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
Embraer: Boeing wrongfully terminated JV, will seek remedies
April 25, 2020: (C) Leeham News: Embraer says Boeing wrongfully terminated the joint venture agreement due to its own problems and reputational damage.
“Embraer believes strongly that Boeing has wrongfully terminated the MTA, that it has manufactured false claims as a pretext to seek to avoid its commitments to close the transaction and pay Embraer the US$4.2 billion purchase price. We believe Boeing has engaged in a systematic pattern of delay and repeated violations of the MTA, because of its unwillingness to complete the transaction in light of its own financial condition and 737 MAX and other business and reputational problems.
Analysis: The collapse of the Boeing-Embraer joint venture
By the Leeham News Team
Analysis
April 25, 2020, © Leeham News: The Boeing-Embraer joint venture is off.
Boeing called off the JV, saying Embraer didn’t satisfy all the conditions required.
The Boeing-Embraer joint venture is dead.
The impact to Embraer is more profound than to Boeing.
When the JV was announced in 2019, the advantages for Boeing were:
- Access to EMB engineers at a time when Boeing’s are aging and ready to retire.
- Access to much lower cost base in Brazil.
- KC-390 program.
- Revenue from EMB Commercial services.
- E2 program, though this is tangential.
The advantages for Embraer were:
- Access to Boeing’s vast customer base, marketing power, balance sheet (again, pre-virus) and capital markets.
- Access to work on new airplane programs: NMA (at the time), Future Small Airplanes (single aisle, either to compete with A220 or larger).
- Work for its engineers.
- A future beyond the struggling E2 and beyond the fanciful turboprop concept.
- A future for Embraer Commercial Airplanes, which in LNA’s view was increasingly risky.
Boeing walks from Embraer joint venture
By Scott Hamilton
April 25, 2020, © Leeham News: Boeing today pulled the plug on its proposed joint venture with Embraer. It claimed the Brazilian company failed to meet all the terms and conditions required of the JV agreement.
“Boeing has worked diligently over more than two years to finalize its transaction with Embraer. Over the past several months, we had productive but ultimately unsuccessful negotiations about unsatisfied MTA conditions. We all aimed to resolve those by the initial termination date, but it didn’t happen,” said Marc Allen, president of Embraer Partnership & Group Operations. “It is deeply disappointing. But we have reached a point where continued negotiation within the framework of the MTA is not going to resolve the outstanding issues.”
Global regulatory approval of the JV was won by nine of 10 regulators. But it has been held up by the European Union, which repeatedly halted consideration while asking for more information. A June 23 target date for a decision was recently reset to August.
The JV agreement provides for a $100m break up fee to be paid by Boeing if anti-trust approval isn’t forthcoming. By terminating the agreement early, Boeing hopes to avoid paying the fee, LNA is told.
Embraer is sure to protest and take an opposite position. Last month, the company said it continued to “take all the necessary actions” to complete the deal.
As recently as March 24, Boeing CFO Greg Smith “stressed the strategic value” of the partnership.
Bjorn’s Corner: Why e in ePlane shall stand for environment, Part 19. ICAO CORSIA.
April 24, 2020, ©. Leeham News: Before we wrap the series about technologies that can help us reduce the environmental footprint of air transport, we describe what the ICAO emissions scheme CORSIA is, its goals, and comment on its importance.
Figure 1. The world’s CO2 emissions increased at a fast pace until today. Source: Wikipedia.
Can a passenger airliner run as a freighter with today’s tariffs? Part 4.
By Bjorn Fehrm
Subscription Required
Introduction
April 23, 2020, © Leeham News: We spent the last weeks checking if passenger airliners used as belly freighters make economic sense.
With the present air freight prices, it does. The high freight prices are a result of half the World’s freight capacity disappearing with the grounding of passenger jets.
Our economic analysis assumed standard densities for the belly cargo. What happens if this is no longer the case? Can more voluminous cargo fly in the passenger cabin?
Figure 1. Air Canada Boeing 777 with humanitarian supplies (face masks) transported in the cabin. Source: Air Canada.
