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 25. June 6, 2025
- New RISE powerplant benefits from decades of GE research and development June 5, 2025
- Engine makers emphasizing durability, reliability June 4, 2025
- Boeing CEO: Lessons learned are key to certification of 737-7/10 and 777X June 2, 2025
- Digital twin is a key to JetZero’s hopes for Blended Wing Body entry June 2, 2025
SPEEA: We’ll organize Charleston engineers
If Boeing decides to put the second 787 line in Charleston, isolating this work from SPEEA engineers in Puget Sound, SPEEA told this column it will immediately begin an organizing effort of engineers hired in or transferred to Charleston.
No further commentary is needed on this one.
Line 2 talks deadlocked: SEA Times
Dominic Gates at The Seattle Times has a story that’s important to Washington State and South Carolina: talks between Boeing and the IAM are deadlocked, he writes.
Boeing wants a 10-year, no-strike contract in exchange for putting Line 2 of the 787 in Everett. The IAM wants a promise the 737 replacement will be in Washington, too, Gates writes–but Boeing is unwilling to make this guarantee.
United nearing decision on refleeting
Update, November 12:
We’ve learned United is splitting the wide-body and narrow-body RFPs into two, now planning to make two purchases instead of one. The wide-body order will come first. Boeing has recently become aggressive with 787 offers and now this is a real competition between the 787 and A350. The narrow-body RFP will almost certainly slip to 2010.
Original Post:
United Airlines is nearing a decision on refleeting, replacing Boeing 747s, 777s 767s and 757s. Flight International has this detail. Flightglobal’s ACAS database shows United operates 25 747-400s, 34 767-300ERs, 19 777-200s, 33 777-200ERs and 94 757s.
This would be a huge order for Airbus or Boeing. United previously said it plans to stick with one supplier.
The original RFP drew hoots from the industry. United sought terms that were considered ridiculous by many, particularly given United’s own financial condition and the existing backlogs at Airbus and Boeing. Industry sources said UA wanted the winning manufacturer to buy the 767s and 757s at above market valuations and lease them back at below market rental rates; to finance 100% of the new airplanes; and require no down payment or progress payments.
Boeing posts big 3Q09 loss
Here is a link to the press release. The earnings call is at 10:30am EDT today. The results were no particular surprise, as the $1bn charge for the 747-8 program and $2.5bn write off on the 787 were previously announced.
Aerospace analysts were fairly sanguine about the earnings.
David Strauss at UBS wrote:
Boeing (BA): No Surprises
- * Q3 loss of $2.22, better than expected CF: Q3 EPS at -$2.22 vs UBSe -$2.10 and consensus at -$2.12. Q3 includes $3.45 in previously announced 787 and 747-8 charges as well as an additional $0.14 for work incurred during Aug/Sep on first three 787 test airplanes. Operational results were lower than we had forecast on 9% revenue growth (UBSe 14%), including 3% growth at IDS, while 10.2% margins at BCA ex charges were above our 8.3% forecast. FCF at $1B was well above our forecast for a $350M use on working capital contribution (receivables & payables) and lower customer financing.
- * Adjusts guidance for charges, 787 schedule reaffirmed:BA lowered its guidance by $3.40 to $1.35-1.55 to reflect the 787 and 747-8 charges. R&D guidance was increased $3B to $6.6-6.8B. $2.5B is for 787 cost reclassification with remainder to adjust BCA “operating model” and for higher IDS R&D. FCF guidance was raised $100M to >$1.2B on lower capex and customer financing. BA commented it has begun the reinforcement of the wing to the side body area and remains on track for first flight by the end of 2009 and first delivery in Q4 2010.
Joe Nadol at JP Morgan wrote:
-
We don’t see much new in the BA results this morning (although on the margin some of the underlying profits and cash flow looked good), and we don’t expect much of an update on the key issues today, particularly 787. Margins in both Commercial and Defense were a somewhat better than we had expected, and cash flow was strong, but we believe the key issue for BA remains the 787 program, and the company had nothing new to say in the release. While we expect many questions on the call to be 787-related, we are not expecting any change today to the company’s outlook for first flight by year end and first delivery in 4Q10. Potential production cuts are a secondary issue for the stock, in our view, but we don’t expect much news on this front either today.
-
In a noisy Q3, Boeing reported a loss of $2.23, ahead of the $2.45 loss we had forecast. EBIT from BCA and IDS each exceeded our estimate, partially offset by higher net interest expense and a smaller-than-expected tax benefit.
-
Noah Popanak at Goldman Sachs wrote:
GS Aerospace & Defense: Boeing (BA; Neutral): First Take: 787 schedule reiterated, cash flow solid.
