By the Leeham News Team
Commentary
Feb. 20, 2024, © Leeham News: Four missing bolts on an emergency exit door plug leg to the in-flight decompression of Alaska Airlines Flight 1282 on Jan. 5 of this year.
It’s not yet clear why the four locking bolts were not installed in the incident aircraft, a Boeing 737-9.
Information revealed to date by the National Transportation Safety Board (NTSB) discovered that Boeing removed the door plug in an unplanned process when some defects were discovered with some rivets. When Boeing line workers reinstalled the plug, for reasons as yet unknown, the four retaining bolts were not reinstalled. The bolts became separated from the plug during the removal. So far as is known, the four bolts never have been found in the factory. The NTSB’s investigation continues.
The Federal Aviation Administration (FAA) grounded the MAX 9s for three weeks while inspection and repair procedures were prepared, approved, and implemented. Inspections were expanded to the MAX 9’s predecessor, the 737-900ER, which had the same door plug. No grounding was required of the -900ER.
Although the processes solved the concerns over all MAX 9s produced to date, the question arises whether the procedures are sufficiently fail-safe going forward.
The inspection of the fleet to verify the correct installation of the lock bolts appears to leave a gap for future production, unplanned plug removals, and reinstallation.
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By Judson Rollins
Feb. 19, 2023, © Leeham News: After last week’s release of Airbus’s 2023 financial results, we undertake our annual analysis of at-risk deals on the OEM’s books.
Airbus has outstanding orders from airlines where there is a material probability that some won’t translate into deliveries. Most resulted from airlines with financial difficulties, but some were related to contractual disputes. When deliveries are delayed beyond a set period, usually 12 months, the customer can cancel orders if the delays are unexcused. Boeing flags such orders as subject to an ASC 606 accounting rule adjustment.
Unlike Boeing, Airbus isn’t subject to the ASC 606 accounting standard, so it only discloses the nominal value of its total adjusted order book in its annual report – but not at-risk orders by program.
LNA analyzed Airbus’s order books in July 2020, November 2020, August 2021, February 2022, August 2022, and December 2022 to identify at-risk orders and develop an apples-to-apples comparison. The above links explain our methodology.
By Scott Hamilton
Feb. 16, 2024, © Leeham News: When the Federal Aviation Administration (FAA) put a freeze on Boeing 737 production rates at the currently approved 38/mo level, LNA revealed that hundreds of orders will face delivery delays. Boeing faces even greater delays than the 38/mo production level suggests, however.
As LNA reported, and confirmed by several aerospace analysts, Boeing’s true production rate for the 737 was 31 per month and even lower—as little as around 20 per month in some periods. The balance of deliveries came from its large inventory of 737 MAXes built during the first nine months of the 21-month grounding of the aircraft.
With Boeing’s full year 2023 delivery data now available, LNA looked at 2024 deliveries that were planned before the Jan. 5 Alaska Airlines 737-9 MAX emergency door plug blew off Flight 1282 on climb out from Portland (OR).
The incident was characterized as an accident due to the nature of the event and damage to the airplane. Nobody died and there were only minor injuries. The decompression at about 16,000 ft. damaged the door surround at row 26 on the left side. The door plug separated from the airplane and was found in a wooded area a few days later. There was damage throughout the 737’s cabin and the cockpit door was ripped off its mountings.
The pilots landed the airplane a few minutes later in Portland.
By Tom Batchelor
February 15, 2024, © Leeham News: French engine, equipment and interiors specialist Safran said revenues soared by more than a fifth in 2023 despite a “challenging supply chain environment” and inflationary pressures.
Announcing the company’s full-year 2023 results, CEO Olivier Andriès hailed the progress made last year as “outstanding”. Revenues were up 22% in 2023, to €23.2bn, vs. €19bn in 2022.
Safran said this was in part due to its positioning on narrow-body markets, which are now above pre-COVID, 2019 levels and growing. With large order backlogs for single-aisle airplanes, the supply chain has struggled to keep up with demand.
The Paris-listed company’s operating income was up 31%, from €2.4bn in 2022 to €3.1bn in 2023, and free cash flow generation topped €2.9bn, which was above expectations and an increase on the €2.6bn in 2022. Read more
By Tom Batchelor
February 15, 2024, © Leeham News: Airbus gave more details of its planned ramp-up today as it announced 2023 full-year results, with revenues climbing 11% year-on-year to €65bn and adjusted earnings before interest and taxes (EBIT) up 4% to €5.8bn.
The European manufacturer is targeting 800 commercial aircraft deliveries in 2024, above the 735 delivered last year, an increase of almost 9%. Airbus is seeking a ramp-up in production to meet increased output targets across its commercial division, including 75/mo for the global A320 family program.
Guillaume Faury, Airbus chief executive officer, told investors that the company was seeking to strike a balance between “very strong demand” for its aircraft and “the ability of the supply chain to meet the demand.”
