Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- How Trump tariffs affected, and could affect, Airbus, Boeing and Embraer December 6, 2024
- Start-up hybrid plane OEM MAEVE teams with MHIRJ for sales, more December 5, 2024
- Production increase delays hurt Airbus costs December 2, 2024
- Books to consider for Christmas November 29, 2024
- Slow, methodical process to restore Boeing’s trust, efficiencies November 28, 2024
Boeing rolls out Ray Conner to analysts
Boeing rolled out Ray Conner, the new CEO of Boeing Commercial Airplanes, to analysts in New York yesterday. The first research note we’ve received, from Imperial Capital’s Ken Herbert, portrayed a positive meeting. Below is a synopsis. As we receive more notes, we’ll add those comments.
We don’t like the resumed policy of using cash to repurchase stock, instead of putting it into new airplane programs (something Richard Aboulafia of the Teal Group, normally a pro-Boeing consultant, has roundly criticized for years).
Imperial Capital
We believe BA is benefitting from several tailwinds, and is demonstrating increased confidence regarding its 787 execution and the ability to take further costs out of the supply chain. However, we believe much of the good news is reflected in BA stock, and we see slowingorders in 2013 as limiting the multiple; therefore, we are maintaining our In-Line rating. Investors areexpecting a significant dividend increase or share repurchase program, which could be a positive catalyst, but we see the new program developments, which include the 737MAX, the 777X and 787-10, as potential competing cash pulls.
Regarding the 787, Boeing confirmed that Charleston is ahead of plan, but that it has been staffed to over deliver. Boeing also made a point of stressing that its movement down the cost curveon the 787 will be similar to that of the 777. We believe that there is an opportunity for Boeing toexceed expectations on the 787.
We continue to believe, however, the much of the execution upside is priced into Boeing stock. We believe that in order for the stock to see material upside, Boeing needs to demonstrate a very bold use of the expected free cash flow, in the form of both increased dividend and share repurchases, that will attract new investor interest and accelerate the EPS growth. However, this will limit the new product development options, considering the potentially competing development requirements of the 737MAX, the 787-10, and the 777X. We believe current BCA leadership wants to do both the 777X and the 787-10, and believes that there is significant pent-up order demand for both new aircraft, but we believe the focus on share repurchases and/or the dividend, reiterated at the 8/28/12 reception, could push some development effort to the right.
Separately:
- A reader posted this link on NEO vs MAX orders and options and we think it so good we’re elevating it to a primary post. This website also recaps which airlines have switched allegiance. Thanks to Dave O’Flynn for the link.
- China ordered 50 A320s instead of the expected 100.
Searching for Amelia
Like many, we’re fascinated with the search for Amelia Earhart, which has resumed. Here are some articles.
Missing Bob Crandall
The link to a video of Bob Crandall on the Charlie Rose show speaking to airline industry issues, and the bankruptcy at American Airlines, spurred some comments from our readers. The most interesting comment came from a Doug Stephan, whose comment is reproduced at the end of this post.
When we co-owned Commercial Aviation Report (until recently called Commercial Aviation Online by Flight Global, which became the fourth owner of the company), we resided in Dallas in Bob Crandall’s backyard at American.
Naturally the proximity gave us many Crandall stories. Stephan’s comment spurred us to remember some. We share a few with readers today.
WN vs AA: A personal story
I am going to depart not only from my usual approach to this blog but also shift from the editorial “we” to a personal “I” for this story. The point of the story is not my personal family issue but an illustrative point about Southwest Airlines and American Airlines.
As readers know, I live in Seattle. I have family in the Chicago area. My family had a developing situation that required that I go to Chicago to deal with it. The plan had been to attend the ISTAT meeting and US Airways media day in Phoenix earlier this week, fly back to Seattle for a day and then on to Chicago Friday. I had booked Southwest for the SEA-PHX-SEA trip and American Airlines for the SEA-ORD-SEA trip.
I truly don’t like flying Southwest because of the boarding process and the lack of an assigned seat. I’m a lifetime Gold Advantage member of American, with all the perks that implies.
I chose WN for the PHX trip because my business partner was joining me and she had to check a bag–and bags fly free on WN. I chose AA for Chicago because of the aforementioned Gold status and perks.
