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 25. June 6, 2025
- New RISE powerplant benefits from decades of GE research and development June 5, 2025
- Engine makers emphasizing durability, reliability June 4, 2025
- Boeing CEO: Lessons learned are key to certification of 737-7/10 and 777X June 2, 2025
- Digital twin is a key to JetZero’s hopes for Blended Wing Body entry June 2, 2025
Boeing’s second quarter of 2020; cutting production as revenue halves due to MAX grounding and COVID-19
July 29, 2020, © Leeham News: Boeing presented its results for the second quarter of 2020 today. The company revenue is halved compared with the last second quarter with full 737 MAX production, 2Q2018. The reported loss was $3bn but the real loss, masked by program accounting, is close to double this number.
Boeing will now cut production of the cash cow 787 to less than half the pre-COVID rate, producing six planes per month instead of 14, and the 777/777X rate goes from five presently to two per month next year and stays there for 2022.
The 737 MAX production will stay at a very low level until the present inventory of 450 produced MAX has cleared. Present planning is a slow ramp during 2021, with a rate of 31 per month only reached at the end of 2022.
Aviation veteran journalist Creedy joins LNA
Kathryn Creedy
July 29, 2020, © Leeham News: Kathryn B. Creedy has joined Leeham News & Analysis as a regular contributor, it was announced today.
Creedy is an award-winning veteran aviation/travel journalist and author who has covered every facet of commercial and business aviation.
Looking ahead for 2020 and 2030 decades: ATR & De Havilland Canada
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Seventh and final in a series.
By Judson Rollins
Introduction
Jet manufacturers typically introduce a new airplane every 15 years or so.
Commercial turboprops have not innovated to nearly the same extent as jets, with rival manufacturers ATR and De Havilland Canada (and predecessor Bombardier) having produced nearly 95% of the world’s in-service fleet. Although order volume has slowed in recent years, more than 300 aircraft are still on order.
Both manufacturers sell aircraft based on 30+ year old designs. However, the market’s size is probably capped because of turboprops’ relatively low cruise altitude and speed, making them limited alternatives to regional jets beyond roughly 500nm. This limits the return on investment from a clean-sheet design, either from aerodynamic improvements or the use of carbon composites.
Emerging threats lie on the horizon as China’s Xian MA700 nears its first flight and Embraer deliberates re-entering the market with a new design. Given sufficient market acceptance, either would constitute a significant threat not only to ATR and DHC, but potentially also the smaller end of the regional jet market.
Summary
- ATR has a commanding share of the market; access to Airbus resources adds to ATR’s ability to win future business.
- DHC’s dwindling order book and high production costs limit its ability to compete.
- Old designs leave the turboprop space ripe for disruption; Embraer may re-enter the market with a clean-sheet design.
Applying ASC 606 to the Airbus Order Book
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Now open to all readers.
By Vincent Valery
Introduction
July 27, 2020, © Leeham News: Since the first quarter of 2018, Boeing applies a new revenue recognition accounting standard, ASC 606, to its aircraft order book.
As a result, the OEM needs to remove orders from the backlog when a customer deviates materially from its contractual obligations.
ASC 606 adjustments affect all Boeing commercial aircraft programs apart from the 767. Orders removed from the 737 backlogs increased from 183 to 622 between the end of 2019 and June 2020. The figure should rise further as more airlines have strained finances due to the COVID-19 outbreak.
Other aircraft OEMs, notably Airbus, do not apply such standard. As a result, the firm backlogs of Airbus and Boeing aren’t apples-to-apples comparisons.
With Airbus reporting earnings Thursday, LNA adjusts the OEM’s order book for orders at material risk of cancellation. The goal is to obtain a more representative market share picture.
Summary
- ASC 606 Course 101;
- Identifying Boeing ASC 606 customers;
- Applying adjustments to Airbus’ order book;
- Estimation of adjusted market shares.
Pontifications: The light bulb goes on
By Scott Hamilton
July 27, 2020, © Leeham News: Airlines across the world are pledging aircraft, slots, airport facilities and real estate to raise money.
Some US airlines recently pledged frequent flyer programs to raise billions of dollars in debt to help carry them through the COVID-19 crisis.
Airfinance Journal last week had a podcast with United Airlines and Goldman Sachs to discuss UAL’s doing this and the larger picture.
