Why bailouts make sense under these circumstances

By Scott Hamilton

Commentary

By Scott Hamilton

March 18, 2020, © Leeham News: The Federal government is preparing a bailout, said to be more than $1 trillion, to pump into the US economy.

Airlines want $50bn. Boeing wants $60bn for the aerospace industry. It’s unclear how much is for Boeing and how much is for industry.

Opposition for the airlines and Boeing was quick to emerge. The objection: how much each spent in recent years on shareholder buybacks.

The bailout package goes across the US economy and includes direct cash grants to individuals. In keeping with LNA’s business, I focus in the column only on aviation.

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US carriers not at imminent risk of bankruptcy despite potential shutdown

By Judson Rollins

March 16, 2020, © Leeham News: Throughout Sunday afternoon and evening, reports – all unconfirmed – began to emerge in the US that as early as today, the Trump administration may announce a suspension of US passenger flights domestically for 2-4 weeks. The suspension, if confirmed, could begin this week. Investors are scrambling to understand how long US airlines can survive on their current cash balances.

LNA reviewed the balance sheets of carriers worldwide in anticipation of such dramatic events. In this article, we will show that US airlines have plenty of time for demand to recover – or the US government to step in with emergency loans or grants similar to those doled out by the Air Transportation Stabilization Board from 2001 to 2003.

This airplane line-up at Chicago O’Hare Airport could be a thing of the past very soon. Source: Pinterest.

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Coronavirus impact to Boeing still unfolding

By Judson Rollins

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March 16, 2020, © Leeham News: Boeing stock sold off 28% last week on news that the company would draw down the remainder of a $13.8bn loan it arranged in February to cover ongoing expenses related to the 737 MAX.

In addition to MAX-related charges, the company is also hoping to close its joint venture with Embraer and has looming debt maturities later this year. But the company’s airplane sales prospects are an increasing source of worry for investors.

The coronavirus and its impacts – which are still unfolding – put up significant obstacles to Boeing’s recovery, even as it hopes to finally see the MAX recertified within a few months. Read more

“We’re sick and tired of new technologies:” Avolon CEO

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Introduction

By Scott Hamilton

March 16, 2020, © Leeham News: “I can tell you from our perspective, we’re kind of sick and tired of new, new technology. It’s not proven to be the home run.”

This blunt assessment comes from the chief executive officer of the big aircraft lessor, Avolon.

Domhnal Slattery

Domhnal Slattery, the CEO, was giving his critique of whether Boeing should launch a new airplane once the 737 MAX crisis is over.

Boeing was on a path to decide whether to launch the New Midmarket Airplane when the MAX was grounded one year ago this month.

Airbus was waiting for Boeing to move before deciding how to respond.

Summary
  • Airbus and Boeing should “stick to their knitting.”
  • Focus on incremental improvements for now.
  • 2030s to 2050s will be the next big advance in technologies.

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Pontifications: What kind of aid could US airlines get?

By Scott Hamilton

March 16, 2020, © Leeham News: Airlines in Europe already asked governments for financial aid as coronavirus forces massive schedule cutbacks and in some cases, complete service suspension.

In the US, talk of aid began in earnest last week.

Delta Air Lines, which is parking 300 airplanes and cutting 40% of its capacity, said it plans to seek US financial assistance.

There is increasing talk that the US may order a complete suspension of domestic air service. If so, this would be like 9/11, when for the first time in history the US shut down its skies.

Trans-Atlantic flights were diverted to Gander as 9/11 unfolded. Source: i.pinimg.com

That lasted only three days.

With federal officials saying the crisis hasn’t peaked in the US and it may be a couple of months before the crisis subsides.

US carriers will almost certainly seek government assistance.

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Bjorn’s Corner: Why e in ePlane shall stand for environment, Part 13.

March 13, 2020, ©. Leeham News: In this week’s Corner, we address an often forgotten aspect of Electric and Electric-Hybrid aircraft design.

The battery as an energy source, as the only or assisting source, has the same weight during the whole flight. A fuel (alternate, fossil, or hydrogen) consumes during the flight. You gradually fly a lighter aircraft. Let’s see how this affects the aircraft’s efficiency.

Figure 1. Embraer’s E175-E2, a latest-generation 88 seater jet used for our example. Source: Embraer.

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Boeing down sharply second day in a row. Airbus stock in similar decline

By Scott Hamilton

March 12, 2020, © Leeham News: Boeing stock is in another sharp decline today.

Yesterday, the stock fell 18%, to close under $200 for the first time since May 2017.

Today, the stock was off 15% in early morning trading, to a low of $156. At this writing, Boeing is down 13.5% at $163. The Dow Jones was down 7%.

Year-to-date, Boeing is off 52%.

While here in the US, focus is on Boeing, looking at the Paris stock exchange, Airbus stock also in in a similar decline—without all the baggage Boeing has.

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Does the new weight bump turn the A330-900 to a trans-Pacific aircraft? Part 2

By Bjorn Fehrm

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Introduction

March 12, 2020, © Leeham News: We continue last week’s theme and compare Airbus’ new 251t variant of the A330-900 to the A350-900 in this article.

We saw in the first article the A330-900 251t is now a credible long-range aircraft, including the long hop over the Pacific ocean. When to use the A330-900 or the A350-900? We analyze their economics and where one is to prefer to the other for long-range operations.

Summary:
  • The Airbus A330-900 in its 251t version can serve many US to Asia routes that were reserved for the A350-900 before.
  • We check if the economics support replacing the A350-900 with the A330-900 for these routes.

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Airlines seek rent relief as coronavirus impacts widen

By Scott Hamilton

March 11, 2020, © Leeham News: Some airlines already are asking for rent relief as a result of widespread groundings of aircraft because of the coronavirus.

BOC Aviation, Avolon and Air Lease Corp are just three lessors acknowledging they’ve already been asked for relief. They spoke on the sidelines of an aviation industry conference in Austin last week.

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Engineers OK Boeing contract extension; techs say no

By Bryan Corliss

March 11, 2020 © Leeham News – New Boeing CEO Dave Calhoun earned a split decision in his first major labor relations test Monday, as unionized engineers with the company’s Commercial Airplanes division narrowly approved a contract extension. A second unit, for technical workers, rejected a similar proposal.

The news came as Boeing announced the first case of COVID-19 among its 70,000-member Puget Sound workforce: an unidentified employee at the company’s Everett plant.

The proposal for engineers belonging to SPEEA (the Society of Professional Engineering Employees in Aerospace) was approved with a 51.2% yes vote, the union reported shortly before midnight (Pacific Time). Technical workers, however, rejected a similar deal with 56.7% “no” vote.

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