Leeham News and Analysis
There's more to real news than a news release.
Boeing Estimates: How accurate and clear are the predictions?
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By the Leeham News Team
Analysis
July 29, 2024, © Leeham News: Annual projections for the upcoming year are an important piece of information released to the world at large for any publicly traded corporation, on what can be expected for the near and extended future.
Boeing (BA) reports its 2Q2024 earnings this Wednesday. An update of its guidance may be forthcoming as Boeing continues to work through additional costs following the Jan. 5 accident involving a 737-9 MAX with Alaska Airlines.
Boeing relies heavily on the use of estimates when filing its annual report and this information is crucial to investors when considering whether to invest, hold, sell or short stock in the company. Not only are estimates used in its financial reporting system, generally known as Program Accounting, but each year BA puts out an expected value of revenue to be generated in the future.
This prognostication is based on converting a percentage of the backlog for the following year and for a total period of four years to come. The 2023 projection is as follows:
“Our total backlog includes contracts that we and our customers are committed to perform. The value in backlog represents the estimated transaction prices on performance obligations to our customers for which work remains to be performed. Backlog is converted into revenue, primarily based on the cost incurred at delivery and acceptance of products, depending on the applicable revenue recognition model. Our backlog at December 31, 2023 was $520,195 [million]. We expect approximately 16% to be converted to revenue through 2024 and approximately 62% through 2027, with the remainder thereafter,” Boeing wrote.
There is also a caveat:
“There is significant uncertainty regarding the timing of when the backlog will convert into revenue due to timing of 737 and 787 deliveries from inventory and timing of entry into service of the 777X, 737-7 and/or 737-10,” Boeing writes in its 2023 annual report.
Bjorn’s Corner: New engine development. Part 17. Combustion.
By Bjorn Fehrm
July 26, 2024, ©. Leeham News: We do an article series about engine development. The aim is to understand why engine development now has longer timelines than airframe development and carries larger risks of product maturity problems.
To understand why engine development has become a challenging task, we need to understand engine fundamentals and the technologies used for these fundamentals.
We have covered the compression in the compressor (Figure 1) and now go on to combustion in the combustor.
Figure 1. The gas turbine cycle and its parts. Source: Rolls-Royce: The Jet Engine.
Farnborough, Day 4: Airbus comes from behind to win order contest
July 25, 2024, © Leeham News: Airbus came from behind today with a big order from flyNAS, a Saudi Arabian low cost carrier, for 75 A320neo family members and its first widebody order, for 15 A330-900s.
The announcement is a Memorandum of Understanding.
Airbus ends the show with 139 orders and commitments. Boeing ends the show with 118 orders and commitments.
ATR announced its only order for the show yesterday, for four ATR-72s from Air Tahiti.
De Havilland Canada ended the show with 22 orders and commitments for the Twin Otter and Certified Refurbished Dash 8-400s.
Embraer didn’t announce any commercial orders, but added nine C-390s to its order book.
New Boeing plea deal filed with court
By Scott Hamilton
July 25, 2024, © Leeham News: The new, second plea agreement between Boeing and the US Department of Justice (DOJ) has been filed with the US federal court in Northern Texas. Boeing agreed to plead guilty to criminal charges. The DOJ proposes a criminal penalty of $243.6m and requires Boeing to spend $455m on internal safety protocols.
The criminal penalty matches the amount in the first plea agreement of January 2021. Under the terms of that agreement, Boeing had three years to shape up, or the DOJ could pursue criminal charges. The three-year monitoring period was due to expire two days after the Jan. 5, 2024, door plug blowout of an Alaska Airlines Boeing 737-9 MAX on climb out from the Portland (OR) airport. This incident occurred at 16,000 ft. Nobody died but there were minor injuries.
The airplane was damaged throughout the cabin and into the cockpit with the sudden depressurization. Boeing bought the airplane back from the airline.
The 2021 fine and the proposed current fine have been roundly criticized as inadequate.
Rolls-Royce aims to shorten hydrogen program pace
By the Leeham News Team
July 25, 2024, © Leeham News, Farnborough Air Show: Rolls-Royce is calling in data specialists Tata Consultancy Services (TCS) to help speed up the development of its hydrogen program, with the help of quantum computing and generative artificial intelligence.
Rolls-Royce hydrogen testing at DLR, Cologne. Credit: Rolls-Royce
The partnership – announced this week at the Farnborough International Airshow – aims to significantly shorten the design time for new hydrogen-powered propulsion systems under development at Rolls-Royce facilities.
The environmental benefits of hydrogen are gaining increased attention and have been front and centre at this year’s airshow. Hydrogen forms a central plank of the Rolls-Royce alternative fuels program.
Anupam Singhal, president of the TCS manufacturing division, told LNA the rationale for the collaboration with the engine manufacturer was bringing proven hydrogen-powered engine designs to market as quickly as possible.
“We have to look at all the tools and technologies available to us to make the entire ecosystem more sustainable,” he said. “Can we cut short the whole engine design time? Can we have this engine on the wing as quickly as possible?”
Under the expanded partnership, TCS will provide engineering skills and support for system design, component design, supply chain support, and program management to Rolls-Royce as it addresses three key challenges related to hydrogen: fuel combustion, fuel delivery, and fuel systems integration with an engine.
TCS has been working with Rolls-Royce for more than a decade, including testing to demonstrate the integration of technologies required for 100% hydrogen fuel operation on a modified Pearl 15 engine. However, this new partnership is not tied to any one product and aims to streamline the Rolls-Royce development program across its various hydrogen research projects. Read more
Customer interest in Open Fan increasing, says GE
By Scott Hamilton
July 25, 2024, © Leeham News: GE Aerospace advances testing and market information with its RISE Open Fan engine, which officials say is the best hope for reducing carbon footprints in the next decade.
