Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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Boeing 3Q result positive; first analyst take
Oct. 21, 2015: Boeing reported a strong 3Q2015, with good cash flow and above-consensus revenue. 787 deferred production rose but less than some analysts 
predicted, yet in-line with International Institute for Strategic Leadership. The press release is here.
The first take on results from some of the analyst community, ahead of the earnings call, follows. LNC’s Bjorn Fehrm will take a concentrated look at the 787 results in a later post.
Is FedEx poised to order 777Fs?
FedEx Boeing 777. Airplane-Pictures.net via Google images.
Oct. 20, 2015. (c) Leeham Co.: Two developments at FedEx may give a boost to Boeing’s slow-selling 777 Classic program.
Pilots approved a six year contract that had been open for some time. Pay increases an average of 10% and other contract benefits were achieved.
Pontifications: 50% of something or 100% of nothing: something to consider at Bombardier
By Scott Hamilton
- On Sunday, The Seattle Times had a long article about whether the Boeing 787 will ever record a profit. Leeham Co’s Bjorn Fehrm is quoted extensively.
Oct. 19, 2015, © Leeham Co. Bombardier is dominating the aerospace news lately, given the reports of talks with Airbus about selling a stake of the CSeries program to the European company; a report that it planned to approach Embraer for a business tie-up; and on Friday, a long analysis by Reuters about BBD’s financial challenges.
Last week I chronicled Bombardier’s history predicament of how it got to where it is today, a very deep hole that the new management—which only got on the scene last February and which has spent much of the year reorganizing the company and hiring a new team—has to dig out of. It’s not an easy task and it won’t come overnight.
Let’s take yet another look at things, given the continued headlines last week.
Do the Boeing 787 sums add up?
By Bjorn Fehrm
Subscription required.
Introduction
Oct. 19, 2015, ©. Leeham Co: Boeing presents its Q3 2015 results on Wednesday. This is a hotly awaited presentation, as analysts then will get another data point in their quest to understand if the 787 program will ever turn a profit.
We believe it is pretty clear that the program will not record an overall profit with the cost of development as well as production costs included. With a development cost of close to $20bn, this is to ask for too much. The question is if the production over the first 1,300 units can turn a profit. This is also under scrutiny.
Boeing employs program accounting for the production phase of an aircraft program and now, 25% into the accounting period for the 787, the accumulated deferred costs are such that it is questionable if future deliveries can compensate.
We take a look at the present state and what Boeing has said about the future. Based on this information, we can deduce if it is probable that Boeing can turn $32bn of deferred cost for the 787 into a profit by 2022.
Summary:
- We analyze Boeing’s information around its deferred production cost for the 787 and show how many analysts have misunderstood what has been said.
- Based on the Boeing information, we can deduce the present production cost level, learning curves and when production costs go below the assumed average in the accounting block.
- We also show what the delivery mix from 787-8 and 787-9 to 787-9 and 787-10 will mean for margins in the program.
- Finally, we judge whether Boeing will turn the corner on production cost and get the accounting block to a black zero (or better).
Bjorn’s Corner: Increasing an aircraft’s range
By Bjorn Fehrm
16 October 2015, ©. Leeham Co: Airbus announced this week how it made an Ultra Long Haul (ULH) aircraft out of the long haul A350-900. The resulting A350-900ULR (Ultra Long Range) enables Singapore Airlines to reopen the famous direct “Flight 21” to New York.
But Singapore’s press release also talks about US West coast destinations, the first being Los Angles. They released this picture:
Reading the many comments around how an aircraft like A350-900 can reach such longer range, it can be worth going through the basics on how different parameters affect range and what Airbus or any other OEM has to consider when they want to increase the range of an existing aircraft.
We will do that from a slightly different angle than normal. We will show how a pilot would think about how he can get an aircraft with more range. Pilots reason in a different way to design engineers. They are better served by thinking on the aircraft’s range performance as endurance, meaning how many hours can we stay aloft. This works better when one plans with the prevailing weather on the route.
