Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: Air Transport’s route to 2050. Part 19. April 25, 2025
- How good is the C929? Part 2. April 24, 2025
- Boeing First Quarter Results Update: China is 10% of the backlog, with 500 in “Unidentified” April 24, 2025
- Boeing First Quarter Results: Tariffs, Return flights, $10.55bn asset sale April 23, 2025
- RTX Q1 2025 Earnings: GTF Talk Takes A Back Seat To Tariffs April 22, 2025
RTX, P&W parent, posts strong 3Q results
By Scott Hamilton
Oct. 22, 2024, © Leeham News: RTX Corp, the parent of troubled engine maker Pratt & Whitney, posted strong financial results for the third quarter today.
PW continues to struggle with replacing engines plagued by technical defects that have grounded nearly 600 Airbus A320neos worldwide. But year-over-year financial results are markedly improved.
Another subsidiary, Collins Aerospace, which makes a variety of components and interiors, reported higher results YOY.
RTX reported $20.1bn in revenues (+6% YOY)m operating cash flow of $2.5bn, free cash flow of $2bn, and returned $1.1bn of capital to shareholders. Net income was $1.472bn vs a loss of $984m in the prior year.
PW reported $7.2bn in revenue for the period vs a mere $926m in 3Q2023. The operating profit was $557m vs a loss of $2.48bn. Despite all the costs taken against the Geared Turbo Fan engines as PW struggles to replace a defective powder on a large installed fleet, aftermarket maintenance, repair and overhaul work drive the YOY improvements on the commercial side. The defense side of PW also saw a 20% increase in revenues.
Collins is hampered by delays in its interiors division, but revenues were up 7% YOY, largely through a 14% increase in components sales to the military. The commercial aftermarket was up 9%. Collins reported an operating profit of just over $1bn on sales of $7.07bn.
Despite these positive results, investment bank Goldman Sachs reported the results were below consensus.
“Segment Earnings Before Interest and Taxes (EBIT) is below driven by the Collins margin. Revenue is ahead at Pratt, and slightly below at Collins and Raytheon. EBIT is ahead at Pratt and Raytheon and below at Collins. Segment EBIT margin of 11.4% is below implied consensus at 11.9%,” Goldman wrote.
Voting by the Numbers: How demographics weigh in Boeing contract vote Wednesday
By the Leeham News Team
Oct. 21, 2024, © Leeham News: The new contract proposal offered Saturday by Boeing to the IAM 751 membership will be voted this Wednesday.
While the offer is much better than the original Tentative Agreement voted down on September 12 and the “Best and Final Offer” Boeing floated a week later, approval by the membership is still in doubt.
Comments on social media weigh heavily against approval. These outlets are hardly scientific. But the sentiment can’t be dismissed.
The new offer doesn’t materially adjust the starting pay of about $21 per hour. Therefore, this issue remains, as LNA outlined on Oct. 14. Although Boeing’s contributions to the 401(k) plan were improved, young workers are more likely to want higher wages now than a pension fund decades in the future.
Legacy workers who saw the Defined Pension Plan taken away 10 years ago remain hostile to any contract that doesn’t restore it—something Boeing is adamant won’t happen.
With a major shift in demographics among the 33,000 members, opposition to the new offer may be stiff, and approval of this offer in doubt.
How do these numbers shape up?
3Q Earnings reports kick off this week
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By Scott Hamilton
Oct. 21, 2024, © Leeham News: Third quarter earnings reports kick off this week. The most anticipated call will be The Boeing Co.
Boeing previewed a big loss for the quarter on Oct. 11. On Oct. 15, it filed a registration statement with the US Securities and Exchange Commission (SEC) for $25bn in equities, debt, and other securities—money that’s badly needed as it bleeds cash. It also filed another SEC document for a “supplemental” $10bn line of credit. This is in addition to a previous $10bn credit agreement.
Coupled with the $10bn in cash, Boeing potentially has up to $55bn in liquidity.
