Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: New engine development. Part 4. Propulsive efficiency April 19, 2024
- Boeing unlikely to meet FAA’s 90-day deadline for new safety program April 18, 2024
- Focus on quality not slowing innovation, says GKN April 18, 2024
- Boeing defends 787, 777 against whistleblower charges April 17, 2024
- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
Boeing on path to surpass Airbus in single-aisle production
Note: This has updated information from its distribution to our e-newsletter recipients a week ago.
Boeing is on a path to overtake Airbus in producing single-aisle aircraft by the end of this decade.
In the hotly contested single-aisle sector, which Airbus currently leads, both OEMs are essentially sold out through 2019. Few delivery slots can by found by either of the Big Two. Airbus already plans to boost production of the A320 family to 46/mo in 2016, when its new Mobile (AL) plant comes on line. It will initially produce 4/mo but has the capacity for 8/mo. It’s Tianjin, China, plant is producing at a rate of 4/mo and likewise has the capacity to go to 8/mo. The Toulouse and Hamburg plants are understood to be at capacity now, giving Airbus a total capacity of 59/mo: Hamburg can produce 25/mo and Toulouse 18/mo.
Odds and Ends: Dual sourcing; FAA overflight bans; Super Constellation
Dual sourcing: There is always much angst in Seattle among the labor groups and Washington State’s elected officials when Boeing decides to put work outside the state. Much of this angst is because Boeing uses this as a sledgehammer to beat up unions for concessions and the state for tax breaks.
But dual sourcing isn’t really a bad thing. Pratt & Whitney is dual sourcing to avoid a single point of failure, as this article explains. Boeing, of course, has made the same point but it always gets submerged by its heavier-handed tactics. We’ve often made the point that if Boeing wants to set up assembly lines elsewhere, why not use the Natural Disaster Risk Diversion as the reason–and nobody could argue the point (well, they could, but it is a valid concern).
FAA overflights: It’s big news here in the USA, likely far less so in the rest of the world: the racial unrest in the small Missouri town of Ferguson, a suburb of St. Louis, where an unarmed 18-year African-American male was shot six times by a white policeman. Police say the young man attacked a police office. Witnesses say he had his hands up to comply with the officer’s orders. A grand jury will attempt to sort out facts. In the meantime, demonstrations–some peaceful, some not, some with looting–have turned Ferguson into an armed camp of police looking like the Army, in Humvees, battle gear and automatic weapons.
What order bubble?
Following the Farnborough Air Show last month, media and some aerospace analysts once again began asking the question: is the order bubble done?
We retort by saying, “What order bubble?”
We have been hearing since 2008 if the order bubble was about to burst. We’ve been asked this question many, many times. The trouble in answering this question is that nobody truly defines what they mean by “order bubble” when they ask if the bubble is about to burst.
Do people mean:
Odds and Ends: Boeing discounting; A380 analysis; A320neo LEAP
Boeing discounting: Although Boeing alternately acknowledges it’s under price pressure from Airbus or it’s maintaining pricing on its aircraft, UBS aerospace analyst David Strauss concludes that discounting is increasing on the 737 and 777 but is somewhat better on the 787.
Strauss writes in an August 6 note that discounting on the 737 is around 59%. The 777 is now discounted at about 54% and the 787 trails at 46%. (He doesn’t bother with the 747-8.) These are for in-production models.
Strauss concludes that 737 discounting increased since the introduction of the MAX in 2011.
Current list pricing for the 737 is $78.3m for the -700, 93.3m for the -800 and $99m for the -900. The MAX list prices are $87.7m, $106.9m and $113.3m.
The list prices for the 777 are $269.5m for the -200ER, $305m for the -200LR, $330m for the -300ER and $309.7m for the -200LRF. The -8X comes in at $360.5m and the -9X at $388.7m.
The 787-8 lists for $218.3m, the -9 for $257.1m and the -10 for $297.5m.
We are hearing, however, of special cases in which the 787-9 runs for $135m or significantly less and the 787-8 for as low as $115m. We also hear of the 777-300ER being offered for as little as $128m in special circumstances. The calculated discounts UBS mentions for 737 fall within the pricing range that we hear in the market. Strauss writes that some discounts to list reached 65%, also within the range of what we have heard.
The discounting becomes increasingly important because Airbus says it can price the A330ceo and neo sharply below the 787, up to 25% less. Boeing has far less flexibility to discount the 787 than with the 737NG and 777 Classic. The former still isn’t making money while the latter have amortized production lines–just as the A330ceo line is fully paid for. Airbus has offered the A330ceo at steeper discounts to list than Boeing offers the 787, and the forthcoming neo will also see steeper discounts than the 787–unless Boeing becomes more aggressive in that pricing, which will only increase the time to profitability.
A380 analysis: Here is a good, detailed analysis about the Airbus A380 and its position in the marketplace.
A320neo LEAP: CFM’s LEAP-1A, for the Airbus A320neo, has entered production. Aviation Week has this article with the details.
Overlooked possibilities for the A330neo
There are overlooked possibilities for the Airbus A330-800 and A330-900 New Engine Options.
What, you may ask, are these?
The A330neo might give new life to the poor-selling A330-200F program and, perhaps more importantly better position Airbus to compete for the next round of the USAF Air Force Tanker competition, the KC-Y program.
Half time 2014 for Boeing and Airbus
The major OEM’s have published their half time 2014 results and we can make an analysis of their half year results together with orders / deliveries and the state of their product lines. We compare Boeing and Airbus on the high end and in a follow up article Embraer and Bombardier on the low end. To make orders and deliveries comparable we include the month of July as the OEMs collected business to be announced at Farnborough mid July.
Boeing had a strong first half 2014. Boeing Commercial Airplanes (BCA) business is now past the initial problems on the 787 program and delivered 48 units January to June 2014 (8 per month) which is the same numbers as for the 777 program. The 737 is now at rate 40 per month with a first half total of 239 deliveries. The 747-8 is at rate 1 with only 6 deliveries and the 767 has stopped as a commercial program with only 1 delivery during the first half year. The commercial deliveries of 342 aircraft drove a 4% increase in company overall revenue and a 5% increase in earnings compared to first half 2013 (both non-GAAP i.e. the core business performance), this despite a Defense, Space and Security side which was down 5% on revenue and down 15% on earnings.
777-9X, 787-9 and 777-300ER in ANA colors
The troubled unit is Boeing Military Aircraft (BMA) which is struggling with its 767 tanker program (KC46A charged BMA with $187 million and BCA with $238 million due to increased development costs) and it is also fighting to not have its major military airplane program, the F18, stop 3 years from now from lack of orders. The military aircraft order drought contrasts with BCA where first half orders was 783 aircraft, mainly 737 but also 777X, where Emirates and Qatar confirmed their orders for 200 777X. Read more
Can the A350-800 rise out of its own ashes, like the Phoenix?
The announcement last week that Hawaiian Airlines swapped its order for six Airbus A350-800s for the A330-800neo isn’t a particular surprise, although we thought HA might issue an RFP and open the competition for Boeing.
That it did not may speak as much as to lack of the Boeing 787’s availability as anything else. But Airbus had some advantages going into a replacement for the A358: HA already operates a fleet of A330-200(ceos), so there is commonality between the neo and the ceo, minimal integration costs and the likelihood of additional Airbus incentives to keep HA in the Airbus family.