We will now take it step-by-step and explain which parameters matters for the pilot and which do not and how he gets his ULH aircraft. Read more
Delta Air sees 777 surplus developing
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Oct. 14, 2015, © Leeham Co.: Delta Air Lines sees a major surplus of young Boeing 777s developing in the near term as key operators plan to let the aircraft go from
leases or retirements. The looming surplus makes it more likely that increased pressure on Boeing’s efforts to sell new 777s, and to sell them at reasonable margins, will become increasingly difficult.
Goldman Sachs, the investment bank, sees Delta’s comments as further evidence supporting the likelihood there will be a sharp production rate reduction as early as 2017, perhaps down to six/mo.
Separately, Bernstein Research’s aerospace analyst Doug Harned, also see 777 rates coming down to the equivalent of 6.5/mo in 2017, six in 2018 and five in 2019. The first 777X isn’t scheduled for delivery until 2020, when Harned predicts only five deliveries of the X.
Qantas robbed of longest flight by Emirates and then Singapore airlines
By Bjorn Fehrm
Oct. 14 2015, ©. Leeham Co: The planned “Flight 21” of Singapore Airlines between Singapore and New York would rob Qantas Airways of the title of flying the longest direct flight in the world come 2018.
Qantas operates today’s longest flight, the one between Sydney (SYD) and Dallas- Ft. Worth (TX) (DFW), using its Airbus A380. Emirates plans to take that crown next year with a Dubai (DXB) to Panama City (PTY) flight, Figure 1. It’s fractionally longer than the Qantas flight when comparing great circle distances (the 2015 and 2016 label).
Qantas CEO Allen Joyce just announced that the airline plans to take that title back when the Boeing 787-9 arrives in 2017. This aircraft enables direct service to London Heathrow (LHR) with flights from Perth (PER) in Western Australia, a flight of 7830nm or 18 hours, labeled 2017 in Figure 1.
Figure 1. Worlds longest flights 2015 to 2018. Source: Great Circle Mapper.
KC-46A refueling boom, drogue testing
Oct. 13. 2015: The US Air Force and Boeing released photos of the KC-46A aerial refueling tanker with the boom and the drogue deployed. Photos by John D. Parker. Click on images to enlarge.
CSeries dilemma: a saga of missed opportunities, bad decisions, stiff competition
By Scott Hamilton
Oct. 12, 2015, © Leeham Co.: The news agencies, stock markets and aerospace analysts last week went wild when Reuters reported there were talks going on between Bombardier and Airbus whereby the latter would take a majority stake in the CSeries program.
Within hours, both companies said talks had ended. As could be expected, the stock went into another tailspin.
Then United Airlines said it wants pilots to approve a contract, and is dangling a 100-seat airplane order for mainline operations as an incentive. The CS100 fits into this category, as does the Embraer E195 E2.
It is worth recapturing reasons BBD finds itself in its current predicament.
Airbus A350-900ULR enables Singapore Airlines to reopen Singapore-New York
By Scott Hamilton and Bjorn Fehrm
The A350-900ULR enables Singapore Airlines to reopen the Singapore-New York “SQ flight 21” that was closed 23 November 2013. It was the world’s longest flight, using an Airbus A340-500 until SQ discontinued it during the more recent high fuel prices that rendered the flight uneconomic.
Update: Singapore has now released this picture through twitter:
It will also enable Singapore to restart direct flights to the US West Coast, something that the main competition, such as Cathay Pacific Airways, has been able to offer because of a better geographical position. The A350-900ULR now closes that competitive gap for Singapore Airlines.
Singapore has converted seven of its A350-900s to the -900ULR version, deliveries will start in 2018. The ULR will be in a custom premium configuration of 170 seats, about 60 more than used on the A340-500.
Read more
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Posted on October 13, 2015 by Scott Hamilton
Airbus, Airlines, Leeham News and Comment
A340-500, A350-900, A350ULR, Airbus, Cathay Pacific Airways, Singapore Airlines