Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- The BWB has a long way to go before flying passengers, freight May 12, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 21. May 9, 2025
- Does an A220-500 need a new wing and engines? Part 2. May 8, 2025
- Embraer downplays tariff impact on 2025 results May 6, 2025
- JetZero readies effort for private equity fund raising May 5, 2025
Global instability poses questions for aerospace industry
By the Leeham News Team
Dec 9, 2024, © Leeham News: The global aerospace sector is facing significant uncertainty as geopolitical tensions, including trade disputes and security concerns, weigh heavily on sections of the industry.
China Southern Airlines plans to sell its 787-8s, but will hang onto its 787-9s. How Chinese airlines proceed from here is not certain. Credit: Boeing
A new administration in Washington (DC), and the impact that may have on the Ukraine war and relations with China, alongside a rapidly evolving situation in the Middle East, will likely alter the balance further in 2025.
A lot has already been baked in, but the industry is still grappling with how each scenario may unfold.
“I’ve been feeling for a while that Boeing’s prospects in China are pretty bleak,” says Bruce McClelland, a senior analyst at market analysts Teal Group, when asked how he expects the next few months will play out for OEMs.
“[Chinese customers] will probably take delivery of a few 737s, and maybe some 787s that are currently on order or may have been built already But I think that China, increasingly, for a number of reasons, doesn’t necessarily need all the Boeing planes that it might have thought it would need.” Read more
How Trump tariffs affected, and could affect, Airbus, Boeing and Embraer
By Scott Hamilton
Dec. 6, 2024, © Leeham News: President-elect Donald Trump vowed to immediately impose a 25% tariff on “ALL” imports into the US from Canada and Mexico, and 10% from China.
Last week, he threatened to impose a 100% tariff on imports from the BRIC-aligned nations if they move away from the US dollar in international economics.
The BRIC nations begin with Brazil, Russia, India, and China (the “BRIC” part of the group). Egypt, Ethiopia, Iran, South Africa, Iran, and the United Arab Emirates round out the group.
There is widespread criticism of the potential damage the Trump tariffs could impose on the US economy. The targeted countries would be certain to impose tariffs on US goods.
The impact could be significant for commercial aviation—and Boeing in particular. Before its repeated self-inflicted wounds began with the 2018/19 737 MAX crisis, which continues today, Boeing was by far the largest US exporter. Deliveries of its 7-Series airplanes outside the US helped balance the trade deficit the US usually has.
Before Trump’s first term, China was the largest customer for Boeing airplanes. Deliveries accounted for 25% or more of Boeing’s annual deliveries. After
Trump took office in 2017 and imposed tariffs on China, Beijing stopped ordering Boeing airplanes. China was the first country to ground the MAX after the two fatal accidents. It was the last to recertify the airplane. And there still remains a sizeable inventory of undelivered 737s awaiting Beijing’s approval for delivery, one by one.
Trump also imposed tariffs on Airbus imports into the US as part of the two-decade-long World Trade Organization (WTO) trade dispute between Airbus and Boeing.
However, imposing tariffs is a complicated process. LNA extensively reported on the WTO battle (see related articles). We explain this further below.
Related Articles
Leeham News articles:
- Boeing files trade complaint vs Bombardier with Trump Administration 4-27-17
- Boeing C Series trade complaint is no surprise 5-1-17
- Boeing-Bombardier trade complaint revisited 7-31-17
- Decision was expected, tariff is a shocker in Boeing-Bombardier case 9-26-17
- Assessing the impact of the Bombardier tariff decision 9-27-17
- No harm to Boeing, what happened and what’s next 1-26-18
- Insignificant impact from steel tariff 3-2-18
- China tariffs on Boeing airplanes unlikely 3-14-18
- Boeing yields on C Series tariff case; what’s next for Bombardier? 3-26-24
- Trump proposes tariffs on Airbus; EU likely to retaliate 4-9-19
- EU ready to instantly retaliate if US imposes tariffs in WTO case 9/29/19
- US imposed $22m in Airbus tariffs in 2019 3/3/20
- EU tariffs on Boeing airplanes in effect 11/16/20
- US to tax fuselage, wings, tail imported for Airbus’ Mobile plant 12/31/20
Start-up hybrid plane OEM MAEVE teams with MHIRJ for sales, more
By Karl Sinclair
Dec. 5, 2024, © Leeham News: Start-up company Maeve last week signed a collaborative agreement with MHIRJ to provide sales and potentially product support for its proposed 80-seat M80 hybrid-electric commuter airliner.
