Leeham News and Analysis
There's more to real news than a news release.
Goldman Sachs predicts rate 5 for 777 in 2017
Oct. 6, 2015: As Boeing prepares to discuss its third quarter October 28, a major Wall Street investment bank predicts Boeing will have to reduce production rates of 
the 777 to five per month in 2017, the year before production begins on the 777X.
Separately, an appraisal company sees values and lease rates of the 777 Classic declining, characterizing the airplane as “struggling” as airplanes come off lease and troubled airlines prematurely dispose of 777s.
In a note published Oct. 4, Goldman Sachs writes that the 777 leasing market has been overlooked by many observers for its impact on new airplane sales Boeing needs to bridge the production gap to the 777X.
“Boeing has a backlog coverage and product transition challenge on the 777,” Goldman writes. “The market appears focused on the total bridge period; but we are more concerned with the large amount of slots that need to be filled for the next 24 months, as well as several existing aircraft coming back in to the market near-term.
ISTAT Europe 2015 in Prague: LCCs and Turkish airways take over Europe
By Bjorn Fehrm
06 October 2015, ©. Leeham Co: The global airline industry is on a steady course as a whole, but there are dramatic changes within Europe as low cost carriers, plus Turkish Airlines, redraw the competitive landscape.
China’s current economic softness raises concerns, with an independent analysis concluding that economic growth here is 2%-3% instead of the announced rate of 7%-8%.
Still, the mixed messages given at the annual ISTAT meeting in Europe this week didn’t put a damper on the mood of 1,200 delegates here in Prague.
- The airlines are fine for 2015 as the fuel price is low but what about 2016? China is braking to a halt and Asia is getting infected? Will the infection spread? Will the airlines return to bad results?
- What about the European airline industry? Can the low costs units of IAG, Lufthansa and Air France-KLM compete with the up-and-coming LCCs? Who is king of long haul travel out of Europe?
- What about the order glut? When Asia slows, will the order bubble break?
Airbus gearing toward 63 A320s per month; Boeing sure to follow
By Scott Hamilton
Oct. 5, 2015, © Leeham Co. Airbus appears to be closing in on a decision to boost the production rate of the A320 family to 63/mo by the end of the decade, a new report from Bernstein Research Group says.
Boeing is sure to follow with rate boosts for the 737, Bernstein writes in an Oct. 1 note.
Leeham Co. has been predicting these moves all year, and in LNC’s interview with Airbus Group CEO Tom Enders last month at the opening of the A320 Final Assembly Line (FAL) in Mobile (AL), Enders indicated the decision to boost rates would be made by the end of the year.
Evaluating airliner performance, Part 4
By Bjorn Fehrm
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Introduction
Oct. 05 2015, ©. Leeham Co: In the final part of our series about comparing and evaluating economic and operational performance of airliners, we will combine the different Cash Operating Costs (COC) with the capital and insurance costs to form the Direct Operating Costs (DOC).
We will also look at typical values for the different costs that make up the DOC for a single aisle Boeing 737 or Airbus A320 aircraft and a typical dual aisle Boeing 787 or Airbus A330neo aircraft.
Summary:
- We describe the cost that form an aircraft’s capital costs and how these differ between an ownership or a lease model.
- When forming the Direct Operating Cost (DOC). The low fuel price of $1.50 per US Gallon has lowered the fuel’s part of DOC to around 20% for single aircraft and 30% for dual aisle aircraft on their typical mission types.
- This means that other costs types in the DOC gets a more dominant role. We show which are the costs to look out for.
- Finally we give the typical CASM (Cost per Available Seat Mile) values for single and dual aircraft in the market.
Bjorn’s Corner: Engine ratings
By Bjorn Fehrm
02 October 2015, ©. Leeham Co: After the article about the role of bypass ratio on a turbofan’s efficiency, we now look at other aspects of civil turbofan engines that are worth some light. It’s about how the engine OEMs create different versions of the same engine to cater for different aircraft variants.