Faury said 2023 had been a “landmark year” with a “record-breaking level of aircraft orders and backlog”. He added: “We continue to see momentum for civil and defense markets.”
However, the Airbus Defense and Space division continues to struggle with adjusted EBIT down 40% year-on-year, to €229m from €384m.
Across all of its business segments, Airbus said it expects to achieve EBIT Adjusted of between €6.5bn and €7bn in 2024. Read more
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By Scott Hamilton
Feb. 15, 2024, © Leeham News: The Federal Aviation Administration (FAA) may have told Boeing it won’t allow product rate increases on the 737 MAX lines, or the addition of the North Line at Everett (WA) until it’s satisfied production quality is under control.
But as LNA first wrote upon this news, Boeing’s production is well below the currently approved 38 per month. We pointed out that Boeing was consistently struggling last year to roll 31 MAXes out of the factory—and often, the number was substantially below 31.
Sometimes the number of newly produced 737s was less than 20 a month, reports one consultant who tracks the production.
Technically, the FAA can’t stop Boeing from producing more 737s than the 38 per month cap. It doesn’t have this authority, reports Aviation Week. But the FAA is the responsible party for issuing individual aircraft airworthy certificates as the 737s are ready for delivery to airlines and lessors. And, according to AvWeek, the FAA won’t issue more than 38 certificates a month.
The FAA suspended Boeing’s so-called ticketing authority for the MAX before the airplane was recertified following the 21 month grounding beginning in March 2019. This suspension was extended to the 787 when production and quality control problems were discovered at the Charleston (SC) assembly plant.
Several aerospace analysts following Boeing pointed out that Boeing hasn’t produced 38 MAXes a month and, like LNA reported, it’s struggled to meet even the previously advertised rate of 31/mo.
The consultancy Cirium charted the actual deliveries by Boeing (and by Airbus) for their respective single-aisle aircraft.
By David Yu and William Loh
Feb. 13, 2024, © Leeham News: As we entered 2024, this is an interesting time for aircraft finance and leasing. As an industry and economy, we have come from historically low-interest rates (cost of funds) close to 0% to a federal funds rate of 5.5%.
The US Federal Reserve has indicated cutting rates going forward. The US economy is still ripping it on many measures and the threat of a hard landing has all but vanished, with inflation coming under control. That said, Wall Street consensus is a low 4% federal funds rate which would mean a lot more rate cutting. But this is not what the frothy economic indicator data suggests. Instead of immediate large cuts, we only see small and short cuts towards the end of the year.
This is not what some folks were hoping for when they entered into previous deals. They want to have the lowest rate possible, especially for those with debt coming to maturity and needing to be refinanced in 2024 (a significant number). Wherever interest rates end up, it will not be what investors have planned for, and too high a rate environment will all but ensure an increased pressure to sell.
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By the Leeham News Team
Analysis
Feb. 12, 2024, © Leeham News: United Airlines has reportedly been looking to Airbus to replace the Boeing 737 Max 10s that Boeing is having difficulty delivering, due to the Alaska Airlines accident and the resulting delays in certification to the Max 7, Max 10 & 777X programs. Airbus has been searching for ways to recover/create slots to take on a premium customer and poach them from Boeing.
A320 production rates are headed towards 75 a month in the 2025/2026 time frame, with Airbus confident that its supply chain can meet the demand and will commit to the rate for the long term. These are record production numbers with the previous high-water mark reached in 2019 with 863 total deliveries: 642 of those from the A320neo family, or 54 a month. The A220 program is also headed for an increased production rate of 14 a month at about the same time.
However, Airbus has its own kinks to work out, along with concerns outside its control:
There has been speculation and calls for Airbus to push the envelope even more, reaching 90 a month to offset the Boeing shortcomings.
75 & 14 a month are already huge goals and pushing suppliers to go past those targets might compromise quality. People will cut corners when they are greedy. Besides, a little scarcity when you are the top dog isn’t the worst thing; Boeing isn’t coming to the party with anything new in the near future.
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By the Leeham News Team
Feb. 9, 2023, © Leeham News: On January 31, Boeing released its year end results for the fiscal year and despite the entire company ending up in the red, analysts and investors alike pointed to the bright spot at Boeing Commercial Airplanes (BCA). Positive margins and earnings of $41 million. Some good news finally, after five years of less than stellar results.
Boeing has been beset by problems since its last profitable year in 2018:
The slide continued into 2024 when a 737 Max 9 door plug blew out during an Alaska Airlines flight, leading to increased scrutiny by regulators and further delays to the Max 7 and Max 10 certification process.
With the earnings release, there was some good news amongst the rubble; BCA was finally beginning to turn things around in the right direction, posting positive margins and a gain of $41 million. Not earth-shaking, but a small measurable baby step towards profitability.