Leeham News and Analysis
There's more to real news than a news release.
737 MAX to roll out to Boeing product strategy challenges
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Introduction
The Boeing 737-8 rolls out tomorrow to challenges to Boeing’s product strategy. Image via Google images.
Dec. 7, 2015, © Leeham Co: Boeing rolls out its first 737 MAX tomorrow to no press fanfare. Today there is a limited press tour of the assembly line, but, according to reporters who were invited, there will be no press briefings.
It’s an inexplicably low-key event for what Boeing otherwise touts as a major evolution of the venerable 737 line.
As good as Boeing claims the airplane will be, and as much spin as Boeing’s marketing department tries to put on the rivalry vs the Airbus A320neo, the 737 MAX clearly is second fiddle—and it’s not going to get better.
Summary
- Airbus holds a commanding market share: 60% to 40% of the family comparisons.
- Airbus holds about a 55% share of the A320neo vs 737-8 comparison.
- The A321neo outsells the 737-9 by about 4:1.
- Boeing faces cash flow challenges in 2020 decade.
Pontifications: Assessing the benefit of new airplanes in low oil pricing
By Scott Hamilton
Dec. 7, 2015, © Leeham Co.: Oil for West Texas Intermediate Crude closed Friday at $39.97. International Brent closed at $43.05. These figures continue to breathe life into used aircraft and raise questions about new orders.
In recent weeks, we’ve seen Delta Air Lines extend use of 15 Boeing 757s. Earlier United Airlines decided to refurbish 21 Boeing 767-300ERs. United is also leasing in 38 used Airbus A319s. Southwest Airlines is acquiring more than 20 used Boeing 737-700s through leases.
New aircraft orders are off for Boeing this year. Through Dec. 2, Boeing posted 568 net orders. Unless there is an explosive month in the remaining 24 days of this year, Boeing won’t meet a book-to-bill rate of one.
Airbus hadn’t posted its November orders as of Friday, but through October, the company recorded 850 net orders, comfortably more than a 1:1 book:bill. It announced 108 firm orders in November, with 14 of these representing a swap from A350-900s to A330-900s.
What is the affect of lower oil prices on the new airplanes?
Bjorn’s Corner: Modern IFE
By Bjorn Fehrm
04 December 2015, ©. Leeham Co: During the last two weeks I have been busy explaining how a mid-life long range aircraft is refurbished. The articles have been about how to prepare 10 year old Boeing 777-200ER and Airbus A340-300 for their second half of life.
One of the things that must be done is updating the part of the aircraft that meets the customer, the cabin. Most passengers don’t know much about the aircraft they are flying, but they can tell you if the seats were comfortable, if there was enough leg space and if the movies on the entertainment system were any good.
This means that if the cabin is brought up to a modern standard with lie-flat business seats, refreshed interior surfaces and textiles, and if there is a personal IFE unit with good content, the passenger will not reflect over that he flies an old aircraft.
Such refreshes cost a lot of money. Without changing all items in a 300 seat cabin, one is easily at between $5m-$10m for material and installation. One of the problems when wishing to keep existing seats, for economic reasons, is that it is virtually impossible to implement in-seat IFE to an existing seat. Luckily there are other solutions. Read more
Used B777-200ER or A340-300, Part 2
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Introduction
By Bjorn Fehrm
Dec. 3 2015, ©. Leeham Co: Last week we started our article series around acquiring used twin-aisle aircraft to start new long haul services or boost an existing network. We focused on Airbus’ A340-300 and Boeing’s 777-200ER, two capable long haulers, both with a capacity of around 290 seats, using our normalized two class cabin. We wanted to understand which one would have the lowest operating costs over a network which has flights up to 12-13 hours.
We analyzed the Cash Operating Cost (COC) of the aircraft in their standard configuration in Part 1. We could see that their COCs are similar. We now study the aircraft’s capital costs. These will include a necessary cabin makeover where we will use the chance for the 777-200ER to convert it to a 10 abreast aircraft in economy. We aim to amortize its higher acquisition cost by spreading these over more passenger seats.
Summary
- The 777-200ER and A340-300 are very close in Cash Operating Costs in their base versions.
- The 777-200ER has a market valuation which is more than double that of the A340-300. Recently this level has declined but the acquisition cost of a -200ER is still higher than the A340-300.
- We use the potential of 10 abreast in economy to see if we can even the per seat cost of the two by spreading the higher costs of the -200ER over more seats.
C-17: the end of an era
Dec. 1,2015: The last C-17 flew off the Boeing production line in Long Beach (CA) last week, ending aircraft
The final C-17 before taking off from the Long Beach (CA) production plant Boeing acquired in the McDonnell Douglas merger of 1997. MDC designed the C-17. Los Angeles Times photo.
production at the former McDonnell Douglas plant that began delivering Douglas DC-8s at the start of the jet age.
It’s the end of an era that lasted six decades.
Prior to producing the DC-8 at Long Beach, Douglas Aircraft Co. built its long line of piston airliners at the Santa Monica (CA) Airport.
The DC-8 was followed by the DC-9, DC-10, the DC-9 Super 80 series, the MD-11, the MD-90 and the final commercial airliner at Long Beach, the MD-95/Boeing 717. The C-17 was the only military aircraft built here.
Here’s a photo array dedicated to this storied history.
Boeing 737 rate hike factors
Boeing 737 factory in Renton (WA). Boeing rendering.
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Introduction
Nov. 30, 2015, © Leeham Co.: As Boeing ponders whether to increase production rates of the 737 line beyond the previously announced 52/mo rate effective in 2018, there are other important considerations besides whether the market can sustain another rate increase and whether the supply chain can gear up to the higher rates.
It is widely known that Boeing is considering rates as high as 63/mo, the maximum capacity at its Renton (WA) plant. Airbus has already announced it plans to go to rate 60/mo for the A320 family in 2019. But a higher rate is being explored, and a relationship to the future of the 747-8 is a factor.
Summary
- Market share protection, backlog clear considerations.
- Termination of the 747-8 program, its effect on suppliers and a Boeing write down are factors.
- Cash flow going into the 2020 decade is important.
Icelandic becomes first regular airline to serve Antarctica
Icelandic Boeing 757 at Union Glacier Blue Runway, Antarctica. Source: Special to Leeham News and Comment.
Nov. 27, 2015: Loftleider Icelandic Airlines is the first regular airline to serve the world’s seventh continent, Antarctica.
Icelandic, a sister company to Icelandair and crewed by Icelandair, operated a Boeing 757-200 into the Union Glacier station last week, Nov. 17, on a proving run. The first passenger flight was yesterday. The 757 was configured for 52J/10Y seats; there were 50 passengers. The flight originated in Puntas Arenas, Chile.
Bjorn’s Corner: Aircraft deterioration
By Bjorn Fehrm
27 November 2015, ©. Leeham Co: In an article yesterday, we looked at the economics of acquiring used aircraft for long range operations. We compare getting a second hand Boeing 777-200ER or Airbus A340-300 to operate as a long range complement to an existing network or to start a charter operation to destinations further away than previously possible.
The low fuel cost has made longer range destinations economical for a number of business models and the low capital cost and good conditions of these aircraft open new opportunities.
One of the things that must be considered in such analysis is the deterioration of the aircraft’s components. This will affect the aircraft’s performance in a marked way. In fact, an aircraft only has its factory advertised performance once in its life-time: at delivery.
Certain types of deterioration can be reset to zero by maintenance actions; others will not be reset completely by a visit to the maintenance shop. Let’s go through the different forms of deterioration that one normally caters for in performance calculations and how one go about to restore the aircraft’s operation as much as possible with scheduled maintenance.