The rush to pledge virtually everything to raise money is déjà vu all over again.
I’ve been in this business since 1979. I’ve been through the 1991 Persian Gulf War, SARS, downturns, 9/11 and the Great Recession. The impact to the airline and aerospace industry from the virus crisis is by far the worst.
Bjorn’s Corner: The challenges of Hydrogen. Part 1. Background.
By Bjorn Fehrm
July 24, 2020, ©. Leeham News: What a difference three months make!
When I wrapped the 20 piece Corner series about e in ePlane not standing for electric, on the first of May, I was virtually alone in saying hydrogen is the best long term alternative to our airliners’ jet fuel.
Today it’s all about hydrogen, especially if you ask industry and authorities in Europe. What happened?
Figure 1. The Russian Tu-155 hydrogen fuel research aircraft that flew in 1988. Source: Tupolev.
Looking ahead for 2020 and 2030 decades: Mitsubishi
Sixth in a Series
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By Scott Hamilton
July 23, 2020, © Leeham News: The Mitsubishi Aircraft (MITAC) SpaceJet program is in limbo.
MITAC parent Mitsubishi Heavy Industries (MHI) suspended development of the M100 SpaceJet in the wake of the COVID-19 crisis. Customers are
suppliers are in the dark about this program’s future.
MHI continues to complete certification of the M90 SpaceJet, which is simply the rebranded MRJ90. But, as LNA previously wrote, the M90 is at an economic disadvantage to the competing Embraer E-Jets.
The planned entry-into-service for the M90 is next year. However, certification process by the Japanese regulator is slow. The impact by COVID on the certification process and EIS remains to be seen.
Summary
- M100 program on hold at least until next year.
- What’s next for MHI?
- Strengths, Weaknesses, Opportunities and Threats
Restoring capacity with the A330ceo or A330neo, Part 6, Wrapup.
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By Bjorn Fehrm
Introduction
July 23, 2020, © Leeham News: Over the last four weeks, we analyzed the venerable Airbus A330, to see if the present low fuel and lease prices make the recent A330neo version less attractive than an older ceo version.
As airlines are cash injection driven in the present COVID-19 crisis, taking delivery of a new aircraft and then do a sell, lease back deal injects fresh cash to the airline. The order deposit and the Pre-Delivery-Payments, PDPs, then flows back to the airline. This is why we see airlines take new aircraft despite not really needing them right now.
The A330 has seen phenomenal growth in capability as the Gross Weight has gone from 212t to 251t over the years. We now wrap the series by looking if there is potential for another stretch in the A330? Could it grow to a true Pacific-Ocean crosser, and if so, what changes should be made?
Summary
- The A330neo now has a 251t Maximum TakeOff Weight (MTOW). Is this enough or could the aircraft gain from another MTOW hike?
- We go through the gains and the areas that need changing should the business case be there to stretch the payload-range curve further for the A330neo.
HOTR: Norwegian claims $1bn+ in damages from Boeing
HOTR072120
By the Leeham News staff
July 21, 2020, © Leeham News: Norwegian Air Shuttle said June 30 it canceled orders for 92 Boeing 737 MAXes and five 787s.
The orders still appear on Boeing’s Unfilled Orders website, which is updated monthly.
In a lawsuit filed June 20 in Cook County Circuit Court (Chicago), NAS claimed breach of contract for failure to deliver the MAXes due to grounding. It claims breach of contract for failure to delivery 787s due to the long-running issues with the Rolls-Royce engines.
As federal aid comes to end, small suppliers see “blood bath”
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By Scott Hamilton
Introduction
July 20, 2020, © Leeham News: As the Payroll Protection Plan of the US government nears expiration, a blood bath among small suppliers is all but certain unless an extension is approved by Congress.
This is the dire forecast by William Alderman of Alderman & Co. Alderman specializes in representing small suppliers and aftermarket companies wanting to exit the business. Small, in this case, is defined as revenues up to $100m.
Alderman told LNA that some of his clients don’t see business recovery for 10 years. This is a different metric than the one most often cited: air traffic returning to pre-COVID levels in 2023-24, by most accounts.
Summary
- Small companies need PPP extension.
- Small companies need working capital, fast.
- If neither is forthcoming, exiting the business in the other alternative.