White Elephants: Bloomberg News doesn’t pull any punches in this article.
747 No. 1 needs help: The Seattle Times has this long story about the first 747-100 that needs restoration.
BABC Conference: The British American Business Council has a conference Sept. 27 in Seattle, with focus on the Middle East. (Go figure.) Here is the link. Tim Clark, CEO of Emirates Airlines, is a key speaker.
CSeries Customers: Here’s a complete listing from Bombardier, the most detailed we’ve seen: The CSeries aircraft order book includes firm orders for 138 CSeries airliners from Braathens Aviation (five CS100 and five CS300 aircraft), Deutsche Lufthansa AG (30 CS100 aircraft), Korean Air (10 CS300 aircraft), Lease Corporation International Group (17 CS300 and three CS100 aircraft), PrivatAir (five CS100 aircraft), Republic Airways (40 CS300 aircraft), an unidentified major network carrier (10 CS100 aircraft), an unidentified European customer (10 CS100 aircraft) and a well-established, unidentified airline (three CS100 aircraft). The CSeries aircraft program has also booked options for 124 aircraft and purchase rights for 10 aircraft from these customers. In addition, the CSeries aircraft program has also achieved a conditional order placed by an unidentified customer for five CS100 and 10 CS300 airliners, as well as three letters of intent: for up to 30 CSeries aircraft from Ilyushin Finance Co; for up to 15 CS300 aircraft from Atlasjet; and for up to 20 CS300 aircraft from airBaltic.
AirAsia and CSeries: CAPA (Centre for Asia Pacific Aerospace) writes what we also figured: the buzz from the Farnborough Air Show about AirAsia and the CSeries seems to be more a ploy than a serious effort. Setting that aside, the CAPA piece is a pretty good analysis of the CSeries potential for low cost carriers.
The Sporty Game: AirInsight has an analysis on Boeing’s product strategy.
Posted on September 12, 2012 by Scott Hamilton
We’re feeling irreverent today….
From Twitter: Boeing Defense @BoeingDefense In Sept issue of #Boeing Frontiers: With #Apollo roots, Boeing has grown to be largest #aerospace employer in #Alabama http://ow.ly/dB0Ef
Comment: We remember when Boeing said Alabamans couldn’t build a tricycle (during the bitter competition for the KC-X tanker).
Hunker Down: We’re going into the bunker on this one–Washington should become a right-to-work state. In 2008, IAM 751 (during its strike) boasted WA is the fourth most-unionized state in the country. We know this inhibits expanding aerospace here. We’ve heard it from companies. We’ve heard it from the head of one of the Economic Development Commissions here that unions are the first topic to come up when he is recruiting companies to expand here. We don’t object to unions per se but we don’t think someone should be forced to join one. (That’s how we feel about Republicans, too….)
Take two Viagra and try again: The refueling boom was being extended when it fell off an Airbus KC-30 during a test flight.
Thank you for smoking: Airbus is really pushing Europe to delay implementation of its emissions trading scheme, which jeaopardizes orders from China. Despite the sarcasm, we agree with Airbus–any regulations through be through ICAO, not on Europe’s own, ill-advised hook.
Macht nichts: No AirAsia order at the Berlin Air Show after all. The airline will be the first to operate the A320neo and the airplane with sharklets.
Macht nichts, II: MTU is a partner with Pratt & Whitney on the Geared Turbo Fan for the Mistubishi MRJ, the Bombardier CSeries, Irkut MS-21 and the A320neo but looks to join GE for the new engine for the Boeing 777X.
Posted on September 11, 2012 by Scott Hamilton
Airbus, Boeing, Bombardier, CSeries, Irkut, Pratt & Whitney
777X, A320NEO, AirAsia, Airbus, Alabama, Boeing, Bombardier, CSeries, IAM 751, Irkut, KC-X, Mitsubishi, MRJ, MS-21, MTU, Pratt & Whitney, Washington State
Boeing & SPEEA: As we routinely do when it comes to trying to understand rhetoric of two warring parties (usually Airbus and Boeing but in this case SPEEA and Boeing), we reach out to third parties. We asked an aerospace engineer not associated with either Boeing or SPEEA about the Bloomberg interview with Boeing’s Mike Delaney in which Delaney was quoted as saying if SPEEA doesn’t accept Boeing’s terms, it will move engineering elsewhere.
Outsourcing engineering has been a sore point with SPEEA for some time and, frankly, outsourcing on the 787 and 747-8 created a lot of problems in the development of these aircraft. So Delaney’s threat can’t be dismissed.
But as with the 787 and 747-8, outsourcing isn’t a simple matter, either. Our third-party noted that engineering tasks may be unique enough that simply shifting work from groups in Seattle to engineers in Wichita (KS), where Boeing is closing its military operation, or to Boeing’s Defense engineers in St. Louis or elsewhere may hardly be a seamless transition.
Boeing, of course, will know this. But at a time when Boeing is ramping up production by 60% and has the 737 MAX, the 787-9, the 787-10, 777X and KC-46A programs underway, we’re not sure shifting work makes a lot of sense.
Even if quality work is assured–in contrast to some of the outsourcing on the 787 and 747-8 programs–and which is by no means a certainty during the switch, transition times could well slow the work at a time Boeing could ill-afford.
But Boeing looks at the long-term. It knew the risks in creating the 787 plant in Charleston. Recall that documents revealed the Charleston move to be high risk for quality, for learning curve and for cost–and the company proceeded anyway because it was fed up with the IAM 751 strikes (or because of incentives, depending on who you believe and we firmly believe the strike theory).
We’ve no doubt that Boeing is fully capable to damning the labor torpedoes. But we firmly hope common sense will prevail for both parties.
Even if a contract is reached, we also firmly believe Boeing will relocate engineering work from Seattle. The sheer volume of growth over the next several decades will demand it. If SPEEA believes otherwise, it’s whistling Dixie. And that’s probably where a lot of the future engineering will be regardless of the outcome of current talks.
Posted on September 8, 2012 by Scott Hamilton
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:
Posted on September 7, 2012 by Scott Hamilton
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.
Posted on September 6, 2012 by Scott Hamilton
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].
Posted on September 4, 2012 by Scott Hamilton
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.
Posted on September 4, 2012 by Scott Hamilton
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.
Posted on August 31, 2012 by Scott Hamilton
777, 777X, 787, A320NEO, A330, Airbus, Boeing, GE Engines, Rolls-Royce
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:
Posted on August 30, 2012 by Scott Hamilton