Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: New engine development. Part 5. Turbofan design problems April 26, 2024
- Airbus 1Q2024 results: Airbus CEO: “A350 in-service experience drives positive reputation and orders” April 25, 2024
- A350-1000 or 777-9? Part 3 April 25, 2024
- Boeing CEO promises company is turning around…again April 24, 2024
- Solid start for stand-alone GE Aerospace despite cuts to LEAP output April 23, 2024
DOD is within its rights to extend tanker deadline
It was predictable that Boeing supporters would become apoplectic when the Defense Department said it will extend the May 10 deadline 60 days to July 9 should EADS decide to submit a bid for the KC-X program, but legally DOD is within its rights.
We talked with two people yesterday who have no skin in this game and both told us that at this stage, ie, before bids have been submitted, DOD has the full discretion to set the deadlines any time it wants. Or DOD has the discretion to cancel the competition altogether, to be extreme about it.
Key conferences coming up
There are a couple of key conferences coming up that we want to particularly bring to the attention of our readers.
In Washington State, there is the Innovation Summit next Friday, April 9.
Aside from the fact we’re appearing on the aerospace panel (our third conference appearance this year already), this summit goes well beyond commercial aerospace and also deals with defense and non-defense issues, including clean technology.
Which leads us to the Advanced Biofuels Leadership Conference April 27-29 in the “other Washington,” WA DC. With aviation moving toward biofuels at an increasingly rapid pace is an important event.
Then there is the Making a Difference: Aerospace Leadership for Energy and Environmental Challenges May 11-12, also in Washington, DC. This is a particularly attractive program. This one is sponsored by AIAA, the American Institute of Aeronautics and Astronautics.
Coupled with Aviation Week’s Eco-Aviation conference (dates this year still to be announced), these provide the most comprehensive opportunities in the US for aviation environmental conferences.
Aviation Week’s 2009 conference.
Airfinance Journal has its 30th Annual conference April 26-27 in New York City. This is a premier aviation conference that focuses on commercial aviation finance.
DOD to EADS: You’ve got 60 days
Update, April 1, 0800PDT: Boeing just issued this statement in response to the DOD announcement yesterday:
ST. LOUIS, April 1, 2010 – The U.S. Department of Defense on March 31 said it will extend the deadline to receive proposals in the U.S. Air Force KC-X Tanker competition from May 10 to July 9 if European Aeronautic Defence and Space (EADS) makes a formal request for an extension. The Boeing Company today responded with the following statement:
“We are deeply disappointed with EADS-Airbus efforts to further delay this vital warfighting program and tilt the U.S. procurement process in its favor. EADS-Airbus has been fully engaged in the competition for four years and was always expected to provide the vast majority of its team’s work content.
“We welcome the denial of EADS’s repeated requests to alter U.S. warfighting requirements, and we support the Air Force’s stated intent to provide a level playing field for qualified competitors. We do not see a legitimate reason for EADS’s bid deadline extension request, and we believe an extension that favors any individual competitor does not further the goal of ensuring fair competition.
“Boeing remains fully prepared to submit a competitive proposal by the May 10 deadline originally set by the Air Force. However, this latest development, along with the World Trade Organization’s recent final ruling that Airbus has been heavily and illegally subsidized for decades, requires Boeing to review all of our options for going forward while we wait for a final determination on a deadline extension.”
Original Post:
DOD just announced that it will extend the deadline from May 10 for 60 days to July 9 in order to give EADS the opportunity to submit a bid for the KC-X contract. This is contingent upon EADS notifying the Pentagon of its intent to bid.
EADS hoped for 90 days.
The Pentagon will compress its evaluation schedule to stay on its delivery date timeline for an early-fall contract award. No changes will be made in the RFP. The Pentagon also rejected questions whether political interference was involved.
Financing airplanes in 2010
Geneva, Switzerland: During the Aircraft Finance and Commercial Aviation Conference, we filed a couple of stories in aircraft finance with Commercial Aviation Online. Since CAO is a paid subscription service, our arrangement with CAO is that it gets exclusive use for a few days before we can post the stories here.
