Leeham News and Analysis
There's more to real news than a news release.
Wells Fargo sees reasonable, risky production rates
June 7, 2016: Single-aisle production rates of 57/mo at Boeing and 60/mo at Airbus are
reasonable when achieved in the near term but more problematic in 2019. Wide-body production rate hikes are risky.
This is the conclusion of a short research note issued June 1 by Wells Fargo Securities.
“Higher Rates Sustainable,” WFS writes. “Aircraft deliveries have historically been cyclical, yet Boeing and Airbus have had flat-to-rising deliveries for 12 years–and both forecast higher near-term deliveries. The bottom line is that the OEMs’ forecasts can be reasonable in our view, assuming aircraft retirement levels and/or traffic growth are above historical rates. Therefore, we expect higher deliveries over the next several years, but think it is unlikely that the full 35-40% A320/737 production increase currently envisioned by the OEMs will be achieved by 2020.”
UTC media day 1: Intelligent aircraft, aftermarket support
June 6, 2016: Intelligent aircraft–systems that communicate more fully within the aircraft
Mauro Atalla, UTC Aerospace Systems
and between the aircraft and the ground–is increasing and it requires more and more power to achieve, says Mauro Atalla, vice president, engineering and technology-sensors and integrated systems of UTC Aerospace Systems.
Intelligent sensors on an aircraft have been reduced in the number on board an aircraft even as the needs greatly increase, he said. There has been a reduction of more than 50%, providing a 50% weight reduction.
UTC media day 1: UTAS, twice the size of any other aerospace systems company
Note: United Technologies Corp (UTC) is holding its annual Media Days today and tomorrow. We’re providing reporting from the event. This is the first time in our long participation that UTC Aerospace Systems is presenting. UTAS is a major supplier and service provider to all the airframe OEMs.
June 6, 2016: UTC Aerospace Systems is just four years old, following mergers with
Dave Gitlin, CEO of UTC Aerospace Systems (UTAS).
Hamilton Sundstrand and Goodrich–the largest in aerospace history, says Dave Gitlin, president of UTC Aerospace Systems.
UTAS provides electrical power and bleed air systems, engine, starters, power systems, all the circulating fans on the Boeing 787, monitoring systems and much more. Evacuation slides, the Ram Air Turbines, landing gear, flaps and slat control systems, brakes and thrust reversers.
Pontifications: The Bottom Line isn’t always about The Bottom Line
By Scott Hamilton
June 6, 2016, © Leeham Co.: Sweetheart deals to win strategic aircraft orders are nothing new in commercial aviation.
John Leahy, COO-Customers for Airbus, last week poked Bombardier for its order from Delta Air Lines. Citing a reported airplane sales price of $22m, which Leahy estimated cost BBD $7m per airplane, Airbus’ chief salesman—known for his barbs and quips—said if BBD sold more C Series faster, the company would go out of business quicker.
Set aside for the moment the numbers he cited as unknown quantities. LNC has different figures we’ve reported and in two posts on my column at Forbes, here and here, there are other aspects to the Delta deal that affect economics.
It’s undisputed that BBD took a US$500m charge against the Delta, Air Canada and AirBaltic deals. The second Forbes post explains why. It’s all about the learning curve. Airbus and Boeing know about this: the first A350s are being chalked up to big losses and the 787 has $29bn in production costs. But it’s not to their benefit to acknowledge this when criticizing the C Series deals.
All this is neither here nor there, however. Airbus, Boeing and McDonnell Douglas all have (had) done deals that don’t seem to make commercial sense when key, strategic transactions were necessary.
Airbus stepping up innovation
By Bjorn Fehrm
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Introduction
June 6, 2016, ©. Leeham Co: In January last year I had a discussion with Airbus CEO Fabrice Bregier regarding the innovation level at Airbus. The background to the discussion was that Airbus was trailing its direct competitor, Boeing Commercial Airplanes, in innovations since the early 2000s.
Airbus started life as a more innovative company than Boeing. It was using new technology in an aggressive way to gain product advantages on the incumbent Boeing. Examples are the universal use of Fly-By-Wire (FBW) and the standardization on a common cockpit layout for all its aircraft, whether single or dual aisle, Figure 1.
Figure 1, Airbus A320 cockpit laying the ground for a common cockpit standard. Source: Wikipedia.
The FBW and common cockpit enabled customer pilots to cover a wider range of aircraft with minimal training. Airbus also led the aerodynamic development with high aspect ratio wings for its A320 and A330/340 series aircraft.
