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 27. June 20, 2025
- Pontifications: A Personal Note June 19, 2025
- Airbus books 142 firm orders as Boeing retracts from the Paris Air Show June 19, 2025
- AIN Media Group Agrees to Acquire Leeham News & Analysis June 17, 2025
- Five for Five: Air India crash points to systemic problems at Boeing that CEO Ortberg must fix June 15, 2025
Odds and Ends: 777-9X will create new class of airplane
Boeing 777X: The 777-8X, said to be a replacement for the 777-200, is really sized closer to the 777-300 and the 777-9X is a new class of airplane. See this story for details.
A330neo: It’s a story that won’t die: talk of re-engining the A330. But does it make sense? AirInsight completed a short report in which economics of the A330, the A330neo, the A350, the 787 and the 777 are evaluated. The results indicate that while the A330neo will have a major gain in fuel performance, and in fact will be almost equal to the 787-8 with substantially more seats for revenue opportunities, it still falls short of the 787-9 and the A350.
The A330neo, suggested by AirAsia, would mimic the minimum-change A320neo and thus be different in scope than the original A350 proposal, which was a re-engined, new-wing, new system version of the A330 (much as the 777X will be compared with the 777). Airbus says it’s not interested in the A330neo “for now” but consultant Michel Merluzeau predicted at a conference organized by the Pacific Northwest Aerospace Alliance that Airbus will eventually proceed with the airplane.
But are the gains good enough to make sense to proceed with the project? The report is offered for sale for a modest $99.
WTO, Airbus and Boeing: It’s another story that won’t die (and do we wish it would): The US vs the EU on the illegal subsidies to Airbus. The US has stepped up its pressure to have the EU decide that the assertions by the EU that it has complied with the WTO findings are inadequate. The US wants to impose $7bn-$10bn in sanctions annually. The EU says the US is full of it.
MAX v NEO: Guy Norris at Aviation Week did his own analysis of the fluff Airbus and Boeing put out about the MAX and NEO fuel efficiency. Just goes to show you can’t believe either party. That’s why we like to rely on the analysis of the customer. Lufthansa has analyzed the MAX and NEO and told us last year (and again at ISTAT last month) it concludes there is only a two percent difference (in Boeing’s favor) between MAX and NEO, which LH said both times simply retains today’s status quo between the two OEMs. (This also throws cold water on Boeing’s claim that the NG is 8% more efficient than today’s A320.)
Missing Bob Crandall
The link to a video of Bob Crandall on the Charlie Rose show speaking to airline industry issues, and the bankruptcy at American Airlines, spurred some comments from our readers. The most interesting comment came from a Doug Stephan, whose comment is reproduced at the end of this post.
When we co-owned Commercial Aviation Report (until recently called Commercial Aviation Online by Flight Global, which became the fourth owner of the company), we resided in Dallas in Bob Crandall’s backyard at American.
Naturally the proximity gave us many Crandall stories. Stephan’s comment spurred us to remember some. We share a few with readers today.
Odds and Ends: 737 cost (not price); Bob Crandall
737 Cost, Not Pricing: Wells Fargo has this item about what American Airlines actually paid for the Boeing 737-800, as opposed to the list price: more than a 50% discount from $84.4m. Note that AerCap (AER) appears to have paid $40m per aircraft in a purchase-leaseback. One assumes American didn’t resell the aircraft for the price paid from Boeing but marked them up at least a little bit. We’ve heard AA’s cost was in the range of $35m but this is unconfirmed.
~$40MM Per 737, It Appears. Based on the change in YTD flight equipment additions, AER added $80MM in planes in Q4; since the only Q4 additions were two new 737-800s leased back to American Airlines, the 20-F implies a $40MM unit price. Also, based on changes in purchase commitments from 9/30/11, we believe the average 737-800 purchase price (over the remaining 33 planes as of year end) is ~$41MM. A new 737-800 typically appraises for ~$45MM.
Bob Crandall: The former CEO of American Airlines provides his usual candid views of the airline industry, of today’s American Airlines, and his greatest failure as CEO in this 30 minute video on the Charlie Rose program.
WN vs AA: A personal story
I am going to depart not only from my usual approach to this blog but also shift from the editorial “we” to a personal “I” for this story. The point of the story is not my personal family issue but an illustrative point about Southwest Airlines and American Airlines.
As readers know, I live in Seattle. I have family in the Chicago area. My family had a developing situation that required that I go to Chicago to deal with it. The plan had been to attend the ISTAT meeting and US Airways media day in Phoenix earlier this week, fly back to Seattle for a day and then on to Chicago Friday. I had booked Southwest for the SEA-PHX-SEA trip and American Airlines for the SEA-ORD-SEA trip.
I truly don’t like flying Southwest because of the boarding process and the lack of an assigned seat. I’m a lifetime Gold Advantage member of American, with all the perks that implies.
I chose WN for the PHX trip because my business partner was joining me and she had to check a bag–and bags fly free on WN. I chose AA for Chicago because of the aforementioned Gold status and perks.
On Tuesday evening–the end of the ISTAT meeting but before the US Airways event–I received a call from my brother indicating the family situation had become critical; I need to fly to Chicago directly from PHX on Wednesday. WN changed the ticket (charging for the fare difference). I called AA to cancel my Friday reservation. The ticket was, as I knew, non-refundable but I also knew I could apply it for a future trip. For the fare difference and, as I also knew (regrettably), a $150 change fee. (Besides which AA also charges for the baggage check, which wasn’t applicable in this case but nonetheless contrasts ith WN’s policy.)