Maeve has administrative headquarters in The Netherlands and technical headquarters in Munch. MHIRJ is the old Bombardier CRJ regional jet global product support system headquartered in Canada.
MHIRJ will lead Maeve’s sales effort for the new M80 and instantly give Maeve credibility in potentially offering a reliable product support system. MHIRJ also has global access to airlines via the CRJ program, which Maeve lacks as a start-up.
If things go as planned, Maeve will see the launch of the first clean-sheet turboprop aircraft in over three decades. The M80 is scheduled to undergo a critical design review by the beginning of 2028, make its first flight in 2030, and enter service in 2032.
“That’s the timeline that they’re still working towards, and that’s why they brought us on, to start looking at their design, from all aspects,” said Ross Mitchell, Senior Vice-President of MHIRJ, in an interview with LNA.
MHIRJ is a fully owned subsidiary of Mitsubishi Heavy Industries (MHI) and is the result of Mitsubishi’s 2020 acquisition of the CRJ Series program.
“MHIRJ is the largest MRO for regional aircraft in the world,” said Mitchell. “The [US labor contract] Scope Clause is a little more complicated than some people think, and because we had that experience dealing with Scope Clause over the years, we can certainly advise them on how to make sure your airplane is most suitable for the US market.”
MAEVE’s proposed M80 hybrid-electric 80-seat airliner. Credit: MAEVE.
Scope Clauses limit the size and number of passengers a regional aircraft can carry and exist between mainline carriers and their respective pilot’s unions. The most common clause among the Big Three is a maximum take-off weight of 86,000 lbs and a seating limit of 76 passengers.
Production increase delays hurt Airbus costs
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By Scott Hamilton
Dec. 2, 2024, © Leeham News: Boeing gets all the attention for late deliveries, higher costs, and bloated staff. However, Airbus isn’t immune to similar problems.
Late deliveries and missing delivery targets are well known. Supply chain issues, which Airbus and Boeing have identified, are one problem. Engines delivered late by CFM, GE, Pratt & Whitney, and late interiors from Safran and Collins (among others) are most often cited. But other suppliers down the food chain also struggle to keep up with pressure to increase production rates. Many are still coping with workforce shortages rooted in the COVID-19 pandemic recovery.
Boeing has a bloated workforce. Last month, it began laying off 10% of its 170,000 person workers.
Airbus also has a bloated workforce. However, under European labor laws, it can’t freely implement layoffs like its US rival can.
The result: productivity per employee suffers, and costs climb. A review of the Commercial division’s employee headcount provides a stark picture.
The Commercial unit had 22.7% more employees at the end of 3Q2024 vs Dec. 31, 2022, when the pandemic was widely considered to be over. It has 23.8% more employees than on Dec. 31, 2020, when the pandemic was in full swing.
Books to consider for Christmas
By Scott Hamilton
Nov. 29, 2024, © Leeham News: In America, it’s the day after Thanksgiving and this means the official start of Christmas shopping season.
Air Wars
- Air Wars, The Global Combat Between Airbus and Boeing, by…me. Sorry, I can’t help putting my
own book at the top of the list. Published in September 2021 while Boeing was still dealing with the grounded 737 MAX and the whole industry with the COVID-19 pandemic, Air Wars covers 33 years to September 2021 of the product and marketing strategies between Airbus and Boeing. There is special focus on Airbus’ super-salesman, John Leahy. But there is plenty of on-the-record input from Boeing executives like Scott Carson, Jim Albaugh and Ray Conner (all retired CEOs of Boeing Commercial Airplanes), Boeing and Airbus salesmen, and customers. The book tells the story about Boeing squandering its dominance and of mistakes by both companies. The book was rated Number 1 buys in the aviation sector by Amazon for a time, and on the recommended Buy lists of the year by the Royal Aeronautical Society and the Puget Sound (Seattle) Business Journal. Available in the US, select Europe and Asian Amazon outlets.
