Following the annual ISTAT meeting in March, we published a piece about the Boeing view of the so-called funding gap for 2009: the financing shortfall seen by just about everyone except Boeing and Airbus as between $10bn and $25bn this year needed to pay for more than 1,000 airplanes due for delivery by the Big Two and Bombardier and Embraer.
Boeing believes the gap is $0-$5bn and Airbus, though not presenting at ISTAT, has a similar view.
We mentioned in our story that we have been invited to visit Boeing Capital officials to get detail about their methodology. We did, and we wrote that piece for Commercial Aviation Online, for which we are a regular contributor. That piece was published April 2. We can now reprint it below.
Update, April 3: The New York Times has this long piece on the prospect of a split procurement.
It is a subtle but major shift on the controversial proposal to split the KC-X aerial tanker contract between Northrop Grumman and Boeing.
KIRO TV (CBS) in Seattle interviewed US Rep. Norm Dicks (D-Boeing/WA), who throughout the previous competitions has been dogmatically in favor of a single contract to Boeing. Dicks is #2 on the House Appropriations Committee, where any funding bill will have to originate. The chairman of the committee is US Rep. John Murtha (D-PA), who came out solidly in favor of a split contract as the only way to break the logjam over an award.
Airbus may scrap the troubled A400M program, according to this London Telegraph report of a Der Spiegel interview with Airbus CEO Tom Enders.
Peugeot Citroen fired Christian Streiff, who designed the Power8 restructuing program for Airbus but then resigned after three months in a power struggle. Here is the report picked up by The New York Times.
Update, 4:00 PM March 30: Airbus discounted the London Telegraph/Der Spiegel report and says the company remains committed to building the A400M. Here is the Reuters report.
The picture about the future of the A400M is about as clear as this one.
Update, March 26, 2:20PM PDT: Bloomberg News moved this piece in which ILFC’s CEO says he’ll get the lessor out from under AIG’s “cloud.”
Mega-lessor International Lease Finance Corp. filed its 2009 10K annual report March 25 with the Securities and Exchange Commission. In it, the company discussed possibilities that could create what’s called a “going concern” situation.
In accounting-speak, the reference is all about bankruptcy. If a company or its auditors raise questions about the ability to continue as a “going concern,” this means there is a possibility the company could seek protection in the US bankruptcy courts. This almost always is a Chapter 11 reorganization filing rather than a Chapter 7 liquidation action.
Boeing is gearing up for a new fight over the KC-X tanker competition but out of the blue, it took a direct hit on the Airborne Laser program, which uses the 747 as the platform.
A California Member of Congress, and a Democrat at that (Ds generally tend to favor Boeing over Republicans), called the ABL program “insanity.” Politico, which covers politics but not usually defense items, gave this piece prominate placement on its website.
Since the first of the year, Boeing has issued WARN (job layoff notices) for 1,113 union jobs belonging to the International Association of Machinists.
Job security was a major goal of the IAM in last year’s 57 day strike that began in September and cost Boeing billions of dollars. The IAM touted the final agreement, preserving 4,500 jobs, as a major victory.
The countdown is underway for the outstanding order of 10 Airbus A380s by mega-lessor International Lease Finance Corp.
ILFC was an early customer for the super-jumbo jet and suffered two year delays along with the other customers when Airbus’ industrial production issues arose for the giant aircraft. As part of the restructured contract for the order as a result of the delays, ILFC obtained the option to cancel the orders in 2010.
We were at the ISTAT conference this week, one of the largest aviation conferences in the world, where 1,000 aviation professionals gather for the Spring Annual General Meeting to assess the current state of the market. And the state of the market is dismal.
ISTAT stands for the International Society of Transport Aircraft Trading.
A major topic, perhaps the major one, was the so-called “funding gap” that exists this year: with $68 billion in aircraft financing required, nearly all observers believe there is a funding shortfall, or gap, of $10 billion to $28 billion, depending on who’s talking.
Except that Boeing, as well as Airbus, doesn’t subscribe to this theory. (Neither does the leasing company AWAS, but this firm is not out front about it.)
Only a few days ago, President Obama’s Office of the Management and Budget suggested delaying the tanker competition for five years. Now the Wall Street Journal reports that another House Member wants to split the tanker acquisition. You can see the report here, and in this case it’s free. Meantime, the conspriracy theorists actually have a pretty good one. A commenter on the DODBuzz blog thinks the delay is designed to give Boeing the opportunity to develop the 777 into a tanker. See the March 11, 9:28am posting. As conspiracy theories go, we like this one. No clue if there’s any validity to it, but the timing does work.
Update, March 12: George Talbot has this long item that the White House denies it wants to delay the tanker program.
The Hill has this piece that House Member John Murtha is preparing legislation for a split buy, with the winner getting a larger piece of the pie, and a production rate of 24 a year rather than the 12-18 originally proposed.
Update, March 13: George Talbot of The Mobile Press-Register has this piece about Boeing, Northrop and their respective supporters banding together to kill any Obama Administration proposal to delay the tanker procurement for five years, as suggested by OMB. The White House denies it has any plans to do so, but the stakeholders aren’t convinced.
Reuters reports more about John Murtha’s plan to kick-start the procurement in this item.