Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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- Boeing CEO promises company is turning around…again April 24, 2024
- Solid start for stand-alone GE Aerospace despite cuts to LEAP output April 23, 2024
- SPEEA, Boeing at impasse over safety program, union says April 23, 2024
- Better transparency needed on Boeing’s 1Q earnings call April 22, 2024
Bjorn’s Corner: Increasing an aircraft’s range, further considerations
By Bjorn Fehrm
23 October 2015, ©. Leeham Co: In last week’s Corner, we went through how Airbus can offer an Ultra Long Haul (ULH) aircraft to Singapore Airlines by increasing the Maximum Take-Off Weight of its A350-900, increasing the tankage and lower the payload. There are a couple of other considerations when extending the range of an aircraft that we did not touch upon. For completeness, we go through them here.
When increasing the allowed weights (really, masses) of a certified airliner, there are a few things that need to be re-evaluated and perhaps modified. First of all, the airframe needs to withstand the higher loads caused by the higher weights. Secondly, the aircraft’s field performance will be affected by higher weights. Required take-off field length must stay within usable limits, as must landing performance.
If the increase in flying weights are significant, it will also require a check on what happens to the aircraft’s flight profile when fully loaded. A heavier aircraft will cruise at lower flight levels and the One Engine Inoperative (OEI) service ceiling will diminish.
We now go through these additional areas and evaluate their impact on overall aircraft performance in general and on an A350-900ULR in particular.
Do the Boeing 787 sums add up, Part 2
By Bjorn Fehrm
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Introduction
Oct. 22, 2015, ©. Leeham Co: This is an update on our article about Boeing 787 program costs now that Boeing has presented its 3Q 2015 results.
It was a good quarter for Boeing with solid performance in revenue and in cash generation. The results for deferred costs for the 787 program were also above Boeing’s guidance (guidance: same losses as for 2Q), with a $577m increase in deferred costs instead of $790m for 2Q.
Boeing’s CFO, Greg Smith, commented that this result and also gave new values for when the 787 goes cash positive and what the learning effects are for the 787-8 and 787-9. We update our analysis based on these further data points.
Summary:
- Boeing reports less deferred costs than expected but Greg Smith put this in perspective in his comments. We decode what this means for the deferral curve for the 787.
- Smith also gave new information regarding learning effects for 787-8 and 787-9 and when the 787 goes cash positive. We check if this changes any of our assumptions in our original article.
Boeing 3Q15 earnings call
Oct. 21, 2015: Dennis Muilenburg, Boeing president and CEO raised 2015 raised revenue and EPS guidance as a result of the strong third quarter results and he said $8bn in share buyback has been completed through the nine months.
Power on for the 737 MAX was achieved.
Dennis Muilenburg, Boeing president and CEO. Reuters photo via Google images.
Extensions of the KC-46A refueling boom and refueling drogues were achieved in the quarter.
Commercial unit business environment remains “healthy” but the cargo market continues to be watched. Demand for the 737 MAX “remains high.” Given the strong market demand, “we continue to see upward pressure on production rates above the [announced] 52/mo.” But Boeing is not yet ready to go forward.
On the 777 Classic, 44 orders and commitments have been received YTD.
Boeing 3Q result positive; first analyst take
Oct. 21, 2015: Boeing reported a strong 3Q2015, with good cash flow and above-consensus revenue. 787 deferred production rose but less than some analysts 
predicted, yet in-line with International Institute for Strategic Leadership. The press release is here.
The first take on results from some of the analyst community, ahead of the earnings call, follows. LNC’s Bjorn Fehrm will take a concentrated look at the 787 results in a later post.
Is FedEx poised to order 777Fs?
FedEx Boeing 777. Airplane-Pictures.net via Google images.
Oct. 20, 2015. (c) Leeham Co.: Two developments at FedEx may give a boost to Boeing’s slow-selling 777 Classic program.
Pilots approved a six year contract that had been open for some time. Pay increases an average of 10% and other contract benefits were achieved.
Pontifications: 50% of something or 100% of nothing: something to consider at Bombardier
By Scott Hamilton
- On Sunday, The Seattle Times had a long article about whether the Boeing 787 will ever record a profit. Leeham Co’s Bjorn Fehrm is quoted extensively.
Oct. 19, 2015, © Leeham Co. Bombardier is dominating the aerospace news lately, given the reports of talks with Airbus about selling a stake of the CSeries program to the European company; a report that it planned to approach Embraer for a business tie-up; and on Friday, a long analysis by Reuters about BBD’s financial challenges.