Flying for Peanuts
- Flying for Peanuts, by Frank Lorenzo. I also had a hand in this book, collaborating with Lorenzo on
the project for a time. But this is not why I’m recommending it. This is Lorenzo’s memoirs. He was a key player in the US airline industry for 25 years and, yes, he left the industry in 1990. Lorenzo was among the first to recognize the opportunities and the threats US deregulation of 1978 represented to the airline industry. He owned the smallest “local service” airline and faced going out of business unless he grew Texas International exponentially and rapidly. Even before deregulation became law, he persuaded the regulator to grant him the ability to adopt very low, unrestricted, system-wide fares branded Peanut Fares (hence the name of the book). Traffic and profits exploded. He sought to grow by making tender offers for other airlines. He lost some and won some and, in the process, incurred the wrath of the labor unions who understood all too well that his business model would infect the other airlines. This is a great read and history of that era, which transformed US airlines and eventually spread to the rest of the world.
Slow, methodical process to restore Boeing’s trust, efficiencies
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By Scott Hamilton
Nov. 28, 2024, © Leeham News: Boeing’s path forward will be slow progress, as the company recovers from a 53 days strike by its largest union, the International Association of Machinists and Aerospace workers, official said Tuesday.
“Where do we stand as Boeing today? Now that our IAM teammates are back, we have the task of resuming production. And it’s much harder to turn things on than to turn lines off,” said Michael Haidinger, president of Boeing’s European and Middle Eastern regions.
Michael Haidinger. Credit: Boeing.
Haidinger appeared before the Aviation Forum 2024, a suppliers-oriented conference held this year in Munich.
“It’s critical for us and for [suppliers] that we do that right. We cannot afford another mistake in our production system. Therefore, our safety and quality management system will guide us and determine the speed through this production restart in the Seattle region in the very near future.”
Engineering, Innovation is our DNA: Embraer
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By Scott Hamilton
Nov. 25, 2024, © Leeham News: Embraer’s revenues may be small compared to Airbus and Boeing.
Luis Carlos Affonso. Credit: Embraer.
But “under the hood,” the company is, in many respects, more innovative and aggressive in developing new airplanes.
Compared with Boeing, which in 2017 wanted to take over Embraer’s commercial airplane unit, Embraer is far more efficient and more dedicated to making safety and engineering the top of its culture.
Airbus hasn’t developed an all-new commercial airliner since the A350, launched in 2013. Boeing hasn’t launched an all-new airliner since the 787, launched in December 2003. Each has developed derivatives of existing products since then. Airbus launched the A330neo in 2014 and the long-range and extra-long-range versions of the A321neo. It added the Ultra-Long-Range model to the A350.
Boeing launched the 737 MAX derivative in 2011, the 747-8 in 2005, and the 777X and 787-10 in 2013.
Since 2000, Embraer developed and certified more than 20 aircraft types across its commercial, military, and executive product lines.
During the same period, Airbus launched the A320neo family in addition to those listed above. Boeing launched the KC-46A (a derivative of the 767-200ER) aerial tanker in 2011 and a few new military programs.
Credit: Embraer.
“One thing that is incredible at Embraer is the amount of new designs, new platforms that we have developed in the last 25 years. I don’t know any other company that has developed so many airplanes in this time frame,” Luis Carlos Affonso, Senior Vice President of Engineering and Technological Development, said during the Embraer investors’ day on Nov. 18 in New York.
No changes to US labor Scope Clauses for indefinite future, says Embraer
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By Scott Hamilton
Nov. 22, 2024, © Leeham News: Embraer doesn’t see any changes in the US airline labor contract Scope Clause for the foreseeable future. This means that the E175-E1, equipped with previous generation engines, will remain in production for the same period.
Arjan Meijer, president and CEO of Embraer Commercial Aircraft. Credit: Embraer.
The E175-E2 with current generation Pratt & Whitney Geared Turbo Fan engines is stillborn.