The stories are below the jump. In them, we report what panelists had to say about the “funding gaps” in 2009 and 2010 and about aircraft values.
Get over it and move on (Part 2)
A flurry of activity has been happening on the air force tanker front while we’ve been in Geneva, Switzerland, (working, not playing). Unfortunately, we think the activity has all been rather sad.
In the aftermath of the World Trade Organization issuing its final report on the US Trade Representative complaint about illegal subsidies to Airbus, the anti-Airbus crowd has once again seized on this issue to attack the new reports that Airbus parent EADS is now likely to bid on the KC-X contract against Boeing’s KC767NewGen.
EADS: decision within days on tanker
Update, March 29: Airbus CEO Tom Enders now says a decision will be made in two-three weeks.
Original Post:
Geneva, Switzerland: EADS will decide within days whether to pursue a bid on the KC-X tanker program, this column has learned.
The Pentagon has yet to officially decide whether to grant a 90 day extension so EADS can be fully briefed on what is necessary to make a bid, something that Northrop Grumman had previously done as the prime contractor. EADS needs to be brought up to speed on everything Northrop learned during the previous effort to bid on the tanker.
Day 2 from Geneva
The second day at the Aircraft Finance and Commercial Aviation Conference in Geneva, Switzerland, covered a lot of ground but the most interesting for our readers is the skepticism over the prospect of re-engining the Boeing 737 and Airbus A320 families.
Potential buyers are anything but convinced this is the way to go. They look at the unknown capital cost, the new costs associated with maintenance, inventory and other factors, and have yet to be convinced that the net-net fuel savings will be sufficiently large to offset the added costs.
Report from Geneva
Here are our thoughts and observations from Day 1 of the Aircraft Finance conference in Geneva, Switzerland:
- The mood here among the 300+ attendees in generally upbeat. There is a general sense that the airline industry has seen its worst and recovery is on the way. A leading indicator is the improvement in the cargo market, which is showing substantial gains year-over-year. Passenger traffic is up but premium traffic, while also showing gains, has a long way to go to recover. Even the notoriously pessimistic IATA was upbeat.
- Aircraft financing for new airplanes is available but expensive. Aircraft financing for used aircraft is much less available.
- The Airbus A319 and Boeing 737-700 cannot effectively compete with the Bombardier CSeries, even if re-engined, is some of the talk here. We were on a panel with James Billing of Boeing and Richard Aboulafia of The Teal Group. Billing prudently avoided being dragged into the discussion over the CSeries, sticking with market forecasts for the single-aisle segment; Aboulafia termed the CSeries a “niche” aircraft. We suggested that Airbus and Boeing could and should “crush” the CSeries by pricing the A319RE and 737-700RE as part of a family offering in airplane campaigns with the A320/321 and 737-800/900 by offering prices on the smaller models Bombardier couldn’t hope to match with the CSeries. Boeing’s Billing and Randy Tinseth, who was in the audience, figuratively ran for the hills on this suggestion—anti-trust regulators would be all over the company on this scenario. An Airbus official in the audience caught us afterward and merely suggested this wouldn’t be a good idea. The genesis of this is that Airbus introduced the A318 to kill the McDonnell Douglas MD-95 and Boeing priced the 737-600 at a reputed $16.7m to undercut MDC’s launch customer sale to SAS. The MD-95 never recovered from the two actions; the A318 and 737-600 proved to be sales dogs.
- There is a growing belief that the Open Rotor engine will not be a successful solution for A320/737 replacement airplanes and the second generation GTF and Leap-X engines will be.
Air India’s 787 penalty payment, 787 vs A330 efficiency
This article from India has an interesting reference to the penalties paid to Air India by Boeing (and what the airline originally wanted) for the delays of the 27 787s on order.
The article also notes that Air India’s analysis is that the 787 is 17% more fuel efficient than the A330.