RISE includes Open Fan, compact core, hybrid-electric systems, and alternative fuels technologies and research.
During GE’s 2Q2024 earnings call on July 23, CEO Larry Culp said GE continues to mature these technologies. “[We’re] moving from component-level evaluations to more module-level tests. For example, with our partner Safran, we’ve demonstrated the aerodynamic and acoustic performance of the Open Fan design with more than 200 hours of wind tunnel tests.
“Additionally, we’ve announced a new agreement with the US Department of Energy to expand supercomputing capabilities, which will further advance Open Fan design,” he said. “The Open Fan is the most promising engine technology to help the industry reduce emissions designed to meet or exceed customer expectations for durability and deliver a step change in fuel efficiency.”
GE held its earnings call during the bi-annual Farnborough Air Show. The timing was awkward; due to Securities and Exchange Commission regulations about sharing information in the 30 days before a call for analysts and shareholders, GE skipped the usual press briefing in advance of the show.
Maeve, P&W Canada team for new hybrid propulsion system airplane
By Bjorn Fehrm and Scott Hamilton
July 24, 2024, © Leeham News at Farnborough International Airshow: Start-up airplane company Maeve and Pratt & Whitney Canada (PWC) have teamed for the design of a new eco-airplane driven by a new type of hybrid electric propulsion system with a target service entry date of 2032.
The M80 aircraft is the latest iteration of a design conceived by Maeve of the Netherlands. It is a 76 to 96-seat twin-engine aircraft that is compliant with the restrictive US pilot Scope Clauses, which limit the size, number, and weight of airplanes operated on behalf of US major airlines. Maeve originally designed a four-engine, 44-passenger electric aircraft called the M01.
Figure 1. The Maeve M80 combines an all-new powerplant from Pratt & Whitney Canada and downward wing droops instead of upward winglets. Source: Maeve.
Farnborough, Day 2: Boeing dominates again
July 23, 2024, © Leeham News: Boeing dominating Day 2 of the Farnborough Air Show with a new, direct order for 20 737-8s from lessor Macquarie AirFinance, and a follow-on order from Qatar Airways for 20 777-9s.
Airbus announced a new order for seven A330-900s from Virgin Atlantic Airways and firmed up a previously announced order from Japan Air Lines for seven A321neos and 20 A350-900s.
Airbus, Pratt & Whitney, and Cebu Pacific Airlines of The Philippines celebrated a Memorandum of Understanding for an order of up to 152 Airbuses announced on July 2. This celebration is not in LNA’s table below.
De Havilland Canada announced orders for 11 DHC-6 Twin Otters.
Farnborough, Day 1: Boeing jumps to orders lead; De Havilland puts new life into the Dash 8-400
July 22, 2024, © Leeham News: Boeing was the clear winner in the orders announcements today at the Farnborough Air Show.
The beleaguered company announced orders, options, and commitments for 78 aircraft (see chart). Rival Airbus announced a Memorandum of Understanding for just five airplanes.
Tiny De Havilland of Canada announced firm orders and commitments for 11 “Certified Refurbished” Dash 8-400s.
The Certified Refurbishment Program is a multi-step process to rework used Dash 8-400s “to keep the fleet flying.” DHC terminated production of new -400s during the COVID pandemic when the old Bombardier factory at Downsview, Toronto, was closed. The airport there is being redeveloped. DHC is building a new plant in Calgary in Western Canada. It’s unclear if production of new -400s will resume. When the factory is complete.
“DHC has actively been acquiring aircraft in the marketplace and has begun upgrading these aircraft for delivery to customers looking to expand their fleets or become Dash 8 customers for the first time,” the company said in a statement.
DHC says refurbishments include:
- Aircraft configuration to match the customer’s existing fleet
- Completion of overdue maintenance, integration of Airworthiness Directives, and Service Bulletin upgrades
- Airframe life extensions through our ESP (Extended Service Plan) to extend the lives of Dash 8-100/200/300 to 120,000 cycles, or the ESP+ which can take the Dash 8-100 to 160,000 cycles
- Freighter conversions, including the introduction of the new Dash 8-400 Large Cargo Door and Quick Change between cargo and passenger missions
- Avionics upgrades
DHC has acquired 28 -400s for the program so far.
IAM members throw down gauntlet to Boeing, overwhelmingly back strike
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By the Leeham News Team
July 22, 2024, © Leeham News: Boeing’s (BA) largest union in Seattle, the International Association of Machinists and Aerospace Workers (IAM) District 751 – voted overwhelmingly to authorize a strike if contract negotiations fail.
Thousands of members attended a rally at T-Mobile Park, home of the Seattle Mariners baseball team, during which “nearly” 99.9% voted to empower the union to strike, according to IAM representatives.
Workers in Washington State are seeking a 40% pay increase in an attempt to claw back concessions previously given to the company by the union. The Local represents over 30,000 members in the region, which includes the plants in Renton and Everett, where the 737 Max and 777 aircraft are assembled.
The current labor contract will expire on Sept. 12, 2024. With a successful mandate granted by the rank and file, leverage will be applied to Boeing in upcoming negotiations. “We want the company to take our proposals seriously and bargain earnestly,” said Jon Holden, President of IAM District 751.
It’s been 10 years since the last contract was approved. The basic contract was entered into after a 57-day strike in 2008. Boeing’s CEO at the time, Jim McNerney, then demanded concessions the following year in return for locating a second 787 assembly line in Everett (WA), the assembly plant for widebody airplanes. The IAM offered concessions, which Boeing said were inadequate, and the second line went to the production facility in Charleston (SC).