Why bailouts make sense under these circumstances

By Scott Hamilton

Commentary

By Scott Hamilton

March 18, 2020, © Leeham News: The Federal government is preparing a bailout, said to be more than $1 trillion, to pump into the US economy.

Airlines want $50bn. Boeing wants $60bn for the aerospace industry. It’s unclear how much is for Boeing and how much is for industry.

Opposition for the airlines and Boeing was quick to emerge. The objection: how much each spent in recent years on shareholder buybacks.

The bailout package goes across the US economy and includes direct cash grants to individuals. In keeping with LNA’s business, I focus in the column only on aviation.

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US carriers not at imminent risk of bankruptcy despite potential shutdown

By Judson Rollins

March 16, 2020, © Leeham News: Throughout Sunday afternoon and evening, reports – all unconfirmed – began to emerge in the US that as early as today, the Trump administration may announce a suspension of US passenger flights domestically for 2-4 weeks. The suspension, if confirmed, could begin this week. Investors are scrambling to understand how long US airlines can survive on their current cash balances.

LNA reviewed the balance sheets of carriers worldwide in anticipation of such dramatic events. In this article, we will show that US airlines have plenty of time for demand to recover – or the US government to step in with emergency loans or grants similar to those doled out by the Air Transportation Stabilization Board from 2001 to 2003.

This airplane line-up at Chicago O’Hare Airport could be a thing of the past very soon. Source: Pinterest.

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Pontifications: What kind of aid could US airlines get?

By Scott Hamilton

March 16, 2020, © Leeham News: Airlines in Europe already asked governments for financial aid as coronavirus forces massive schedule cutbacks and in some cases, complete service suspension.

In the US, talk of aid began in earnest last week.

Delta Air Lines, which is parking 300 airplanes and cutting 40% of its capacity, said it plans to seek US financial assistance.

There is increasing talk that the US may order a complete suspension of domestic air service. If so, this would be like 9/11, when for the first time in history the US shut down its skies.

Trans-Atlantic flights were diverted to Gander as 9/11 unfolded. Source: i.pinimg.com

That lasted only three days.

With federal officials saying the crisis hasn’t peaked in the US and it may be a couple of months before the crisis subsides.

US carriers will almost certainly seek government assistance.

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Pontifications: Stop hitting the snooze button, Boeing

By Scott Hamilton

Dec. 9, 2019, © Leeham News: I know Boeing is preoccupied right now. But it has to get off the pot and decide to proceed with a new airplane.

We believe the New Midmarket Airplane is still required. But Boeing salesmen have also floated the concept of a new, single-aisle airplane to key players in the market. Either way, Boeing has to do something.

At least, that’s how we see it at Leeham Co.

The order last week by United Airlines for 50 Airbus A321XLRs should be a wake up call.

It’s not the only one Boeing has had.

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United orders 50 A321XLRs

Dec. 3, 2019, © Leeham News: United Airlines today announced an order for 50 Airbus A321XLRs.

The airplane has an advertised range of 4,700nm (5,400 statute miles), or a nine hour flight.

Airbus A321XLR in United Airlines “swoop” colors. Source: Airbus.

UAL will replace its aging Boeing 757s on a one-for-one basis beginning in 2024.

The XLR’s targeted entry into service is 2023.

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Can the DHC 8-400 compete with the CRJ550 for the 50 seat Scope Clause market? Part 2.

By Bjorn Fehrm

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Introduction

November 21, 2019, © Leeham News: Last week we started our analysis of the De Havilland Canada’s DHC 8-400 as a replacement for US Scope Clause 50 seat jets like the Bombardier CRJ200 or the Embraer ERJ-145.

We compared a newly produced and adapted DHC 8-400 with United’s CRJ-700 conversion to CRJ550, a 50-seater version of the larger jet. After looking at the airplane dimensions and cabin spaces last week we now go deeper into the configuration of the aircraft and their economics.

Summary:

    • The DHC 8-400 is offered as a 50 seater and 65 seater variant to fit the US Scope Clause market.
    • The Turboprop has a cost advantage over the jet at the cost of a 20% longer trip time.

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Preferred 737 MAX return to service timeline for Airlines

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By Vincent Valery

Introduction  

Oct. 21, 2019, © Leeham News: As Boeing sorts out final requirements with regulators for the 737 MAX return to service, preparations to resume deliveries are in full steam.

The company is hiring scores of temporary workers to return grounded and built but not yet delivered airframes. A note from Alliance Bernstein estimates that Boeing will be able to hand over 25 aircraft per month on top of those that come off the assembly line.

After taking hefty losses and having lost its most robust cash flow source for almost a year, Boeing will want to hand over as many aircraft to airlines as fast as possible.

Do all 737 MAX customers, likewise, want their aircraft back in service as soon as possible?

Summary
  • National regulators will drive return to service timeline;
  • Passenger demand variations;
  • 737 MAX exposure by region;
  • Demand peaks might dictate who flies first;
  • Maintenance, compensation, and other considerations.

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The time for a 767RE passenger model has come and gone

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Introduction

Oct. 14, 2019, © Leeham News: Boeing is reconsidering a previous idea to re-engine the 767 with GEnx powerplants, Flight Global reported last week.

The idea was run up the flagpole, so-to-speak, in 2017.

Boeing 747-400. Source: Delta Air Lines.

At that time, the 737 MAX was just entering service. There was, of course, no hint of any turbulence on the horizon.

The business case for the New Midmarket Aircraft was difficult even then. So why not look at a 767RE and restarting the 757 line, also up upgrades?

Boeing being Boeing, it looks at everything. It ruled out restarting the 757 line (the challenges would have been pretty daunting).

The 767 got more studious traction, including simply restarting the passenger line and providing a really cheap acquisition. A 767RE, however, was viewed as too complex under the circumstances and it would compete with the 787.

American Airlines and United Airlines were actually interested in the airplane restart.

Summary
  • B767F-RE may be to counter A330-900F approach to a major cargo airline.
  • B767P-RE likely would be met favorably–by Airbus.
  • Re-engining 767 repeats 737RE experience.

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Airbus holds the line on A350 production rate

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Introduction

Sept. 4, 2019, © Leeham News: Airbus’ decision a few months ago to keep the A350 production rate at 10/mo appears to be a wise one, considering that there is a small production gap in 2022 but increasingly large ones from 2023.

Boeing boosted rates this year of the 787, which competes with the A350-900 but not the -1000, to 14/mo. Boeing is sold out at this rate in 2020 and 2021, but has a big gap in 2022 and larger gaps thereafter.

Both companies bank on a splurge of orders early next decade to fill the production gaps. Each says there will be a retirement surge beginning in about 2022.

Airbus offers the A330neo and A350. Boeing pitches the 787 and 777X—with a combined production capacity of 35/mo or 389/yr at current rates.

Summary
  • Skyline quality is generally good, but weak spots and one blue-chip order bear watching.
  • Some significant production gaps emerge in 2023.
  • A330-900 competes with A350-900 for orders.

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Pontifications: Boeing can’t catch a break

By Scott Hamilton

July 15, 2019, © Leeham News: Boeing can’t catch a break.

Some may argue it doesn’t deserve one, given what’s come out about the 737 MAX development. And the sloppy production of the 787 at the Charleston (SC) plant. And the FOD issues with the KC-46A at the Everett (WA) plant.

To be sure, Boeing has gotten a lot of bad press it’s deserved. But last week, two pieces of news had connections to the MAX that were (1) overwrought and (2) unwarranted.

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