Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Solid start for stand-alone GE Aerospace despite cuts to LEAP output April 23, 2024
- SPEEA, Boeing at impasse over safety program, union says April 23, 2024
- Better transparency needed on Boeing’s 1Q earnings call April 22, 2024
- 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
Flight recorders narrow cause of AF447
Recovery of the flight recorders from Air France 447, an Airbus A330-200 that crashed into the Atlantic two years ago, appears to have quickly identified the events that led to the crash–and contrary to all those who claimed the vertical tail fell off or the A330 is a deathtrap, it appears the pilots simply weren’t trained properly to handle the events.
The Wall Street Journal has this detailed account of what investigators have found.
Lest anyone now charge that the failure to fly through the frozen pitot tube situation is exclusively an Airbus problem, Flight Global’s David Kaminsky-Morrow posted a link to a National Transportation Safety Report from 19– in which a crew stalled an airplane after the pitot tubes froze up and crashed, killing all aboard.
The aircraft? A Boeing 727-200.
The point: accidents like these often happen across OEM lines. And the actions of Airbus-haters was pretty disgusting.
Odds and Ends: $19bn cash turnaround for Boeing
We’re catching up from a week out of the office and one thing that especially caught our eye is this comment in a research note late last week from JP Morgan:
Potential cash turnaround on 787 is enormous. By the end of this year, Boeing plans to have amassed $19 bil in 787 inventory, most of which will consist of so called deferred production costs, or the extra cost above the long-term average to build the first few dozen aircraft. We expect the initial 787 block to be 1,000 aircraft, which should take ~8 years to deliver. Even if the program never contributes a penny of earnings and ends after that initial block, it should therefore generate ~$19 bil of operating cash flow over that delivery period, or an average of ~$3/share annually. While from an accounting standpoint this would be a reduction of inventory, it is best thought of as underlying cash profitability on the aircraft (say 20% margin on 120 units/year times $100+ million each) that is offset perhaps entirely by the amortization of the sunk cost from the delays. The potential $3/share of positive 787 FCF compares to an expected cash outflow of $8/share from 787 inventory build this year, plus another $3/share of R&D and capex, making the total 787 outflow ~$11/share. Overall, the vast majority of the cash flow improvement opportunity results from elimination of the cash outflow, so while the difference between a 20% margin and a 10% margin might be significant, it pales in importance next to simply getting the program ramped up and into the black.
Other items of note:
We’re back, looking at the WTO’s ruling on Airbus case
While we were gone, the WTO issued its ruling on the Airbus case, which was appealed by both sides.
There’s been plenty post-ruling analyses written already, and since we’re nearly a week later, we’re not going to add much to it except to point you to Aspire Aviation’s analysis and say this: Both sides won some and both sides lost some in this case. The USTR failed to achieve its top goal, and that is to have the WTO rule launch aid illegal, so blocking aid to Airbus to make the A350 XWB was a failure.
Flightblogger has a very good take on how both sides “spin” the final appeal report. The Wall Street Journal has a balanced view on who won and who didn’t.
This is a major defeat for the US–and for Boeing.
DC7 Challenge for our Readers
A quick post in connection with our DC-7B trip. We’ll put the following in context when we do some trip reports next week. In the meantime, we have a series of challenges for our Readers.
Here are the “rules” for the following questions:
- Only certificated carriers (scheduled, non-scheduled, flying clubs and cargo airlines) are “eligible” for these questions.
- In answering, list the airline, the final route and the date.
- No gun-runners, drug smugglers or mere ferry flights.
When flying had panache
We’re off May 15-21 on another adventure (the previous one we talked about being our Alaskan polar bear photo safari). This time we’re scheduled on a trip that includes 12 hours of flying in a Douglas DC-7B
This airplane was originally Eastern Air Lines and it was discovered, with the original EAL interior, and restored. Here is a story about this restoration.
Government subsidies for healthy companies
Two news items caught our eye this morning.
The first was the financial reporting for EADS today. Although EADS reported a small loss on foreign exchange and financing costs, the company increased its cash position. This came under criticism in Germany for the bailout of the A400M program.
Boeing’s clarity provided at BCC meeting
Update, May 11: UBS had Boeing’s Mike Bair, the head of the 737 future program, for presentations yesterday and issued its report. Much of the UBS report is similar to the Credit Suisse and Buckingham information captured below; here’s some of the new stuff.
- While still not taking a re-engined 737 off the table entirely, it was clear from our discussion that BA’s preference remains an all new NB for initial delivery in 2019-20. While no major announcement is expected in Paris, BA anticipates material selection in 2012 (metal vs. composite), followed by component selection strategy
(make vs. buy) in 2013 and official program launch in 2013-14, assuming a launch order is in place. BA envisions an eventual production rate of 60-70/month, which it sees as high enough to justify a dual source strategy for some major components. - While still not taking a re-engined 737 off the table entirely, it was clear during our discussion that Boeing’s preference remains an all new narrowbody with initial delivery in 2019-20.
- Boeing does not expect to make a major announcement at the Paris Airshow. It commented that it would expect a launch decision on a potential new aircraft to come roughly five-six years ahead of first delivery, putting program launch in the 2013-14 timeframe,
assuming a launch customer is in place by then. - Boeing commented that it would take a defection by a current 737 customer to get it to think more seriously about re-engining. Boeing sees this as unlikely and noted that Easyjet is the only 737 operator ever to defect to A320 and that it took very aggressive pricing by Airbus to achieve that outcome.
Our comment on the last point: Bair is wrong, of course: United and Frontier were two 737 customers to defect and Air Berlin also bought A320s; we believe there were more but don’t recall specifically.
Original Post:
In what is the clearest picture yet of Boeing’s intentions for program development, Boeing Capital Corp. officials met May 3 with aerospace analysts and financial types in one of BCC’s periodic meetings. What emerged from the meeting is a clear understanding of Boeing’s current thinking for the current 737 line and the New Airplane, which for this report we will identify as the 7X7.
This report is based on conversations with participants of the meeting, subsequent analyst reports that were issued and presentations to the group by Boeing.
Making a silk purse out of a sow’s ear: the 737-900ER
Here’s a story we did for Commercial Aviation Online.
| Date: | 04/05/2011 10:00 |
| Source: | Commercial Aviation Online |
| Location: | Seattle |
| By: | Scott Hamilton |
Sometimes aircraft take a long time to come into their own. The Boeing 757 was initially a slow-seller but ultimately sold slightly more than 1,000 aircraft. The Boeing 737-200 was such a slow-seller that Boeing nearly decided to sell the aircraft, lock, stock and production line to Japanese interests. Boeing stuck with the 737, to its benefit; the 737 has, to-date, sold more than 6,000 and Boeing is openly talking about keeping the production line open to “at least” 2026, an incredible 60 years after it began.