Leeham News and Analysis
There's more to real news than a news release.
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.
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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.
Key Airbus, Boeing supplier sees recovery in 2022
By Scott Hamilton
Oct. 28, 2020, © Leeham News: A key supplier to Airbus and Boeing believes there will be a “significant upturn” in passenger traffic and aircraft demand in 2022, well before consensus.
Hexcel provides composites and other materials for the Airbus A320 and A350 and Boeing 737 MAX.
And Raytheon Technologies sees passenger traffic returning to pre-COVID levels in 2023, depending on widespread use of vaccines.
Consensus is a return to pre-COVID levels in 2024.
In its 3Q2020 earnings press release Oct. 20, Hexcel’s CEO, Nick Stanage said, “The overall long-term demand for aircraft and our advanced composites technology remains robust, and the potential for a significant upturn in 2022 and beyond looks positive.”
The actions we are taking will ensure that Hexcel emerges from the effects of this pandemic stronger than ever. As we do, our liquidity will have been strengthened, our cost structure will be reset, and we will be well positioned to deliver strong shareholder returns.”
Quizzed on the earnings call, Stanage elaborated:
HOTR: With MAX nearing recertification, Boeing has bigger problem
By the Leeham News team
Oct. 27, 2020, © Leeham News: Boeing’s 737 MAX may be nearing recertification and airlines worry about passenger acceptance.
But Boeing’s larger MAX problem is its general product line-up.
LNA pointed out the poor sales of the 7 MAX in the past. We’ve also compared the lagging sales of the 9 MAX and 10 MAX compared with the A321neo.
As a result of the MAX grounding and now COVID-19’s disastrous financial impact on airlines around the world, more than 1,000 orders have been canceled or reclassified as iffy under the ASC 606 accounting rule.
Airbus doesn’t publicly reclassify the European equivalent of ASC 606. But LNA in July estimated how many A320s would be similarly classified. At that time, about 425 appeared to be similarly subject to ASC 606 if this accounting rule was applied to Airbus.
Public data doesn’t support Airbus A320 production rate hike
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Introduction
By Scott Hamilton
Oct. 26, 2020, © Leeham News: Airbus’ 3Q2020 earnings call is Wednesday. News emerged last week the OEM is notifying supplies that they should be prepared to increase production of the A320 from 40/mo to 47/mo in the second half of next year.
It is worthwhile looking at the delivery skyline as it currently exists.
Summary
- Forecasted delivery stream doesn’t support rat 47/mo until 2024.
- Airbus appears to be banking on faster recovery from COVID—or
- Picking up market share from Boeing.
Pontifications: Earnings previews Airbus, Boeing; Watching Mitsubishi
By Scott Hamilton
Oct. 26, 2020, © Leeham News: It’s earnings call week for Boeing and Airbus.
And Mitsubishi Heavy Industries is said to plan an announcement “freezing” development of the SpaceJet.
Let’s preview these events.
Bjorn’s Corner: The challenges of Hydrogen. Part 12. Safety
By Bjorn Fehrm
October 23, 2020, ©. Leeham News: In our series on Hydrogen as an energy store for airliners we look deeper at the safety of a hydrogen airliner.
Do the safety rules for the aircraft or the airport need to be written new or can the existing ones be used with changes?
Enhancing the Dreamliner, Part 3: 787-9
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By Vincent Valery
Introduction
Oct. 22, 2020, © Leeham News: After analyzing the 787-8, we now turn our attention to the following Dreamliner variant that entered into service, the -9.
Summary
- Lessons learned from 787-8 mishaps;
- A resounding commercial success;
- Some in-service drawbacks;
- Competition limits pricing power;
- An ultra-long-haul route.
Twin Aisle Deliveries: The Good, the Bad, and the Ugly
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By Vincent Valery
Introduction
Oct. 19, 2020, © Leeham News: LNA published last week an update on the latest 737 MAX production and delivery plans. This week, we turn our attention to the twin-aisle programs at Airbus and Boeing.
Both OEMs announced significant monthly production rate reductions earlier this year: the Dreamliner will go to six next year. The Airbus A350 is at five per month, while the A330 and Boeing 777 are at two. Airbus and Boeing will publish their third-quarter earnings later this month, which could include updated production rates.
LNA investigates the implications of the updated production and delivery plans for twin-aisle programs at Airbus and Boeing.
Summary
- Two programs in acceptable shape;
- Awaiting an elusive return to favor later this decade;
- A lack of healthy customers make the situation critical;
- Summing it all up with one metric.