Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: Air Transport’s route to 2050. Part 28. June 27, 2025
- Parent agency, FAA often at odds as politics outweighs safety June 26, 2025
- Electric Flight and the Ugly Duckling June 25, 2025
- Engine makers tout “Plan A” but have “Plan B” backups in R&D June 23, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 27. June 20, 2025
Boeing earnings call: will Muilenburg be more forthcoming than McNerney?
- See Scott Hamilton’s new column with Forbes on-line, It’s time for hard questions for Boeing.
Jan. 26, 2016, © Leeham Co. Boeing’s earnings call tomorrow could have additional revelations about the 777 production rate and how its cash flow is being 
enhanced by continued maneuvering of advances and accelerated pre-delivery deposits (PDPs).
Whether it will or not remains to be seen. Under former CEO Jim McNerney, Boeing’s penchant for obfuscation was legendary among the aerospace analysts.
Dennis Muilenburg, who took the CEO title last summer in addition to his Chief Operating Officer position, has already shown he’s different than McNerney, evidenced by the surprise, early contract agreement with the engineers union, SPEEA.
Boeing last week announced a further rate cut, effective in September, for the ailing 747-8 program. Along with this came a pre-tax charge of nearly $900m.
Major questions to be answered revolve around the future production rate for the 777 and the cash flow.
Boeing 777 Classic production gap closing
- See Scott Hamilton’s new Forbes on-line column, It’s time for hard questions for Boeing.
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Introduction
Jan. 26, 2016, © Leeham Co. Boeing needs to sell more than 200 777 Classics, all with delivery dates through 2021, to bridge the gap to full production of the 777-8/9, according to an updated analysis by Leeham Co.
Boeing firmed up an order for six 777 Classics early this month there are at least two campaigns in which Boeing hopes to land orders for around 20 777-300ERs.
But it’s the all-important delivery stream that isn’t announced with orders which raise the question of whether Boeing can bridge the gap.
The last 747-8 that is not a white tail is scheduled for delivery in May 2017—hardly enough to match the production rate in 2016 of one per month through August–or even the newly announced reduced rate of one-half per month from September.
Boeing booked a net of two 747-8F sales last year, but these were white tails sold to Boeing Capital Corp. for lease to Air Bridge Cargo.
The outlook for the 747-8 is very bleak. The outlook for the 777 Classic program remains challenging, to put it charitably.
Summary
- Annual update shows 777 production gap narrowing, but still remains.
- Aerospace analysts think 777 rate has to come down to six or lower.
- Pinning hopes on recovering air cargo market increasingly a reach.
Alaska Air’s brand refresh after 25 years
Jan. 25, 2016: Alaska Airlines announced its first rebranding in 25 years today, revealing a new livery and 
new logo font.
The airline is in a fierce battle with Delta Air Lines, as the latter develops Seattle into a major hub, adding domestic flights to feed its international routes. Seattle is Alaska’s principal hub and with its sibling Horizon Air continues to maintain a 51% market share. Read more
Pontifications: Shifting focus to Embraer
By Scott Hamilton
Jan. 25, 2016, © Leeham Co. Embraer announced last week it had cut metal on its first E195 E2, more than a month before the roll-out of the first E190 E2, scheduled for Feb. 25, at is Sao Jose, Brazil, plant.
The aggressive manufacturer of small(er) passenger jets is moving forward full speed toward its next generation of aircraft even as Airbus, Mitsubishi, COMAC and Irkut encounter one delay after another.
Minuscule demand for Boeing 747-8F
- See Scott Hamilton’s new column for Forbes on-line, It’s time for hard questions for Boeing.
Subscription Required
Introduction
One of Boeing’s white tail 747-8Fs. This, and another that has been stored, was painted in the livery of the Seattle Seahawks. Boeing photo.
Jan. 25, 2016, © Leeham Co. Boeing’s decision to cut the production rate on the 747-8 is not a surprise. It’s only a surprise that it took officials so long to do so.
The company continues to cling to the hope of a recovery in the global air cargo market to sustain the program. This is unlikely, however.
The business case for the 747-8F is minuscule.
Summary
- The metrics of the global freight market have simply changed too much.
