affected the different aircraft programs, and how Airbus predicts the recovery ramp to look.
Figure 1. The loss of 25 years of growth in Air Transport due to COVID 19. Source: Airbus.
Widebody write-downs are coming – how much will asset values be affected?
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By Judson Rollins
Introduction
Air New Zealand 777-300ER stored at Victorville, CA (USA). Source: New Zealand Herald.
May 27, 2021, © Leeham News: As central banks pumped liquidity into the global economy over the past 15 months, aviation has attracted a steady stream of investor interest.
However, aircraft transactions have been few and far between apart from growth in sale-leasebacks. An expected wave of lessor consolidation has been limited to one major transaction, the AerCap/GECAS merger announced in March. Even this was likely driven by GECAS parent General Electric’s push to dismantle its finance business, GE Capital.
Fly Leasing, a lessor with just 84 aircraft, sold itself to private equity firm Carlyle Aviation Partners in March. These have been the only lessor mergers or acquisitions to date, despite wide speculation the COVID pandemic would spur many lessors to combine.
A lack of merger activity is likely because aircraft leasing is not a business with large economies of scale.
Widebody aircraft values have fallen 30%-40% since the start of 2020, according to the UK appraiser Ishka. Relatively few of these aircraft have been written down on lessor balance sheets, but more are expected to be so toward the end of this year.
Summary
- Equity investors looking for high returns are finding disappointment so far.
- Asset write-downs are unlikely to have much impact on lessor viability – but could open the door to distressed sales.
- Could a glut of unused widebodies lead to a wave of new airlines?
(Updated) Airbus 1Q2021, a strong quarter in difficult times
April 29, 2021, © Leeham News: Airbus presented its results for the first quarter of 2021 today. It was a reassuring result when other aircraft manufacturers suffer.
The Airbus operations delivered an operational profit of €0.7bn with a net profit of €0.5bn, reflecting good progress in sizing the company for the new reality and a solid performance in operations. Commercial aircraft delivered 125 planes during the quarter against 122 last year. The outlook for 2021 from the 2020 results briefing in February was maintained.
Bjorn’s Corner: The challenges of hydrogen. Part 34. Series wrap-up
By Bjorn Fehrm
April 23, 2021, ©. Leeham News: I said last week we spend this final Corner on hydrogen-fueled air transport, describing projects outside the big ones, like Airbus.
But more important events took place in the week with implications for sustainable air transport. We wrap up by describing these and speculate where these take us.
“The thin blue layer that enables life on our rock planet.” Source: President Biden’s introduction to the climate summit.
Airbus 2020, prudent navigation of a challenging environment
February 18, 2021, © Leeham News: Airbus presented its results for 2020 today. The company reported a net loss of €0.5bn at revenues of €50bn (€70.5bn 2019). Airbus’ operations delivered a result of +€1.7bn; it was then reduced to a loss by charges of €2.2bn for the year.
Airliner deliveries reduced by 34% to 566 for the year (863), with net orders at 268 aircraft (768). A forecast for 2021 was given as same-level deliveries with operating profit at +€2bn and break-even Free Cash Flow.
Podcast: 10 Minutes About the A321XLR and Why Boeing Can’t Compete
Jan. 26, 2021: © Leeham News: Today’s episode is 10 Minutes About the A321XLR and Why Boeing Can’t Compete. LNA’s Judson Rollins worked 
for Boeing when the MAX was created. He brings an airline background as well, having worked for Air New Zealand and Continental.