Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: New aircraft technologies. Part 6. Fuselage manufacturing March 31, 2023
- Bjorn’s Corner: New aircraft technologies. Part 6P. Fuselage manufacturing March 31, 2023
- MCAS, The Aircraft Certification Act and the unintended consequences of Congressional Intervention March 30, 2023
- Pontifications: Technical challenges for UAMs, et al, only part of the problems March 28, 2023
- An uneven financial recovery among OEMs and Suppliers March 27, 2023
Bjorn’s Corner: The challenges of airliner development. Part 30. Serial Production
By Bjorn Fehrm, Henry Tam, and Andrew Telesca.
November 19, 2021, ©. Leeham News: Last week, we described how we finished the testing and the process to get our Type Certificate.
Now we look at the phase after Design and Production certification, the start of production, Figure 1. The upstart and ramp of production have many challenges. We will start the discussion with one that is often overseen, the cost of ramping production to full serial production rate.
Figure 1. Our program plan for the aircraft. Source: Leeham Co.
Airbus details A350F specifications
By Scott Hamilton and Bjorn Fehrm
November 11, 2021, © Leeham News: Airbus has given more information about what led to their new freighter, the A350F, and its data. Scott Hamilton talked to Airbus Chief Commercial Officer Christian Scherer at the IATA AGM on Oct. 3-5 in Boston, and Bjorn Fehrm spoke to Head of Freighter marketing, Crawford Hamilton, about the technical details. (The two Hamiltons are not related.)
The A350F is the most capable new-build freighter Airbus has designed, posing the most serious threat to Boeing’s dominance of jet freighters since the dawn of the jet age. Some expect Boeing to respond next week with a program launch of the 777XF, but LNA understands this won’t be the case.
“The market has asked us to produce it,” said Scherer of the A350F. “So we launched the program based on our own belief of the strength of the business case.”
“The A350F beats the competing production freighter (Boeing’s 777F, our note) on payload, volume, and economics,” says Crawford Hamilton. “We have taken extra care to make the door larger and the floor extra sturdy to ease loading planning and execution. The A350F will be the freight forwarder’s preferred machine.”
The Airbus new freighter, the A350F. Source: Airbus.
Embraer 3rd Quarter 2021 results
By Bjorn Fehrm
November 5, 2021, ©. Leeham News: Embraer presented its 3Q2021 results today. The results were better than expected as the company has tight control over its spending and managed to deliver nine E-jets and 21 Business jets in the quarter, giving a revenue increase over 3Q last year of 26%.
Sales were also positive and the backlog has grown from $15.9bn last quarter to $16.8bn. Profits before tax were $30m from a loss of $37m a year ago. The strong results had the company upgrade its guidance for 2021.
Airbus’ 9 months 2021 results; Full steam ahead
By Bjorn Fehrm
October 28, 2021, © Leeham News: Airbus presented its results for the first nine months of 2021 today. The company is now heading out of a 15 month COVID hibernation at full steam.
Market demand is strong for its Civil airliners and especially for the larger model in the A320 series. Airbus is now upgrading all four Global Final Assembly Lines (FALs) to A321 production capability.
The strong result came from deliveries of 424 commercial aircraft compared with 341 last year. Guidance remains at 600 airliner deliveries for the year but operating profit is raised to €4.5bn (was €4bn) and Free Cash Flow to €2.5bn (€2bn).
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?