The aircraft OEMs create different size variants from the same base model of aircraft by means of stretches. There is no better example of that than the Boeing 737. Over the years it has had more than 10 major versions. For the present in-service series, 737NG, there is three official variants, from the -700 to the -900ER. Originally it also had a smaller -600 variant.
These require engines from 20klbf to 27klbf. How this is achieved and what it means for engine characteristics and reliability is the focus of today’s Corner. We will also compare it to a typical long range engine, the Rolls-Royce Trent 1000/7000, which powers the Boeing 787 and Airbus A330neo.
Assessing the China market
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Introduction
Sept. 30, 2015, (c) Leeham Co.: The Boeing deals announced last week with China put the country into the spotlight about its commercial aviation ambitions.
For many, the various deals announced by Boeing raise alarm bells. For most, that fire horse already left the fire station. The smoke has been billowing out of China (or maybe that’s smog) for a long, long time.
Summary
- Boeing announces 300 orders and commitments for China, though the company was vague about the details. We try to dissect what’s real and what’s smoke.
- Additional deals announced by Boeing are driven by China’s pay-to-play approach to business.
- Other OEMs, suppliers also have to pay-to-play.
- China’s deals with Airbus and Boeing are only two elements of a national goal for commercial aerospace.
- IP theft and technology transfer big concerns.
Boeing KC-46A first flight
Sept. 30, 2015: Boeing Friday launched the first flight of the USAF KC-46A aerial refueling tanker. The event was seven months late and all the program margin has been eaten up by the delays, but this was a milestone nonetheless.
The flight continued for four hours.
An additional video may be found here. Boeing’s press release is here. Boeing’s video with narration and test pilot reaction is here.
Pontifications: Boeing moves in China only the beginning
By Scott Hamilton
Sept. 28, 2015, (c) Leeham Co.:The move by Boeing to establish a 737 Completion Center in China is only one step in a series of moves to increase its footprint there.
Boeing also said it will join with China’s National Development Reform Commission to develop:
- Industrial cooperation;
- A “world-class” aviation transportation system through deliveries to China of Boeing airplanes and services;
- Technologies to reduce aviation’s environmental impact and enhance sustainability;
- Leadership and training for the next generation of leaders in China’s aviation industry;
- Continued cooperation to support the safety, efficiency and capacity of China’s air transport system
- Further cooperation in biofuels.
“Boeing and Aviation Industry Corp. of China (AVIC) will broaden their long-term collaboration to support Boeing’s commercial airplane programs,” the company announced last week in connection with the visit to Seattle by the president of China. “In a framework agreement, the companies said they intend to further advance AVIC’s manufacturing capabilities by adding major component and assembly work packages; strengthening leadership; and developing AVIC’s broad aviation infrastructure and business practices, including supply chain management.”
I believe this is only the beginning of a new push of Boeing’s expansion outside Washington State, elsewhere in the US and overseas.
Separately, last week it was also announced that a key supplier is done expanding in Washington State. Future expansion will be elsewhere.
Evaluating airliner performance, Part 2
By Bjorn Fehrm
Subscription required.
Introduction
Sep. 24 2015, ©. Leeham Co: In the second part of our series about comparing and evaluating economic and operational performance of airliners, we look at the parts beyond fuel that make up the Cash Operating Costs (COC) for an airliner.
While fuel consumption, crew costs and aircraft maintenance costs can be evaluated in a way which closely resembles reality, other costs in the COC are too complex to model in their true form.
This is the case for underway or airway fees, landing fees and station fees. Here, just about every country/airport in the world has taken the liberty to invent its own charging principles and formulas. With several hundred different formulae for these charges, the way out is to use industry-accepted approximation for these costs.
Summary:
- We establish how crew cost are modeled for our evaluation missions, taking into account the complex world of work time regulations for pilots and cabin crew.
- We also describe how we handle airframe and engine maintenance costs and how these get allocated to our missions.
- Finally, we describe how the complex underway and landing/station costs are modeled with the accepted approximations these require.