Financing Airbus, Boeing customers

Too much is being made over a decision by France to funnel cash through French banks for the express purpose of providing financing to Airbus customers.

France will provide $6.5 billion to the banks for loans to the airlines. The US government should follow suit. Bloomberg News has this report about the lack of financing available to customers potentially hurting Boeing.

The French stories headline or write about the money to the banks being aid to Airbus. In a round-about way, it is, but more to the point the world credit crisis is putting the squeeze on airlines. Depending on who you believe, there is a funding gap of $10bn to $28bn this year for customers buying airliners. Even though Airbus and Boeing pledged up to $1.5bn and $1bn respectively in customer financing this year, and other OEMs will likely step up as well, and even though the export credit agencies are doubling their participation, this isn’t enough.

The Obama Administration proposes around $900bn as a stimulus for the US economy, some of it for dubious project the Republicans rightly question, such as millions to resod the National Mall in Washington, hundreds of millions to engineer social policy via Planned Parenthood and (at least at one point) funding to build a museum in Las Vegas about the history of the mob.

Boeing is the USA’s largest exporter. Instead of funding dubious projects, Obama should earmark money for the banks that would be required to put into the credit markets to finance Boeing airplanes.

France got it right. The US should follow its example.

2009 ‘Year of Boeing tanker’

The head of the Boeing Tanker Program call this the ‘Year of the Tanker,” according to a news release from the company.

In the news release, Dave Bowman, VP and GM of the program, vows to win the KC-X competition that is to be resumed this year. It’s unclear yet whether the Pentagon will simply pick up where it left off last September when suspending the competition or whether an entirely new process will be started.

Boeing claims 44,000 jobs will be supported by its KC-767 tanker. Northrop claims 48,000 jobs for its KC-30. Boeing claims its tanker is 85% American content by value; Northrop claims its tanker is 60% US content (and that the KC-767 is 69% US content). Boeing’s supporters, notably Sen. Murray, challenge Northrop’s jobs claims but have nothing concrete to back up the challenge. (We’re highly skeptical of both claims, for reasons we’ve written about many times.)

But what is truly “American built?” The Wall Street Journal today (Jan. 26)  has a very interesting article asking this question of the automotive industry. The parallels to aerospace are apt.

Boeing’s internal press release on the tanker follows.

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787 test planes to retain temp fasteners

All six Boeing 787s slated to be test airplanes in the certification program will retain an undisclosed number of temporary fasteners, we’ve learned.

Temporary fasteners became a cause célèbre, it will be remembered, when Airplane #1 used for the July 8, 2007, roll-out to an international media extravaganza was revealed to have thousands of temporary fasteners as a result of a shortage of the proper fasteners. This required non-standard ones be used to assemble the display airplane.

Since then, fasteners have been a continuing source of frustration for Boeing. Shortages, followed by incorrect installation at the Global Aeronautica industrial partner and then the revelation that thousands of them were designed incorrectly and have to be removed and replaced, adding further delays to the program.

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A320 Enhancement

Fortunately we can laugh about this one.


Lessor LCAL in 787 talks

Middle East lessor LCAL is in compensation talks with Boeing over delays to the 787 program.

LCAL was created to lease 787s and has 21 on order. With the delays to the program, the lessor’s business plan is in disarray. Steve Clarke, president of LCAL, gave us this statement when we inquired:

For several months LCAL has, like a number of other B787 customers, been in compensation negotiations with Boeing over the delays to the aircraft we have on order. These negotiations are progressing slowly but have yet to be concluded.

It would be inappropriate for LCAL to comment further on the details of its negotiations.

Thoughts on US 1549

Update, January 19:

More information continues to emerge over the remarkable saga of US Airways flight 1549. Readers can Google the news stories and get plenty; we linked to New York Times pieces at the end of this column, below the jump. A good resource is Flight International, which always excels at accident reporting.

Here are some more of our thoughts, none of which has made it into the media so far as we know.

This isn’t the first time an airliner was brought down by birds. Way back around 1961-62, an Eastern Airlines Lockheed Electra crashed on take-off from Boston’s Logan Airport after hitting a flock of starlings so thick that all four turbo-prop engines failed. This happened right at lift-off. All aboard were killed, if memory serves correctly.

Did the Airbus flight envelope protection system help US 1549’s pilots control the airplane as it descended to the Hudson River? The system is designed to prevent stalls, and it’s believed the captain properly had a nose-up attitude in order to hit the water with the tail of the plane and minimize impact to the front of the aircraft. The maneuver was tricky to say the least without engine power. Did the computer system help prevent a crash? Update, 8:00 PM PST January 19: The Wall Street Journal, in an article dated January 20 and posted on its website January 19, confirms that the flight envelope system was operating and contributed to the safe landing of the airplane.

Was this a crash, like the media reported? In fact, this was a controlled water landing and, yup, the aircraft was destroyed–but was it a crash in the classic sense of the word? Even the flight attendants described the contact with the water like a “hard landing.”

