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
David Calhoun’s first and last addresses to Boeing shareholders have common themes, four years apart
David Calhoun, president and CEO of The Boeing Co.
May 21, 2024, © Leeham News: David Calhoun was named CEO of The Boeing Co. in December 2019. He assumed office in January 2020. He had been on the Board of Directors since 2009. His first annual shareholders meeting as CEO was the 2020 AGM, for the financial year 2019.
When Calhoun was named CEO, the 737 MAX had been grounded for nine months, following the crashes in October 2018 and March 2019 of the Lion Air and Ethiopian Airlines MAX 8s. There was no end in sight for the grounding—which ultimately lasted 21 months.
Three months after Calhoun assumed office, the global COVID-19 pandemic erupted. Global passenger traffic collapsed and so did deliveries of the widebody aircraft prevalent on international routes. Boeing Commercial Airplanes (BCA) revenues and cash flow, already emasculated by the MAX grounding, was put under further strain. Then, in October 2020, Boeing suspended all deliveries of new 787s after finding production flaws. This suspension lasted 20 months.
Following the January 5, 2024, accident involving Alaska Airlines Flight 1282, a 737-9 MAX, Boeing’s safety record which came under fire in 2018-19 was again called into question. Calhoun announced his retirement effective the end of this year. Other Board-level and executive changes were also announced.
The May 17, 2024, Boeing AGM was Calhoun’s last as CEO. His prepared statement was reminiscent of his first as CEO. Some of the themes—notably about safety—expressed last week were eerily similar to those articulated in 2020 during his first address to shareholders.
LNA has assembled Calhoun’s first and last addresses to shareholders. We’ve highlighted common themes between the two addresses, made four years apart.
Southwest, the “legacy LCC,” part 2: Bloated labor expense, difficult fleet strategy result in uncompetitive cost structure
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By Judson Rollins
Introduction
May 20, 2024, © Leeham News: Southwest Airlines was founded on the principles of high employee productivity and low labor costs. But 53 years after beginning operations, its labor cost as a percentage of expenses — and per seat-mile — is now the highest among US airlines.
Boeing 737 MAXes parked after the 2019 MAX grounding. Source: Getty Images via AFP.
LNA studied Southwest’s and its US competitors’ 2023 annual reports to comprehensively understand their relative profitability. The resulting picture is less than flattering to the Dallas-based carrier. Southwest is increasingly a “legacy LCC,” with LCC-like unit revenue but a legacy cost structure.
Summary
- Labor costs are dramatically worse than legacy or LCC competitors.
- Fleet and route strategy are crimped by overreliance on the Boeing 737.
- Southwest’s insular management team and culture may be its greatest obstacle to business model innovation and continued profitability.
Bjorn’s Corner: New engine development. Part 8. Open Rotor technology
By Bjorn Fehrm
May 17, 2024, ©. Leeham News: We do an article series about engine development. The aim is to understand why engine development now has longer timelines than airframe development and carries larger risks of product maturity problems.
To understand why engine development has become a challenging task, we need to understand engine fundamentals and the technologies used for these fundamentals.
In the last Corner, we looked at why Open-Rotor engines are more efficient. Their propulsive efficiency can be considerably higher than that of a turbofan. We will explore this further this week.
Figure 1. A counterrotating Open Rotor design that SAFRAN ground tested in 2019. Source: SAFRAN.
Boeing’s safety, labor battles heat up while CEO will walk with $34m payout
By Scott Hamilton
May 16, 2024, © Leeham News: Even as Boeing is under fire for safety issues, the company’s battles heat up.
- Boeing remains at an impasse with its engineers and technicians union over creating a new safety program. The company has doubled down, the union says. SPEEA has turned to lawyers for legal advice.
- The US Department of Justice on Tuesday notified Boeing that it concluded the company failed to live up to terms of a 2021 Deferred Prosecution Agreement (DPA) intended to put to rest all criminal liabilities stemming from the 2018-19 737 MAX crashes that killed 346 people. DOJ may go ahead with criminal prosecutions now.
- The firefighters union was locked out by Boeing over contract negotiations, bringing in replacement workers. The union says Boeing’s actions threaten safety at its plants. SPEEA and its powerful touch labor union, the IAM 751, are picketing with the firefighters in support.
- IAM 751 apparently is using the firefighters’ strike as a training ground in anticipation of its own possible strike in September when its current contract expires.
A350-1000 or 777-8? Part 2
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By Bjorn Fehrm
May 16, 2024, © Leeham News: We are doing an article series comparing the capabilities of the Airbus A350-1000 and the Boeing 777X. We have looked at the A350-1000 versus the 777-9 and started comparing the history and capabilities of the 777-8 versus the A350-1000 last week.
Now, we use our Aircraft Performance and Cost Model (APCM) to fly the aircraft on a typical route and compare their performance.