Somewhere during the problems with the A380, the creative and innovative spirit got caught in the aim to unify the group, to make sure that the “I make it my way” initiatives stopped in the different national industries that made up Airbus.
Bjorn’s Corner: Transponders, the kingpin of safe air navigation, Part 3.
By Bjorn Fehrm
June 3, 2016, ©. Leeham Co: Over the past few weeks, we have described how transponders go from being little more capable than the WW2 IFF that they were developed from, to how they will act as information beacons, sending the aircraft’s ID, position and speed to all surrounding listeners every second.
The consequences of this change are nothing short of revolutionary. From a situation where the ground controller or adjacent aircraft had scarce information on the multitude of aircraft they tried to track, Figure 1, they can now receive all the information they need from the aircraft under observation.
Figure 1. NASA simulation of air traffic over US on a normal day. Source: NASA
This, together with other technologies like data link-based communication, will change Air Traffic Management as we know it.
Boeing: no new technical issues with KC-46A
Dennis Muilenburg, CEO of The Boeing Co. Boeing photo.
June 2, 2016: Boeing is not discovering more technical issues with the KC-46A, but recent issues relating to the refueling boom and wing pods are being worked through while concurrent production progresses.
“As we discover things in flight tests, we have to roll them into the airplanes. This will be a wide-body program for decades,” he said, forecasting sales of 400 tankers, said Dennis Muilenburg, CEO of The Boeing Co., speaking at the Bernstein Thirty-Second Annual Strategic Decisions Conference 2016.
IATA on air safety
By Bjorn Fehrm in Dublin
Introduction
June 1, 2016, ©. Leeham Co: We report from the International Air Transport Association’s (IATA) Annual General Meeting running in Dublin Thursday and Friday this week, where all the world’s airlines meet to report on a number of initiatives and decide on things to do going forward.
The first briefing from IATA was on the level of safety in the air for 2015, measured through the IATA Operational Safety Audit, IOSA. 2015 was a good year, not quite to the level of 2014 which was the safest year in history, but close at 0.32 jet hull losses per one million flights instead of 0.27 recorded for 2014, Figure 1.
Figure 1. Jet hull losses during 2015 per million flight hours. Source: IATA.
As a reference, the the 2013 rate was 0.41 hull losses over one million flights. The 2015 rate was a 30% improvement over the average rate of the years 2010-2014. The turboprop level was worse at 1.29 hull losses per million flights but it was a large improvement compared to previous years at 3.13 and 3.95. It shall be cautioned that the sample size for Turboprops is much smaller than for Jets, therefore one hull loss will affect the statistics quite a lot. Read more
Airbus changing production to be more competitive
By Bjorn Fehrm
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Introduction
June 1, 2016, ©. Leeham Co: With the large aircraft development programs being on the way to fade out and give way to incremental improvement programs, Airbus is shifting its focus onto making its production more competitive.
The revenue and profitability of Airbus commercial aircraft depends on up to 90% on delivered airliners. With the pricing determined by the market, the production costs are virtually determining Airbus’ bottom line.
Figure 1. The forward part of an A350 loaded into Station 50 in the Final Assembly line. Source: Airbus.
The classical Airbus production system was designed to satisfy industrial-political rather rational production criteria, with each participating national aeronautical industry vigorously carving out its piece of the production pie. The result was a production system that had non-optimal efficiencies.
With the coming 5-10 years being a period of incremental development amid a further ramp up of production, the time has now come to focus the Airbus production system and to change this to an efficient and streamlined operation.
Airbus aircraft programs in review
By Bjorn Fehrm in Hamburg
Introduction
May 31, 2016, ©. Leeham Co: Airbus went through a complete review of all their aircraft programs as part of their yearly briefing for media in Hamburg today. A lot was said regarding the status for the different programs by Airbus CEO Farbice Bregier, its COO customers John Leahy and Executive VP Strategy and Marketing Kiran Rao.
Figure 1. Most recent A350 delivery was to Cathay Pacific. source: Airbus.
The briefing was given against a backdrop of weak orders and deliveries for the first five months of the year. Both Bregier and Leahy said, “This is to be expected, it’s not sustainable that we have Book-to-Bill ratios (orders vs. deliveries) of over 1.5 or even close to two for many consecutive years. We have a backlog of 6,700 aircraft that customers expect us to deliver and they have little appetite to order new aircraft when they can earliest get them by 2021 at the earliest.
“We are now in a period of focus on deliveries and we can expect and be happy with a book to bill ratio of around one for the coming years. The extraordinary backlog also justifies our decision to increase production to 60 units per month for our A320 single aisle program.”
Here follows what was said for each of the programs.