- Load factors for freight remain stuck below 45%.
- Yields continue to be low.
- Shifting trends from main deck freighters to using lower deck space on the big passenger airlines continues to grow.
- Low fuel prices, temporary though they may be, diminish the new for new 747-8Fs.
- Low capital cost 747-400 Passenger models stored in the desert or soon to be exiting the world’s fleet, along with stored 747-400Fs, provide ample opportunity for cheap freighters.
Bjorn’s Corner: The coin has two sides
By Bjorn Fehrm
22 January 2016, ©. Leeham Co: Today’s Corner should have been about something else. But we learned yesterday that yet another order did not go Bombardier’s way, the 125 seat aircraft order of 40 units for United Airlines.
Normally I don’t care about who gets a single aisle order; the players that are active are all producing very good products and which one that gets chosen in not a big deal.
Boeing took this business with its smallest 737NG member 737-700. The 737NG was scheduled to take on aircraft like the CSeries and the re-engined A320neo while Boeing perfected a clean sheet single aisle for the end of this decade.
This corner is about national characters and what happens when this character gets under pressure. It’s also about the fact that the coin has two sides.
Boeing cuts 747-8 production rate, takes charge
Jan. 21, 2016, (c) Leeham Co. Boeing today announced it will cut the production rate of the 747-8 from the current 1.3/mo and the previously announced 1/mo to 0.5/mo, effective in September.
The previously announced rate reduction is effective in March.
Boeing took an $885m pre-tax charge ($569m after tax). the company had warned in SEC filings a forward loss could happen if the commercial markets didn’t pick up. Today Boeing said the global air cargo market hasn’t picked up, and in fact has reversed itself, falling off. Boeing was counting on the air cargo recovery to fuel a resurgence in the ailing 747-8 program.
Even at the reduced rate of one-half airplanes a month isn’t going to solve Boeing’s problem.
United chooses 737-700 over CS100 in big blow to Bombardier
Jan. 21, 2016: United Airlines elected to order 40 Boeing 737-700s instead of the Bombardier CS100, it was announced today. It’s a huge blow to Bombardier, which was hoping to land this order to give a big boost to the CSeries program.
The reasons are obvious, even to an outsider, and don’t speak to the attributes of the CSeries, which remain compelling.
Here’s what we believe was behind the United decision:
Analysis: Sukhoi’s regional jet SSJ100, Part 2
By Bjorn Fehrm
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Introduction
21 January 2016, ©. Leeham Co: The first part of our analysis, published Monday, looked at Russia’s first effort to design and aircraft to penetrate the Western airplane market, Sukhoi Superjet (SSJ100). We concluded that the SSJ100 regional airliner was a good effort.
The aircraft was essentially a Russian airframe with Franco-Russian engines, Western systems and Western avionics. For aircraft that are delivered to Western airlines, it also has an Italian-designed/produced interior.
The aircraft has been in successful deployment with Interjet of Mexico and has now been ordered by CityJet of Dublin. After having looked at base characteristics of the aircraft/engine and also analysed the fuel consumption, we now continue with developing the Cash and Direct Operating Costs of the SSJ100. We compare it with the market leader in the 100 seats regional market, Embraer’s E190.
Summary:
- The SSJ100 is competitive on fuel costs compared to the E190.
- Maintenance costs for SSJ100 is still hard to predict as there is still too limited operational experience.
- Capital costs are lower for the SSJ100. This means that Direct Operating Costs, DOC, are attractive for the SSJ100.
The fuel effect; or old is beautiful
By Bjorn Fehrm
19 January 2016, ©. Leeham Co: When Willie Walsh, the CEO of IAG, said that the Airbus A340-600 “is a fantastic aircraft at fuel below $60 a barrel but perhaps not at $120,” he put operational words to something the Growth Frontiers 2016 conference in Dublin had been grappling with since it opened on Monday morning.
What is going to happen now? Crude is falling below $30 a barrel and Jet fuel is below $1 a gallon. This must have an effect on how people decide, whatever the lessors and aircraft OEMs say.
And it had to be a senior airline CEO that broke the mantra that everyone was repeating: “We don’t see fuel prices having any effect on fleet planning for airlines.”