Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Boeing’s 737 North Line and the Everett factory: in transition now June 9, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 25. June 6, 2025
- New RISE powerplant benefits from decades of GE research and development June 5, 2025
- Engine makers emphasizing durability, reliability June 4, 2025
- Boeing CEO: Lessons learned are key to certification of 737-7/10 and 777X June 2, 2025
MRO demand, pricing power near record levels: great for providers, painful for operators
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By Judson Rollins
October 24, 2023, © Leeham News: In aviation’s topsy-turvy post-Covid recovery, one group of companies faces a near-perfect storm of positive developments: maintenance, repair, and overhaul (MRO) service providers and their suppliers.
Source: Maxim Commercial Photography via Aviation Week.
Last week, MRO providers and airline representatives met in Amsterdam for Aviation Week’s MRO Europe conference. There was an almost palpable sense of “it is what it is” resignation from airlines about costs and delays and from providers regarding labor availability and supply chain challenges.
However, the current balance of power clearly favors providers, who face almost unprecedented demand. The aforementioned constraints serve to limit MRO capacity further, giving providers almost unprecedented pricing power.
The biggest obstacle facing both providers and airlines is a growing gap between market demand and production rates of key components, especially for engines. This shortage is exacerbated by limited aftermarket supply, which in turn is driven by limited feedstock for part-outs.
Summary
- Long backlogs, high prices are a growing concern for airlines.
- Lessors are also facing strong tailwinds from MRO, engine market dynamics.
- Production and pricing strategies are being called into question.
Q3 Could Be Boeing’s Reddest Earnings Report This Year
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By Dan Catchpole
The U.S. Air Force accepted the first of five T-7A Red Hawk test aircraft from Boeing on Sep. 14th. (Image courtesy of USAF and Boeing Co.)
October 23, 2023, © Leeham News: Wall Street analysts expect Boeing to post its biggest quarterly loss of the year when it reports its third quarter earnings on Wednesday. The company’s commercial and defense divisions continue to struggle with rework, slow work, supply chain snafus, and other challenges for both its commercial and defense and space divisions. Those divisions’ losses likely will be offset somewhat by Boeing Global Services, which continues to be a bright spot on the company’s otherwise blood-red ledger book.
Analysts aren’t expecting any big surprises, just more of the same financial dark clouds that have been camped out over Boeing in recent years. They expect Boeing to announce a loss due to well-known challenges, especially with its 737 and 787 programs, as well as ongoing struggles within Boeing Defense, Space and Security. In recent research notes, investment analysts have forecast BDS posting a loss between $475m and $500m for the quarter.
Across Boeing’s divisions, Wall Street expects the company to book more than $1bn in losses. Projections vary by as much as $1bn. At the low end, TD Cowen expects a loss of just under $900m. At the other end, Bernstein projects about $1.85bn in losses. In either case, that would be the biggest loss since 2022’s third quarter, when Boeing posted a $3.3bn loss.
Summary:
- BCA continues to struggle with the 737 and 787 programs. It just announced a price revision deal on those programs with airframe supplier Spirit AeroSystems.
- BDS is expected to post more charges due to ongoing struggles with new and mature programs.
Bjorn’s Corner: New aircraft technologies. Part 35. Prototype manufacturing and Testing
By Bjorn Fehrm
October 20, 2023, ©. Leeham News: We are discussing the different design phases of an airliner development program. The typical phases and their time use and manning are described in the Gant chart in Figure 1.
After covering Conceptual, Preliminary, and Detailed design, we now discuss Prototype manufacturing and Testing.
Figure 1. The development plan for a new airliner. Source: Leeham Co.
Order Risk for Boeing: Warning Flags
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By the Leeham News Team
Oct. 19, 2023, © Leeham News: Airbus and Boeing have airplane order backlogs exceeding 10,000 aircraft. Most of the respective production lines are sold 
out to 2026 and even beyond 2030. Airlines and lessors must place orders soon to get into the queue. If early delivery positions are sought, the customers must hope Airbus and Boeing can find a few slots—but there won’t be many.
Like airlines selling their seats, Airbus and Boeing overbook production slots. The OEMs bet on boosting production rates, customers willing to defer deliveries (for whatever reason), cancellations to open earlier slots, or to meet delivery commitments. These bets sometimes pay off—and sometimes they don’t.
Today, LNA looks at the Top Boeing Customers of each product line and assesses the risk factors of whether these carriers will likely take delivery of their orders. We looked at Airbus’ Risk Orders on Oct. 16.
Risk Adjusted Business for leasing aircraft
By William Loh, International Aviation Advisors and
Dr. David Yu, CFA, Senior ISTAT Appraiser, AAVA Group, NYU Shanghai and Stern
Airbus A320neo. Credit: Leeham News.
