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 21. May 9, 2025
- Does an A220-500 need a new wing and engines? Part 2. May 8, 2025
- Embraer downplays tariff impact on 2025 results May 6, 2025
- JetZero readies effort for private equity fund raising May 5, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 20. May 2, 2025
ANA CEO opens ISTAT Asia 2016
By Bjorn Fehrm in Tokyo
May 18, 2016, ©. Leeham Co: The CEO of All Nippon Airways (ANA) Osamu Shinobe opened the 2016 International Society of Transport Aircraft Trading (ISTAT) conference in Tokyo today, in front of some 700 delegates. Shinobe presented an overview of the airline’s recent success and its future plans. This includes the plans for use of the three Airbus A380 that the airline bought in January this year.
ANA is Japan’s most successful carrier in recent years, leading the incumbent Japan Airlines in revenue and profits since 2010. The airline had its historical base in a large domestic market share but has been complementing that with an aggressive international expansion in recent years.
All Nippon Airways Boeing 787 in special Starwars livery. Source: ANA
Its landmark buy of Boeing 787 Dreamliners shall be seen in this context. The 787, for which ANA was the launch customer, is the kingpin in ANA’s expansion plans, where an expanding international network shall feed the established domestic network. Read more
Pontifications: Improbably, 787 surplus develops
By Scott Hamilton
May 16, 2016, © Leeham Co.: As improbable as it sounds, a short-term surplus of Boeing 787s has developed, say several market officials. Lease rates in some cases on 787-8s and 787-9s have dropped below $900,000/mo for 787-8s and somewhat above this figure for 787-9s as lessors compete with Boeing to place airplanes.
Analysts covering leasing companies, both publicly traded and privately owned, have also heard about falling lease rates for 787s.
“However, this all hinges on the cost and learning curve assumptions, which are difficult to get confident with considering we hear 787 lease rates are under pressure, and there are slots opening up, which can impact timing of future deliveries,” Canaccord wrote in a research note last week after the Boeing Investors Day in which officials outlined the plans to recover $29bn in deferred production costs. Other analysts also report hearing of lease pricing pressure on the 787s.
- Slow sales for the Boeing 787, reports Reuters.
How good is a MAX 7X and why would it replace the original? Part 2
By Bjorn Fehrm
Subscription required
Introduction
May 16, 2016, ©. Leeham Co:In Part 1 we described the driving forces behind Boeing’s investigations into changing the definition of the 737 MAX 7.
There are good reasons to make the -7 model larger. The passenger market is moving the average size of the cabins upwards by about 2-3 seats per year. Boeing therefore made the middle model, the -800 and later the MAX 8 larger than the 737-400. It went from 146 seats in two classes to 162 seats.
Figure 1. Boeing’s 737 MAX 7. Source: Boeing
But the -700 and therefore the MAX 7 stayed the same size as the predecessor, the -300 at 126 seats. As described in our last article, this is not an ideal size. You don’t amortize the cost of the aircraft’s crew over an optimal number of passengers at normal loadfactors and you have a smaller number of very specific 737-7 in your fleet. We now discuss what would be a more competitive definition for a 737 MAX 7.
Summary
- The 737-700 and MAX 7, as presently defined, is sized at 126 seats two class.
- A more competitive sizing would be closer to 150 seats in order to maximize the utilization of the regulatory mandated aircraft crew resources.
- The exact sizing will depend on how many seats the dominant customer, Southwest Airlines, wants to have in its one class economy seating, which uses a generous seat pitch of 31-32 inches.
Bjorn’s Corner: Landing after navigation, Part 2
By Bjorn Fehrm
13 May 2016, © Leeham Co: Last week we started to describe what is necessary to make a precision approach after a flight. We described the rather elaborate installations needed for the classical precision approach with an ILS system. It requires two transmitters and large antennae installations for each runway.
We will now describe the system which will replace ILS as worldwide instrument landing system, an augmented Global Navigation Satellite System (GNSS), where GPS is the variant provided by the US Department of Defence, Figure 1. Other GNSS are Russia’s GLONASS and Europe’s Galilleo.
Figure 1. The GPS system consists of up to 24 satellites which deliver position, velocity and time. Source: Wikipedia.
The problem with a non-augmented GPS is the precision. Classically the accuracy was worst case any where in the World around 100m horizontally and 150m vertically, but that was when the US military deliberately reduced the accuracy for civil use (Selective Availability). Today this deliberate reduction has stopped and the accuracy is 25m horizontally and 43m vertically worst case.
This is not enough for a precision approach. We will now describe what is done to bring the accuracy to a level where precision approaches can be flown with GPS. Read more
Analyst reaction to Boeing investors day
May 12, 2016: Analysts were largely underwhelmed in their take-aways from the Boeing investors day. Their reactions:
Bernstein Research (Outperform)
| Boeing held its investor conference this week, including tours of Everett and Renton facilities. Overall, we viewed the event as positive, with management emphasizing strong free cash flow growth through the decade, with potential for margin expansion.
