Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: Air Transport’s route to 2050. Part 28. June 27, 2025
- Parent agency, FAA often at odds as politics outweighs safety June 26, 2025
- Electric Flight and the Ugly Duckling June 25, 2025
- Engine makers tout “Plan A” but have “Plan B” backups in R&D June 23, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 27. June 20, 2025
Is Boeing Chicago misreading the SPEEA mood–as it did IAM 751 in 2008?
There have been many articles this week detailing the increasingly contentious, evolving situation in the contract negotiations between Boeing and the engineers union, SPEEA.
We’ve previously written that this wasn’t going to be a love-fest. And it isn’t. Jon Talton at The Seattle Times has this comment, which is a pro-union take. Boeing says it wants to control costs, notably with pension and health care costs, but that it will still have industry-leading wages. SPEEA says Boeing is asking for take-aways. This Bloomberg article neatly sums up the Boeing position.
We’re not going to weigh in on the intricacies of who’s right and who’s wrong, for this depends entirely on your point of view. We do have sympathy for the Boeing position that health care and pension costs have to be reset, but we’re not going to opine on the details of any reset.
What we going observe is the following:
Odds and Ends: Airbus takes a look at the future; Air India gets 787 Saturday; John Leahy
Looking at the future: Airbus takes a look at the future in this company-issued document. Airbus discusses the environment, Air Traffic Management and more. This link has more information about how Airbus looks at the future.
Air India: We’ll still believe it when we see it but Air India is supposed to take delivery of its first 787 Saturday. (This is skepticism about the airline, not Boeing, for clarity….) Here is a microsite from Boeing. The best part is the construction of the airplane.
John Leahy: The COO-Customers at Airbus got a promotion of sorts. See this Bloomberg article. It’s well deserved.
Boeing and SPEEA: Things aren’t going at all well in the contract negotiations between Boeing and SPEEA.
Hypocrisy and Aerospace Industries Assoc.
On Twitter:
ReutersAerospaceNews @ReutersAero
Alabama move won’t open door to Airbus in US lobby group: We dont want foreign govts to use AIA to lobby ours, CEO Blakey tells #ReutersA&D
This is hypocrisy. The UK’s BAE System is a member of AIA. Rolls-Royce (North America) is a member. Brazil’s Embraer Aircraft Holdings is a member. France’s Dassault Systems is an associate member. Safran USA (obviously part of France’s Safran) is an associate member. And these are just the ones we immediately recognize from the AIA member list.
There key issues that Airbus and Boeing have in common: flight safety, air traffic management, environment, bio-fuel. There is no reason why Airbus Americas shouldn’t be a part of this group to participate in lobbying Congress for these kinds of issues. EADS North America, which already has major Defense contracts, could help on something like sequestration.
Airbus buys $12bn worth of supplies from the US and plans to double this. Even Washington State, Boeing’s home, is a top supplier to Airbus.
Who or what is black-balling Airbus?
Shame on AIA on this one. The reason given is transparently bull[stuff].
Odds and Ends: China’s Wings; B-17; Airbus Market Forecast
We just finished a book about China National Aviation Corp. (CNAC). It’s a long book, 498 pages. it’s meticulously footnoted. The Bibliography is 100 of the 498 pages. We found the book a bit tedious for all the detail, but 
others will find the vast, detailed history of CNAC and the politics of dealing with the pre-World War II Chinese government fascinating.
The book details the famed “Douglas 2 1/2,” the war-damaged DC-3 with the right wing replaced by one belonging to a DC-2. The airplane flew, as did another with a mis-matched, smaller engine and smaller propeller.
There are several instances of the DC-3 being flow overweight, one in which the airplane carried more than 70 passengers vs the then-standard 21. The airplane couldn’t get off the runway. But the runway was built ending against a sloped berm, and the DC-3 became airborne ski-jump style.
CNAC was run by an American, William Langhorne Bond, whose son Langhorne became US Transportation Secretary under President Carter (and who was responsible for grounding the McDonnell Douglas DC-10 after the crash of American Airlines flight 191 in Chicago-a crash we covered as a reporter).