With the quarter’s loss already pre-announced and the new $25bn liquidity plan filed with the SEC, much of the suspense for Boeing’s earnings call is over. Also on Wednesday, the company’s largest union, the IAM 751 workers, vote on a new contract offer to end a strike closing in on its sixth week. Further color about CEO Kelly Ortberg’s “reset” plan for the company will be closely watched.
Boeing’s earnings call is Wednesday at 10:30 am EDT. The press release will be issued before the stock market opens. The union vote will be announced Wednesday evening.
In addition to Boeing’s earnings call this week, RTX (parent of ailing Pratt & Whitney) and GE Aerospace announce their earnings on Tuesday at 8:30 am EDT and 7:30 am EDT, respectively.
RTX results continue to be dragged down by PW’s continuing technical challenges with the Gear Turbo Fan engines that power the Airbus A220, A320neo and Embraer E-Jet. GE faces a drag on late deliveries and time-on-wing issues with its LEAP engines that power the Boeing 737 MAX and A320neo. GE is also affected by all the production turmoil and IAM strike at Boeing.
Germany’s MTU Aerospace reports on Thursday as well. MTU is a supplier to PW and GE. Safran reports on Friday.
Boeing, IAM reach contract agreement; vote on Wednesday
Oct. 19, 2024, © Leeham News: Boeing and its striking union, the IAM 751, announced a new agreement this morning on an improved contract offer.
The IAM summarized the new offer here. The highlights:
Bjorn’s Corner: Air Transport’s route to 2050. Part 1.
By Bjorn Fehrm
October 18, 2024, ©. Leeham News: In Corners over the last years, we have covered new airliner technology and engine developments that would apply to the next-generation airliners in the largest segment of the market, the single-aisle segment, or as we like to call it, the Heart of the Market segment, as it’s not sure it will be a single-aisle aircraft.
The series has assumed this generation will be hydrocarbon-fueled gas turbine-propelled airplanes. Therefore, it has not covered the current state of alternatives to gas turbine-based hydrocarbon propulsion.
We will cover this now. We are now 10 years into the discussions and work of reducing Air Transport’s reliance on hydrocarbon fuels, which started in earnest when Airbus flew the E-Fan battery-electric aircraft at the Farnborough Air Show in 2014, Figure 1.
How are we doing?
Figure 1. Airbus E-Fan at Farnborough Air Show 2014. Source: Wikipedia.
Heart Aerospace’s revised ES-30, Part 2
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By Bjorn Fehrm
October 17, 2024, © Leeham News: We analyze Heart Aerospace’s latest evolution of the hybrid ES-30 (bottom aircraft in the picture), which replaces the original battery-based 19-seater (top aircraft) and the original ES-30 (mid aircraft).
The latest version, presented in spring 2024, is a parallel hybrid, putting gas turbine turboprop engines outside the electric motors. What are the advantages of the parallel hybrid version, and will it make the Heart ES-30 project more likely to succeed?
We use our Aircraft Performance and Cost Model (APCM) to understand the design choices and the costs involved.
Summary:
- The latest revision of the Heart Aerospace hybrid electric aircraft, the ES-30, takes the hybrid architecture from a serial to a parallel system. It simplifies the architecture.
- Does the revised ES-30 make airline operational sense? We analyze this using our Aircraft Performance and Cost Model.
Boeing: Breaking Up is Hard to Do
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By Karl Sinclair
Oct. 14, 2024, © Leeham News: As newly minted CEO Kelly Ortberg struggles to deal with striking workers from the International Aerospace Machinists (IAM) union in the Seattle and Portland (OR) areas, calls continued for the Boeing Company (BA) to shed one or more of the divisions that make up the corporate entity.
Some point to the turnaround at General Electric, which has now become the standalone GE Aerospace (GE), after a series of divestitures and consolidations into three business units, with two being sold, as a model that Boeing should follow.
While the prospect seems to be rather straightforward, it is far more complex and intertwined than simply throwing up a for sale sign on the front door of an underperforming or unwanted business segment. It might be better to ride out the current storm as a whole and focus efforts on fixing what ails the patient, rather than cutting off a limb.