Last week I chronicled Bombardier’s history predicament of how it got to where it is today, a very deep hole that the new management—which only got on the scene last February and which has spent much of the year reorganizing the company and hiring a new team—has to dig out of. It’s not an easy task and it won’t come overnight.
Let’s take yet another look at things, given the continued headlines last week.
Do the Boeing 787 sums add up?
By Bjorn Fehrm
Subscription required.
Introduction
Oct. 19, 2015, ©. Leeham Co: Boeing presents its Q3 2015 results on Wednesday. This is a hotly awaited presentation, as analysts then will get another data point in their quest to understand if the 787 program will ever turn a profit.
We believe it is pretty clear that the program will not record an overall profit with the cost of development as well as production costs included. With a development cost of close to $20bn, this is to ask for too much. The question is if the production over the first 1,300 units can turn a profit. This is also under scrutiny.
Boeing employs program accounting for the production phase of an aircraft program and now, 25% into the accounting period for the 787, the accumulated deferred costs are such that it is questionable if future deliveries can compensate.
We take a look at the present state and what Boeing has said about the future. Based on this information, we can deduce if it is probable that Boeing can turn $32bn of deferred cost for the 787 into a profit by 2022.
Summary:
- We analyze Boeing’s information around its deferred production cost for the 787 and show how many analysts have misunderstood what has been said.
- Based on the Boeing information, we can deduce the present production cost level, learning curves and when production costs go below the assumed average in the accounting block.
- We also show what the delivery mix from 787-8 and 787-9 to 787-9 and 787-10 will mean for margins in the program.
- Finally, we judge whether Boeing will turn the corner on production cost and get the accounting block to a black zero (or better).
Bjorn’s Corner: Increasing an aircraft’s range
By Bjorn Fehrm
16 October 2015, ©. Leeham Co: Airbus announced this week how it made an Ultra Long Haul (ULH) aircraft out of the long haul A350-900. The resulting A350-900ULR (Ultra Long Range) enables Singapore Airlines to reopen the famous direct “Flight 21” to New York.
But Singapore’s press release also talks about US West coast destinations, the first being Los Angles. They released this picture:
Reading the many comments around how an aircraft like A350-900 can reach such longer range, it can be worth going through the basics on how different parameters affect range and what Airbus or any other OEM has to consider when they want to increase the range of an existing aircraft.
We will do that from a slightly different angle than normal. We will show how a pilot would think about how he can get an aircraft with more range. Pilots reason in a different way to design engineers. They are better served by thinking on the aircraft’s range performance as endurance, meaning how many hours can we stay aloft. This works better when one plans with the prevailing weather on the route.
We will now take it step-by-step and explain which parameters matters for the pilot and which do not and how he gets his ULH aircraft. Read more
Delta Air sees 777 surplus developing
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Oct. 14, 2015, © Leeham Co.: Delta Air Lines sees a major surplus of young Boeing 777s developing in the near term as key operators plan to let the aircraft go from
leases or retirements. The looming surplus makes it more likely that increased pressure on Boeing’s efforts to sell new 777s, and to sell them at reasonable margins, will become increasingly difficult.
Goldman Sachs, the investment bank, sees Delta’s comments as further evidence supporting the likelihood there will be a sharp production rate reduction as early as 2017, perhaps down to six/mo.
Separately, Bernstein Research’s aerospace analyst Doug Harned, also see 777 rates coming down to the equivalent of 6.5/mo in 2017, six in 2018 and five in 2019. The first 777X isn’t scheduled for delivery until 2020, when Harned predicts only five deliveries of the X.
Qantas robbed of longest flight by Emirates and then Singapore airlines
By Bjorn Fehrm
Oct. 14 2015, ©. Leeham Co: The planned “Flight 21” of Singapore Airlines between Singapore and New York would rob Qantas Airways of the title of flying the longest direct flight in the world come 2018.
Qantas operates today’s longest flight, the one between Sydney (SYD) and Dallas- Ft. Worth (TX) (DFW), using its Airbus A380. Emirates plans to take that crown next year with a Dubai (DXB) to Panama City (PTY) flight, Figure 1. It’s fractionally longer than the Qantas flight when comparing great circle distances (the 2015 and 2016 label).
Qantas CEO Allen Joyce just announced that the airline plans to take that title back when the Boeing 787-9 arrives in 2017. This aircraft enables direct service to London Heathrow (LHR) with flights from Perth (PER) in Western Australia, a flight of 7830nm or 18 hours, labeled 2017 in Figure 1.
Figure 1. Worlds longest flights 2015 to 2018. Source: Great Circle Mapper.