Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- NBA Single or Dual Aisle Airline preferences May 10, 2021
- Pontifications: A330-300 could be great deal ahead May 10, 2021
- Bjorn’s Corner: The challenges of airliner development. Part 2. Why Certification? May 7, 2021
- China’s air travel “recovery:” volume improving, but revenue still elusive May 6, 2021
- HOTR: Annual Reports give hint to MAX return in China May 4, 2021
Boeing AGM routine, action came an hour before
April 20, 2021, © Leeham News: Despite some media suggestions that the Boeing Annual Shareholders’ Meeting would be a “showdown,” the event proved as LNA predicted: More of the same.
All 10 company nominees to the Board of Directors were elected or reelected. They were unopposed, so there was no room for a showdown on this score.
Dissident shareholder resolutions were voted down. Company resolutions were approved.
The only surprise came an hour before the meeting, when Boeing announced that Greg Smith, the CFO since 2011, will retire July 9. This wasn’t expected.
In the same announcement, the Board waived the mandatory retirement age of 65 for CEO David Calhoun. He turned 64 Sunday. The Board gave Calhoun until age 70 before he’d have to retire. There’s nothing to say he couldn’t before then. But this gives Calhoun more time to right the ship and set Boeing on a new path for the future. Calhoun’s one year Countdown now has up to six years.
Below are some initial reactions from Wall Street aerospace analysts about the two moves.
The conundrum of a new airplane design vs a derivative
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By Scott Hamilton
Introduction
April 19, 2020, © Leeham News: When it comes to a decision by an aircraft manufacturer whether to develop an entirely new airplane or a derivative, these multi-billion dollar decisions involve hundreds of thousands of considerations.
Airbus missed with its first A350 design, but has a winner with the A350 XWB. Source: Airbus.
Sometimes derivatives will do the job. Sometimes a new airplane is the better choice.
Given that Boeing faces a decision whether to launch the Next Boeing Airplane (NBA) and Airbus must decide how to respond, all within the next few years, looking at the considerations and some history is timely.
Today’s examination is going to focus at the 40,000 ft level. We’re not going to delve down into the decisions over suppliers or the minutiae into production. Rather, we’re going to look at general strategy.
Summary
- Airbus wins big gamble with A320neo decision.
- Boeing was victor with 787, while Airbus missed with first A350 design.
- Boeing missed with 747-8I and, it appears so far, with 777X.
- Next airplane decision by Boeing will drive Airbus response. Read more
Pontifications: End appears in sight for 16-year old US-EU trade dispute
By Scott Hamilton
April 19, 2021, © Leeham News: There appears to be progress in resolving the 16 year long trade dispute between Airbus and Boeing. Finally.
The dispute officially is between the European Union and the United States. But neither political entity would have pursued a dispute but for complaints by Boeing and Airbus.
No recap of the trade dispute is required for LNA readers.
Bjorn’s Corner: The challenges of hydrogen. Part 33. Wrap-up: The Eco-system
By Bjorn Fehrm
April 16, 2021, ©. Leeham News: Last week, we wrapped up the operational part of sustainable air transport using hydrogen as an energy source.
Now we look at where we are with the all-important Eco-system. It has many moving parts and risks a chicken and egg stalemate.
Figure 1. The prospective conversion of the European gas pipeline network to hydrogen. Source: EU.
Aviation Writers Bloc: Calhoun’s Countdown
April 15, 2021, © Leeham News: Boeing CEO David Calhoun turns 64 on April 18. This means he is in his final year on Boeing’s Board of Directors and as an employee, unless the Board extends his contract beyond the mandatory retirement age of 65.
In a new feature, the Aviation Writers Bloc, LNA’s panel discusses Calhoun’s legacy, whether he’ll launch a new airplane program and whether Boeing Commercial Airplanes will remain headquartered in Puget Sound.
Investors’ bull case on aircraft OEMs has gaps
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By Judson Rollins
Introduction
April 15, 2021, © Leeham News: Late last month, the aerospace and defense analysis team at Credit Suisse (CS) published its view on the future of the Airbus-Boeing duopoly, as well as an introduction to COMAC’s market position and future.