Summary:
- Widebody aircraft can temporarily fly as belly freighters without loading cargo in the cabin, but enabling cabin cargo will improve the business case with the present lower-density cargo.
- For single-aisle jets the belly cargo holds are too small, a cabin cargo loading system is necessary for efficient operation.
- Is it OK to take out the seats and load cargo in the cabin? For normal cargo no, it isn’t. We check what is required.
Supply chain focus: Hexcel’s first 2020 quarter
By Bjorn Fehrm
April 22, 2020, ©. Leeham News: With the COVID-19 meltdown of airline traffic and aircraft deliveries, we place a special focus on the airliner industry supply chain in the next months.
Hexcel Corporation reported its 1Q2020 yesterday. In addition to the absence of MAX deliveries for a year, the mounting COVID crisis meant revenue was down with 11% year on year and profits 40%. The merger with Woodward Inc. is off. “This is the time for crisis management, not a merger,” said management.
Hexcel is a key supplier to Airbus A350.
Read more
HOTR: Airlines, lessors cancel ~250 MAXes since January
By the Leeham News Staff
April 21, 2020, © Leeham News: Since the COVID-19 pandemic went viral beginning in January, there have been nearly 250
cancellations of the Boeing 737 MAX.
Some of these were related more directly to the grounding of the MAX. In fact, it could reasonably be argued that most were. COVID-19 exacerbated the problems, now that passenger demand fell by as much as 95%.
The MAX was grounded globally March 13, 2019. Purchase agreements generally allowed the customer to cancel the contract if delivery is delayed more than 12 months, provided there isn’t an “excusable delay.” Pandemics typically fall under an excusable delay. Grounding by regulators depends on the language in the specific contracts.
Japan seeks to develop aircraft industry ties through Asian trade partnerships
By Judson Rollins
Subscription Required
April 20, 2020, © Leeham News: Japan has long been known as an engineering powerhouse, and Japanese manufacturing titans like Mitsubishi Heavy Industries and Kawasaki Aerospace have been a key part of Boeing and Airbus supply chains for the last two decades.
Japan’s government wants to expand the country’s influence by signing agreements with members of the Association of Southeast Asian Nations (ASEAN) to secure improved cooperation with downstream suppliers. Aircraft and engine OEMs and key tier-one suppliers already have manufacturing operations in Thailand, Singapore, Malaysia, Indonesia, the Philippines, and India.
The first of these agreements is expected to be signed with Malaysia, which declared its ambition to become the biggest aerospace producers in Southeast Asia by 2030.
On the sidelines of February’s Singapore Air Show, LNA met with representatives of Japan’s Ministry of Trade, Economy, and Industry (METI) to discuss the proposed agreement with Malaysia. This article has been withheld until now due to the myriad aerospace issues caused by the COVID-19 crisis.
Summary
- Bilateral agreement postponed due to COVID-19.
- Areas of cooperation include manufacturing, training and more.
- Malaysia’s growing aerospace footprint.
Pontifications: What shape and how long will recovery take?
By Scott Hamilton
April 20, 2020, © Leeham News: There just is little good news for the aerospace industry right now.
Airbus announced it will reduce production by a third across the A-Series airliners. I don’t think this will be the last cut.
Boeing last week said it will resume production in the Seattle area of its wide-body airplanes. It’s also now preparing to restart production of the 737 MAX, clearly a piece of good news. Defense-related production for the P-8 Poseidon and the KC-46A tanker resumed last week.
But Boeing hasn’t laid out its production plans for the 7-Series airplanes. This undoubtedly will come next week. Monday is the shareholders’ annual meeting. This will be held virtually at 9am CDT. Access is via the Boeing website. The first quarterly earnings call will be held two days later, also accessible via the web. Either meeting may outline the production plans for the rest of the year.
Bjorn’s Corner: Why e in ePlane shall stand for environment, Part 18. Low hanging fruit.
April 17, 2020, ©. Leeham News: We continue the summary of the series why e in ePlane should be more about environment focus than electric aircraft.
Last week we summarized the high hanging fruit technologies pursued presently, now we continue with the low hanging fruit.
Figure 1. The Gartner hype curve. Source: Wikipedia.