Leeham News and Analysis
There's more to real news than a news release.
Pontifications: Aircraft prices, rents plunge
By Scott Hamilton
Nov. 9, 2020, © Leeham News: Aircraft prices and lease rates are plunging as the COVID-19 pandemic continues to devastate the airline and manufacturing industries.
The Australian newspaper reports that Rex Airlines will pay A$60k/mo for its ex-Virgin Australia Boeing 737-800s, rising to A$100k after 12 months. This is US$43,600 to US$72,700.
Rex is a small regional airline that is leaping to a jet operator. It committed to take 10 737s.
The article says the airplanes are more than 10 years old.
Compare the rates to the rents listed Nov. 2 by Ishka, the UK-based appraisal and consultancy firm: US$115k/mo for a 15-year-old model.
Virgin’s airplanes date from 2003 to 2018. The oldest leased airplanes date to 2004.
It’s not especially surprising that swamped with excess airplanes that lessors will place airplanes for whatever they can get. Lessors are under great pressure to service their own debt.
Even Ishka’s estimates for 20-year old airplanes are higher than the Rex rates.
But the real story is what new airplanes are going for. And the prices are eye-popping low.
Bjorn’s Corner: The challenges of Hydrogen. Part 14. Supply of Hydrogen
By Bjorn Fehrm
November 6, 2020, ©. Leeham News: In our series on Hydrogen as an energy store for airliners we now look at how to create a supply industry for hydrogen.
The problem of a sizable and competitive hydrogen supply industry is a chicken or egg problem. To achieve a competitive and functioning hydrogen transport system we need an adequate hydrogen infrastructure and to get an adequate hydrogen industry we need large-scale consumers.
Figure 1. The CO2 problem and the main contributors. Source: Wikipedia.
Enhancing the Dreamliner, Part 5: 787-10
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By Vincent Valery
Introduction
Nov. 5, 2020, © Leeham News: After analyzing the 787-9, we now turn our attention to the last Dreamliner variant that entered into service, the -10.
The 787-10 was developed as a minimum change stretch of the 787-9. Keeping it at the same gross weight as the 787-9 meant it could share the same wing and landing gear, yet offer a higher capacity. The longer fuselage meant higher empty weight and drag so the range of the -10 was cut compared with the other Dreamliners.
Summary
- Maximizing commonality by trading range for volume;
- Limited near-term replacement market;
- A case for further enhancements;
- Payload limitations on a long-haul route.
HOTR: Airbus, Boeing R&D spending continues decline
By the Leeham News Team
Nov. 5, 2020, © Leeham News: Research and Development spending by the Airbus and Boeing commercial units declined year-over-year.
The movement is in keeping with cost-cutting by the Big Two OEMs. For Airbus, the reduction is due to the coronavirus pandemic. For Boeing, it’s due 
to the 737 MAX grounding and the pandemic.
Boeing’s spending typically lags Airbus. Richard Aboulafia, a consultant with Teal Group, for years criticized Boeing over its smaller spending, favoring instead shareholder value. Airbus overtook Boeing is innovative single-aisle airplane development years ago. Boeing’s choice of creating a 777 derivative instead of a new design to compete with the A350-1000 proved to be a weak move. There are only a handful of customers and the skyline is weak.
Boeing 787 SC plant has room to increase production in current building: Exclusive Leeham News Analysis
Now open to all readers.
By the Leeham News Team
Introduction
Nov. 2, 2020, © Leeham News: When Boeing announced consolidation of the 787 Program in Charleston, Washington State and local officials—as well as thousands of employees—hoped that if production rates recovered, the final assembly line in Everett would reopen.
However, for Everett and Washington State, the message is clear. The 787 is leaving for good.
Boeing made it clear that consolidation wouldn’t happen if Charleston couldn’t grow the production beyond the current maximum of 7/mo.
LNA’s analysis makes it clear the South Carolina facility can do so.
The Charleston FAL is positioned to build all future 787s, at rates higher than the recent 7/mo maximum.
Summary
- The Charleston FAL can go higher than the historical maximum of 7/mo without capital expenditures.