The Scope Clause is a long-standing contract provision for American, Delta, United, and Alaska airlines that restricts the passenger capacity, weight, number of aircraft, and sometimes the operating range of regional aircraft that may be operated by airline subsidiaries or independent regional carriers on behalf of the mainline airline.
The Scope Clause aims to protect higher-paying pilot jobs from being farmed out to lower-paid pilots flying regional aircraft.
Airline managements see a cost benefit to farming out these jobs. They also recognize that many markets can’t support bigger airliners, yet these markets are crucial to feeding the hubs that dominate the US airline industry.
Embraer is now the only manufacturer outside China and Russia producing a regional jet designed specifically for these markets. The E1 entered service in 2004. The company launched the E2 program with a new engine, updated systems, and aerodynamic improvements only nine years later. The smallest original E-Jet, the E170, was dropped. The E175/190/195 was offered as the E2.
However, US unions refused to alter the Scope Clause to allow the E175-E2 to replace the E175-E1 to accommodate the heavier weight of the E2, which exceeded Scope restrictions by only a few tons due to heavier engines. Thus, Embraer put the E175-E2 on indefinite hold and continued to sell updated E1s to US airlines.
Embraer goal: $10bn in revenues by 2030, nearly doubling YE2023
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By Scott Hamilton
Nov. 21, 2024, © Leeham News: Only a few years ago, Embraer was struggling. Airbus acquired Bombardier’s C Series program for US$1 and rebranded it the A220. Instead of competing against a financially distressed Bombardier with its E2 jets, Embraer faced the global might of Airbus.
In a defensive move, Embraer agreed to create a joint venture with Boeing as the junior partner, with a mere 20% share of the JV.
Francisco Gomes Neto, President and CEO of Embraer. Credit: Embraer.
Sales of the E2 stalled while the market awaited Boeing’s takeover of Embraer’s commercial unit. All regulatory authorities quickly approved the JV except the European Union, which stalled interminably. Embraer believes Airbus was behind the stall, and it may have been. The USA’s new President, Donald Trump, imposed a 20% tariff on Airbuses delivered to the US, and the EU was in a retaliatory mood.
Then Boeing’s global 737 MAX fleet was grounded beginning on March 10, 2019, after two fatal crashes revealed a design flaw of a flight control system. A year later, the COVID-19 global pandemic began. Sales and deliveries from all manufacturers, including Embraer, immediately tanked.
A month later, Boeing withdrew from the JV. Embraer cried foul and this year won a $150m arbitration break-up fee claim.
Today, it’s clear Embraer’s operational and financial performances have recovered from these difficult years. The stock price is up 147%. Deliveries of the E-Jets are nearing pre-pandemic, pre-JV levels. The defense, executive jet, and services divisions are on upward swings. And now, Embraer’s goal is to hit $10bn in revenues by 2030, almost double what it reported for the full year of 2023.
Executives outlined the company’s progress and ambitions at an investors’ day conference in New York on Monday. This is the first in a series of reports from this event.
Spirit Airlines bankruptcy could free up scores of A320/321s
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By Scott Hamilton
Nov. 18, 2024, © Leeham News: Spirit Airlines’ bankruptcy will likely be its death knell unless a deep-pocketed savior emerges. The carrier filed a pre-packaged bankruptcy petition today, expecting to emerge in the 1Q2025. Uncertainties follow any Chapter 11 filing, however, and there is no guarantee Spirit will successfully reorganize.
Spirit Airlines A320neo. Credit: Spirit Airlines.
However, a fairly large order book for the A320neo and A321neo could help lessors that hold a large portion of these orders remarket the aircraft to viable airlines.
Spirit, an Ultra-Low-Cost Carrier (ULCC), has nearly 100 neos on order. Thirty-three are for the A320neo, and 65 are for the A321neo. All but six have delivery dates from 2026 onward, well before production begins. Airbus can deliver these aircraft to a new buyer’s specifications. Monument positions (lavs and galleys, for example) don’t have to be relocated, and interiors may be configured as a new buyer desires.
The biggest challenge will be whether interior companies can accommodate new Buyer Furnished Equipment (BFE) near-term. Safran, Collins and others are running late on some interiors as it is.
This chart shows the delivery stream for Spirit’s aircraft, as based on data from Cirium last month.
