Leeham News and Analysis
There's more to real news than a news release.
Carrots and sticks needed to achieve sustainability goals, says Airbus
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By Tom Batchelor
February 22, 2024, © Leeham News: The sustainability challenge is redefining the aerospace industry in all sorts of ways.
An Airbus A350-1000 is refuelled with a 35% blend of SAF prior to its participation at the 2024 Singapore Airshow’s flying display. Credit: Airbus
For Airbus, which spent €3.2bn on research and development last year, that comes in the form of clean-sheet designs for hydrogen-powered aircraft that promise to reduce in-flight carbon emissions to zero. The European planemaker’s ambition is to bring to market the world’s first such commercial aircraft by 2035.
But Airbus is also working on a successor to the A320 family, referred to as the “next-generation single-aisle” aircraft. At the company’s full-year briefing on February 15, more details were revealed about the aircraft, including confirmation that it would run entirely on Sustainable Aviation Fuel (SAF).
“We’re working on technology to develop the next short-to-medium range aircraft before the end of the next decade, which will be capable of flying up to 100% SAF,” Julie Kitcher, Airbus’ chief sustainability officer, told LNA in Toulouse. “It will be much more fuel efficient, but also feature a new wing design and new materials; we’re working on a lifecycle approach to this aircraft.” Read more
Part 2: Reconstituting Boeing’s ODA system
By the Leeham News Team
Analysis
Feb. 21, 2024, © Leeham News: In part one, LNA looked at the Organization Designation Authorization, more commonly known as the ODA, what it is, and why it is so important to industry.
The ODA is an organization that is granted the privilege to operate as the Federal Aviation Administration (FAA) on selected work package types. ODAs are composed of “unit members,” the FAA term for people doing ODA work.
Boeing and many other aerospace companies in the US use ODAs. Airbus uses similar people under a different designation issued by EASA, Europe’s regulator. Boeing’s ODA authority was restricted by the FAA in the aftermath of the 737 MAX crisis that led to the 21-month grounding of the global fleet.
The FAA is reconsidering Boeing’s ODA authority.
There are two types of unit members: Designees and others who do ODA work without formal FAA signature authority.
Credit: Federal Aviation Administration.
An example of how a Type Certification (TC) ODA organization uses these two different talent pools can be seen through the Certification process where detailed analysis done by the group is approved (signed off) by an ODA unit member who is a Designee. The FAA suspended Boeing’s “ticketing authority” for the 737 and 787 following the MAX crisis and quality concerns on the 787 production line. Ticketing authority is one ODA mission.
Make the fix on Boeing 737-9 door plug fail-safe
By the Leeham News Team
Commentary
Four missing bolts were the reason the emergency exit door plug separated from a Boeing 737-9. The inspections-and-repair edict from the FAA may not be enough for a fail-safe fix. Credit: NTSB.
Feb. 20, 2024, © Leeham News: Four missing bolts on an emergency exit door plug leg to the in-flight decompression of Alaska Airlines Flight 1282 on Jan. 5 of this year.
It’s not yet clear why the four locking bolts were not installed in the incident aircraft, a Boeing 737-9.
Information revealed to date by the National Transportation Safety Board (NTSB) discovered that Boeing removed the door plug in an unplanned process when some defects were discovered with some rivets. When Boeing line workers reinstalled the plug, for reasons as yet unknown, the four retaining bolts were not reinstalled. The bolts became separated from the plug during the removal. So far as is known, the four bolts never have been found in the factory. The NTSB’s investigation continues.
The Federal Aviation Administration (FAA) grounded the MAX 9s for three weeks while inspection and repair procedures were prepared, approved, and implemented. Inspections were expanded to the MAX 9’s predecessor, the 737-900ER, which had the same door plug. No grounding was required of the -900ER.
Although the processes solved the concerns over all MAX 9s produced to date, the question arises whether the procedures are sufficiently fail-safe going forward.
The inspection of the fleet to verify the correct installation of the lock bolts appears to leave a gap for future production, unplanned plug removals, and reinstallation.
Airbus’s orders at risk
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By Judson Rollins
Introduction
Feb. 19, 2023, © Leeham News: After last week’s release of Airbus’s 2023 financial results, we undertake our annual analysis of at-risk deals on the OEM’s books.