Where and who will be laid off in Boeing reset?
By Scott Hamilton
Oct. 14, 2024, © Leeham News: As Boeing prepares to lay off about 10% of its workforce of 170,000 employees, the key question remains unanswered:
Who and where will the layoffs come from?
Boeing didn’t say in its Friday announcement, other than in broad terms: “These reductions will include executives, managers, and employees,” CEO Kelly Ortberg said in a message to employees.
“Executives” in the Boeing organization include down to the Director level in management—not just the C or officer level. Union and non-union employees are at risk.
But there was no information about which divisions will be subject to layoffs, or how many in each.
Boeing Commercial Airplanes has the most employees of the three divisions of the company. But the “Enterprise” by far employs more than BCA or the other two units. Figure 1 has the breakdown.
Pontifications: Boeing needs massive reset, and not just with labor
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Now open to all readers.
- CEO Kelly Ortberg’s “reset” plan is long overdue. But Boeing needs to do better for the IAM members, and the members need to give up on the defined pension plan.
By Scott Hamilton
Oct. 14, 2024, © Leeham News: The Friday afternoon announcements by Boeing CEO Kelly Ortberg of a 10% employee reduction, termination of the 767 commercial airliner in 2027, and recognition that commercial and defense programs need drastic surgery is long overdue.
When Ortberg became CEO on Aug. 8, he said one of his top priorities was to “reset” relationships with labor. So far, this hasn’t worked out. But it’s the entire company that needs a reset. And this has been a long, long time coming. I’ll detail this below. But first, let’s talk about the contract talks between the company and the largest union, the IAM 751.
Members, 33,000 of them, walked out on Sept. 13 at 12:01 am. Production of all commercial airliners except the 787 ceased. Production of the commercially-based P-8 and KC-46A also came to a halt, as have all deliveries from Washington State.
Negotiations broke off entirely last week and Boeing withdrew its Best and Final Offer (BAFO). Both sides blamed the other, and competing Unfair Labor Practices complaints have been filed with the National Labor Relations Board. (NLRB).
One of the key areas of dispute: the size of the wage increase. But other factors, such as health care, go into total compensation. Boeing’s total compensation not only lagged others in aerospace, it’s had negative growth since 2018.
Read more
How Boeing’s actions affect Products, Airbus: Analysis (Update)
Updated Oct. 12 with new and clarifying information.
By Scott Hamilton
Oct. 11, 2024, © Leeham News: Boeing’s late announcement today of a 10% company-wide layoff of its 170,000 leaves a lot of questions.
Boeing managers were told to expect guidance on Monday. As of Saturday, there is no information available about where the layoffs will occur–how many will be from Boeing Commercial Airplanes, for example, vs Boeing’s Defense and Services units.
Boeing’s announcement did not define “executives;” LNA understands that in the company’s organization, “executives” extend down to the Director management level.
Beyond the immediate, announced moves and impacts to Boeing (see Related Article), terminating the 767-300ERF program in 2027 when current orders are filled will hurt the US Air Force KC-46A aerial refueling tanker cost basis. The commercial program absorbed some of the tanker’s program costs. This was one reason cited by FedEx’s founder Fred Smith to support extending production beyond 2027 when new international emissions regulations render the civilian version ineligible to continue.
Pushing entry-into-service of the 777-9 to 2026 and the 777-8F into 2028 should benefit Airbus with sales of the A350. Its largest passenger version, the -1000 model, is smaller than the 777-9 by nominally 60 passengers. But some airlines consider the -9 too big anyway. Airbus has few near-term production slots available for the A350, so any delay for the 777-9 benefits Airbus.
The same holds true for the 777-8F. Airbus offers a freighter version of the A350 and further delays of the 777-8F should benefit Airbus.
Airbus has a goal to produce 10 A350s a month in 2026. The line is essentially sold out then and slightly oversold in 2027. But the wing factor in Wales has a capacity of 12-13 shipsets a month; it’s unclear what the current capacity of the A350 final assembly line in Toulouse is. The pacing item remains with the supply chain capacity.