Consistent with our analysis, the 737 and 787 are described as sold out through 2019, with a decline in 777 deliveries in 2018. The 787 should serve as the key driver of rising free cash flows, along with lower capex. Margins should be aided by flat R&D. Cost reduction is key to Boeing’s margin goals, which should be helped by a large backlog with prices set. We are more positive on services at this stage, which is a key focus. Defense is now expected to see modest growth. We rate BA Outperform, TP $184. |
Analysts skeptical going into Boeing investors day
Subscription Required
Introduction
May 12, 2016, © Leeham Co.: Boeing executives faced skeptical aerospace analysts at its annual investors day yesterday in Seattle.
Presentations by Dennis Muilenburg, CEO of The Boeing Co., Chairman, President and Chief Executive Officer, CFO Greg Smith, Ray Conner, CEO of Boeing Commercial Airplanes, and Leanne Caret, CEO of Boeing’s defense unit, didn’t appear to have any immediate impact on the stock price for those listening in on the webcast. Stock was flat during the day. Notes from the analysts attending in person won’t be issued for a day or two.
We met with seven analysts on Tuesday, before and after their tour of the Everett (WA) wide-body plant facility to gauge their points of interest going into the investors day yesterday. We also talked with some of them on Wednesday after the presentations.
Summary
- Skepticism was high over how Boeing believes it can recover the $29bn in deferred production costs on the 787 program. CFO Smith addressed this during his Wednesday presentation.
- Boeing finally conceded the 777 Classic production rate will come down, to 5.5/mo by 2018. Officials initially claimed the rate would remain at 8.3/mo to the entry-into-service of the 777X, later lowering to 7/mo from next year.
- There is a belief that Boeing’s product strategy is now on the defensive to Airbus. BCA CEO Conner believes otherwise.
Boeing investors day: Conner: today’s hard decisions assure future
May 11, 2016: Decisions Boeing has made today have been hard, but assure Boeing will be around another 100 years, says Ray Conner, CEO of Boeing Commercial Airplanes. “We compete every day with aggressive competitors.”
Note: Boeing is holding its annual investors’ day (really a half-day) today, with presentations by: Dennis Muilenburg , Chairman, President and ChiefExecutive Officer, Greg Smith , Chief Financial Officer and Executive Vice President of Corporate Development & Strategy, Ray Conner , Vice Chairman and Commercial Airplanes President and Chief Executive Officer and Leanne Caret , Executive Vice President and Defense Space & Security President and Chief Executive Officer. We’ll report on the presentations by Muilenburg, Smith and Conner, but not the DSS unit.
Conner sees continued growth in aircraft demand. Boeing’s backlog continues to grow, but Boeing also continues to monitor global conditions. But compared with 2001 after 9/11, Boeing’s backlog is more diverse in the world and among the type of customers. Deferrals, cancellations and skyline adjustments are “way, way below historical averages.”
Boeing investors day: Smith: becoming a global industrial champion
May 11, 2016: Boeing strives to be a global industrial champion, not just against its peer group, says Greg Smith, the chief financial officer of The Boeing Co. Boeing has a continuing commitment to returning cash to shareholders, repurchasing 150 million shares, he said.
Note: Boeing is holding its annual investors’ day (really a half-day) today, with presentations by: Dennis Muilenburg , Chairman, President and ChiefExecutive Officer, Greg Smith , Chief Financial Officer and Executive Vice President of Corporate Development & Strategy, Ray Conner , Vice Chairman and Commercial Airplanes President and Chief Executive Officer and Leanne Caret , Executive Vice President and Defense Space & Security President and Chief Executive Officer. We’ll report on the presentations by Muilenburg, Smith and Conner, but not the DSS unit.
Boeing has had 17 production rate increases in recent year, with five more on the way.
Boeing investors day: Muilenburg: we cannot stand still
Dennis Muilenburg, CEO of The Boeing Co.
May 11, 2016: Boeing is in the strongest position it’s ever been but Boeing cannot stand still, says Dennis Muillenburg, chairman and CEO of The Boeing Co. Customers want high value and low costs.
“Our goal is to set a higher bar for ourselves and be the best in aerospace,” Muilenburg told an international group of aerospace analysts at the company’s annual investors’ day. “You’ll see us emphasizing more and more ‘one Boeing.'”
Note: Boeing is holding its annual investors’ day (really a half-day) today, with presentations by: Dennis Muilenburg , Chairman, President and Chief Executive Officer, Greg Smith , Chief Financial Officer and Executive Vice President of Corporate Development & Strategy, Ray Conner , Vice Chairman and Commercial Airplanes President and Chief Executive Officer and Leanne Caret , Executive Vice President and Defense Space & Security President and Chief Executive Officer. We’ll report on the presentations by Muilenburg, Smith and Conner, but not the DSS unit.
Muilenburg said Boeing will lead with innovation, including more modern factories, as evidenced by the new wing production plant for the 777X wing analysts viewed Tuesday.