- We believe the quarter and guidance are in-line with expectations given the 787 and 747-8 items were announced intra-quarter. In our view, the significantly more important items are: (1) 787 first flight (by year-end) and first delivery (in 4Q10) were reiterated, (2) 3Q cash flow of $1.2bn was strong and full-year cash guidance was reiterated, (3) the full-year BCA aircraft financing target was reduced, (4) there is no change to any build rate schedules, and (5) all 2009 guidance excluding charges was reiterated.
- Analysis
We view today’s results positively and anticipate the market will do the same, as the quarter itself is largely a non-event (given the 787 and 747-8 charges were already announced), and there are other positives to point to in areas where investors have had significant concern. The most significant one is the reiteration of the 787 schedule, as there has been a lot of recent discussion in the market of further potential delays, but today the schedule was reiterated. Other major positives include strong cash flow, and a lower BCA aircraft financing target, two areas where there has been serious doubt with regard to BA’s full-year targets, and it now appears as if they will meet or exceed both.
Read more
Ahead of Boeing 3Q09 earnings787
Boeing releases its third quarter earnings tomorrow (Oct. 21). The company has already announced another $1bn write down for the 747-8 program and some aerospace analysts are predicting another $2.5bn write-off for the 787.
The company said it will provide an update on the 787 program tomorrow. Here are some of the things we think should come out of the call:
Boeing builds berms (with no delays)
Here in the Seattle area, there is a highly developed industrial, office and residential area called Kent Valley. As the name suggests, it is in a low-lying area that includes the Green River. And a flood plain, protected by the Hansen Dam, an old, old earthen dam that is in danger of breaching in the anticipated heavy winter rains.
Here is a KOMO TV (ABC-Seattle) story on the berms.
The Army Corp of Engineers said to prevent a breach and a catastrophic flooding, it may be forced to release waters into Kent Valley. (In one area of a suburb called Auburn, the main street could be 20 ft. deep even with a controlled release.)
A “flood emergency” has been declared by King County. Businesses, industries, residences, apartments and basically everyone who can have been constructing berms and sand-bagging. Boeing, with several facilities in Kent Valley (including the aforementioned Auburn), is building an eight foot berm around its facility. Naturally there are many questions from employees.
Here are some answers to some frequently asked questions at Boeing’s Kent Space Center regarding the Hansen Dam flood plans….
Boeing “leaning” toward KC-767
Boeing is “leaning” toward offering the KC-767 to the US Air Force in the KC-X competition, an executive revealed at a conference in Everett (WA) today. Boeing previously has been coy about whether it will offer the KC-767, or a tanker based on the 777 or two separate bids, one for each airplane.
George Maffeo, Vice President of Supplier Manager for all the 7-Series commercial programs except the 787, told the annual Aerospace Conference of the British-American Business Council-Pacific Northwest that the tanker development team of Boeing’s Integrated Defense Systems (IDS) unit has moved over to Boeing Commercial Aircraft (BCA) to learn from their experiences to offer better technologies and cost efficiencies to beat the Northrop Grumman/EADS/Airbus KC-30.
Washington CEOs to Boeing: Keep 787 Line 2 here
Dear Mr. McNerney: please take note of this.
SEATTLE--(Business Wire)-- A wide group of CEOs and corporate leaders recently sent this letter to Boeing Commercial Airplanes President & CEO James Albaugh urging the company to site its second 787 line in Washington state: Read more
“We want competition”
There is a competition underway for a military airplane in which the government is leaning toward a sole-source selection. The competition to the favored airplane company is advocating for a competition, saying the government will get a better price and a better airplane.
Growing Washington Aerospace
We addressed the Governor’s Eastern Washington Aerospace Summit October 7, 2009, in Spokane, outlining a number of opportunities that aerospace in Washington State should pursue to grow.
Here is the press release on this address, and below the jump is a link to our presentation.
Washington Should Look Beyond Tradition to Grow Aerospace
Issaquah, WA, October 7, 2009: Washington State officials should look beyond traditional businesses to grow aerospace opportunities here, said Scott Hamilton, managing director of Leeham Co., in a speech today before the Eastern Washington Governor’s Aerospace Summit in Spokane.
“State officials and stakeholders understandably focus on Boeing and its supporting supplier base when it comes to Washington aerospace,” Hamilton said. “But global aerospace is changing and it is a mistake to maintain this focus. The time has come to dramatically expand thinking to adjust to realities, opportunities and new requirements of commercial and defense aviation and aerospace.”