CS’s main thesis struck a decidedly upbeat note: “As a result of excess retirements due to [COVID-19], significant [sustainability investor] pressure on decarbonization, and the appeal of new warrantied aircraft, we might actually expect a period of solid new aircraft demand in a year or two.”
In terms of specific manufacturers, the team was unsurprisingly more bullish on Airbus than Boeing. They cited Airbus’s “strong market positions in narrowbodies” and their expectation that Boeing’s “recovery will be encumbered by the realities of its product portfolio.” CS did see room for longer-term optimism on Boeing, arguing that while spend on new product development “would pressure numbers this decade, it could also shift the competitive pendulum back … helping anchor a higher terminal [share] value.”
However, CS’s view seems to be more optimistic than that reflected in the two manufacturers’ equity prices. Airbus and Boeing shares are down 23% and 26% from their respective early-2020 highs.
A deeper look into their analysis raises several questions about the future trajectory for commercial aircraft sales.
Summary
- Aircraft retirements aren’t the overreaction they appear to be.
- Sustainability is already a priority for airlines and manufacturers; new regulations will only dampen commercial aircraft demand.
- The appeal of new aircraft, while boosted by low interest rates, must be balanced against the wide availability of used ones.
- A slow recovery in business travel will dampen yields, crimping investment in new aircraft.
Today’s 737 MAX, A320neo values vs 2019
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By Scott Hamilton
Introduction
April 12, 2021, © Leeham News: The Boeing 737 MAX reentered service in December after a 20 month grounding.
Determining values post-grounding and during the COVID-19 pandemic was complicated. The question over values is further confused by steep discounts given by Boeing as part of its need to compensate customers for the grounding.
There have been few “free market” MAX transactions to establish a solid current market value (CMV). The appraisal firm Aviation Specialists Group (ASG) last week issued its April Guide, listing values of virtually every jet airplane in service—and some that aren’t, yet. (ASG lists the Boeing 737-10 MAX, which is not even in flight testing, but not the 737-7 MAX, which was the lead test airplane for recertification.)
Summary
- MAX values this month compared with April 2019 are double-digit lower on a percentage basis, except for the MAX 10.
- A320neo values softened in the pandemic environment, but are better than the MAX.
- A321neo values went up slightly last month compared with 2019.
Pontifications: More of the same expected at Boeing’s annual meeting
By Scott Hamilton
April 12, 2021, © Leeham News: Boeing’s annual shareholders’ meeting is April 20.
The entire Board of Directors is up for election. Boeing sets terms for one year. In theory, this prevents entrenchment. In Boeing’s case, Board members historically are reelected year after year after year.
There are several members who were appointed after the 737 MAX crisis. Still, there are major gaps in the Board’s makeup.
Bjorn’s Corner: The challenges of hydrogen. Part 32. Wrap-up: Going forward
By Bjorn Fehrm
April 9, 2021, ©. Leeham News: Last week we made a summary of the history of initiatives for sustainable aviation, now we look at the likely developments over the next 10 years.
What is the likely development for different classes of airliners and what technologies will be popular?
Analyzing the trades between a single- and twin-aisle NMA
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By the Leeham News Team
Introduction
April 8, 2021, © Leeham News: Some people believe Boeing should launch a new single-aisle airplane about the size of the 757-200/300 to compete with the Airbus 321neo.
Others believe the new airplane should be a twin-aisle aircraft. A few, including LNA, believe the new airplane must be a three-member family and must be a twin-aisle.
The largest member of a single-aisle Boeing NMA would be longer than the Boeing 757-300. Photo: Delta Air Lines.
Whatever the new airplane is, the general specifications are aircraft up to 250 passengers in two classes and a range of up to 5,000nm.
There is also agreement the airplane must start across from the A321neo. Configurations vary widely, but 190-200 seats in two classes are common.
Boeing CEO David Calhoun said on an earnings call that the next new airplane will compete with the A321 and cover the Middle of the Market.
Summary
- A single-aisle, 250-passenger airplane would be longer than the 757-300.
- Technical build challenges, while not insurmountable, exist with long, thin airplane.
- Gate and ramp space constraints accompany a long airplane.
- Other trades exist for a twin-aisle design.