Hand-wringing over birds around the airport was overblown in this case. The A320 didn’t strike the birds around the airport; the plane was miles away at 3,200 ft. Birds at the airport had nothing to do with this accident.

Speaking of over-wrought hand-wringing, Fox News’ Sean Hannity was worse than usual. This dip claimed the accident was the fault of US Sen. Charles Schumer (D-NY), the environmentalists and liberals because of laws protecting Canadian geese around airports. This one is over the top even for this right-wing wack job.

Speaking of wack jobs, KIRO Radio (Seattle) conservative talk show host Dori Monson had one call into his program as he was doing a superb job interviewing pilots about the US Airways incident. This caller wanted President Bush to invade Canada because the birds thought to have struck the A320 were Canadian geese. Dori, a bit of a wack job himself on occasion, exceled at his coverage and knows the ridiculous when he sees it. He so wanted to talk to this lady, but she hung up before he got to her. (Dori’s screener got her subject matter.)

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Airbus 2008 orders 4th best

Airbus announced its 2008 order book today, with 777 net orders, reflecting cancellations of 65 A319s from bankrupt US discount airline Skybus, the last of the original A350 orders and a few others.

The tally is the fourth best Airbus posted going back through 1995, that last data immediately available from the company.

Gross orders were 900.

Airbus  Orders
1 2007 1458
2 2005 1111
3 2006 824
4 2008 777
5 1998 454
6 1997 389
7 2004 270
8 1999 244
9 2000 243
10 2002 219
11 1996 208
12 2003 186
13 2001 184
14 1994 80
15 1995 77

SPEEA begins work-to-rules on 747-8

SPEEA, the Boeing engineers union, has begun a work-to-rules effort in Wichita (KS) on the 747-8 program intended to put pressure on the company as contract talks continue, we’ve learned. SPEEA also passed out 2,000 fliers at the wide-body plant at Everett (WA) Monday night preparing the engineers there for a work-to-rules program in support of Wichita if negotiations didn’t go well.

They aren’t: SPEEA issued the following press release moments ago:

Message to SPEEA-represented employees at Wichita Boeing

Boeing reaffirms disappointing wage and benefit offer – Employment seminars planned

The Boeing Company presented a disappointing and disrespectful offer to WEU negotiators today. The offer showed virtually no movement from previous wage and benefit offers the company talked about in November.

“This is very unfortunate,” said Ray Goforth, SPEEA executive director. “The company is showing a clear lack of commitment to the future of Wichita IDS.”

The wage offer was contradicted by data recently distributed by Boeing to employees. The data, contained in a CNN news report, said engineers should receive 4.5% raise increases. The link to the article was removed from the Boeing negotiations page today after SPEEA pointed out it contradicted what the company presented during negotiations. Read the CNN article: A 3% raise this year? That’s all folks

SPEEA research shows that despite the economic downturn, the job market remains intact for experienced aerospace engineers. Spirit AeroSystems, Airbus and even Cessna are hiring engineers. Given Boeing’s apparent lack of support for Wichita engineering, SPEEA will start providing seminars to help Boeing engineers find employment elsewhere in the aerospace industry. With many employees nearing retirement age, moving to another firm can have significant financial benefits for individuals.

(More after the jump.) Read more

First meaningful 787s cancellations coming

Look for the first meaningful Boeing 787 cancellations to appear, perhaps as early as this month, due to delays and the economy.

By “meaningful” we mean more than the one from some obscure airline that has already occurred. And we are not talking about Delta/Northwest, which has been publicly hinted at by Delta.

The positions would revert to Boeing, which would not resell them but would absorb them to relieve–however slightly–the pressures on the delivery stream brought on by two years of delays.

In terms of financial impact to the 787 program, this particular cancellation isn’t all that great–after all, there are 900+ orders. But there will be a cash-cost (compensation) to Boeing, we understand, because of the delays to the customer.

KC-X procurement faces deferral

The controversial KC-X aerial tanker procurement will likely be deferred, predicts Goldman Sachs. So will several other Boeing programs, according to Goldman: the Airborne Laser, the Ground-Based MidCourse Missile Defense System and the Boeing/SAI Future Combat Systems.

Goldman made the predictions during an investor’s conference call today (Jan. 12). The company believes the incoming Obama administration will defer these and other defense programs as it adjusts priorities within the Defense Department and as part of its overall economic recovery plan.

Goldman does not predict that overall defense spending will fall; on the contrary, the firm believes that defense spending will be maintained or increased.

President-elect Obama said during the presidential campaign that the Armed Services need to be modernized and replenished after years of spending on the Iraq War, and that troops need to be redeployed to Afghanistan to continue the fight against terrorists and to get Osama Bin Laden.

The Orlando Sentinel quotes an analyst with Global Security as saying the KC-X isn’t needed at all.