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
GE Posts Mixed Q3 Earnings: Strong Earnings with LEAP Shipset Declines and Further 777-X Delays
By Chris Sloan
October 27, 2024, © Leeham News: GE completed its second quarter as a pure play aerospace play, announcing Q3 2024 earnings with positive revenue, profit, sales growth, and services coupled with headwinds from overall reduced engine deliveries of 4%, impacts to the GE-9X program from the Boeing 777-X’s latest delays, and the all too familiar supply chain constraints. Growth in services and pricing power provided a boost.
“Our recent wins and wide bodies and narrow bodies built on our considerable backlog of $149bn,” said GE Aerospace Chairman and CEO Larry Culp. Recent commercial campaign wins include narrowbody orders from lessor Avolon, which ordered 150 LEAP-1A engines to power 75 A320/321neos and announced widebody commitments from EVA Air for four GEnx-powered 787s and Qatar’s order for 40 GE9X engines to power 20 777s. The propulsion provider, however, is guiding towards a 10% decline in commercial engine deliveries year-on-year. Markets punished GE with an 8.5% drop in its stock price by mid-morning trading.
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.
