Leeham News and Analysis
There's more to real news than a news release.
COVID production rates “firm” up
By Scott Hamilton
July 30, 2020 © Leeham News: Airbus and Boeing refined their COVID production schedules this week slightly downward in some cases.
Airbus largely held to its previously announced production schedule. It dropped the A350 rate by one, to 5/mo from six. The A320 rate remained at 40/mo, as did the A330 rate at 2/mo. The A220 rate is returning to 4/mo in Montreal and 1-2/mo in Mobile.
Airbus 1H2020; “We have reached the right production level for the pandemic”
By Bjorn Fehrm
July 30, 2020, © Leeham News: Airbus presented its results for the first half of 2020 today. Airbus CEO, Guillaume Faury said on the analyst call “We made a large adjustment to lower production rates end April. We are there now and it seems the right level. Except for a small adjustment for A350, from six to five per month, we are happy, we have found the right level for the crisis”.
The group revenue settled at €18.9bn for the first half of 2020 compared with €30.9 a year ago, with deliveries at 196 commercial aircraft (389 1H2019). EBIT adjusted for the first half is €-0.9bn, the size of the COVID-19 extra costs charge.
Airbus says A350 loans now WTO compliant
By Bjorn Fehrm
July 30, 2020, ©. Leeham News: Airbus CEO Guillaume Faury announced Friday that it had made the A350 Repayable Launch Investment (RLI) loans fully WTO compliant, to break the deadlock in the 16-year-old fight with Boeing over state subsidies to their airliner industries. The claim was reiterated today during the Airbus second-quarter earnings call.
“We have fully complied with all the WTO requirements. These additional amendments to the A350 RLIs demonstrate that Airbus has left no stone unturned to find a way towards a solution,” said Faury. “This is a clear signal of support to those who are suffering from the severe impact of the tariffs imposed by the USTR, especially at a time when industries are hard hit by the consequences of the COVID-19 crisis.”
Sunset of the Quads, Part 1
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By Vincent Valery
Introduction
July 30, 2020, © Leeham News: British Airways announced two weeks ago that it would immediately retire its entire Boeing 747 fleet. Several other operators announced accelerated retirements of their Queen of the Skies fleets. There are now fewer than 100 747s left in passenger service.
While less publicized, airlines have also been accelerating the retirement of their Airbus A340 fleets. Lufthansa put its 10 remaining A340-600s into long-term storage.
So far, Air France is the only airline to have permanently retired its A380 fleet, initially scheduled for 2022. However, Emirates and China Southern are the only airlines currently operating the Superjumbo in passenger service. All but a handful of A380s are in storage, with some airlines not intending to bring them back into service for several years.
Credit: Qantas
The slump in passenger traffic caused by the COVID-19 outbreak accelerates the sunset process of the markets operated by quad-engined aircraft. What did the quads bring that was desirable and what changed? Are quad engine aircraft gone for all times?
We look into these questions in this article series, and we start with the Queen of the Skies, and we focus its best selling variant, the 747-400.
Summary
- Shrinking quad-engine jet fleet;
- Flying an A340 or 747 will be rare;
- Uncertain future for A380;
- 747-400 commercial success;
- An ultra-long-range route.
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.