Airbus has outstanding orders from airlines where there is a material probability that some won’t translate into deliveries. Most resulted from airlines with financial difficulties, but some were related to contractual disputes. When deliveries are delayed beyond a set period, usually 12 months, the customer can cancel orders if the delays are unexcused. Boeing flags such orders as subject to an ASC 606 accounting rule adjustment.
Unlike Boeing, Airbus isn’t subject to the ASC 606 accounting standard, so it only discloses the nominal value of its total adjusted order book in its annual report – but not at-risk orders by program.
LNA analyzed Airbus’s order books in July 2020, November 2020, August 2021, February 2022, August 2022, and December 2022 to identify at-risk orders and develop an apples-to-apples comparison. The above links explain our methodology.
Summary
- Airbus is more prone to country- and carrier-specific risks than geopolitical.
- Order risk threatens to push Airbus’s market share even higher.
- Airbus single-aisle order risk is mainly driven by low-cost carrier exposure.
- Widebody order risk is a mix of long-deferred orders and regional problems.
Ryanair, Southwest, United take biggest hit from FAA cap on 737 MAX production
By Scott Hamilton
Feb. 16, 2024, © Leeham News: When the Federal Aviation Administration (FAA) put a freeze on Boeing 737 production rates at the currently approved 38/mo level, LNA revealed that hundreds of orders will face delivery delays. Boeing faces even greater delays than the 38/mo production level suggests, however.
As LNA reported, and confirmed by several aerospace analysts, Boeing’s true production rate for the 737 was 31 per month and even lower—as little as around 20 per month in some periods. The balance of deliveries came from its large inventory of 737 MAXes built during the first nine months of the 21-month grounding of the aircraft.
With Boeing’s full year 2023 delivery data now available, LNA looked at 2024 deliveries that were planned before the Jan. 5 Alaska Airlines 737-9 MAX emergency door plug blew off Flight 1282 on climb out from Portland (OR).
The incident was characterized as an accident due to the nature of the event and damage to the airplane. Nobody died and there were only minor injuries. The decompression at about 16,000 ft. damaged the door surround at row 26 on the left side. The door plug separated from the airplane and was found in a wooded area a few days later. There was damage throughout the 737’s cabin and the cockpit door was ripped off its mountings.
The pilots landed the airplane a few minutes later in Portland.
Safran overcomes supply chain woes as revenues soar
By Tom Batchelor
February 15, 2024, © Leeham News: French engine, equipment and interiors specialist Safran said revenues soared by more than a fifth in 2023 despite a “challenging supply chain environment” and inflationary pressures.
Announcing the company’s full-year 2023 results, CEO Olivier Andriès hailed the progress made last year as “outstanding”. Revenues were up 22% in 2023, to €23.2bn, vs. €19bn in 2022.
Safran said this was in part due to its positioning on narrow-body markets, which are now above pre-COVID, 2019 levels and growing. With large order backlogs for single-aisle airplanes, the supply chain has struggled to keep up with demand.
The Paris-listed company’s operating income was up 31%, from €2.4bn in 2022 to €3.1bn in 2023, and free cash flow generation topped €2.9bn, which was above expectations and an increase on the €2.6bn in 2022. Read more
Airbus hails ‘landmark year’ with strong 2023 results amid delivery ramp-up
By Tom Batchelor
February 15, 2024, © Leeham News: Airbus gave more details of its planned ramp-up today as it announced 2023 full-year results, with revenues climbing 11% year-on-year to €65bn and adjusted earnings before interest and taxes (EBIT) up 4% to €5.8bn.
The European manufacturer is targeting 800 commercial aircraft deliveries in 2024, above the 735 delivered last year, an increase of almost 9%. Airbus is seeking a ramp-up in production to meet increased output targets across its commercial division, including 75/mo for the global A320 family program.
Airbus FY 2023 commercial positioning. Click to enlarge. Source: Airbus.
Guillaume Faury, Airbus chief executive officer, told investors that the company was seeking to strike a balance between “very strong demand” for its aircraft and “the ability of the supply chain to meet the demand.”
Faury said 2023 had been a “landmark year” with a “record-breaking level of aircraft orders and backlog”. He added: “We continue to see momentum for civil and defense markets.”