The situation in Chicago has now stablized for now but for the near term, I will buy WN to Chicago for family follow-up for the flexibility of being able to change tickets without a change fee. Tom Horton, take note: a lifetime Gold member is on your rival for now. I might be able to claim mileage to exotic places on AA and oneWorld compared with Lubbock and Little Rock on WN, but this doesn’t matter. Gary Kelly, also take note: good policies in place in these circumstance–even if I still despise your damn open seating.
Odds and Ends: 787 ramp up, ISTAT, Airbus, the price of oil in 1968
787 Ramp-Up: UBS Securities issued a research note Monday in which it reports that the 787 rate ramp-up to 10 per month–a goal Boeing’s to be by the end of 2013–has slipped to the first quarter of 2014.
- More from UBS: Supply chain ahead of Boeing: We believe the supply chain is still ahead of Boeing given significant rework and a high level of component deliveries in 2009-10, although a pick up is expected soon. We understand Boeing now plans to ramp from current 3.5/mo to 5/mo in Q4 (had been Q1), 7/mo in Q2 2013 (had been Q4 2012) and 10/mo in Q1 2014 (had been Q2 2013).
ISTAT: We’re at the annual ISTAT AGM in Phoenix and we’ll be reporting throughout the event odds and ends (adding to this post initially, separate posts later on). So come back often.
From ISTAT:
- 40% of Airbus 2011 deliveries were via lessors: 115 through direct sale to lessors, 95 via lessor purchase-leaseback
- Lessor sees overlapping production of 737 NG with MAX, A320neo with CEO due to limited availability of production slots because of massive early neo/MAX commitments.
- Congressional targeting Ex-Im Bank financing is short-sighted; cutting funding will harm Boeing, GE, Pratt & Whitney.
- Airbus has delivered 10 A330-200Fs, four operators now.
- Undercurrent buzz about 737MAX. Watch for developments in the next weeks and months.
- Airbus about to start final assembly line for A350.
- Flight tests of Trent XWB going well.
- Airbus now advertising A350-1000 at 369 passengers, up from 350.
From Twitter, via Phil LeBeau of CNBC: @Boeing says it has NOT changed its goal of building 10 Dreamliners per month by end of 2013.
Back to ISTAT:
- A321neo gains 600nm, A320neo gains 500nm.
- Average oil price 1968 non-inflation adjusted was $3.18bbl (that’s per barrel, not per gallon!).
- Airbus sold 448 A320ceo since launch of neo.
- Airbus competes 99% of the time against Boeing, not new entrants, for sales. Barriers to entry for a new aircraft type very high rather than changing fleet type.
Side trip to Ex-Im:
Take a read of this column on the Ex-Im Bank financing controversy.
Back to ISTAT:
Boeing….
- Mike Bair: We are in a march to put Airbus out of business in the twin-aisle space: 777 vs A340, 787 vs A330, 747-8 vs A380.
- 787-10 will have 50% lower operating costs than A340-600, Boeing’s Bair claims.
- 747-8I has turned out to be the darling of billionaires who have too much money–Bair.
- New revenue opportunities for long, thin routes validate the 787 like San Diego to Japan. Opening new markets and opportunities for customers.
- Boeing uses 162 seats in 737-800/8 vs A320ceo/neo 150 seat comparisons; Airbus uses 157 seats for the Boeing.
- Every engine/airframe combination has a sweet spot, a bucket’s flat area with 3-4 inches of fan diameter. In MAX’s case, this means the 68.4 inch fan is the sweet spot.
- Our intent is to build the MAX until the market decides it doesn’t want it any more.
Boeing comments on 787 delamination, delivery expectations
Jim Albaugh, CEO of Boeing Commercial Airplanes, today commented on the delamination issues on the 787 and the effect on deliveries and production going forward. He spoke at a JP Morgan conference. there are several stories that can be found on Google News, but here’s a link to a Reuters piece that neatly sums things up. Here is a link to Aspire Aviation’s synopsis.
Among other things, Albaugh said Boeing should deliver 70-85 787s and 747-8s, roughly evenly split between the two, or about 35-42 of each airplane. Jon Ostrower also Tweeted that the plan is to deliver the last re-worked 787 in 2014. Some may recall that Boeing’s Scott Fancher, at the time the head of the 787 program (now heading up 777), once said it would take “years” to complete the rework on the plethora of 787s lined up at Everett’s Paine Field. Ostrower also Tweeted, quoting Albaugh, as saying the first “clean” 787 will be line #66 (it had been forecast to be #63).
The other key point is about the delamination. While this has gotten a lot of high-profile attention, particularly in the context of the overall 787 program difficulties, independent sources we checked with tell us that while this is another annoying and embarrassing event for Boeing, the fix in relatively simple and the problem not particularly consequential. Boeing, of course, has said as much but skeptics continue to question Boeing’s credibility due to the history of the program often turning out to be worse than Boeing’s statements. Case-in-point is Boeing’s continued insistence that it will meet the goal of producing 10 787s per month by the end of next year and the disbelief expressed by every aerospace analyst and consultant we’ve seen. (Granted, there may be some who accept the goal as doable, but we’ve not seen them.)
Separately, an interesting public dispute between Air India, a 787 customer, and Boeing emerged. Air India says Boeing agreed to pay $500m for delays of 27 787s. Albaugh says that’s news to him. We ask, what precisely did Air India say? The news reports are too ambiguous. Did Air India say cash compensation or that Boeing is paying $500m in compensation, which, of course, could take many forms such as discounts, services, parts, etc? This would make Albaugh’s statement that no check is being written correct. So it goes….