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 4. Propulsive efficiency April 19, 2024
- Boeing unlikely to meet FAA’s 90-day deadline for new safety program April 18, 2024
- Focus on quality not slowing innovation, says GKN April 18, 2024
- Boeing defends 787, 777 against whistleblower charges April 17, 2024
- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
Airbus critique of 787
Jon Ostrower of FlightBlogger has a stunning coup: a 48 page critique of Boeing’s 787 by Airbus. His blog link is here. He has a link to the full report.
Profiles of Airbus Financial, Boeing Capital
With the capital market crunch, Airbus and Boeing each said it is prepared to step up and help with customer financing. Below are two stories we did for Commercial Aviation Online, a subscription-only service, about Airbus and Boeing financial arms. Each is reprinted here with permission. The stories appeared on CAO’s website November 3.
Profile: Boeing Capital Corp.
Industry officials and observers fret that the capital market crunch will make it difficult for airlines to finance airplanes through the rest of this year and well into next. Accordingly, analysts predict that OEMs will have to step up next year with $5bn in financing support.
The Boeing Co. said its Boeing Capital Corp. (BCC) finance arm stands ready to provide $1bn in financing next year. Airbus, engine makers and regional airliner producers can be expected to pick up the rest of the OEM, based on history.
BCC’s federal 10Q filing with the US Securities and Exchange Commission shows that BCC has $1.9bn in financing commitments for 2009 out of $9.5bn in total on its books (see Table).
Boeing officials are clear that they want BCC to be the lender of last resort for its customers, and BCC officials are pounding the pavement looking for financing for its customers so BCC doesn’t have to step up.
The pressure on BCC is building, however. BCC received “a number of requests from both domestic and foreign airlines to reduce lease or rental payments or otherwise restructure obligations,” the company said in its 10Q filing. BCC did not provide any details, other than agreement to restructure the terms on 16 717s leased to Midwest Airlines. Midwest is hanging on by its flaps, returning these 16 airplanes to BCC and downsizing by contracting with regional airlines to operate the Embraer 170 jets. All 717s are to be returned by the end of this year.
787 update due shortly
In this week’s column:
- 787 Update Due Shortly
- Other program issues at Boeing
- The decline and fall of the Chinese aviation sector
- The impact of the Global economies on Airbus and Boeing
787 Update Due Shortly
Boeing plans an update of the 787 program by mid-December, with expectations that a new timeline for first flight and first delivery will be forthcoming. Aerospace analysts diverge on these predictions right now.
JP Morgan forecasts first flight in the first quarter while Goldman Sachs predicts 2Q09 or 3Q09. Based on conversations we’ve had with Boeing insiders, the unions and others, we believe the first flight is likely in the June-August 2009 period.
When, then, will be the first delivery? Cowen & Co. predicts 2Q10; JP Morgan and Goldman predict delivery will be a year after the first flight. Boeing has consistently maintained that it can complete flight testing within 6-9 months after first flight, but given the track record of its predictions so far, we’re inclined to side with JP Morgan and Goldman and go with one year after first flight.
SPEEA vote today
Update, 10:30 PM PST:
It’s official: 79% of the engineers and 69% of the technicians voted for the contract.
Update, 9:00 PM PST:
Unofficial returns: it appears that both contracts passed. It may be another 30-60 minutes before the returns are official.
Update, 8:00 PM PST:
SPEEA is still counting the votes. There was a record vote of more than 14,000. Estimates are another 60-90 minutes for the tally to be completed.
Original Post:
SPEEA, the engineer’s union at Boeing, will tally votes today on a new contract.
Actually, there are two contracts–one for the technicians and one for the engineers.
Up to now, technicians have been pretty vocal that they don’t like the terms negotiated by the SPEEA leadership, responding with a vitriol that surprised the negotiating team, who thought they had a good contract deal. This raised fears that the technicians might reject the contract, while the engineers are expected to approve it.
Final results aren’t expected to be counted until late tonight (Seattle time), but we’re geared up to post results as soon as we have them this evening.
If, by chance, either contract is rejected and a strike is authorized, don’t expect a walk-out. SPEEA historically goes back to the bargaining table to renegotiate if a contract is rejected. SPEEA has only struck twice in 40-some years.
Hazy has deal to buy ILFC
Bloomberg News has a story quoting the head of mega-lessor saying he has a deal to buy International Lease Finance Corp. from insurance giant AIG.
ILFC is the largest customer of Airbus and Boeing. It owns and manages a fleet of slight more than 1,000 planes with a value of $55 billion.
This is a highly positive development for the airline industry. But as is often the case, the devil is in the details. The deal has to close (next year) and it remains to be seen how it is structured and what flexibility the company has in the future.
Boeing and the Southern strategy?
Steve Wilhelm of the Puget Sound Business Journal (Seattle) has a long story about Southern states “eyeing” Boeing in the wake of the IAM strike. Speculation has been rampant (in peaks and valleys) that Boeing might be fed up with its unions in heavily unionized Washington State and be looking South when it comes time to build its next airplane (or two).