However, the Airbus Defense and Space division continues to struggle with adjusted EBIT down 40% year-on-year, to €229m from €384m.
Across all of its business segments, Airbus said it expects to achieve EBIT Adjusted of between €6.5bn and €7bn in 2024. Read more
Production rates below Boeing’s claim, low supplier confidence
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By Scott Hamilton
Feb. 15, 2024, © Leeham News: The Federal Aviation Administration (FAA) may have told Boeing it won’t allow product rate increases on the 737 MAX lines, or the addition of the North Line at Everett (WA) until it’s satisfied production quality is under control.
But as LNA first wrote upon this news, Boeing’s production is well below the currently approved 38 per month. We pointed out that Boeing was consistently struggling last year to roll 31 MAXes out of the factory—and often, the number was substantially below 31.
Sometimes the number of newly produced 737s was less than 20 a month, reports one consultant who tracks the production.
Technically, the FAA can’t stop Boeing from producing more 737s than the 38 per month cap. It doesn’t have this authority, reports Aviation Week. But the FAA is the responsible party for issuing individual aircraft airworthy certificates as the 737s are ready for delivery to airlines and lessors. And, according to AvWeek, the FAA won’t issue more than 38 certificates a month.
The FAA suspended Boeing’s so-called ticketing authority for the MAX before the airplane was recertified following the 21 month grounding beginning in March 2019. This suspension was extended to the 787 when production and quality control problems were discovered at the Charleston (SC) assembly plant.
Several aerospace analysts following Boeing pointed out that Boeing hasn’t produced 38 MAXes a month and, like LNA reported, it’s struggled to meet even the previously advertised rate of 31/mo.
Figure 1. Cirium plotted the actual new production deliveries vs the advertised production rates for Airbus and Boeing single-aisle aircraft.
The consultancy Cirium charted the actual deliveries by Boeing (and by Airbus) for their respective single-aisle aircraft.
What is an ODA and why is it critical to understand it
By the Leeham News Team
Feb. 14, 2024, © Leeham News: In Congressional hearings last week, the administrator of the Federal Aviation Administration (FAA) said the agency will retain an outside organization to review whether its oversight of Boeing needs to alter how this is done.
Administrator Mike Whittaker, who has only been on the job a few months, said the FAA may want to change its Organization Designation Authorization (ODA) process that oversees Boeing.
ODA Unit Members (Designees) are Boeing employees who report to the FAA. But for years, highlighted by the first 737 MAX crisis in 2018-19, complaints suggested Boeing exerted undue influence on its Designees to get what it wanted in the development, production, and oversight of its 7-Series airplanes.
Because of that crisis combined with multiple issues with the 787 production facility in Charleston (SC), Boeing’s ODA was suspended.
The FAA also has a problem: Boeing’s ODA was suspended. Congress has a problem: The FAA and Boeing appear to operate too closely together and have lost public trust.
What is an ODA and why does the FAA need to delegate work back to the companies being monitored using Designees? LNA takes a deep dive analysis into the ODA problems at Boeing and what can be done to restore confidence in Boeing, the FAA, Congress, and the flying public. This is the first of two articles.
Risk-Adjusted Business Outlook
- A 2024 view of macroeconomic and indicators for the aircraft finance and leasing markets
By David Yu and William Loh
Feb. 13, 2024, © Leeham News: As we entered 2024, this is an interesting time for aircraft finance and leasing. As an industry and economy, we have come from historically low-interest rates (cost of funds) close to 0% to a federal funds rate of 5.5%.
The US Federal Reserve has indicated cutting rates going forward. The US economy is still ripping it on many measures and the threat of a hard landing has all but vanished, with inflation coming under control. That said, Wall Street consensus is a low 4% federal funds rate which would mean a lot more rate cutting. But this is not what the frothy economic indicator data suggests. Instead of immediate large cuts, we only see small and short cuts towards the end of the year.
This is not what some folks were hoping for when they entered into previous deals. They want to have the lowest rate possible, especially for those with debt coming to maturity and needing to be refinanced in 2024 (a significant number). Wherever interest rates end up, it will not be what investors have planned for, and too high a rate environment will all but ensure an increased pressure to sell.