Leeham News and Analysis
There's more to real news than a news release.
Pontifications: MAX RTS, Emirates 777X order, Suspending 737 production, more
By Scott Hamilton
Editor’s Note: News reports Sunday indicated Boeing is considering reducing or suspending production of the 737 MAX. LNA reported this possibility Dec. 11.
While Sunday’s reports suggest Boeing will halt production, LNA is told a rate cut to between 10-20 airplanes a month is also possible in order to minimize impact to the supply chain.
Dec. 16, 2019, © Leeham News: It’s time for catching up on a variety of topics.
Topics this week:
- 737 MAX Return to Service.
- Emirates Airline 777X order reduction.
- Suspending or reducing 737 production—it’s not the first time.
- E175-E2 first flight.
- Airbus wins Project Sunrise.
Bjorn’s Corner: Why e in ePlane shall stand for environment. Part 1. Hype versus reality.
December 13, 2019, ©. Leeham News: The first all-electric commercial aircraft, a Harbor Air DHC-2 Beaver, flew over the Fraser River near Vancouver in the week (Figure 1). It was powered by a magniX electric engine fed with energy from batteries.
Despite this progress, this Corner series is about why the e in our future ePlanes should stand for environment and not electric.
Figure 1. Harbour Air seaplane flying with a magniX electric engine feed by batteries. Source: magniX.
Norwegian’s attempt to survive
Subscription Required
By Vincent Valery
Introduction
Dec. 12, 2019, © Leeham News: Norwegian Air Shuttle (NAS), struggling to survive after years of over-expansion, took major steps over the last few weeks to overhaul its finances and strategy.
Major strategic shifts included the sale of the Argentinian subsidiary, the end of trans-Atlantic narrowbody operations, and exit out of long-haul markets in two Scandinavian capitals.
The airline appointed Jacob Shram, a former McKinsey consultant and Statoil executive, as a new CEO. Former JetBlue Chief Commercial Officer Marty St. George is also joining the airline on an interim basis.
After years of breakneck expansion, the airline vowed a shift in focus on profitability and business efficiency. In this article, LNA analyzes the various announcements and assesses whether NAS has a chance to survive in the long term.
Summary
- (Finally) cutting the losses;
- No stones left unturned to raise cash;
- Drastically altered fleet plans;
- Chances of working out.
With no end of MAX grounding in sight, Boeing may be forced to cut or suspend production soon
Dec. 11, 2019, © Leeham News: With confirmation by the Federal Aviation Administration that recertification of the 737 MAX won’t happen until 2020, Boeing is rapidly facing a decision whether to reduce or suspend MAX production.
With no end in sight, Boeing can’t continue production of the MAX at the rate of 42/mo much longer.
Through Dec. 6, there were just under 400 MAXes that have been produced. Another 381 MAXes were in service when global regulators grounded the fleet March 11-13.
FAA: No MAX certification until 2020; analysis forecast 15 more crashes if MCAS not fixed
Dec. 11, 2019, © Leeham News: A new round of Congressional Hearings about the Boeing 737 MAX got underway today.
FAA Administrator Stephen Dickson, testifying today before the US House Transportation Committee in a hearing about the Boeing 737 MAX.
Before the hearing began at the House Transportation Committee, FAA Administrator Steve Dickson appeared on CNBC today. Among his statements: recertification of the MAX will slip to 2020, confirming what had become apparent for some time.
“Like I said there are a number of processes, milestones, that have to be completed,” Dickson said in an interview on “Squawk Box.” “If you just do the math, it’s going to extend into 2020,” he told CNBC.
- Transcript of CNBC interview: CNBC Dickson transcript 121119
First reports from Boeing’s MAX briefings last week
Dec. 10, 2019, © Leeham News: The first reporting from last week’s Boeing briefings for analysts, opinion-makers, influencers and consultants (but not the media) began to emerge Saturday. (Media briefings may be scheduled in January.)
The briefings are the latest in Boeing’s effort to restore confidence in the 737 MAX.
US trade rep rejects Airbus tariff reduction claim
Dec. 9. 2019, © Leeham News: The US Trade Representative (USTR) Friday dismissed Airbus; conclusion last week that the tariff authorized by the World Trade 
Organization (WTO) should be lowered by about $2bn.
The WTO’s Compliance Panel last Monday largely rejected the European Union’s appeal of the amount the Arbitration Panel set in October that $7.5bn in tariffs could be levied by the US.
The Trump Administration levied tariffs on a wide variety of non-aerospace goods from across the EU. It also levied a 10% tariff on Airbus airplanes imported into the US. It exempted the A320 family of planes assembled at the Mobile (AL) plant.
Airbus responded to the Compliance Panel’s decision by noting it viewed reduced the “harm” to Boeing as a result of the decision in February by Airbus to cease production of the A380 in 2021.
Accordingly, Airbus asserted that the tariff should be reduced by about $2bn.
Contesting the assertion
The USTR issued a statement Friday rejecting this claim.
“Two months ago, the WTO arbitrator found that the EU’s subsidies caused adverse effects worth $7.5bn per year,” the USTR said. “Nothing in the WTO report even suggests that the compliance panel found that the amount has decreased. There is accordingly no basis for Airbus’s assertions that the report “implies” that the U.S. countermeasures should be reduced by $2bn.
A tectonic shift towards large narrowbody
Subscription Required
By Vincent Valery
Introduction
A321XLR. Source: Airbus.
Dec. 9, 2019, © Leeham News: There are now more firm orders for the Airbus A321neo than all the latest generation widebody programs combined: Airbus A330neo and A350, Boeing 787 and 777X. The largest Airbus narrowbody makes up 44% of all A320neo family orders, compared to 22% for the A320ceo family.
After peaking in 2015, twin-aisle aircraft now represent a smaller portion of all deliveries. Boeing will lower the future Dreamliner production rate from 14 to 12 per month, while Airbus did not proceed with an A350 rate hike.
Being at a later point in the cycle, economic slowdown, and trade tensions explain part of the lower demand for widebody aircraft. However, there are good reasons to believe something more fundamental is at play.
LNA wrote a few months ago that Trans-Atlantic market fragmentation is hurting large widebody sales. This article analyzed the strategic shift occurring at numerous airlines that is hurting all twin-aisle sales, including the smaller A330neo and 787.
Summary
- Late cycle and trade war hurt widebody demand;
- Mitigating operating cost pressures on shorter routes;
- Narrowbody capital efficiency cannibalizes widebody;
- Monitoring the highest traffic growth region;
- Consequences for future programs.
Pontifications: Stop hitting the snooze button, Boeing
By Scott Hamilton
Dec. 9, 2019, © Leeham News: I know Boeing is preoccupied right now. But it has to get off the pot and decide to proceed with a new airplane.
We believe the New Midmarket Airplane is still required. But Boeing salesmen have also floated the concept of a new, single-aisle airplane to key players in the market. Either way, Boeing has to do something.
At least, that’s how we see it at Leeham Co.
The order last week by United Airlines for 50 Airbus A321XLRs should be a wake up call.
It’s not the only one Boeing has had.
FAA takes first steps for re-certification of the MAX
December 6, 2019, ©. Leeham News: The FAA issued a draft of the updated Master Minimum Equipment List (MMEL) for the Boeing 737 MAX 8 and 9 on its website yesterday. It’s there to be commented on by anyone who has input to its content within 30 days.
This step is the first external sign the re-certification of the 737 MAX has begun.