- Production rates can increase under the current process more than 40%.
- Rates can increase more than 70% with some process changes.
- The current FAL can accommodate these higher rates.
Pontifications: Certification timing may push EIS for 777X
Nov. 2, 2020, © Leeham News: Throughout the 737 MAX investigations and recertification process, former Boeing CEO Dennis Muilenburg said there would be no delay on 777X certification.
By Scott Hamilton
On Boeing’s earnings call last week, Muilenburg’s successor, David Calhoun, said there could be.
“On the 777X, we continue to work with the regulators on certification work scope, including reflecting the learnings from the 737 cert process,” Calhoun said. “As with any development program, there are inherent risks that can affect schedule. And while we continue to drive toward entry into service in 2022, this timing will ultimately be influenced by certification requirements defined by the regulators.”
Boeing is certifying the 777X under the Changed Product Rule, the same process used for the MAX. Certification is being pursued as a derivative of the 777, a point of scrutiny on the MAX.
Bjorn’s Corner: The challenges of Hydrogen. Part 13. The supply of Hydrogen
October 30, 2020, ©. Leeham News: In our series on Hydrogen as an energy store for airliners we now address the problem of liquid hydrogen supply for air transport.
Before we go into the ecosystem and its costs, let’s start with a more principle discussion. Is continuing today’s consumption pattern a valid alternative?
Figure 1. World energy consumption by type and development. Source: Wikipedia.
Airbus stopped consuming cash in 3Q2020
October 29, 2020, © Leeham News: Airbus announced its third-quarter 2020 financial results today. It has achieved convergence of production and deliveries by delivering 145 aircraft in the quarter and 341 since the start of the year. It will keep its present production rates until next summer when A320neo rates are expected to increase.
The convergence of production and delivery rates combined with other measures has stopped the outflow of cash and Free Cash Flow from operations was positive in the quarter and is expected to stay positive until the end of 2020.
Enhancing the Dreamliner, Part 4: the 787-9 analyzed.
Subscription Required
By Bjorn Fehrm
Introduction
October 29, 2020, © Leeham News: We look deeper at the 787-9, the most successful member of the Dreamliner family. It’s 50 seats larger than the 787-8 but shares the same wing dimensions and engines.
The 787-9 quickly overtook the smaller 787-8 in sales and deliveries once its performance was clear to the airlines.
By following on the 787-8 it could benefit from many enhancements in design and production, becoming a very efficient aircraft in the process. To check its efficiency we run the 787-9 against its predecessor, the Boeing 777-200ER, on the San Francisco to Sydney route and look at the data.
Summary
- The 787-9 enjoyed all the improvements that came to light when developing the 787-8. The result is one of the most efficient twin-aisle aircraft on the market.
- Why it’s popular with the airlines becomes evident when we compare with the aircraft it replaces, the 777-200ER.
Update 2: (adds earnings call information): Update 1: (adds Calhoun on CNBC): Boeing cites grounding, COVID, 787 quality issues in 3Q/9 month loss
Oct. 28, 2020, © Leeham News: Boeing released its 3Q2020 and nine months financial report this morning and, as expected, it wasn’t pretty.
- Boeing burned through more than $4.8bn in cash during the quarter from losses. Another $262m in cash was used on building additions.
- For nine months, Boeing reported an operating loss of nearly $6.2bn.
- Debt remains at $61bn.
- “Commercial Airplanes third-quarter revenue decreased to $3.6bn, reflecting lower delivery volume primarily due to COVID-19 impacts as well as 787 quality issues and associated rework. [Emphasis added.] Third-quarter operating margin decreased to (38.1) percent, primarily driven by lower delivery volume, as well as $590m of abnormal production costs related to the 737 program,” Boeing reported.
- Boeing Global Services revenue declined by nearly $1bn and earnings fell by slightly more than $400m, impacted by the decline in commercial aviation because of COVID.
- The value of the commercial airplanes backlog at Sept. 30 was $312.68bn vs $376.59bn. Boeing delivered 98 airliners in the nine months compared with 301 in 2019. The MAX was grounded March 13, 2019, with deliveries halted then.