The senior Bond was one of those rare individuals who successfully went up against the legendary Juan Trippe, whose Pan Am owned a minority stake in CNAC, and persuaded him to stick with CNAC when Trippe was ready to abandon the airline during the Sino-Japanese war preceding Pearl Harbor.
Bond’s disappointment of losing CNAC to the Communists after World War II after all he’d been through to keep the airline alive is palatable.
The book is easily available through Amazon.com.
Cash cows at Airbus and Boeing
Eyes are on Boeing over the prospect of a 777X.
Chatter doesn’t cease about the prospect of an Airbus A330neo.
Boeing is in no hurry to proceed with the “7X” and an A330neo is unlikely any time soon, if at all.
Here’s why.
Boeing rolls out Ray Conner to analysts
Boeing rolled out Ray Conner, the new CEO of Boeing Commercial Airplanes, to analysts in New York yesterday. The first research note we’ve received, from Imperial Capital’s Ken Herbert, portrayed a positive meeting. Below is a synopsis. As we receive more notes, we’ll add those comments.
We don’t like the resumed policy of using cash to repurchase stock, instead of putting it into new airplane programs (something Richard Aboulafia of the Teal Group, normally a pro-Boeing consultant, has roundly criticized for years).
Imperial Capital
We believe BA is benefitting from several tailwinds, and is demonstrating increased confidence regarding its 787 execution and the ability to take further costs out of the supply chain. However, we believe much of the good news is reflected in BA stock, and we see slowingorders in 2013 as limiting the multiple; therefore, we are maintaining our In-Line rating. Investors areexpecting a significant dividend increase or share repurchase program, which could be a positive catalyst, but we see the new program developments, which include the 737MAX, the 777X and 787-10, as potential competing cash pulls.
Regarding the 787, Boeing confirmed that Charleston is ahead of plan, but that it has been staffed to over deliver. Boeing also made a point of stressing that its movement down the cost curveon the 787 will be similar to that of the 777. We believe that there is an opportunity for Boeing toexceed expectations on the 787.
We continue to believe, however, the much of the execution upside is priced into Boeing stock. We believe that in order for the stock to see material upside, Boeing needs to demonstrate a very bold use of the expected free cash flow, in the form of both increased dividend and share repurchases, that will attract new investor interest and accelerate the EPS growth. However, this will limit the new product development options, considering the potentially competing development requirements of the 737MAX, the 787-10, and the 777X. We believe current BCA leadership wants to do both the 777X and the 787-10, and believes that there is significant pent-up order demand for both new aircraft, but we believe the focus on share repurchases and/or the dividend, reiterated at the 8/28/12 reception, could push some development effort to the right.
Separately:
- A reader posted this link on NEO vs MAX orders and options and we think it so good we’re elevating it to a primary post. This website also recaps which airlines have switched allegiance. Thanks to Dave O’Flynn for the link.
- China ordered 50 A320s instead of the expected 100.
Odds and Ends: Crummy DOT data and why we’re skeptical; 787 deliveries; PAL and A321 deliveries
Crummy DOT Data: We’ve previously written that we, and AirInsight, are skeptical about airline data filed with the US Department of Transportation. AirInsight doesn’t rely on it at all when doing aircraft economic analysis. We are openly skeptical of Boeing’s reliance on DOT 41 data when comparing maintenance costs of the 737 vs the Airbus A320.
Aviation Week has this item that illustrates precisely why we think DOT 41 data has to be viewed with great skepticism.
Airbus Mobile and Washington State: This Op-Ed in, of all places, The Seattle Times, explains how Washington State will benefit from Airbus’ new Mobile (AL) plant. Says what we’ve been saying for a long time. Misses the fact that WA is the No 1 or No 2 supplier to Airbus in the US by company count and No. 6 by dollar volume.
787 Deliveries: 17 and counting, with Air India, Qatar and others to deliver shortly. We are feeling more and more confident Boeing will hit its target of 40 deliveries this year, with just four months and a few days left.
PAL’s Big Airbus Order: This has been written up a lot, so it’s no surprise. What caught our eye was Aviation Week’s report that says Airbus found A321 delivery slots next year. Who deferred or who cancelled to find these slots in a production line that’s supposed to be sold out to mid-to-late this decade?
A350 Supply Chain Challenge: Aviation Week has this article about changes to the A350 supply chain and change incorporation.