Boeing seeks to cut production costs of 787-8 to boost sales

By Scott Hamilton

Sept. 2, 2020, © Leeham News: Boeing is considering production changes to the slow-selling 787-8 to lower costs and boost sales.

The effort comes at a time when global passenger traffic is at record lows and recovery of international traffic is forecast to take four or five years.

Boeing photo.

As airline traffic recovers, carriers appear to be favoring smaller aircraft in restarting suspended routes.

In recent years, Boeing discouraged sales of the 787-8 because it is a low margin airplane with high production costs. This is a legacy of the program and development difficulties from 2004-2011, when it finally entered service.

The 787-9 and 787-10 are high margin aircraft Boeing counted on to reduce the billions of dollars in deferred production and tooling costs. At one time, this exceeded $32bn.

The early program difficulties resulted in the production and parts of the -8 to be substantially different than the -9/10, which have 95% commonality. The -8 was only 30% common.

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HOTR: Five more airlines under court restructuring or ceasing operations

By the Leeham News Staff

Aug. 31, 2020, © Leeham News: The Smartwings Group is the latest airline to file for a court restructuring.

LNA’s monthly tracking of failed carriers adds Virgin Atlantic, EasyFly, Go2Sky, ExpressJet, and the Smartwings Group to the list of carriers in bankruptcy or court-supervised restructuring since COVID collapsed the global airline industry beginning in mid-March.

Among those five, Go2Sky and ExpressJet announced that they would cease operations. Virgin Atlantic won the support of its creditor for a court-supervised restructuring.

 

European Regionals Face Hostile Operating Environment

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By Kathryn B. Creedy

Third in a Series. Previous articles:

Introduction

Aug. 31, 2020, (c) Leeham News: European regionals face far greater challenges than Covid and, sadly, much of what is happening to the industry is beyond its control. The result is similar to failures seen in the U.S.  Flybe’s recent loss resulted from pre-Covid problems which also led to the pre-Covid failures of such airlines as Flybmi and Cobalt.

The failures illustrate, however, the three reasons why European regionals are so fragile – low-cost competition, geography, and challenging government policy.

 

 

 

 

 

Flybe is just the latest of many regionals to cease operations owing to harsh conditions in Europe.

Summary
  • Government Policies Hardest on Regionals
  • LCC Competition Challenging
  • Consumer Protections Crushing
  • Turboprops Have Large Role

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Pontifications: WA State frets about Boeing brain drain, but it’s already happening

By Scott Hamilton

Aug. 31, 2020, © Leeham News: Elected officials and others in Washington State worry about the “brain drain” as Boeing considers whether to consolidate 787 production from Everett to Charleston.

These people are asleep at the switch and have been for some time. The brain drain is already just around the corner.

Nearly half of the membership of SPEEA, the engineers and technicians union at Boeing, are 50 years or older right now.

Almost two thirds of these are within 55-64 years old. In other words, ready for retirement right now or soon to be.

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Bjorn’s Corner: The challenges of Hydrogen. Part 6. Tank placement.

August 28, 2020, ©. Leeham News: In our series on Hydrogen as an energy store for airliners we look at the challenge of placing the hydrogen tanks efficiently.

Different from carbon fuels, liquid hydrogen needs specially shaped and bulky tanks. It can’t be stored in the wingbox as today’s Jet-A1.

Figure 1. The Tu-155 Hydrogen research aircraft with its aft fuselage tank. Source: Tupolev.

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Sunset of the Quads, Part 4.

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By Bjorn Fehrm

Introduction  

August 27, 2020, © Leeham News: After presenting Boeing’s and Airbus’ first 300 seater long-range widebodies, the 777-200ER and A340-300 in Part 3, we now fly them both on the route Paris to San Fransisco to understand their economics.

The A340-300 was first on the market, but when the 777-200ER arrived amid changed ETOPS rules, the four holer found the twin a difficult competitor. We use our airliner performance model to understand why.

Summary
  • The A340-300 has about the same payload-range performance as the later introduced 777-200ER.
  • Its economics is competitive with the 777-200ER, yet sales dried up when the 777-200ER became available. We explain why.

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HOTR: Values, rents leveling off for 5-year old aircraft

By the Leeham News staff

Aug. 25, 2020, © Leeham News: Lease rates and aircraft values on narrowbody, mainline jets appear to be leveling off, except for the Boeing 737-700.

Ishka, the UK-based appraisal company, revised its tracking presentation in last week’s update. Moving from text to a graphic, it’s visually apparent that values for the A320, 737-700, Boeing 737-800 and -900ER began to level off in May. Values for the Airbus A321 began to level off in June.

Lease rates for all airplanes except the 737-700 began to level off in June. Rates for the -700 continue to decline.

These are for off-lease, half-life aircraft that are five years old.

Half-life means an airplane half-way through its maintenance cycle.

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R&D spending at Boeing plunges; Airbus yet to kick in

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By Scott Hamilton

Introduction

Aug. 24, 2020, © Leeham News: Research and development spending at Boeing Commercial Airplanes declined 21% in the first half this year compared with 2019.

From 2017 through 2019, BCA’s R&D spending declined 13%.

During the first half this year, Airbus Commercial airplanes R&D spending declined 1%. From 2017-2019, R&D spending increased 31%.

Boeing’s decline in 2019 vs 2018 and the first half of 2020 vs 2019 clearly reflects the grounding of the 737 MAX.

The flat spending in 2017-2018 reflects Boeing’s corporate approach of keeping R&D spending level while returning 100% of free cash flow to shareholders.

Airbus, on the other hand, was aggressively pursuing green aviation R&D, driven by a European Union that is more dedicated to green aviation than the USA is.

Summary
  • COVID-19 related R&D spending cuts may not be fully seen until the third quarter.
  • Boeing suspended R&D spending on the New Midmarket Airplane in January. Coupled with MAX grounding pressure, Boeing’s spending was already depressed.
  • Airbus said it was suspending all R&D except for the A321XLR after the global COVID devastation on air passenger demand.
  • Airbus historically outspends Boeing in R&D.

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Pontifications: Did Boeing telegraph its decision in February consolidating 787 production?

Aug. 24, 2020, © Leeham News: Did Boeing telegraph plans to consolidate its 787 production in Charleston last February?

By Scott Hamilton

That’s when Boeing announced it asked the Washington Legislature to cancel tax breaks granted in 2003 to locate what was then the only 787 production line, in Washington.

Given subsequent events in which Boeing in July said it will consider consolidating two lines into one, one must wonder if the decision is already made. There’s near unanimous conclusions by outsiders that Everett’s days producing the 787 are numbered.

When Boeing said it asked the Legislature to cancel the tax breaks, officials said it was doing so to comply with a long-ago decision by the World Trade Organization that the breaks were illegal.

The WTO has yet to agree. It’s their call, not Boeing’s whether compliance was achieved.

But what is unequivocally true is that if Boeing moved 787 production out of Washington, those 2003 tax breaks would disappear. Gary Locke, who was governor in 2003 when the Legislature approved them, told me in 2008 this was the case.

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IAM warns members: Boeing is coming for concessions on 787 consolidation study

Aug. 22, 2020, © Leeham News: The president of Boeing’s touch labor union, IAM 751, is warning members that the company study about potentially consolidating 787 production in Charleston could lead to a request for new concessions from the union.

IN a post yesterday on the union’s website, John Holden said a request from Boeing hasn’t happened yet—”however, it is something that we need to expect and prepare for, and we believe that we may be facing that threat soon.”

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