Leeham News and Analysis
There's more to real news than a news release.
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.
Analysis: Airbus A350 production and accounting strategy
By Bjorn Fehrm
Subscription required.
Introduction
Oct. 12 2015, ©. Leeham Co: Airbus is ramping up the A350 program at a rather slow pace. For the first year of production, 2015, it plans 15 deliveries and “a little more than double that” for 2016. Airbus is also introducing “contract accounting” for the first A350 deliveries.
As initial costs for producing a new aircraft model can be 400%-500% higher than the ultimate run-in production cost, Airbus introduces this novel accounting principle to maintain 2015 and 2016 profits “at about the same level.”
We use our aircraft model to understand why Airbus is ramping the A350 as it is and why it uses “contract accounting.” We also show what would be the effects on Airbus profits should A350 not ramp slowly and Airbus use special accounting to keep group quarterly results from surprises.
Summary:
- The ramp of production of a new aircraft type is extremely expensive. Initial costs exceed what the customer pays for the aircraft with 400%-500%. This can generate company losses if no special actions are taken.
- We use our aircraft model to show what has been done for the A350 program and why.
- The wish to have a steady quarterly profit has forced Airbus to use the same accounting practices that is Boeing’s way to keep profits looking good, but with a shorter duration.
- We explain how this accounting works and what it will mean for Airbus profits.
Bjorn’s Corner: Engine rubbing
09 October 2015, ©. Leeham Co: Last week an Airbus A320neo prototype with Pratt & Whitney’s (PW) GTF had a problem while testing hot and high conditions at Al-Ain airport in Abu Dhabi. The engine suffered a rubbing problem and PW and Airbus decided to replace the engine before returning the A320neo to Toulouse.
I had the opportunity to discuss what happened with PW people at ISTAT this week and decided it makes for a good follow up to our two other engine Corners to write about what happened and how serious it was.
The problem was compressor blades rubbing against the compressors stator wall. PW knew that this engine individual could have that problem. They saw when assembling the engine it was a bit tight in the compressor area. PW said they told Airbus there was a risk with this particular unit, and sure enough, there was rubbing to be seen when they boroscope checked the engine after the test.
Here what it was all about and what to do about it. Read more
Airbus and Boeing swing it out at ISTAT Europe 2015
By Bjorn Fehrm
07 October 2015, ©. Leeham Co: This year’s ISTAT Europe conference had been characterized by a “Steady as you go” ambiance until the traditional match between Airbus and Boeing on “Large aircraft segment” panel got going. This is normally when things can get a bit more exiting and this year’s version did not disappoint.
Airbus’ Mark Perman-Wright, Head corporate and Investor marketing, kicked off the jabbing during his coverage of all the usual segments, claiming that Boeing got to know that Airbus held the upper hand in just about all airliner segments.
Randy Tinseth, Vice President Marketing for Boeing, immediately responded that this was all wrong and that indeed Boeing was the market leader in all imaginable measurement dimensions.
The audience of 1.200 financiers, lessors, airlines, consultants, etc., could see that a drastically lower fuel price had changed nothing. Airbus’ and Boeing’s fight over the market dominance, both real and verbal, is as fierce as ever. As we could get a hold of Boeing’s presentation and both OEMs followed the same route through their product programs we will use Tinseth’s slides as a base for our ringside review. Read more
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.
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