Oct. 17, 2023, © Leeham News: We have seen over many years that mainstream commercial aircraft are attractive assets to own and lease. They are easily recoverable, and produced by a stable duopoly of manufacturers. In normal times, aircraft generate fairly predictable US dollar cash flows over their long economic lives. There is no near-term risk of technological obsolescence, especially for the latest generation narrowbody aircraft.
Demand for travel drives demand for aircraft. On average, the aircraft fleet has doubled approximately every 15 years as travel demand has risen by 5% annually. Passenger growth has grown by 1.6 to two times world GDP growth over the last 30 years, but these relationships have been shaken to the core since 2019.
The airline industry is a derivative of the economic cycle. It is also prone to occasional external shocks as the result of war, terrorism or as we’ve recently seen, disease. Historically the industry has a proven resilience to these shocks. Over the last 30 years, the industry generally recovered within a relatively short time, with demand reverting to the long-term trend line.
Such stability does not mean that investors should be lulled into a false sense of believing that they understand the details well enough. This is where the rubber meets the runway and good advice plus prudent models come into play.
In this article, we discuss our Internal Rate of Return/Net Present Value (IRR/NPV) Model and the results of changes in some of the parameters. The main drivers of the return are normally the equipment cost, the monthly lease rate, and future sale value (FSV) (and year). Downtime is obviously also important, but we will assume none in this case. The following is a table of (pre-tax, annual) IRRs based on changes in these parameters, for a 2023 Airbus A320-200neo. Note that the parameters that have changed from row to row are in bold.
Order risk for Airbus: Warning flags
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By the Leeham News Team
Oct. 16, 2023, © Leeham News: Airbus and Boeing have airplane order backlogs exceeding 10,000 aircraft. Most of the respective production lines are sold out to 2026 and even beyond 2030. Airlines and lessors must place orders soon to get into the queue. If early delivery positions are sought, the customers must hope Airbus and Boeing can find a few slots—but there won’t be many.
Like airlines selling their seats, Airbus and Boeing overbook production slots. The OEMs bet on boosting production rates, customers willing to defer deliveries (for whatever reason), cancellations to open earlier slots, or to meet delivery commitments. These bets sometimes pay off—and sometimes they don’t.
Today, LNA looks at the Top Customers of each product line and assesses the risk factors of whether these carriers will likely take delivery of their orders. We’ll do the same for Boeing.
Bjorn’s Corner: New aircraft technologies. Part 34. Design for Certification
October 13, 2023, ©. Leeham News: We are discussing the Detailed design phase of an airliner development program. We have discussed program management methods, development techniques, tools for Detailed design, that improved production methods are as important as improved technology, and that the interaction with the suppliers is key.
But another consideration that affects detail design is the influence of the Certification process. Certification has a major influence on the program work in every step of the aircraft program.
Figure 1. The online version of the FAA 14 CFR Part 25 Airliner Airworthiness regulations. Source: US CFR.
Further developments of the A321, Part 3
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By Bjorn Fehrm
October 12, 2023, © Leeham News: We do an article series about what can be the next development for Airbus’ most popular aircraft, the A321neo. We started with the base data last week to understand the present aircraft and its limitations.
Now, we use our Airliner Performance and Cost Model (APCM) to look at possible changes that can increase the capacity and efficiency of the aircraft and what can be achieved at a reasonable cost.
Summary:
- The capacity of the A321neo can be increased within a rather limited project.
- The more challenging part is not to lose range and field performance from the capacity increase.
Pontifications: For aviation geeks and historians; Boeing’s next airplane
By Scott Hamilton
Oct. 10, 2023, © Leeham News: For aviation geeks—and there are plenty of us—and historians, a resource that is the best single place I’ve seen is Chris Sloan’s TheAirchive.Net – The Hub of Air Transport History. Sloan—who joined LNA yesterday as a writer—started The Airchive 20 years ago. It’s a compilation of just about everything a geek or historian could imagine: timetables, route maps, brochures, information about airport terminals, cabins, cockpits and so much more.
Sloan’s data of course includes photos of airplanes, memorabilia, safety cards, boneyards, and even menus. He also has a section highlighting museums. This section includes many well-known museums and also some I’d never heard of.
Personnel changes for LNA announced
Oct. 9, 2023, © Leeham News: Leeham News announces several personnel changes today.
Bryan Corliss, who has been a Contributor to LNA for years, is leaving to become a corporate communication specialist with The Society of Professional Engineering Employees in Aerospace (SPEEA). SPEEA is the engineers and technicians union for Boeing and Spirit AeroSystems. LNA is sorry to lose Corliss’ depth of aerospace and labor knowledge. Corliss’ email with LNA will be active for a month so readers may connect with him.