One quote from the story that is filled with irony is:
“If I was a Boeing executive, I’d look at the state of Alabama and see there’s a qualified work force … I’d take a look at the assets we have,” said Stephen Nodine, president of the Mobile County Commission, whose offices are in Mobile, Ala.
Alabama, of course, is the proposed site for the Northrop Grumman/Airbus KC-30 tanker proposed in competition with Boeing’s KC-767, which will be assembled in the Seattle area if Boeing ultimately wins the contract. But what is more ironic is that Boeing’s Integrated Defense Systems denigrated the skills of the Alabama workers during the tanker competition, suggesting they might have trouble building a tricycle if Northrop got the tanker contract. (It apparently mattered not that IDS has a large facility in Huntsville, AL.) Boeing’s Commercial unit cringed at the IDS statement because the Northrop/Airbus production model isn’t that different from BCA’s assembly model, including the high-profile 787 program (in which case IDS may have a point) but to a lesser degree with the 767 itself.
And speaking of tankers, Northrop didn’t even wait for the new Congress and the new president to take office before resuming the tanker wars with an advertisement that got the Pentagon’s chief purchaser up in arms (so to speak). Read about this one here and here.
We criticized Northrop for being slow off the PR and advertising mark in 2007, letting Boeing’s well-oiled machine set the agenda and frame the debate. (Once Northrop got running, it did make up for lost ground and scored some great PR/advertising hits.) But this advertisement, and more so it’s timing, strikes us as very premature. Nobody knows who the decision-makers in the Pentagon will be (and in any event, they shouldn’t be influenced by ads) and we doubt Members of Congress are paying much attention to the tanker debate right now anyway. With four million people expected for the inauguration of Barak Obama and the organization of the power structure in Congress, we suspect the Members of Congress might just be focused on something else right now.
Is Boeing fundamentally sound?
Addison Schonland and Richard Aboulafia join us in a 19 minute podcast discussing whether Boeing is fundamentally and structurally sound. This follows comments by Boeing Commercial Airplanes President Scott Carson at a Credit Suisse conference saying so.
Do we agree or disagree? Listen and find out.
Update, November 21:
We inadvertently linked the podcast reference to a nice environmental story-we fixed it. Sorry about that.
Delta to buy from Boeing–and Airbus
James Wallace today confirmed what we predicted from the get-go when Delta Air Lines and Northwest Airlines announced its merger months ago: that Delta, long a solid Boeing customer, will buy from Airbus.
Wallace is the aerospace writer for The Seattle Post-Intelligencer; his story may be found here.
747-8 delayed by 9 months
Boeing just announced what we were the first to predict nearly a year ago: flight testing and delivery of the 747-8 will be delayed. The press release is here.
Boeing announced a nine month-long delay, in part due to engineering resource issues. We’ve been reporting a creeping delay in the program, initially six months, then nine and most recently one year. Customers tell us they expect a year’s delay.
Meanwhile, the French news service AFP reports Airbus may not deliver all A380s next year originally planned. This short item is here.
SPEEA strike authorization vote set
Negotiations between Boeing and SPEEA appear to have taken a discouraging turn. SPEEA scheduled a strike authorization vote by the Council (SPEEA’s parliament) to authorize a strike vote by the membership.
Boeing stalls negotiations – Council issues strike authorization vote – Managers improperly poll members
With The Boeing Company stalling on responding to SPEEA counterproposals, the Northwest Council on Thursday authorized a member vote seeking strike authorization power for the Professional and Technical negotiating teams.
The bargaining unit councils each voted unanimously to hold a member vote on strike authorization. A simple majority “YES” vote gives the negotiation teams authority to call a strike if necessary. The action comes after two days of non-productive and discouraging dialog with Boeing over key economic issues, including wages, pensions, medical benefits and the company’s ongoing attempts to strip Utah engineers from the Professional contract.
“A great deal of progress has been made,” said SPEEA Executive Director and Chief Spokesperson Ray Goforth. “It would be unfortunate for customers, shareholders and employees of Boeing if we can’t reach a deal at the bargaining table.”
Main Table talks started Oct. 29 after eight months of negotiations in committees. Early this week, SPEEA negotiation teams made some major moves in an attempt to bring negotiations to a successful close. Despite the efforts, Boeing negotiators remain convinced they can force SPEEA members to accept a contract that keeps wages below market, removes pensions for new hires and opens the door to fragmenting bargaining units into smaller and smaller groups of employees.
By mutual agreement, specific details of the responses and counterproposals will not be available until negotiations conclude.
Managers improperly poll members
SPEEA has heard that some managers are polling employees in the workplace about their views on terms and conditions of employment. This improper communications is being used by Boeing negotiators to gauge what is an acceptable contract offer for SPEEA members.
For legal reasons, we are interested in your experience if contacted by management. This type of employee polling is not acceptable as part of the collective bargaining process and is affecting our ability to successfully conclude our contract negotiations with the company.