On Tuesday evening–the end of the ISTAT meeting but before the US Airways event–I received a call from my brother indicating the family situation had become critical; I need to fly to Chicago directly from PHX on Wednesday. WN changed the ticket (charging for the fare difference). I called AA to cancel my Friday reservation. The ticket was, as I knew, non-refundable but I also knew I could apply it for a future trip. For the fare difference and, as I also knew (regrettably), a $150 change fee. (Besides which AA also charges for the baggage check, which wasn’t applicable in this case but nonetheless contrasts ith WN’s policy.)
The situation in Chicago has now stablized for now but for the near term, I will buy WN to Chicago for family follow-up for the flexibility of being able to change tickets without a change fee. Tom Horton, take note: a lifetime Gold member is on your rival for now. I might be able to claim mileage to exotic places on AA and oneWorld compared with Lubbock and Little Rock on WN, but this doesn’t matter. Gary Kelly, also take note: good policies in place in these circumstance–even if I still despise your damn open seating.
Boeing, IAM 751 reach labor agreement, settles NLRB case, MAX stays in Seattle
IAM press conference 11am PST. Live video KIROTV.com.
Obama proposes $100 per flight fee and Southwest Airlines objects
No kidding. This article speaks for itself.
This is one of the dumbest things to come out of the Administration yet. The airlines are already over-taxed, more so than so-called “sin taxes” levied on tobacco and alcohol. The airlines support a huge segment of the national economy–the travel industry.
This is an astoundingly stupid idea.
Grand jury focuses on convicted felon in airport deal
Scot Spencer is a name some of us will remember as one of the sordid players in commercial aviation.
Spencer and co-investors purchased Braniff II from the Hyatt family in the late 1980s and proceeded to run it into bankruptcy. Out of those ashes rose Braniff III, which promptly also went into bankruptcy. Spencer and some of the same co-investors wound up convicted of bankruptcy fraud. The US Department of Transportation banned Spencer from commercial aviation. It’s been assumed by many that this meant airlines but others believed the ban was much broader.
After serving his time, Spencer wound up in San Bernadino (CA), running another airline (which DOT shut down) and incredibly, this smooth-talker wound up managing the former Norton AFB for a transition to a civilian airport with a goal of commercial airline service.
Historical Flight Foundation’s DC-7B: Trip Report
I had the opportunity this month to join a group of 50 aviation geeks on the first international passenger flight of a Douglas DC-7 in decades.
Historical Flight Foundation’s Eastern Airlines DC-7B restoration, Opa-Locka Airport (Miami) prior to boarding for our trip to St. Maarten. Photo by Scott Hamilton.
This airplane, N836D, was delivered to Eastern Airlines in 1958. It flew with Eastern for about seven years and was sold to the Nomad travel club, which operated it for a number of years, still with the EA interior, before selling it to a third party who intended to create another travel club but never completed funding. It sat in St. Paul (MN) for 33 years until the owner of Florida Air Transport (FAT) discovered it and bought it. The Historical Flight Foundation was created for restoration to full EAL 1958 colors.
Ralph Pettersen, who was on the HFF trip, several years ago wrote this article with photos of the interior of the DC-7B as it had been stored at the St. Paul Airport.
Wikipedia has this history of the DC-7. Eastern ordered 49 DC-7Bs, more than any other carrier. According to the book, From the Captain to the Colonel, a history of Eastern by the late Robert Serling, EAL’s CEO Capt. Eddie Rickenbacker over-ordered the DC-7, knowing the jet-powered Boeing 707 and Douglas DC-8 were around the corner. (Eastern ordered the DC-8.) According to the book, had Eastern ordered fewer DC-7s and Lockheed Electras and more DC-8s, Eastern would not have been at a competitive disadvantage during the early years of the jet age.
When flying had panache
We’re off May 15-21 on another adventure (the previous one we talked about being our Alaskan polar bear photo safari). This time we’re scheduled on a trip that includes 12 hours of flying in a Douglas DC-7B
This airplane was originally Eastern Air Lines and it was discovered, with the original EAL interior, and restored. Here is a story about this restoration.
Ice Road Tourist
We’re big fans of the History Channel’s Ice Road Truckers (also available on Comcast On Demand), so when the opportunity arose to take a photo-tour that included Alaska’s famed Dalton Highway (aka the Haul Road) featured in Ice Road Truckers in the last two seasons en route to see polar bears, the Northern Lights and Alaska’s famed scenery, we leapt at the chance. We previewed our trip in our North to Alaska post.
Carlile Trucking Co. is featured in Ice Road Trucker. This is at the Coldfoot truck stop on the Haul Road.