Summary:
- The A350-1000 and the latest 777-8 definition is a closer payload-range match than the A350-1000 and 777-9.
- Passenger and cargo capabilities are similar. The economic comparison will be determined by maintenance costs for the engines.
Southwest, the “legacy LCC,” part 1: Not keeping up with industry standards crimps unit revenue
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By Judson Rollins
Introduction
May 13, 2024, © Leeham News: Southwest Airlines, previously a longtime darling of investors and leisure passengers alike, struggles to find its footing now that the post-covid US domestic market is returning to normal.
“Bags fly free” is more headache than help for Southwest as it tries to grow unit revenue. Source: Forbes.
The airline eked out a 0.8% operating margin in 2023 and fell to -6.2% in the first quarter of 2024. Investors have lost faith in the company’s ability to return to its previously strong margins.
Southwest “is now a ‘show-me’ [investment],” airline analyst Helane Becker of Cowen recently told investors. “We expect shares to trade in a narrow range until they can return to sustainable profitability and at least high single-digit operating margins.”
After a deep dive into the airline’s cost and revenue performance, LNA believes the company is in a strategic quandary with few ways to offset rapidly rising labor, maintenance, and fuel costs. In short, Southwest is increasingly a “legacy LCC,” with LCC-like unit revenue but a legacy cost structure.
Summary
- The airline struggles to achieve innovations widely implemented elsewhere.
- Unit revenue is comparable to low-cost competitors, but a leisure-oriented network, product, and passenger experience leave little opportunity to increase it.
- Underinvestment in IT and onboard product reduces Southwest’s reliability and alienates much-needed high-yield passengers.
Bjorn’s Corner: New engine development. Part 7. Open Rotor Propulsive Efficiency
By Bjorn Fehrm
May 10, 2024, ©. Leeham News: We do an article series about engine development. The aim is to understand why engine development now has longer timelines than airframe development and carries larger risks of product maturity problems.
To understand why engine development has become a challenging task, we need to understand engine fundamentals and the technologies used for these fundamentals.
In the last Corner we started a discussion around Open Rotor engines after looking at geared versus direct-drive Turbofans. We now look deeper at the Open Rotor Propulsive Efficiency.
Figure 1. The CFM RISE Open Fan engine. Source: CFM.
Airbus’ A350-1000 or Boeing’s 777-8? Part 1
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By Bjorn Fehrm
May 9, 2024, © Leeham News: We are doing an article series comparing the capabilities of the Airbus A350-1000 and the Boeing 777X series. We started with the 777-9, the larger model. Now, we continue with the shorter 777-8, an aircraft closer in size to the A350-1000.
The 777-8 was originally launched in a shorter version together with the 777-9. Then, it went very quiet around the 777-8, with some analysts speculating that the passenger version would not be done. The 777X freighter, the 777-8F, was launched in January 2022. It became a bit longer than the 777-8. This now forms the final definition of the 777-8.
Summary:
- The comparison of the A350-1000 and the 777-8 is comparing the longer-narrower versus the shorter-wider.
- Which is the best? We use Leeham’s Aircraft Performance and Cost Model (APCM) to find out.
Embraer: Improved results, but no plan for new narrowbody
By Leeham News Team
May 7, 2024, ©. Leeham News: Embraer presented its 1Q2024 results today, showing revenues for the period up 25% and deliveries up 67% year-on-year.
Notably, however, the Brazilian planemaker dampened speculation of a push to launch a new narrowbody to compete with the A320/B737.
Embraer’s firm order backlog now stands at $21.1 billion, its highest point over the past seven years.
That was helped by the firm order from American Airlines for 90 E175 jets, plus purchase rights for 43 more.
Francisco Gomes Neto, Embraer’s CEO, highlighted during a call on Tuesday the company’s campaigns for more than 200 aircraft within the commercial division – including both the E1 and E2 family.
For 2024, Embraer is still expecting to deliver between 72 and 80 commercial aircraft, compared to 64 in 2023. Read more
Shanahan: Spirit AeroSystems and Airbus need to have “family meeting”
By the Leeham News Team
May 7, 2024, © Leeham News: For a company actively negotiating its own dismemberment, Spirit AeroSystems managed to record first quarter losses even worse than Wall Street expected. The company recorded $617M in losses and burned through $444M in cash during the first three months of the year due to the ongoing Boeing 737 MAX crisis and unfavorable prices on its Airbus A530 and A220 work.
“The death throes of Spirit are hard to watch, as these 1Q numbers are pretty horrendous,” Rob Stallard, Vertical Research aerospace analyst, wrote in a research note after the company released its earnings report.
It recorded $495M in net forward losses, largely from the Airbus A350 ($280M) and A220 ($167M) programs. Read more